Transglobe Apartment Real Estate Investment Trust

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 51-102 Continuous Disclosure Obligations -- Application for relief from requirement in Section 8.4 of NI 51-102 to include financial statement disclosure in business acquisition report -- Filer completed the acquisition (the Acquisition) of the Acquisition Portfolio -- Two of the properties of the Acquisition Portfolio (the Weston Road and the Ontario Street properties) were not owned or co-owned by DrimmerCo prior to March 31, 2011 (the After-Acquired Properties) -- Filer has made every reasonable effort to obtain access to, or copies of, the historical accounting records in respect of the After-Acquired Properties necessary to prepare and audit the Acquisition Portfolio financial statements, but such efforts were unsuccessful in respect of Weston Road -- Filer filed a prospectus supplement on July 25, 2011 -- Prior to filing the Prospectus Supplement, the Filer submitted a pre-filing requesting an interpretation that the Prospectus Supplement would include satisfactory financial statements or other information as an alternative to the financial statements or other information that will be required to be included in, or incorporated by reference into, a BAR filed under Part 8 of NI 51-102 -- Prospectus Supplement included the Prospectus Financials -- Acquisition was subject to the applicable requirements of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions relating to, among other things, preparation of a formal valuation of the non-cash assets involved in the Acquisition and minority approval -- Filer will provide the Prospectus Financials in lieu of the financial statements required by Section 8.4 of NI 51-102 in the BAR in respect of the Acquisition Portfolio -- Relief granted subject to conditions including provision of the Prospectus Financials.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, s. 8.4.

September 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

TRANSGLOBE APARTMENT REAL ESTATE

INVESTMENT TRUST

(the Filer)

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 a decision pursuant to Section 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) that the Filer be exempt from the requirement to include the financial statement disclosure prescribed under Section 8.4 of NI 51-102 and Item 3 of Form NI 51-102F4 in the business acquisition report (BAR) of the Filer relating to the Acquisition (as defined herein) (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 (the Principal Regulator), 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 each of British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon Territory and Nunavut (collectively, with Ontario, the Jurisdictions).

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.

Representations

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

1. The principal, registered and head office of the Filer is located at 5935 Airport Road, Suite 600 in Mississauga, Ontario.

2. The Filer is an unincorporated, open-ended real estate investment trust governed by the laws of the Province of Ontario pursuant to an amended and restated declaration of trust dated as of September 1, 2011.

3. The Filer is a reporting issuer, or the equivalent thereof, in each Province and Territory of Canada.

4. The trust units of the Filer (the Trust Units) are listed and posted for trading on the Toronto Stock Exchange under the symbol "TGA.UN".

5. The Filer was formed to own multi-suite, residential rental properties across Canada and, as at the date hereof, the Filer owns a portfolio of 151 properties principally located in urban centres in the Provinces of Alberta, Ontario, Québec, New Brunswick and Nova Scotia.

6. The Filer is authorized to issue an unlimited number of Trust Units and an unlimited number of special voting units (the Special Voting Units). As at September 2, 2011, there are 40,460,333 Trust Units and 14,450,462 Special Voting Units issued and outstanding. The number of Special Voting Units outstanding at any point in time is equivalent to, and accompanies, the number of outstanding class B limited partnership units of limited partnerships managed and controlled by the Filer which are exchangeable into Trust Units for the purpose of providing voting rights with respect to the Filer to the holder of such exchangeable securities.

7. On July 21, 2011, the Filer entered into the agreements of purchase and sale pursuant to which it agreed to indirectly acquire (the Acquisition) a portfolio (the Acquisition Portfolio) of 57 real estate properties currently owned or co-owned by affiliates of TransGlobe Investment Management Limited (collectively, DrimmerCo), and promissory notes pursuant to which certain DrimmerCo entities will provide instalment payments to the Filer in consideration of the Filer assuming certain pooled mortgages upon completion of the Acquisition in order for the Filer to achieve a specified effective weighted average interest rate across such pooled mortgages.

8. Two of the properties in the Acquisition Portfolio, being 2180 & 2890 Weston Road, Toronto, Ontario (Weston Road) and 165 Ontario Street, St. Catharines, Ontario (Ontario Street), were not owned or co-owned by DrimmerCo prior to March 31, 2011 (the After-Acquired Properties).

9. The Filer has made every reasonable effort to obtain access to, or copies of, the historical accounting records in respect of the After-Acquired Properties necessary to prepare and audit the Acquisition Portfolio financial statements, but such efforts were unsuccessful in respect of Weston Road.

10. Ontario Street was previously owned by DrimmerCo, until December 17, 2009, at which time the property was sold to a third party, although DrimmerCo continued to manage the property. DrimmerCo entered into an agreement of purchase and sale to re-acquire Ontario Street from such third party prior to closing of the Acquisition. DrimmerCo has access to the historical accounting records in respect of Ontario Street necessary to prepare and audit the Acquisition Portfolio financial statements, to the extent included in the Prospectus Financials (as defined below).

