H&R Real Estate Investment Trust

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Real estate investment trust and finance trust received past relief from: NI 51-102, NI 52-109, NI 52-110 , NI 44-101, NI 44-102 to accommodate stapled structure. During the period after a reorganization is implemented to eliminate the stapled structure and before the filer has filed stand-alone financial statements, the filer will not be able to rely on the past relief. Transitional relief granted.

Securities Act (Ontario), s. 74(1) – relief from prospectus requirements to allow a trust to issue trust units to existing holders of exchangeable units of certain partnerships controlled by the trust pursuant to a distribution reinvestment plan (DRIP) of the trust – Distributions made in respect of exchangeable units to be applied to the purchase of trust units under the DRIP – relief required since exemption for DRIPs in National Instrument 45-106 Prospectus Exemptions is not available for use – exchangeable units are intended to be, to the greatest extent possible, the economic equivalent of trust units – holders of exchangeable units are entitled to receive distributions paid by the partnerships that are equivalent to distributions paid by the trust on trust units – exchangeable units are exchangeable into trust units at any time – relief also granted to allow DRIP participants that are holders of exchangeable units to make optional cash payments to purchase additional trust units – first trade relief granted for trust units acquired under the decision, subject to certain conditions.

Applicable Legislative Provisions

National Instrument 44-101 Short Form Prospectus Distributions, ss. 2.2, 8.1.
National Instrument 44-102 Shelf Distributions, ss. 2.2. 11.1.
National Instrument 51-102 Continuous Disclosure Obligations, Parts 4, 5, 6, 7 and 8, s. 13.1.
National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, ss. 4.2, 5.2, 8.6.
National Instrument 52-110 Audit Committees, Part 5, s. 8.1.
Securities Act, R.S.O. 1990, c. S.5, as am., s. 74(1).

July 27, 2018

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
H&R REAL ESTATE INVESTMENT TRUST
(the “Filer”)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision (the “Requested Relief”) under the securities legislation of the Jurisdiction (the “Legislation”) that:

Financial Disclosure Requirements

(i)            pursuant to section 13.1 of National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102”), the Filer be exempted from the obligations in Parts 4 and 5 of NI 51-102 relating to the filing of annual and interim financial statements, along with the accompanying annual or interim management’s discussion and analysis (“MD&A”), on a stand-alone basis, and relating to the delivery of the same to the holders of trust units (“H&R REIT Units”) of the Filer (the “Financial Disclosure Requirements”);

(ii)           pursuant to section 13.1 of NI 51-102, the Filer be exempted from the requirements (the “BAR Requirements”) of Part 8 of NI 51-102 to (i) determine whether an acquisition or probable acquisition is a significant acquisition with reference to stand-alone financial statements of the Filer, and (ii) present stand-alone historical and pro forma financial statements in a business acquisition report (a “BAR”);

(iii)           pursuant to section 8.6 of National Instrument 52-109 – Certification of Disclosure in Issuers' Annual and Interim Filings (“NI 52-109”), the Filer be exempted from the requirements of sections 4.2 and 5.2 of NI 52-109 in respect of filing the chief executive officer and chief financial officer certificates that the Filer would normally have to file if it prepared annual and interim financial statements and MD&A on a stand-alone basis (the “Certificate Form Requirements”);

Short Form / Shelf Qualification

(iv)          pursuant to section 8.1 of National Instrument 44-101 – Short Form Prospectus Distributions (“NI 44-101”), the Filer be exempted from the requirements contained in subparagraph 2.2(d)(i) of NI 44-101 for eligibility to file a short form prospectus, in particular the requirement that the Filer have current annual financial statements for any period for which the Filer previously filed Combined Financial Statements (as defined below) (the “Short Form Criteria”);

(v)           pursuant to section 11.1 of National Instrument 44-102 – Shelf Distributions (“NI 44-102”), subsection 2.2(1) of NI 44-102, with respect to the requirement that the Filer have current annual financial statements for any period for which the Filer previously filed Combined Financial Statements, and subparagraph 2.2(3)(b)(i) of NI 44-102, shall not apply to the Filer (the “Shelf Criteria”); and

