Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief in Multiple Jurisdictions -- Filer wants to reorganize its business -- Filer has both designated exchangeable securities and designated credit support securities -- exemptions in sections 13.3 and 13.4 technically not available -- relief granted subject to Filer meeting certain conditions.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, ss. 13.1(2), 13.3, 13.4.

National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, ss. 8.5, 8.6(2).

National Instrument 52-110 Audit Committees, ss. 1.2(g), 8.1(2).

December 10, 2013

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 DUNDEE INDUSTRIAL LIMITED PARTNERSHIP (the "Filer")

DECISION

Background

The principal regulator has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the "Legislation") granting the Filer an exemption from the following:

1. the continuous disclosure requirements (the "Continuous Disclosure Requirements") contained in National Instrument 51-102Continuous Disclosure Obligations ("NI 51-102"), as amended from time to time; and

2. the certification requirements (the "Certification Requirements") contained in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, as amended from time to time;

collectively, the "Exemption Sought".

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

1. the Ontario Securities Commission is the principal regulator for the application, and

2. 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, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.

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

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

1. The Filer is a limited partnership formed under the laws of the Province of Ontario on December 21, 2010.

2. The Filer's head office is located at 30 Adelaide Street East, Suite 1600, Toronto, Ontario, M5C 3H1

3. Dundee Industrial Real Estate Investment Trust ("Dundee Industrial REIT") is an unincorporated, open-ended real estate investment trust created by a declaration of trust dated October 4, 2012, as amended and restated.

4. Dundee Industrial REIT's head office is located at 30 Adelaide Street East, Suite 1600, Toronto, Ontario, M5C 3H1.

5. Dundee Industrial REIT is a reporting issuer in each of the Provinces of Canada.

6. DIR Industrial Properties Inc. ("DIR Inc.") is a corporation incorporated under the laws of the Province of Ontario on July 19, 2013.

7. DIR Inc. is a direct subsidiary of the Filer.

8. DIR Inc. is a reporting issuer in each of the Provinces of Canada other than Quebec.

9. Dundee Real Estate Investment Trust ("Dundee REIT") is an unincorporated, open-ended real estate investment trust created by a declaration of trust dated May 9, 2003, as amended and restated.

10. Dundee REIT's head office is located at 30 Adelaide Street East, Suite 1600, Toronto, Ontario, M5C 3H1.

11. Dundee REIT is a reporting issuer in each of the Provinces of Canada.

12. Dundee Industrial (GP) Inc., a corporation incorporated under the laws of Ontario on December 21, 2010 and a wholly-owned subsidiary of Dundee Industrial REIT, is the general partner of the Filer.

13. The limited partnership interests in the Filer consist of LP Class A Units ("LP A Units") and LP Class B Units ("LP B Units"). Dundee Industrial REIT owns all of the issued and outstanding LP A Units of the Filer. All of the issued and outstanding LP B Units of the Filer are owned by subsidiaries of Dundee REIT.

14. The LP B Units are, in all material respects, economically equivalent to the units of Dundee Industrial REIT ("REIT Units") on a per unit basis. The LP B Units are exchangeable on a one-for-one basis for REIT Units at any time at the option of the holder, unless the exchange would jeopardize Dundee Industrial REIT's status as a "mutual fund trust" or a "real estate investment trust" under the Income Tax Act (Canada) or create significant risk that Dundee Industrial REIT would be subject to tax under paragraph 122(1)(b) of the Income Tax Act (Canada) or such exchange would be contrary to solvency requirements or other provisions of applicable law or contravene the provisions of the declaration of trust of Dundee Industrial REIT relating to ownerhip by non-residents of Canada. Each holder of LP B Units is also the holder of an identical number of "special trust units" of Dundee Industrial REIT issued in connection with the issuance of LP B Units and which provide voting rights with respect to Dundee Industrial REIT. The special trust units are not transferrable separately from the LP B Units to which they relate.

15. As of September 30, 2013, there were 16,282,096 LP B units outstanding representing approximately 23% of the outstanding REIT Units on a fully-exchanged basis.

16. All of the issued and outstanding common shares of DIR Inc., being the only voting securities of DIR Inc., are owned by the Filer. DIR Inc. is not a "subsidiary" of the Filer nor of Dundee Industrial REIT as such term is defined in subsection 1.2(4) of the Securities Act (Ontario).

17. As of September 30, 2013, DIR Inc. had $19,420,000 aggregate principal amount of 6.25% convertible unsecured subordinated debentures due November 30, 2017 ("Convertible Debentures") issued and outstanding. The Convertible Debentures are convertible into redeemable preference shares ("Redeemable Preference Shares") of DIR Inc. at a conversion price of $5.55 per share. The trust indenture ("Trust Indenture") governing the Convertible Debenture provides that, in accordance with the terms of the Redeemable Preference Shares, each Redeemable Preference Share will be redeemed by DIR Inc. immediately following its issuance in consideration for 0.4485 REIT Units.

18. The Convertible Debentures are listed and posted for trading on the Toronto Stock Exchange.

19. Dundee Industrial REIT has provided a full and unconditional guarantee (as contemplated by section 13.4 of NI 51-102) of DIR Inc.'s obligations under the Trust Indenture.

