Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Application for exemptive relief to permit issuer and underwriter, acting as agent for the issuer, to enter into an equity distribution agreement to make "at the market" (ATM) distributions of trust units over the facilities of the TSX or another marketplace -- ATM distributions to be made pursuant to shelf prospectus procedures in Part 9 of NI 44-102 Shelf Distributions -- issuer will issue a press release and file agreements on SEDAR -- application for relief from prospectus delivery requirement -- delivery of prospectus not practicable in circumstances of an ATM distribution -- relief from prospectus delivery requirement has effect of removing two-day right of withdrawal and remedies of rescission or damages for non-delivery of the prospectus -- application for relief from certain prospectus form requirements -- relief granted to permit modified forward-looking certificate language -- relief granted on terms and conditions set out in decision document -- decision will terminate 25 months after the issuance of a receipt for the shelf prospectus -- decision and application also held in confidence by decision makers until the earlier of the entering into of an equity distribution agreement, waiver of confidentiality or 90 days from the date of the decision.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 71, 147.

National Instrument 44-101 Short Form Prospectus Distributions, Part 8 and Item 20 of Form 44-101F1.

National Instrument 44-102 Shelf Distributions, ss. 6.3, 6.7, Part 9 and ss. 2.1, 2.2 of Appendix A.

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.

March 10, 2020

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 SLATE RETAIL REIT (the Issuer) AND BMO NESBITT BURNS INC. (the Agent and, together with the Issuer, the Filers)

DECISION

Background

The Ontario Securities Commission (the Decision Maker), being the principal regulator in the Jurisdiction, has received an application (the Application) from the Filers for a decision under the securities legislation of the Jurisdiction (the Legislation) for the following relief (the Exemption Sought) that:

(a) the requirement that a dealer, not acting as agent of the purchaser, who receives an order or subscription for a security offered in a distribution to which the prospectus requirement applies, send or deliver to the purchaser the latest prospectus (including the applicable prospectus supplement(s) in the case of a base shelf prospectus), and any amendment to the prospectus (the Prospectus Delivery Requirement) does not apply to the Agent or any other TSX participating organization or other marketplace participant acting on behalf of the Agent as a selling agent (each, a Selling Agent) in connection with any "at-the-market distribution" (each, an ATM Distribution and collectively, an ATM Offering), as defined in National Instrument 44-102 Shelf Distributions (NI 44-102), of class U trust units (Units) of the Issuer pursuant to one or more substantially identical equity distribution agreements (each, an Equity Distribution Agreement) to be entered into by the Issuer and the Agent; and

(b) the requirements to include in a prospectus supplement or an amendment thereto, each of the following:

(i) a forward-looking issuer certificate of the Issuer in the form specified in section 2.1 or section 2.4, as applicable, of Appendix A to NI 44-102;

(ii) a forward-looking underwriter certificate in the form specified in section 2.2 or section 2.4, as applicable, of Appendix A to NI 44-102; and

(iii) a statement respecting purchasers' statutory rights of withdrawal and remedies of rescission or damages in substantially the form prescribed by Item 20 of Form 44-101F1 Short Form Prospectus,

(collectively, the Prospectus Form Requirements) do not apply to the Prospectus Supplement (as defined below) or an amendment thereto provided that the Issuer includes in the Prospectus Supplement or an amendment thereto the form of issuer certificate and form of underwriter certificate and include in the Prospectus Supplement or an amendment thereto the revised description of a purchaser's statutory rights of withdrawal and remedies for rescission or damages described below, in each case (other than with respect to the underwriter certificate) superseding and replacing the corresponding language in the Shelf Prospectus (as defined below) solely with regards to an ATM Offering.

The Decision Maker has also received a request from the Filers for a decision that the Application and this decision (together, the Confidential Material) be kept confidential and not be made public until the earliest of: (i) the date on which the Filers first enter into an Equity Distribution Agreement; (ii) the date the Filers advise the Decision Maker that there is no longer any need for the Confidential Material to remain confidential; and (iii) the date that is 90 days after the date of this decision (the Confidentiality Relief).

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

(a) pursuant to subsection 3.6(3)(b) National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions, as the Issuer's head office is located in Ontario, the Ontario Securities Commission is the principal regulator for the Application;

(b) the Filers have provided notice that subsection 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, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Nunavut and Yukon Territory (collectively and together with the Jurisdiction, the Reporting Jurisdictions); and

(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority.

Interpretation

Terms defined in MI 11-102, National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR), National Instrument 14-101 Definitions or NI 44-102 have the same meaning if used in this decision, unless otherwise defined herein. All dollar figures in this decision refer to Canadian dollars.