Prospectus Requirements

(vi)          the Filer be exempt from the prospectus requirements in the Legislation in respect of any trade of H&R REIT Units by the Filer (or by a trustee, custodian or administrator acting for or on behalf of the Filer) to holders of units of certain subsidiary limited partnerships controlled by H&R REIT (the “Subsidiary Partnerships”), which will be exchangeable for H&R REIT Units in accordance with their terms (the “Exchangeable Units”), under a distribution reinvestment plan and unit purchase plan (the “DRIP”) under which distributions out of earnings, surplus, capital, or other sources payable to holders of Exchangeable Units in respect of the Exchangeable Units and optional cash payments by holders of Exchangeable Units are applied to the purchase of H&R REIT Units (“DRIP Exemption”),

in each case provided that certain conditions are satisfied.

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

(a)           the Ontario Securities Commission is the principal regulator for the application, and

(a)           the Filer has provided notice that subsection 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, Quebec, Prince Edward Island, New Brunswick, Newfoundland and Labrador and Nova Scotia (collectively and together 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 Filer is an open-ended unincorporated real estate investment trust established under the laws of the Province of Ontario that owns a North American portfolio of office, industrial, residential and retail properties. The head office of the Filer is located in Toronto, Ontario.

2.             H&R Finance Trust (“H&R Finance” and together with the Filer, the “Trusts”) is an open-ended limited purpose unit trust established under the laws of the Province of Ontario that primarily invests in notes issued by H&R REIT (U.S.) Holdings Inc. (“U.S. Holdco”), an indirect wholly-owned subsidiary of the Filer. The head office of H&R Finance is located in Toronto, Ontario.

3.             The Trusts are reporting issuers or the equivalent under the securities legislation of each of the Provinces of Canada and are in compliance in all material respects with the applicable requirements of the securities legislation of each of the Provinces of Canada.

4.             As provided in the respective declarations of trust of the Filer and H&R Finance, each H&R REIT Unit is stapled to a trust unit of H&R Finance (an “H&R Finance Unit”) (and each H&R Finance Unit is stapled to a H&R REIT Unit), and a H&R REIT Unit, together with a H&R Finance Unit, trades as a “Stapled Unit” (the “Stapled Units”) until there is an “Event of Uncoupling” (the “Stapled Structure”).

5.             Pursuant to a decision document dated October 24, 2013 In the Matter of H&R Real Estate Investment Trust and H&R Finance Trust (the “2013 Decision”), subject to certain conditions stipulated therein: (i) the Filer has been granted an exemption from the Financial Disclosure Requirements; (ii) H&R Finance has been granted, pursuant to section 13.1 of NI 51-102, an exemption from the obligations in Parts 4 and 5 of NI 51-102 relating to the filing of annual and interim financial statements, along with the accompanying annual or interim MD&A, on a stand-alone basis, and relating to the delivery of the same to the holders of H&R Finance Units; (iii) the Trusts have been granted an exemption from the BAR Requirements; (iv) the Trusts have been granted an exemption from the Short Form Criteria, in particular, the requirement that the Trusts have current annual financial statements for any period for which the Trusts file one set of financial statements prepared on a combined basis (“Combined Financial Statements”); and (v) the Trusts have been granted an exemption from the Certificate Form Requirements.

6.             Pursuant to the 2013 Decision, the Trusts obtained relief similar to the Requested Relief in connection with the Financial Disclosure Requirements, the BAR Requirements, the Certificate Form Requirements and the Short Form Criteria (the “2013 Relief”).

7.             Pursuant to a decision document dated April 28, 2015 In the Matter of H&R Real Estate Investment Trust and H&R Finance Trust (the “2015 Decision”) the Trusts have been granted an exemption from the Shelf Criteria.

8.             Pursuant to the 2015 Decision, the Trusts obtained relief similar to the Requested Relief in connection with the Shelf Criteria (the “2015 Relief”).

9.             Pursuant to a decision document dated March 11, 2016 In the Matter of H&R Real Estate Investment Trust and H&R Finance Trust, the Trusts have been granted an exemption similar to the DRIP Exemption (the “2016 Relief”, together with the 2013 Relief and the 2015 Relief, the “Prior Relief”).

10.          One of the conditions to each of the 2013 Relief and 2015 Relief is that the H&R REIT Units and H&R Finance Units remain stapled. One of the conditions to the 2016 Relief is that the Stapled Units trade on a marketplace (as defined in National Instrument 21-101 Marketplace Operation).