20. The Filer is proposing to reorganize its business, subject to the receipt of this decision granting the Exemption Sought. Such reorganization will include the following steps:

(a) DIR Inc. will incorporate a new wholly-owned subsidiary corporation ("New GP") under the laws of Ontario;

(b) DIR Inc. and New GP will form a new limited partnership ("New LP") under the laws of Ontario, of which New GP will be the sole general partner and DIR Inc. will be the sole limited partner;

(c) DIR Inc. will transfer to New LP properties with an estimated fair market value of between $150 million and $160 million, representing approximately 70% of the total fair market value of the assets of DIR Inc., in consideration for an increase in capital in New LP and the assumption by New LP of existing mortgages associated with the transferred properties; and

(d) DIR Inc. will transfer all of the shares of New GP and the limited partnership interest in New LP to the Filer in repayment of existing indebtedness owing by DIR Inc. to the Filer.

21. The Trust Indenture provides that, in connection with the proposed transfer (the "Transfer") to the Filer of the shares of New GP and the partnership interest in New LP, the Filer must agree to be bound by the terms of the Trust Indenture with the same effect as if it had been named as a principal obligor because the Transfer constitutes a transfer of all or substantially all of the assets of DIR Inc. Accordingly, upon completion of the Transfer, the Filer (as successor to and co-obligor with DIR Inc.) will become jointly and severally liable for all obligations under the Trust Indenture in respect of the Convertible Debentures.

22. Upon completion of the Transfer, by virtue of becoming a co-obligor for the Convertible Debentures, the Filer will become a reporting issuer pursuant to paragraph (c) of the definition of reporting issuer in subsection 1(1) of the Securities Act (Ontario).

23. Neither Dundee Industrial REIT nor DIR Inc. is in default of any of its obligations under the securities legislation of any of the Provinces of Canada in which it is a reporting issuer.

24. There are no insiders of the Filer other than Dundee Industrial REIT and Dundee Industrial (GP) Inc. who are not also insiders of Dundee Industrial REIT.

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 effective upon the Transfer being completed provided that:

1. Dundee Industrial REIT continues to beneficially own all of the outstanding voting securities of the Filer;

2. the Filer continues to satisfy all the conditions set forth in subsection 13.4(2.1) of NI 51-102, other than paragraph 13.4(2.1)(a) insofar as it incorporates by reference paragraph 13.4(2)(c) of NI 51-102 and except as modified as follows:

(a) any reference to parent credit supporter in section 13.4 of NI 51-102 shall mean Dundee Industrial REIT;

(b) any reference to credit support issuer in section 13.4 of NI 51-102 shall mean the Filer;

(c) any reference to subsidiary credit support issuer in section 13.4 of the NI 51-102 shall include DIR Inc.; and

(d) any reference to designated credit support securities in section 13.4 of NI 51-102 shall include the Convertible Debentures.

3. the Filer does not issue any securities other than:

(a) designated credit support securities (as such term is defined in NI 51-102) for which Dundee Industrial REIT has provided a full and unconditional guarantee;

(b) securities, including LP A Units, issued to and held by Dundee Industrial REIT or an affiliate of Dundee Industrial REIT;

(c) debt securities issued to and held by banks, loan corporations, loan and investment corporations, savings companies, trust corporations, treasury branches or credit unions, financial services cooperatives, insurance companies or other financial institutions;

(d) securities issued under the exemption from the prospectus requirement in section 2.35 of National Instrument 45-106 Prospectus and Registration Exemptions ("NI 45-106");

(e) LP B Units or other designated exchangeable securities (as such term is defined in NI 51-102) for which Dundee Industrial REIT is the issuer of the underlying security (as such term is defined in NI 51-102); and

(f) the Convertible Debentures in respect of which the Filer will become a co-obligor at the time of completion of the Transfer.

4. the Filer does not have any securities outstanding other than:

(a) designated credit support securities (as such term is defined in NI 51-102) for which Dundee Industrial REIT has provided a full and unconditional guarantee;

(b) securities, including LP A Units, issued to and held by Dundee Industrial REIT or an affiliate of Dundee Industrial REIT;

(c) debt securities issued to and held by banks, loan corporations, loan and investment corporations, savings companies, trust corporations, treasury branches or credit unions, financial services cooperatives, insurance companies or other financial institutions;

(d) securities issued under the exemption from the prospectus requirement in section 2.35 of NI 45-106;

(e) LP B Units or other designated exchangeable securities (as such term is defined in NI 51-102) for which Dundee Industrial REIT is the issuer of the underlying security (as such term is defined in NI 51-102); and

(f) Convertible Debentures.

5. Pursuant to the Trust Indenture, on and after the date of the Transfer, the Filer continues to be a co-obligor for the due and punctual payment of the principal amount of the Convertible Debentures, the interest thereon and all other moneys payable under the Trust Indenture and Dundee Industrial REIT continues to provide a guarantee of the payments to be made by the Filer in respect of the Convertible Debentures.

6. The Filer concurrently sends to all holders of designated exchangeable securities (as such term is defined in NI 51-102), including the LP B Units, all disclosure materials that are sent to holders of REIT Units in the manner and at the time required by securities legislation.

7. Dundee Industrial REIT includes in all mailings of proxy solicitation materials to holders of designated exchangeable securities (as such term is defined in NI 51-102) a clear and concise statement that:

(a) explains the reason the mailed materials relate solely to Dundee Industrial REIT;

(b) indicates that the designated exchangeable securities are the economic equivalent to the underlying units (as such term is defined in NI 51-102); and

(c) describes the voting rights associated with the designated exchangeable securities.

8. In respect of the Certification Requirements, the Filer continues to satisfy the conditions for relief from the Continuous Disclosure Requirements set forth above in paragraphs 1, 2, 3, 4, 5, 6 and 7.

"Sonny Randhawa"
Manager
Corporate Finance Branch