Representations

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

The Issuer

1. The Issuer is an unincorporated open-end limited purpose real estate investment trust established under and governed by the laws of the Province of Ontario. The head office of the Issuer is located in Toronto, Ontario.

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

3. The Units are listed on the Toronto Stock Exchange (the TSX) under the trading symbols "SRT.UN" (quoted in Canadian dollars) and "SRT.U" (quoted in U.S. dollars).

The Agent

4. The Agent is a corporation incorporated under the laws of Canada with its head office located in Toronto, Ontario.

5. The Agent is registered as an investment dealer under the securities legislation of each of the provinces and territories of Canada, is a member of the Investment Industry Regulatory Organization of Canada, and is a participating organization of the TSX.

6. The Agent is not in default of any requirements under applicable securities legislation in any jurisdiction of Canada.

Proposed ATM Distribution

7. Subject to mutual agreement on terms and conditions, the Filers propose to enter into one or more substantially identical Equity Distribution Agreements for the purpose of ATM Offerings involving the periodic sale of Units by the Issuer through the Agent, as agent, under the shelf prospectus procedures prescribed by Part 9 of NI 44-102.

8. The Issuer filed a short form base shelf prospectus in each of the Reporting Jurisdictions on March 2, 2020 providing for the distribution from time to time of Units and such other securities as the Issuer deems appropriate (the Shelf Prospectus). Prior to making an ATM Distribution, the Issuer will have filed in each of the Reporting Jurisdictions a prospectus supplement describing the terms of the applicable ATM Offering, including the terms of the applicable Equity Distribution Agreement, and otherwise supplementing the disclosure in the Shelf Prospectus (the Prospectus Supplement, and together with the Shelf Prospectus as supplemented or amended and including any documents incorporated by reference therein (which shall include any Designated News Release as defined below), the Prospectus).

9. Upon entering into an Equity Distribution Agreement, the Issuer will immediately:

(a) issue and file a news release pursuant to section 3.2 of NI 44-102 announcing the applicable Equity Distribution Agreement and indicating that the Shelf Prospectus and the Prospectus Supplement have been filed on SEDAR and disclosing where and how purchasers under the applicable ATM Offering may obtain copies; and

(b) file the Equity Distribution Agreement on SEDAR.

10. Under an Equity Distribution Agreement, the Issuer may conduct one or more ATM Distributions subject to the 10% limitation set out in subsection 9.1(1) of NI 44-102.

11. The Issuer will conduct ATM Distributions only through the Agent, as agent, directly, or through a Selling Agent, and only through the methods constituting "at-the-market distributions" within the meaning of NI 44-102, including sales made on the facilities of the TSX or another "marketplace" within the meaning of National Instrument 21-101 Marketplace Operation upon which the Units are listed, quoted or otherwise traded (each, a Marketplace).

12. The Agent will act as the sole agent of the Issuer in connection with an ATM Distribution directly or through one or more Selling Agents on a Marketplace, and will be the sole entity paid an agency fee or commission by the Issuer in connection with such sales. If sales are effected through a Selling Agent, the Selling Agent will be paid a seller's commission for effecting the trades on behalf of the Agent. The Agent will sign an underwriter certificate, in the form set out in paragraph 29 below, in the Prospectus Supplement. A purchaser's rights and remedies under applicable securities legislation against the Agent, as agent of an ATM Distribution through a Marketplace, will not be affected by a decision to effect the sale directly or through a Selling Agent.

13. The aggregate number of Units sold on one or more Marketplaces pursuant to an ATM Distribution on any trading day will not exceed 25% of the aggregate trading volume of the Units traded on all Marketplaces in Canada on that day.

14. Each Equity Distribution Agreement will provide that, at the time of each sale of Units pursuant to an ATM Distribution, the Issuer will represent to the Agent that the Prospectus contains full, true and plain disclosure of all material facts relating to the Issuer and Units being distributed. The Issuer will, therefore, be unable to proceed with sales pursuant to an ATM Distribution when it is in possession of undisclosed information that would constitute a material fact or a material change in respect of the Issuer or the Units.

15. During the period after the date of the applicable Prospectus Supplement and before the termination of any ATM Distribution, if the Issuer disseminates a news release disclosing information that, in the Issuer's determination, constitutes a "material fact" (as such term is defined in the Legislation), the Issuer will identify such news release as a "designated news release" for the purposes of the Prospectus. This designation will be made on the face page of the version of such news release filed on SEDAR (any such news release, a Designated News Release). Each Prospectus Supplement will provide that any such Designated News Release will be deemed to be incorporated by reference into the Prospectus. A Designated News Release will not be used to update disclosure in the Prospectus by the Issuer in the event of a "material change" (as such term is defined in the Legislation).