11.          On October 19, 2017, the Trusts announced a proposed reorganization of the Stapled Structure (the “Reorganization”). The Reorganization was described in the Trusts’ joint management information circular dated October 31, 2017. Joint meetings of unitholders of the Trusts were held on December 7, 2017 to approve the Reorganization. The voting unitholders of the Trusts approved the Reorganization by the requisite majority, with approximately 99% of the votes cast by voting unitholders of each of the Trusts, respectively, voting in favour of the Reorganization. On December 15, 2017, the Trusts announced receipt of a final order from the Court of Queen’s Bench of Alberta (the “Court”) approving the Reorganization.

12.          On February 14, 2018, as a result of the U.S. federal income tax legislation originally referred to as the Tax Cuts and Jobs Act enacted in December 2017, the Trusts announced that they had determined that the Stapled Structure was no longer necessary and that the Reorganization would be amended to eliminate the Stapled Structure with the Filer remaining in place and holders of H&R REIT Units continuing to hold such units.

13.          On March 21, 2018, the Trusts and the other parties to the Reorganization agreed to the terms of an amended Reorganization (the “Amended Reorganization”) and the Trusts received a final order from the Court approving the Amended Reorganization. The announcement of receipt of the final order and the details of the Amended Reorganization were disclosed in a press release of the Trusts dated March 22, 2018.

14.          The Amended Reorganization will be effected by way of plan of arrangement involving the Filer, H&R Finance and certain of the Filer’s subsidiaries resulting in, among other things, (i) H&R Finance transferring debt owed to it by U.S. Holdco to the Filer, (ii) the occurrence of an “Event of Uncoupling”, (iii) unitholders subsequently transferring their H&R Finance Units to the Filer for nominal consideration and retaining their H&R REIT Units, and (iv) termination of H&R Finance and the Stapled Structure. As a consequence of the Amended Reorganization, the H&R REIT Units and H&R Finance Units will be “unstapled”. The Filer will continue to exist and be a reporting issuer and holders of H&R REIT Units will continue to hold those units. As a result of its termination, H&R Finance will cease to be a reporting issuer. Following completion of the Amended Reorganization, investments that are currently held through the Filer and H&R Finance will instead be held solely through the Filer. The H&R REIT Units are expected to trade on the Toronto Stock Exchange (the “TSX”) under the ticker symbol “HR.UN”.

15.          The Amended Reorganization is subject to the receipt by the Trusts of an advance income tax ruling from the Canada Revenue Agency in form and substance satisfactory to the Trusts and other customary closing conditions. The Filer received the required advance tax ruling dated July 12, 2018. The Amended Reorganization is expected to be implemented in August 2018.

16.          If the Filer relies on the Requested Relief from the Short Form Criteria or Shelf Criteria, each short form prospectus, prospectus supplement or pricing supplement to a short form base shelf prospectus, or other similar public offering document filed by the Filer qualifying the distribution of securities of the Filer (a “Prospectus”), will incorporate by reference at least the following documents (the “Prospectus Documents”):

(a)           the Filer’s then current annual information form (“the Filer’s Current AIF”);

(b)           the most recently filed audited annual Combined Financial Statements, along with the corresponding MD&A, until such time as the Filer files its next audited annual financial statements in accordance with NI 51-102 (expected to be by March 31, 2019);

(c)           (i) if, at the date of the Prospectus, the Filer has filed or has been required to file interim financial statements for its most recently completed interim period and Combined Financial Statements relating to the applicable interim period have been filed, such Combined Financial Statements relating to such interim period, along with the corresponding interim MD&A, or (ii) if, at the date of the Prospectus, the Filer has filed or has been required to file interim financial statements for a period subsequent to the then most recent financial year-end of the Filer in respect of which annual financial statements have been filed, and such interim financial statements are stand-alone financial statements of the Filer, such stand-alone interim financial statements relating to such interim period, along with the corresponding interim MD&A;

(d)           the content of any news release or other public communication that is publicly disseminated by, or on behalf of, the Filer prior to the filing of the Prospectus through news release or otherwise and that contains historical financial information about the Filer and H&R Finance, or the Filer on a stand-alone basis, as applicable for a period more recent than the end of the most recent period for which financial statements are required under paragraphs (b) and (c) above;

