Cominar Real Estate Investment Trust

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Take-over Bids -- Identical consideration -- Issuer needs relief from the requirement in subsection 97(1) of the Securities Act (Ontario) and section 2.23 of Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids that all holders of the same class of securities must be offered identical consideration -- Under the bid, Canadian resident security holders will receive cash or units of the offeror; security holders who are residents of the U.S. will receive substantially the same value as Canadian security holders in the form of cash paid to such security holders based on the proceeds from the sale of their units.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 97(1), 104(2)(c).

January 13, 2012

Translation

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUÉBEC AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

COMINAR REAL ESTATE INVESTMENT TRUST

(the Applicant)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Applicant for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from the requirement in Section 2.23(1) of Regulation 62-104 respecting Take-Over Bids and Issuer Bids and in Section 97(1) of the Securities Act (Ontario) to offer identical consideration to all holders of the same class of securities subject to a take-over bid (the Identical Consideration Requirement) in connection with the Applicant's take-over bid (the Take-Over Bid) for all of the Canmarc Units (as defined below) of Canmarc Real Estate Investment Trust (Canmarc) (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Autorité des marchés financiers is the principal regulator for this application;

(b) the Applicant has provided notice that Section 4.7(1) of Regulation 11-102 respecting Passport System (Regulation 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Nova Scotia, New Brunswick, Newfoundland & Labrador, Prince Edward Island, the Northwest Territories, Nunavut and Yukon; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in Regulation 14-101 respecting Definitions and Regulation 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

The decision is based on the following facts represented by the Applicant:

1. The Applicant is a trust existing under the laws of the Province of Québec constituted under a contract of trust made as of March 31, 1998, as amended as of May 8, 1998, May 13, 2003, May 11, 2004, May 15, 2007, May 14, 2008 and May 18, 2010.

2. The registered and head office of the Applicant is located in Québec City, Province of Québec.

3. The Applicant is a reporting issuer in each of the provinces of Canada.

4. The Applicant is not in default of any requirement of securities legislation applicable to it.

5. The authorized capital of the Applicant consists of an unlimited number of trust units (the Applicant Units). As at December 30, 2011, there were 76,822,274 Applicant Units issued and outstanding.

6. The Applicant Units are listed and posted for trading on the Toronto Stock Exchange (the TSX).

7. Canmarc is a trust existing under the laws of the Province of Québec pursuant to a Declaration of Trust dated March 30, 2010, as amended.

8. Canmarc's head office is located in Montréal, Province of Québec.

9. Canmarc is a reporting issuer in each of the provinces and territories of Canada.

10. As at December 20, 2011, based on publicly available information, there were 54,799,532 Canmarc Units issued and outstanding.

11. The Canmarc Units (as defined below) are listed and posted for trading on the TSX.

12. The Take-Over Bid was commenced by advertisement on December 2, 2011.

13. The Take-Over Bid is not being made to any person in any jurisdiction in which such offer or solicitation is unlawful. The Take-Over Bid is not being made or directed to, nor will deposits of Canmarc Units be accepted from or on behalf of, holders of Canmarc Units in any jurisdiction in which the making of or acceptance thereof would not be in compliance with the laws of such jurisdiction.

14. Under the Take-Over Bid, the Applicant has offered to purchase all of the trust units of Canmarc not currently owned by the Applicant and its subsidiaries and all trust units of Canmarc that may be issued after the date of the Take-Over Bid and before the expiry thereof upon the exercise, conversion or exchange of (i) the Class B LP Units of Homburg Canada REIT Limited Partnership (if any), (ii) the deferred units and the restricted units issued under the long-term incentive plan of Canmarc or (iii) other securities that are convertible into or exchangeable or exercisable for, or existing rights to acquire, trust units of Canmarc (collectively, the Convertible Securities and, together with the trust units of Canmarc and the associated rights issued under the existing unitholder rights plan of Canmarc or any other unitholder rights plan which may be adopted by Canmarc, the Canmarc Units). The Applicant has offered, at the option of the holders of Canmarc Units, either (i) $15.30 cash, not subject to pro-ration or (ii) 0.7054 Applicant Unit, subject to pro-ration, with a maximum aggregate number of 16 million Applicant Units available under the Take-Over Bid.

15. The Applicant Units issuable under the Take-Over Bid have not been and will not be registered under the 1933 Act or any state securities (or blue sky) laws in the United States of America (the U.S.) or the securities laws of any other country. Although, as discussed below, the Applicant Units issuable under the Take-Over Bid will be exempt from the registration requirements of the 1933 Act, the issuance of Applicant Units to certain holders of Canmarc Units in the U.S. and elsewhere (the Ineligible Unitholders) under the Take-Over Bid might not be exempt from the registration requirements of a significant number of U.S. state securities laws or the securities laws of other countries. Because the Applicant Units will not be registered under any U.S. state securities laws or the securities laws of other countries, the offer or sale of Applicant Units under the Take-Over Bid to Ineligible Unitholders could violate certain U.S. state securities laws and other foreign securities laws.