16. If, after the Issuer delivers a sell notice to the Agent directing the Agent to sell Units on the Issuer's behalf pursuant to the applicable Equity Distribution Agreement (a Sell Notice), the sale of Units specified in the Sell Notice, taking into consideration prior sales under an ATM Offering, would constitute a material fact or material change, the Issuer will suspend sales under the Equity Distribution Agreement until either: (i) it has filed a Designated News Release or material change report, as applicable, or amended the Prospectus; or (ii) circumstances have changed such that the sales would no longer constitute a material fact or material change.

17. In determining whether the sale of the number of Units specified in a Sell Notice would constitute a material fact or material change, the Issuer will take into account a number of factors, including, without limitation: (i) the parameters of the Sell Notice, including the number of Units proposed to be sold and any price or timing restrictions that the Issuer may impose with respect to the particular ATM Distribution; (ii) the percentage of the outstanding Units that the number of Units proposed to be sold pursuant to the Sell Notice represents; (iii) the trading volume and volatility of the Units; (iv) recent developments in the business, affairs and capital structure of the Issuer; (v) sales under earlier Sell Notices; and (vi) prevailing market conditions generally.

18. In addition, the Agent will monitor closely the market's reaction to trades made on any Marketplace pursuant to an ATM Distribution in order to evaluate the likely market impact of future trades. The Agent has experience and expertise in managing sell orders to limit downward pressure on trading prices. If the Agent has concerns as to whether a particular sell order placed by the Issuer may have a significant effect on the market price of the Units, the Agent will recommend against effecting the trades pursuant to the applicable Sell Notice at that time. It is in the interest of both the Issuer and the Agent to minimize the market impact of sales under an ATM Distribution.

Disclosure of Units Sold in an ATM Offering

19. For each month during which Units are distributed over the TSX or any other Marketplace by the Issuer pursuant to an ATM Offering under the Prospectus, the Issuer will file on SEDAR, within seven calendar days after the end of the month with respect to sales during the prior month, and make publicly available, as a notice of proceeds, a report disclosing the number and average price of Units so distributed during that month, as well as total gross proceeds, agent's commission and net proceeds.

20. The Issuer will also disclose in its annual and interim financial statements and management discussion and analysis filed on SEDAR in respect of that financial period, the number and average price of Units sold pursuant to an ATM Offering during that annual or interim financial period, as well as total gross proceeds, commissions and net proceeds.

Prospectus Delivery Requirement

21. Pursuant to the Prospectus Delivery Requirement, a dealer effecting a trade of securities offered under a prospectus is required to deliver a copy of the prospectus (including the applicable prospectus supplement(s) in the case of a base shelf prospectus) to the purchaser within prescribed time limits.

22. The delivery of a prospectus is not practicable in the circumstances of ATM Distributions, as neither the Agent nor a Selling Agent effecting the trade will know the identity of the purchasers.

23. The Prospectus will be filed and readily available to all purchasers electronically via SEDAR. As stated in paragraph 9 above, the Issuer will issue a news release that specifies where and how copies of the Prospectus can be obtained.

24. The liability of an issuer or an underwriter (or others) for a misrepresentation in a prospectus pursuant to the civil liability provisions of the Legislation will not be affected by the grant of an exemption from the Prospectus Delivery Requirement, because purchasers of securities offered by a prospectus during the period of distribution have a right of action for damages or rescission, without regard to whether the purchaser relied on the misrepresentation or in fact received a copy of the prospectus.

Withdrawal Right and Right of Action for Non-Delivery

25. Pursuant to the Legislation, an agreement to purchase securities in respect of a distribution to which the prospectus requirement applies is not binding on the purchaser if a dealer receives, not later than midnight on the second day (exclusive of Saturdays, Sundays and holidays) after receipt by the purchaser of the latest prospectus or any amendment to the prospectus, a notice in writing that the purchaser does not intend to be bound by the agreement of purchase (the Withdrawal Right).

26. Pursuant to the Legislation, a purchaser of securities to whom a prospectus was required to be sent or delivered in compliance with the Prospectus Delivery Requirement, but was not so sent or delivered, has a right of action for rescission or damages against the dealer who did not comply with the Prospectus Delivery Requirement (the Right of Action for Non-Delivery).