(e)           any material change report, other than a confidential material change report, filed by the Filer under Part 7 of NI 51-102 since the end of the financial year in respect of which the Filer’s Current AIF is filed;

(f)            any BAR filed by the Filer for acquisitions completed since the beginning of the financial year in respect of which the Filer’s Current AIF is filed, unless:

(i)            the BAR is incorporated by reference in the Filer’s Current AIF; or

(ii)           at least nine months of the relevant business operations are reflected in annual financial statements required under paragraph (b) above;

(g)           any information circular filed by the Filer since the beginning of the financial year in respect of which the Filer’s Current AIF is filed, other than an information circular prepared in connection with an annual general meeting of the Filer if the Filer has filed and incorporated by reference in the Prospectus an information circular for a subsequent annual general meeting; and

(h)           any other disclosure document which the Filer has filed pursuant to an undertaking to a provincial and territorial securities regulatory authority, or pursuant to an exemption from any requirement of securities legislation of a Canadian jurisdiction, since the beginning of the financial year in respect of which the Filer’s Current AIF is filed.

17.          As a result of the 2013 Decision, prior to the effective date of the Amended Reorganization, the Filer is exempt from the requirement to file financial statements and MD&A in accordance with NI 51-102 subject to certain conditions, including that the Filer files Combined Financial Statements and related MD&A and that each H&R Finance Unit remains stapled to a H&R REIT Unit and trades together as a Stapled Unit. Accordingly, following the effective date of the Amended Reorganization, at the time the Filer files a short form prospectus pursuant to NI 44-101, or a short form base shelf prospectus pursuant to NI 44-102, it will not be able to satisfy the Short Form Criteria or Shelf Criteria, respectively, since it will not have current annual financial statements, as it has only prepared and filed Combined Financial Statements, and since each of the 2013 Relief and 2015 Relief will no longer be effective as an “Event of Uncoupling”, as defined in each of the 2013 Decision and the 2015 Decision, will have occurred.

18.          The Filer has satisfied, and is currently satisfying, each of the conditions to the Prior Relief.

19.          For the period from the effective date of the Amended Reorganization until the Filer has filed its own stand-alone annual financial statements pursuant to NI 51-102 (expected to be by March 31, 2019), the Filer would not be able to satisfy the Short Form Criteria or Shelf Criteria, absent the Requested Relief.

20.          If the Amended Reorganization is implemented following the end of an interim period or fiscal year but prior to the time the Filer files Combined Financial Statements and accompanying MD&A for such interim period or fiscal year, the Filer will not be able to rely on the 2013 Relief when filing the financial statements and MD&A for such interim period or fiscal year because the H&R REIT Units and H&R Finance Units will become “unstapled” as part of the Amended Reorganization and will no longer trade together as Stapled Units. For such an interim period or fiscal year, the Filer will file Combined Financial Statements and accompanying MD&A for that interim period or fiscal year in accordance with the Requested Relief. The Requested Relief in this regard will be conditional upon, among other things, (i) the Stapled Structure having been in existence at the end of the applicable interim period or fiscal year, and (ii) the Amended Reorganization having been implemented prior to the Filer having filed Combined Financial Statements and accompanying MD&A for such interim period or fiscal year. In such circumstances, following the completion of the fiscal period in which the Amended Reorganization is implemented, the Filer will file stand-alone financial statements and accompanying MD&A in accordance with NI 51-102.

21.          H&R REIT controls, either directly or indirectly, certain limited partnerships which issue, among other securities, units exchangeable at any time for Stapled Units (and, following completion of the Amended Reorganization, H&R REIT Units). These exchangeable units include the Class B Limited Participation LP units (“HRLP Exchangeable Units”) of H&R Portfolio Limited Partnership, the Exchangeable GP units (“HRRMSLP Exchangeable Units”) of H&R REIT Management Services Limited Partnership and exchangeable limited partnership units (the “Primaris Exchangeable Units”) of Grant Park Limited Partnership and Place du Royaume Limited Partnership.

22.          The HRLP Exchangeable Units, the HRRMSLP Exchangeable Units and the Primaris Exchangeable Units are each intended to be, to the greatest extent practicable, the economic equivalent of the Stapled Units and on completion of the Amended Reorganization, the economic equivalent of the H&R REIT Units.