16. Rule 802 under the 1933 Act (Rule 802) provides an exemption from the registration requirements of the 1933 Act for offers and sales in any exchange offer for a class of securities of a "foreign private issuer" (as defined for purposes of the 1933 Act and the rules and regulations issued by the SEC thereunder) or in any exchange of securities for the securities of a foreign private issuer in any business combination if the holders of the foreign subject company resident in the U.S. hold no more than 10% of the securities that are the subject of the exchange offer or business combination and the other conditions of Rule 802 are satisfied. Rule 802 and the related rules provide that, for the purposes of this calculation, securities held by the offeror are to be excluded. Rule 802 and the related rules also provide that, in the context of a non-consensual exchange offer or proposed business combination transaction, the subject company will be presumed to be a "foreign private issuer" and U.S. holders will be presumed to hold 10% or less of its outstanding subject securities unless (a) the average daily trading volume of the subject securities in the United States exceeds 10% of the average daily trading volume of the subject securities on a worldwide basis for the period specified in the rules, (b) the most recent annual report or annual information form filed by the subject company indicates that U.S. holders hold more than 10% of the outstanding subject securities, or (c) the offeror knows or has reason to know, before the public announcement of the offer, that the level of U.S. ownership exceeds 10% of such securities.

17. The average daily trading volume of the Canmarc Units in the U.S. for the specified period did not exceed 10% of the average daily trading volume for the Canmarc Units on a worldwide basis for the specified period. Furthermore, Canmarc has not disclosed in its most recent annual report or annual information form that holders of Canmarc Units in the U.S. (U.S. Unitholders) collectively hold more than 10% of the Canmarc Units, and the Applicant did not know or have reason to know, before the public announcement on November 28, 2011 of its intention to proceed with the Take-Over Bid, that the level of U.S. ownership of the Canmarc Units exceeds 10% of such securities. Accordingly, the Applicant is entitled to rely on the presumption under Rule 802 that Canmarc is a "foreign private issuer" and that holders of Canmarc Units in the U.S. do not hold more than 10% of the Canmarc Units. The Applicant plans to satisfy the other requirements of Rule 802. Accordingly, the offer and sale of the Applicant Units in the Take-Over Bid will be exempt from the registration requirements of the 1933 Act.

18. In order for the exemption provided in Rule 802 to apply, U.S. Unitholders must be permitted to participate in the exchange offer or business combination on terms at least as favourable to those offered to the other holders of the subject securities. The offeror need not extend the offer to securityholders in those states or jurisdictions that require registration or qualification, except that the offeror must offer the same cash alternative to securityholders resident in any such state that it has offered to securityholders in any other state or jurisdiction.

19. There is no general exemption from U.S. state "blue sky" laws commensurate with Rule 802. As a result, the securities laws of a significant number of U.S. states could prohibit the offer and sale of the Applicant Units to U.S. Unitholders without registration of the Applicant Units to be issued to U.S. Unitholders resident in such states unless such holders are otherwise eligible to be issued Units in transactions exempt from registration under the laws of such states. The Applicant is taking the same view with respect to other foreign securities laws.

20. Registration under applicable state securities laws and the securities laws of any other country of the Applicant Units deliverable to Ineligible Unitholders would be costly and burdensome to the Applicant.

21. The Applicant will deliver Applicant Units in any jurisdiction in which it is satisfied, in its sole discretion, that the Applicant Units may be lawfully delivered in reliance upon available exemptions from the registration requirements of the securities laws of such jurisdiction, on a basis determined to be acceptable to it.

22. The Applicant proposes, with respect to Ineligible Unitholders that would otherwise receive Applicant Units in exchange for their Canmarc Units, to, at the sole discretion of the Applicant, have such Applicant Units issued on their behalf to a selling agent. The selling agent shall, as agent for such Ineligible Unitholders, as expeditiously as is commercially reasonable thereafter, sell such Applicant Units on their behalf through the facilities of the TSX and have the net proceeds of such sale, less any applicable brokerage commissions, other expenses and withholding taxes, delivered to such Ineligible Unitholders (the Vendor Placement). Each Ineligible Unitholder for whom Applicant Units are sold by the selling agent will receive an amount equal to such holder's pro rata interest in the net proceeds of sales of all Applicant Units so sold by the selling agent. Such Vendor Placement will be done in a manner intended to maximise the consideration to be received from the sale on behalf of the Ineligible Unitholders and minimise any adverse impact of the sale on the market for the Applicant Units.

23. The take-over bid circular discloses the Vendor Placement and the procedure to be followed with respect to Ineligible Unitholders that deposit their Canmarc Units under the Take-Over Bid.

24. There is currently a "liquid market" (as such term is defined in Section 1.2 of Regulation 61-101 respecting Protection of Minority Security Holders in Special Transactions) for the Applicant Units and the Applicant's financial advisor has advised that in its view it is reasonable for the trustees of the Applicant to conclude that there will continue to be such a "liquid market" for the Applicant Units following completion of the Take-Over Bid, any related second-step transaction and the sale of the Applicant Units on behalf of Ineligible Unitholders as described in paragraph 22 above.

25. If the Applicant increases the consideration offered to holders of Canmarc Units resident in Canada, the increase in consideration will also be offered to holders of Canmarc Units resident outside of Canada, including Ineligible Unitholders, at the same time and on the same basis.

26. Except to the extent that the relief requested herein is granted, the Take-Over Bid will otherwise be in compliance with the requirements under the Legislation governing take-over bids.

Decision

Each of the Decision Makers is satisfied that the decision meets the tests set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted.