Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to a real estate investment trust (REIT) from the requirement to file a business acquisition report (BAR) under Part 8 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) in connection with the REIT's acquisition of a 495 suite portfolio -- Acquisition is not significant under the asset and investment test in section 8.3(2) of NI 51-102, but is significant under the income test -- REIT submitted that the calculation of consolidated income from continuing operations of the REIT for purposes of the income test under section 8.3(2) of NI 51-102 produces anomalous results because the significance of the acquisition is exaggerated out of proportion to its significance on an objective basis in comparison to the results of the other significance tests and all other business, commercial, financial and practical factors -- REIT provided the principal regulator with additional measures that show that, as a business, commercial, financial and practical matter, the acquisition should not be considered as a significant acquisition for the REIT -- The results from these measures are generally consistent with the results of the asset and investment tests under section 8.3(2) of NI 51-102 -- Relief granted based on the REIT's representations that as a business, commercial, financial and practical matter, the acquisition should not be considered as a significant acquisition for the REIT.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, Part 8 and s. 13.1.

June 27, 2011

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(THE "JURISDICTION")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

CANADIAN APARTMENT PROPERTIES

REAL ESTATE INVESTMENT TRUST

(THE "FILER" OR THE "REIT")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for relief from the requirement in Part 8 of National Instrument 51-102 Continuous Disclosure Obligations ("NI 51-102") to a file a business acquisition report ("BAR") in connection with the Filer's acquisition of a 495 suite portfolio in New Westminster and Richmond, British Columbia (the "BC Portfolio") which was completed on April 15, 2011 (the "Exemption Sought").

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

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) the Filer has provided notice that section 4.7 (1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut.

Interpretation

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

Representations

This decision is based on the following facts represented by the Filer:

The REIT

1. The REIT is an internally managed unincorporated open-ended real estate investment trust established under the laws of the Province of Ontario by a declaration of trust and its head office is located in Toronto, Ontario.

2. The REIT is a reporting issuer under the securities legislation of each of the provinces and territories of Canada and is not in default of securities legislation in any jurisdiction.

3. The units of the REIT are listed and posted for trading on the Toronto Stock Exchange under the trading symbol CAR.UN.

4. The REIT completed its initial public offering (the "IPO") on May 21, 1997 pursuant to its final long form prospectus dated May 12, 1997.

5. The proceeds of the IPO were used by the REIT to satisfy a cash payable on the acquisition of certain properties under contract, to pay a term loan commitment fee, to repay mortgage financing and a loan provided to acquire certain properties, for future property acquisitions, working capital, mortgage principal repayments and capital improvements.

The BC Portfolio Acquisition

6. On April 15, 2011, the REIT acquired the BC Portfolio for an aggregate purchase price of approximately $74.6 million.

7. The acquisition of the BC Portfolio constitutes a "significant acquisition" of the REIT for the purposes of Part 8 of NI 51-102, requiring the REIT to file a BAR within 75 days of the acquisition pursuant to section 8.2(1) of NI 51-102.

Significance Test for the BAR

8. Under Part 8 of NI 51-102, the REIT is required to file a BAR for any completed acquisition that is determined to be significant based on the acquisition satisfying any of the three significance tests set out in section 8.3(2) of NI 51-102.

9. The acquisition of the BC Portfolio is not a significant acquisition under the asset test in section 8.3(2) of NI 51-102 as the value of the BC Portfolio represented only approximately 3.17% of the consolidated assets of the REIT as of December 31, 2010.

10. The acquisition of the BC Portfolio is not a significant acquisition under the investment test in section 8.3(2) of NI 51-102 as the REIT's acquisition costs represented only approximately 3.17% of the consolidated assets of the REIT as of December 31, 2010.

11. However, the acquisition of the BC Portfolio would be a significant acquisition under the income test in section 8.3(2) of NI 51-102. In particular, the BC Portfolio represents approximately 5,561.40% of the REIT's income from continuing operations as of December 31, 2010.

12. For the purposes of completing its quantitative analysis of the income test, the REIT is required to compare its income from continuing operations against the proportionate share of income from continuing operations of BC Portfolio. The application of the income test produces an anomalous result for the REIT in comparison to the results of the asset test and the investment test. Excluding depreciation of income producing properties when applying the income test would not result in the BC Portfolio acquisition being considered significant, more accurately reflects the significance of the BC Portfolio acquisition from a business and commercial perspective, and its results are generally consistent with the results of the asset test and the investment test. The application of the income test with depreciation of income producing properties excluded results in the BC Portfolio representing only approximately 3.83% of the REIT's income from continuing operations for the fiscal year ended December 31, 2010.

De Minimis Acquisition

13. The REIT does not believe (nor did it believe at the time it made the acquisition) that the acquisition of the BC Portfolio is significant to it from a practical, commercial, business or financial perspective.

14. The Filer has provided the principal regulator with additional measures which further demonstrate the insignificance of the BC Portfolio acquisition to the Filer and which are generally consistent with the results of the asset test and the investment test. These additional measures include measures based on:

(a) the total number of suites in the BC Portfolio when compared to the total number of residential suites in which the REIT has ownership interests, and

(b) the percentage of the gross rental income from the REIT's portfolio during the period from January 1, 2010 to December 31, 2010 represented by the gross rental income from the BC Portfolio during that same period.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted.

"Jo-Anne Matear"
Assistant Manager
Ontario Securities Commission