11. On July 21, 2011, the Filer and DrimmerCo also entered into an internalization and separation agreement, pursuant to which, among other things, the Filer agreed to assume responsibility for the day-to-day administration and operation of its properties and the Filer and DrimmerCo agreed to terminate certain of their commercial relationships (collectively, the Management Internalization).

12. On July 25, 2011, the Filer filed a prospectus supplement (the Prospectus Supplement) to the Filer's short form base shelf prospectus dated May 11, 2011 (the Base Shelf Prospectus) qualifying for distribution subscription receipts (the Subscription Receipts) and extendible convertible unsecured subordinated debentures (the Debentures) of the Filer, which distributions were completed on July 29, 2011.

13. Each Subscription Receipt entitled the holder thereof to receive one Trust Unit, without payment of any additional consideration, upon completion of the Acquisition and the Debentures had an initial maturity date of the earlier of (i) the termination of the Acquisition and (ii) October 31, 2011, which would be extended to September 30, 2018 upon completion of the Acquisition.

14. The Prospectus Supplement included the following financial statements (the Prospectus Financials):

Acquisition Portfolio Statements

(a) Statements of operations and divisional equity and statements of cash flows for the Acquisition Portfolio, other than Weston Road (prepared on a carve-out basis from existing financial information of the vendors thereof) for the years ended December 31, 2010 (subject to the following sentence in respect of Ontario Street) and 2009 (audited for 2010 and unaudited for 2009), together with the balance sheets as at December 31, 2010 and 2009 (and accompanying notes thereto), all prepared under pre-transition Canadian Generally Accepted Accounting Principles. The carve-out financial statements of the Acquisition Portfolio contained, on the face of the balance sheet, a note reference to a subsequent event. Such note explained that at the end of 2009, Ontario Street was sold to a third party by DrimmerCo and that DrimmerCo entered into a purchase and sale agreement to repurchase the property. In addition, the note indicated that the 2009 results included the operations of Ontario Street up to the time of its sale. The note also included summarized operating results for Ontario Street for fiscal 2010. The note was audited as part of the Acquisition Portfolio Statements.

(b) Unaudited interim statements of comprehensive income and changes in divisional equity and statements of cash flows for the Acquisition Portfolio other than the After-Acquired Properties (prepared on a carve-out basis from existing financial information of the vendors thereof) for the three months ended March 31, 2011, together with the statements of financial position as at March 31, 2011, December 31, 2010 and January 1, 2010 (and accompanying notes thereto), all prepared under International Financial Reporting Standards (IFRS). The unaudited financial statements also contained a note with respect to Ontario Street similar to that described in (a) above and included summarized operating results for Ontario Street for the interim period.

Pro forma Statements

(c) Unaudited pro forma statement of financial position of the Filer as at March 31, 2011 (giving effect to the Acquisition and Management Internalization, as if such events occurred at March 31, 2011), together with accompanying notes, prepared under IFRS.

(d) Unaudited pro forma statements of comprehensive income of the Filer for the financial period from May 14, 2010 to December 31, 2010 and the interim period from January 1, 2011 to March 31, 2011 (each giving effect to the Acquisition and Management Internalization, as if such events occurred at May 14, 2010 and January 1, 2010, respectively) together with accompanying notes, prepared under IFRS.

The pro forma financial statements of the Filer included the results of the Acquisition Portfolio, other than Weston Road.

15. The Prospectus Supplement also incorporated by reference the following financial statement presentation into the Base Shelf Prospectus:

(a) Audited consolidated financial statements of the Filer as at December 31, 2010 and for the period from May 14, 2010 to December 31, 2010 and the notes thereto.

(b) Unaudited condensed consolidated interim financial statements of the Filer as at and for the three months ended March 31, 2011 (without comparative financial statements for the corresponding period in the prior year as the Filer was not then in existence).

(c) Financial statements and schedules contained in the previously-filed business acquisition reports of the Filer and a management information circular of the Filer, each to the extent incorporated by reference into the Base Shelf Prospectus.

16. Based on the financial information provided by DrimmerCo, the unaudited gross revenue of Weston Road for the year ended December 31, 2010 (approximately $1.3 million) represents approximately 1.8% of the unaudited gross revenue of the Acquisition Portfolio for the year ended December 31, 2010 (approximately $71.8 million), and the unaudited net operating income of Weston Road for the year ended December 31, 2010 (approximately $0.6 million) represents approximately 1.8% of the unaudited net operating income of the Acquisition Portfolio for the year ended December 31, 2010 (approximately $33.0 million). In addition, the purchase price paid by DrimmerCo for Weston Road (approximately $11.2 million) represents approximately 1.5% of the expected total purchase price of the Acquisition Portfolio (approximately $740 million).