23.          The Filer first implemented the DRIP effective January 1, 2000. The DRIP was amended and restated on December 21, 2001, on October 1, 2008 following the internal reorganization of the Filer to establish H&R Finance and the Stapled Units, and on March 11, 2016 to allow Exchangeable Units to participate. The DRIP will be further amended and restated as a result of the Amended Reorganization.

24.          The Filer will be unable to rely on the exemption from the prospectus requirement in the Legislation with respect to reinvestment plans to distribute H&R REIT Units under the amended and restated DRIP to holders of Exchangeable Units enrolled in the amended and restated DRIP since this exemption only permits distributions made in respect of an issuer’s securities and optional cash payments by a holder of an issuer’s securities to be applied to the purchase of the same issuer’s securities.

Decision

1.             The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

2.             The decision of the principal regulator under the Legislation is that the Requested Relief is granted effective on completion of the Amended Reorganization, provided that the Amended Reorganization is implemented in substantially the manner contemplated by the representations above and provided that the conditions set out below are satisfied:

(a)           In respect of the Financial Disclosure Requirements:

(i)            the Filer files, under its SEDAR profile, Combined Financial Statements using International Financial Reporting Standards (“IFRS”) to reflect the financial position and results of the Filer and H&R Finance on a combined basis for any completed fiscal period prior to implementation of the Amended Reorganization;

(ii)           any Combined Financial Statements filed by the Filer include the components specified in subsections 4.1(1) of NI 51-102 (for annual financial reporting periods) and 4.3(2) of NI 51-102 (for interim financial reporting periods);

(iii)          the annual Combined Financial Statements filed by the Filer are audited;

(iv)          the annual Combined Financial Statements filed by the Filer are accompanied by the fee, if any, applicable to filings of annual financial statements;

(v)           the MD&A of the Filer is prepared with reference to the Combined Financial Statements for any completed fiscal period prior to implementation of the Amended Reorganization;

(vi)          the Filer and H&R Finance satisfied or were exempt from the requirements set out in National Instrument 52-110 – Audit Committees prior to implementation of the Amended Reorganization;

(vii)         the audit committee of the Filer is responsible for:

(A)           overseeing the work of the external auditors engaged for the purposes of auditing or reviewing the Combined Financial Statements under IFRS for any completed fiscal period prior to implementation of the Amended Reorganization; and

(B)           resolving disputes between the external auditors and management of the Filer regarding financial reporting;

(viii)         the Filer continues to satisfy the requirements of section 4.6 of NI 51-102, except that for each financial reporting period in respect of which Combined Financial Statements are prepared, the Filer shall only be required to send to holders of H&R REIT Units copies of the Combined Financial Statements and related MD&A;

(ix)          the auditors of the Filer are the same as the auditors of H&R Finance prior to implementation of the Amended Reorganization;

(x)           prior to the implementation of the Amended Reorganization, except for distributions of H&R REIT Units that were immediately followed by a consolidation of outstanding H&R REIT Units such that an equal number of H&R REIT Units and H&R Finance Units are outstanding immediately following such consolidation, (A) the Filer did not issue any H&R REIT Units that were not stapled to H&R Finance Units, (B) each H&R REIT Unit was stapled to a H&R Finance Unit and traded as a Stapled Unit, and (C) each H&R Finance Unit was stapled to a H&R REIT Unit and traded as a Stapled Unit;

(xi)          prior to the implementation of the Amended Reorganization, except for distributions of H&R Finance Units that were immediately followed by a consolidation of outstanding H&R Finance Units such that an equal number of H&R Finance Units and H&R REIT Units were outstanding immediately following such consolidation, (A) H&R Finance did not issue any H&R Finance Units that were not stapled to H&R REIT Units, (B) each H&R Finance Unit was stapled to a H&R REIT Unit and traded as a Stapled Unit, and (C) each H&R REIT Unit was stapled to a H&R Finance Unit and traded as a Stapled Unit; and

(xii)         each Stapled Unit was listed and posted for trading on the TSX prior to the implementation of the Amended Reorganization.

