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 a business acquisition report (BAR) -- 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 one of the properties, Cinco Ranch. Prospectus dated June 27, 2014 included the Prospectus Financials, which included a financial forecast and independent appraisal for the Acquisition Properties. BAR to be filed will include the Prospectus Financials -- financial forecast and independent appraisal will be incorporated by reference into the BAR.

Applicable Legislative Provisions

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

July 24, 2014

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. 3) CORE FUND (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 Business Acquisition Report relating to financial statement disclosure for significant acquisitions, so that the Filer does not need to include in the business acquisition report (BAR) of the Filer relating to the Acquisition Transaction (as defined herein), the financial statements of (a) Cinco Ranch (as defined herein) for the period prior to its acquisition by the Cinco Ranch Vendor (as defined herein) and (b) Allure (as defined herein) and Sunset Ridge (as defined herein) for the period prior to the commencement of their respective operations (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 1801 -- 3300 Bloor Street West, West Tower, Toronto, Ontario, M8X 2X2.

2. The Filer is a limited partnership established on May 1, 2014 under the laws of the Province of Ontario pursuant to a limited partnership agreement dated May 1, 2014, as amended and restated thereafter as of July 4, 2014.

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

4. The limited partnership interests in the Filer are divided into five classes of 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 5,273,666 Units outstanding.

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

6. The Filer was formed for the primary purpose of indirectly acquiring, owning and operating a portfolio of income-producing rental properties in the U.S. multi-family real estate market, including an initial portfolio of interests in three properties (collectively, the Acquisition Properties) consisting of (i) a 100% interest in the Residences at Cinco Ranch in Houston, Texas (Cinco Ranch); (ii) a 100% interest in The Allure in Cedar Park, Texas (Allure); and (iii) a 50% interest in The Villages at Sunset Ridge in Humble, Texas (Sunset Ridge).

7. On June 27, 2014, the principal regulator issued a receipt (the Receipt) in respect of the final prospectus of the Filer (the Prospectus) relating to the initial public offering of the Units (the IPO), qualifying for distribution up to US$60 million of Units.

8. The Receipt evidenced the granting by the principal regulator 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 (a) Cinco Ranch for the period prior to its acquisition by the vendor thereof (the Cinco Ranch Vendor) on April 19, 2012 and (b) Allure and Sunset Ridge for the period prior to the commencement of their respective operations.

9. On July 9, 2014, the Filer completed its IPO of approximately US$49.62 million of Units, and on July 10, 2014, the Filer completed its indirect acquisition of the Acquisition Properties for an aggregate purchase price of approximately US$90.55 million, satisfied, in part, by way of cash from the proceeds of the IPO (theAcquisition Transaction).

10. Prior to the Acquisition Transaction, Cinco Ranch was owned by the Cinco Ranch Vendor, an arm's length third party that acquired the property on April 19, 2012.

11. The Cinco Ranch Vendor does not possess, nor has access to, and is not entitled to obtain access to, financial information in respect of Cinco Ranch for any period prior to its acquisition by the Cinco Ranch Vendor.

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

13. Prior to the Acquisition Transaction, Allure was indirectly acquired from an arm's length third party by the Manager and, pursuant to the Acquisition Transaction, the Filer indirectly acquired Allure from the Manager.

14. Allure commenced operations on April 1, 2013, following completion of the construction of its initial apartment suites.

15. The Manager was not the owner of Allure at its commencement of operations, however, the Manager obtained access to, or copies of, historical accounting records in respect of Allure for the period from its commencement of operations to its acquisition by the Manager.

16. Prior to the Acquisition Transaction, Sunset Ridge was indirectly acquired from an arm's length third party by the Manager and, pursuant to the Acquisition Transaction, the Filer indirectly acquired a 50% interest in Sunset Ridge from the Manager.

17. Sunset Ridge commenced operations on February 1, 2013, following completion of the construction of its initial apartment suites.

18. The Manager was not the owner of Sunset Ridge at its commencement of operations, however, the Manager obtained access to, or copies of, historical accounting records in respect of Sunset Ridge for the period from its commencement of operations to its acquisition by the Manager.

19. 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.

20. 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).

21. 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 Allure: audited carve-out statements of income (loss) and comprehensive income (loss), changes in owner's equity and cash flows for the three-month period ended March 31, 2014 and the period from April 1, 2013 (commencement of operations) to December 31, 2013; audited carve-out statements of financial position as at March 31, 2014 and December 31, 2013 along with unaudited comparative information as at April 1, 2013;

(b) in respect of Cinco Ranch: audited carve-out statements of income (loss) and comprehensive income (loss), changes in owners' equity and cash flows for the three-month period ended March 31, 2014, year ended December 31, 2013 and the period from April 19, 2012 (date of acquisition by the Cinco Ranch Vendor) to December 31, 2012 along with unaudited comparative information for the three-month period ended March 31, 2013; audited carve-out statements of financial position as at March 31, 2014, December 31, 2013, December 31, 2012 and April 19, 2012;

(c) in respect of Sunset Ridge: audited carve-out statements of income (loss) and comprehensive income (loss), changes in owner's equity and cash flows for the three-month period ended March 31, 2014 and the period from February 1, 2013 (commencement of operations) to December 31, 2013 along with unaudited comparative information for the three-month period ended March 31, 2013; audited carve-out statements of financial position as at March 31, 2014 and, December 31, 2013 along with unaudited comparative information as at February 1, 2013; and

(d) an unaudited pro forma condensed consolidated statement of financial position of the Filer as at March 31, 2014 (giving effect to the IPO including the acquisition of the Acquisition Properties by the Filer as if such events occurred on March 31, 2014); unaudited pro forma condensed consolidated statements of income (loss) and comprehensive income (loss) for the three-month period ended March 31, 2014 and the year ended December 31, 2013 (in each case giving effect to the IPO including the acquisition of the Acquisition Properties by the Filer as if such events occurred on January 1, 2013); together with accompanying notes, in each case prepared in accordance with IFRS;

(collectively, the Prospectus Financials).

22. The Filer will also incorporate by reference into the BAR, from the Prospectus:

(a) the financial forecast for each of the quarters ended September 30, 2014, December 31, 2014, March 31, 2015 and June 30, 2015 and for the 12-month period ended June 30, 2015, which includes information on all of the Acquisition Properties and is accompanied by a signed auditor's report with respect to the examination of the forecast made by the Filer's auditors (collectively, the Financial Forecast); and

(b) the descriptions of the appraisals completed by a third party appraiser for each of the Acquisition Properties (collectively, the Appraisals Description), a copy of each of which such appraisals is available under the Filer's profile on the SEDAR website at www.sedar.com.

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 with respect to the BAR provided that the Filer includes the Prospectus Financials in the BAR in respect of the Acquisition Transaction, and incorporates by reference into the BAR the Financial Forecast and the Appraisals Description.

"Sonny Randhawa"
Manager, Corporate Finance
Ontario Securities Commission