17. Prior to filing the Prospectus Supplement, the Filer submitted a pre-filing under Part 8 of National Policy 11-202 -- Process for Prospectus Reviews in Multiple Jurisdictions, requesting an interpretation that the Prospectus Financials constitute satisfactory financial statements or other information as an alternative to the financial statements or other information that will be required to be included in, or incorporated by reference into, a business acquisition report filed under Part 8 of NI 51-102, and that, accordingly, the Prospectus Supplement did not need to include the complete financial statements of the After-Acquired Properties to contain full, true and plain disclosure of all material facts relating to the Subscription Receipts and Debentures. The pre-filing was resolved in the manner set forth in the Prospectus Financials presented in the Prospectus Supplement, with, additionally, the Filer having proposed to the Principal Regulator to include the "Acquisition Portfolio Statements" and the "Pro forma Statements" from the Prospectus Supplement in the BAR and to submit a formal exemption application in respect of compliance with the BAR financial requirements, to the extent required, including to provide financial statements for the interim period ended March 31, 2011 rather than for the interim period ended June 30, 2011.

18. The Acquisition and certain aspects of the Management Internalization, among other matters, were subject to the applicable requirements of Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions relating to, among other things, preparation of a formal valuation of the non-cash assets involved in the Acquisition and the approval by a majority of the votes cast by disinterested holders of Voting Units (Unitholders) entitled to vote on the Acquisition at a duly constituted meeting of Unitholders held to consider the Acquisition (the Meeting).

19. In connection with the Meeting, the Filer filed on SEDAR and delivered to its Unitholders a management information circular dated August 2, 2011, which included the Prospectus Financials.

20. On August 9, 2011, the Filer filed its condensed consolidated comparative interim financial statements for the three months and six months ended June 30, 2011.

21. On August 31, 2011, the Acquisition was approved by the requisite favourable vote of the Unitholders and, on September 1, 2011, the Acquisition and Management Internalization were completed, the Subscriptions Receipts were exchanged for Trust Units and the maturity date of the Debentures was extended to September 30, 2018.

22. The Acquisition is a "significant acquisition" for purposes of NI 51-102 and the Filer must file a business acquisition report in respect of the Acquisition (the BAR).

23. Unless otherwise exempted, including pursuant to Section 13.1 of NI 51-102, the BAR must include or incorporate by reference the financial statements set out in Section 8.4 of NI 51-102 relating to the Acquisition Portfolio. In effect, the BAR must contain: (a) two full years of financial statements relating to the Acquisition Portfolio, with the most recent year being audited (i.e. the 2009 and 2010 fiscal years); (b) financial statements relating to the Acquisition Portfolio for the applicable completed interim period for the current year compared against the same interim period for the preceding year, unless otherwise exempt by Section 8.9 of NI 51-102 (i.e. the interim period ended June 30, 2011, pursuant to Section 8.4(3) of NI 51-102 and assuming the unavailability of the exemption in Section 8.4(4)(c)(ii) of NI 51-102); (c) pro forma statement of financial position of the Filer as at the date of the most recent statement of financial position filed (i.e. as at June 30, 2011, assuming the unavailability of the exemption in Section 8.4(4)(c)(ii) of NI 51-102 noted in Section 8.4(6)(a) of NI 51-102); (d) pro forma income statements for the Filer's applicable completed annual and interim periods (i.e. the 2010 fiscal year and the interim period ended June 30, 2011, assuming the unavailability of the exemption in Section 8.4(4)(c)(ii) of NI 51-102 noted in Section 8.4(6)(b) of NI 51-102).

24. With reference to Section 8.4(4)(a) of NI 51-102, the Acquisition does not constitute a material departure from the business or operations of the Filer before the Acquisition.

25. With reference to Section 8.9 of NI 51-102:

(d) as the vendors of the Acquisition Portfolio are private entities, they do not prepare quarterly financial statements in the form and substance as required by securities laws and, as such, a reasonable person would view it as impracticable to present interim financial statements of the Acquisition Portfolio (excluding Weston Road and, to the extent noted in the Prospectus Financials, Ontario Street) for the three-months ended March 31, 2010 on a basis consistent with the interim financial statements for the three-months ended March 31, 2011, which as presented in the Prospectus Financials, have been prepared in accordance with IFRS;

(e) the financial statements for the Acquisition Portfolio (excluding Weston Road and, to the extent noted in the Prospectus Financials, Ontario Street) for the years ended December 31, 2010 and 2009 are available and are presented in the Prospectus Financials; and

(f) the notes to the interim financial statements of the Acquisition Portfolio (excluding Weston Road and, to the extent noted in the Prospectus Financials, Ontario Street) for the three-months ended March 31, 2011 disclose the fact that the Filer is unable to prepare the information for the three month period ended March 31, 2010 on a basis consistent with the financial statements for the three month period ended March 31, 2011.

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 provided that the Filer includes the Prospectus Financials in the BAR in respect of the Acquisition.