(b)           In respect of the BAR Requirements:

(i)            the Filer satisfied each of the conditions set out in paragraph 2(a) above that were to be satisfied prior to implementation of the Amended Reorganization, and satisfies each of the conditions set out in paragraph 2(a) above that are to be satisfied following implementation of the Amended Reorganization;

(ii)           the Filer applies the significance tests under subsection 8.3(2) of NI 51-102 with reference to the most recent annual Combined Financial Statements until such time as the Filer files its next audited annual financial statements in accordance with NI 51-102 (expected to be by March 31, 2019);

(iii)           the Filer applies the optional significant tests under Section 8.3(4) of NI 51-102 with reference to the most recently filed interim financial statements that are Combined Financial Statements until such time as the Filer files its next financial statements for an interim period or fiscal year that are not Combined Financial Statements;

(iv)          if a BAR is required to be filed, the BAR includes, with respect to the Filer, pro forma combined and/or stand-alone financial statements for the applicable periods and as at the applicable statement of financial position date.

(c)           In respect of the Certificate Form Requirements:

(i)            the Filer satisfied each of the conditions set out in paragraph 2(a) above that were to be satisfied prior to implementation of the Amended Reorganization, and satisfies each of the conditions set out in paragraph 2(a) above that are to be satisfied following implementation of the Amended Reorganization;

(ii)           the certificates filed by the Filer in accordance with section 4.1 of NI 52-109, in connection with the filing of Combined Financial Statements prepared under IFRS for each completed annual financial reporting period prior to the implementation of the Amended Reorganization, are substantially in the form required by section 4.2 of NI 52-109, except that the certificates refer to and certify matters in respect of the filing of the Filer’s annual information form and the Combined Financial Statements and related MD&A; and

(iii)           the certificates filed by the Filer in accordance with section 5.1 of NI 52-109, in connection with the filing of Combined Financial Statements prepared under IFRS for each completed interim financial reporting period prior to implementation of the Amended Reorganization, are substantially in the form required by section 5.2 of NI 52-109, except that the certificates refer to and certify matters in respect of the filing of Combined Financial Statements and related MD&A.

(d)           In respect of the Short Form Criteria:

(i)            the Filer satisfied each of the conditions set out in paragraph 2(a) above that were to be satisfied prior to implementation of the Amended Reorganization, and satisfies each of the conditions set out in paragraph 2(a) above that are to be satisfied following implementation of the Amended Reorganization;

(ii)           the Filer satisfies the criteria in section 2.2 of NI 44-101 except for the requirement in subparagraph 2.2(d)(i);

(iii)           each H&R REIT Unit is listed and posted for trading on a short form eligible exchange (as defined in NI 44-101); and

(iv)          each Prospectus filed by the Filer incorporates by reference the Prospectus Documents.

(e)           In respect of the Shelf Criteria, the Filer continues to satisfy the conditions set out in paragraph 2(d) above.

“Winnie Sanjoto”
Manager, Corporate Finance
Ontario Securities Commission

(f)            In respect of the DRIP Exemption:

(i)            at the time of the trade, the Subsidiary Partnerships continue to be controlled directly or indirectly by H&R REIT and H&R REIT is, directly or indirectly, the beneficial owner of all the issued and outstanding voting securities of the Subsidiary Partnerships;

(ii)           the ability to purchase H&R REIT Units under the DRIP for distributions out of earnings, surplus, capital, or other sources payable by the Subsidiary Partnerships or through optional cash payments made by holders of Exchangeable Units is available to every holder of Exchangeable Units in Canada;

(iii)           for so long as the DRIP includes a cash payment option, the DRIP Exemption will only apply if (i) the aggregate number of H&R REIT Units issued through optional cash payments does not exceed, in the financial year of the Filer during which the distribution takes place, 2% of the issued and outstanding H&R REIT Units as at the completion of the Amended Reorganization (for the remainder of the financial year in which the Amended Reorganization occurs) and, thereafter, as at the beginning of the financial year, and (ii) the H&R REIT Units trade on a marketplace (as defined in National Instrument 21-101 – Marketplace Operation); and

(iv)          the first trade of any H&R REIT Units acquired under this decision in the Jurisdictions will be deemed to be a distribution unless the conditions in subsection 2.6(3) of National Instrument 45-102 Resale of Securities are satisfied at the time of such first trade.