Securities Law & Instruments

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 of the acquisition properties -- Filer has made every reasonable effort to obtain access to, or copies of, the historical accounting records in respect of the acquisition properties necessary to prepare and audit the acquisition properties financial statements, but such efforts were unsuccessful in respect of two of the properties -- Filer filed a prospectus on April 3, 2013 -- Prior to filing the prospectus, the Filer submitted a pre-filing requesting an interpretation that the prospectus 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 included the prospectus financials -- Relief granted subject to conditions including provision of the acquisition financials.

Applicable Legislative Provisions

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

December 16, 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
STARLIGHT U.S. MULTI-FAMILY (NO. 2) CORE FUND
(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the Decision Maker (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 Business Acquisition Report relating to financial statement disclosure for significant acquisitions, so that the Filer does not need to include financial statements of Palm Valley (as defined herein) for the period prior to the date of its acquisition by the Vendor (as defined herein) in the business acquisition report (BAR) of the Filer relating to the Acquisition Transaction (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, 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 and Newfoundland and Labrador (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 401 The West Mall, Suite 1100, Toronto, Ontario, M9C 5J5.

2. The Filer is a limited partnership established on September 23, 2013 under the laws of the Province of Ontario pursuant to a limited partnership agreement dated September 23, 2013, as amended and/or restated from time to time thereafter.

3. The Filer is a reporting issuer, or the equivalent thereof, in each Province of Canada and, to the best of its knowledge, information and belief, is not in default of any requirement of the Legislation.

4. The interests in the Filer are divided into five classes of limited partnership units (Units): class A limited partnership units (Class A Units), class C limited partnership units, class D limited partnership units, class F limited partnership units and class U limited partnership units (Class U Units). The Filer is authorized to issue an unlimited number of Units of each class. As at the date hereof, there are 3,400,000 Units outstanding.

5. The Class A Units and Class U Units of the Filer are listed and posted for trading on the TSX Venture Exchange under the symbols "UMF.A" and "UMF.U" respectively.

6. The Filer was formed for the primary purpose of indirectly acquiring, owning and operating a portfolio of diversified income-producing rental properties in the U.S. multi-family real estate market, including an initial portfolio of two properties (the Acquisition Properties) consisting of (i) a 65% interest in Falls at Eagle Creek in Houston, Texas (Eagle Creek) and (ii) a 100% interest in Palm Valley in Austin, Texas (Palm Valley).

7. On October 31, 2013, the Decision Maker issued a receipt (the Receipt) in respect of a final prospectus of the Filer (the Prospectus) relating to the initial public offering of the Units (the IPO) qualifying for distribution up to US$50 million of Units (as well as further Units issuable pursuant to an over-allotment option granted to the agents of the IPO).

8. The Receipt evidenced the granting by the Decision Maker of relief requested relating to financial statement presentation in the Prospectus, exempting the Filer from, among other things, the requirements of National Instrument 41-101 General Prospectus Requirements to include historical financial statements in respect of Palm Valley, for the period prior to the acquisition of Palm Valley by the vendor thereof (the Vendor) on December 8, 2011.

9. On November 15, 2013, the Filer completed its IPO of approximately US$32.7 million of Units, and on November 18, 2013, the Filer completed its acquisition of the Acquisition Properties for an aggregate purchase price of approximately US$63.6 million, satisfied, in part, by cash from the proceeds of the IPO (the Acquisition Transaction).

10. Other than summary internal financial information commencing May 2010 (which is incomplete and unsuitable for the purposes of preparing audited financial statements) obtained as part of its due diligence process in connection with the acquisition, the Vendor does not possess, nor has access to, and is not entitled to obtain access to, financial information in respect of Palm Valley for any period prior to its acquisition by the Vendor on December 8, 2011.

11. Starlight Investments Ltd., the promoter of the Filer for the IPO and the manager of the Filer (the Manager) had, without success, made (including with the assistance of the Vendor) every reasonable effort to obtain access to, or copies of, historical accounting records in respect of Palm Valley for the period prior to its acquisition by the Vendor. In particular, the entity that sold Palm Valley to the Vendor has refused to provide such historical accounting records to any of the Vendor, the Filer and the Manager.

12. The Acquisition Transaction is a "significant acquisition" for purposes of NI 51-102 and the Filer must file a BAR in respect of the Acquisition Transaction.

13. Unless otherwise exempted 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 Properties (the BAR Financials).

14. The Filer will satisfy the requirements in respect of the BAR Financials by including in the BAR the following financial statements (each prepared in accordance with International Financial Reporting Standards (IFRS)):

(a) in respect of Eagle Creek prior to its acquisition by Starlight U.S. Eagle Creek on September 16, 2013: audited carve-out statements of income and comprehensive income, changes in owners' equity and of cash flows for the years ended December 31, 2012, December 31, 2011 and December 31, 2010; audited carve-out statements of financial position as at December 31, 2012, December 31, 2011 and December 31, 2010; unaudited carve-out statements of income and comprehensive income, changes in owners' equity and cash flows for the interim period from January 1, 2013 to September 16, 2013 together with comparative financial information for the nine month period ended September 30, 2012; unaudited carve-out statements of income and comprehensive income for the interim period from July 1, 2013 to September 16, 2013 together with comparative financial information for the three month period ended September 30, 2012; and an unaudited statement of financial position as at September 16, 2013;

(b) in respect of Eagle Creek after its acquisition by Starlight U.S. Eagle Creek on September 16, 2013: unaudited carve-out statements of income and comprehensive income, changes in owner's equity and cash flows for the interim period from September 16, 2013 to September 30, 2013 and an unaudited carve-out statement of financial position as at September 30, 2013;

(c) in respect of Palm Valley after its acquisition by the Vendor on December 8, 2011: audited carve-out statements of income and comprehensive income, changes in owners' equity and cash flows for the nine months ended September 30, 2013, the year ended December 31, 2012 and the period from December 8, 2011 to December 31, 2011; audited carve-out statements of financial position as at September 30, 2013, December 31, 2012, December 31, 2011 and December 8, 2011; unaudited statements of income and comprehensive income for the three month period ended September 30, 2013, together with unaudited comparative financial information for the three and nine month periods ended September 30, 2012; and audited carve-out statements of cash flows for the nine month period ended September 30, 2013, together with unaudited comparative financial information for the nine month period ended September 30, 2012; and

(d) unaudited pro forma condensed consolidated financial statements of the Filer, consisting of the pro forma condensed consolidated statement of income (loss) and comprehensive income (loss) of the Filer for the year ended December 31, 2012 and the nine month period ended September 30, 2013 and unaudited pro forma condensed consolidated statement of financial position of the Filer as at September 30, 2013 and the related notes thereto, together with any additional pro forma statements of the Filer, and the related notes thereto, in each case prepared in accordance with IFRS.

(collectively, the Acquisition Financials).

Decision

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

The decision of the Decision Maker under the Legislation is that the Exemption Sought is granted with respect to the BAR provided that the Filer includes the Acquisition Financials in the BAR in respect of the Acquisition.

"Sonny Randhawa"
Manager, Corporate Finance
Ontario Securities Commission