27. Neither the Withdrawal Right nor the Right of Action for Non-Delivery is workable in the context of ATM Distributions because of the impracticability of delivering the Prospectus to a purchaser of Units thereunder.

Prospectus Form Requirements

28. To reflect the fact that an ATM Offering is a continuous distribution, the Prospectus Supplement and any amendment thereto will include the following issuer certificate in substitution for the certificate prescribed by the Prospectus Form Requirements (with appropriate modifications in respect of the filing of an amendment prescribed by section 2.4 of Appendix A to NI 44-102), such issuer certificate to supersede and replace the issuer certificate in the Shelf Prospectus, solely with regards to an ATM Offering:

"The short form prospectus, together with the documents incorporated in this prospectus by reference, as supplemented by the foregoing, as of the date of a particular distribution of securities offered by the prospectus, will, as of that date, constitute full, true and plain disclosure of all material facts relating to the securities offered by the prospectus and this supplement as required by the securities legislation of each of the provinces and territories of Canada."

29. To reflect the fact that an ATM Offering is a continuous distribution, the Prospectus Supplement and any amendment thereto will include the following underwriter certificate in substitution for the certificate prescribed by the Prospectus Form Requirements:

"To the best of our knowledge, information and belief, the short form prospectus, together with the documents incorporated in the prospectus by reference, as supplemented by the foregoing, as of the date of a particular distribution of securities offered by the prospectus, will, as of that date, constitute full, true and plain disclosure of all material facts relating to the securities offered by the prospectus and this supplement, as required by the securities legislation of each of the provinces and territories of Canada."

30. A different statement of purchasers' rights than that required by the Legislation is necessary so that the Prospectus Supplement will accurately reflect the relief granted from the Prospectus Delivery Requirement. Accordingly, the Prospectus Supplement will state the following, with the date reference completed, in substitution for the language prescribed by the Prospectus Form Requirements:

"Securities legislation in certain of the provinces and territories of Canada provides purchasers with the right to withdraw from an agreement to purchase securities and with remedies for rescission or, in some jurisdictions, revision of the price, or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment are not delivered to the purchaser, provided that the remedies are exercised by the purchaser within the time limit prescribed by securities legislation. However, purchasers of Units under an at-the-market distribution by the REIT will not have the right to withdraw from an agreement to purchase the Units and will not have remedies of rescission or, in some jurisdictions, revision of the price, or damages for non-delivery of the prospectus, because the prospectus and prospectus supplements relating to the Units purchased by the purchaser and any amendment relating to Units purchased by such purchaser will not be delivered as permitted under a decision dated [•], 2020 and granted pursuant to National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.

Securities legislation in certain of the provinces and territories of Canada also provides purchasers with remedies for rescission or, in some jurisdictions, revision of the price or damages if the prospectus and prospectus supplements relating to securities purchased by a purchaser and any amendment contains a misrepresentation, provided that the remedies are exercised by the purchaser within the time limit prescribed by securities legislation. Any remedies under securities legislation that a purchaser of Units under an at-the-market distribution by the REIT may have against the REIT or the Agent for rescission or, in some jurisdictions, revision of the price, or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment contain a misrepresentation remain unaffected by the non-delivery and the decision referred to above.

Purchasers should refer to any applicable provisions of securities legislation and the decision referred to above for the particulars of these rights or consult with a legal adviser."

31. The Prospectus Supplement will disclose that, solely with regards to an ATM Offering, the statement in paragraph 30 above supersedes and replaces the statement of purchasers' rights contained in the Shelf Prospectus.

Decision

The Decision Maker is satisfied that this 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 provided that:

(a) the Issuer complies with the disclosure requirements set out in paragraphs 19, 20, 28, 29, 30 and 31; and

(b) the Issuer and the Agent respectively comply with the representations made in paragraphs 9, 10, 11, 12, 13, 14, 15, 16, 17 and 18.

This decision will terminate on April 2, 2022 (being the date that is 25 months from the date of the receipt for the Shelf Prospectus).

The further decision of the Decision Maker is that the Confidentiality Relief in respect of the Exemptions Sought is granted.

As to the Exemption Sought from the Prospectus Delivery Requirement and the Confidentiality Relief:

"Craig Hayman"
Commissioner
Ontario Securities Commission
"Garnet Fenn"
Commissioner
Ontario Securities Commission

As to the Exemption Sought from the Prospectus Delivery Requirement, the Prospectus Form Requirements and the Confidentiality Relief:

"Lina Creta"
Manager, Corporate Finance
Ontario Securities Commission