MMI Properties Inc.

Headnote

Licensed Agents not subject to section 206(1) of the Regulation in connection withtrades of Hotel Units provided that each Hotel Unit has an aggregate acquisitioncost of not less than $250,000, the potential purchaser represents that thepurchaser has access to investment advice and the exemption shall expire on thethird anniversary of the date of the Order.

Statutes Cited

Securities Act, R.S.O. 1990, as. am., paragraphs 35(1)(5), 72(1)(d).

Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as. am., ss.206(1), s. 211.

Real Estates and Brokers Act, R.S.O. 1990, c. R.4, as. am.

Rules Cited

OSC Rule 45-501, s.3.1

UPON the application (the "Application") of MMI Properties Inc. (the"Applicant") to the Ontario Securities Commission (the "Commission") for an orderpursuant to section 211 of the Regulation exempting real estate agents ("LicensedAgents") licensed under the Real Estate and Business Brokers Act, R.S.O. 1990, c.R.4, as amended (the "Ontario Real Estate Act") from the registration requirement ofsubsection 206(1) of the Regulation, in connection with trades of certain strata lots("Hotel Units") located at 175 Robson Street, Vancouver, British Columbia in adevelopment to be known as Hilton Suites Vancouver (the "Development");

AND UPON considering the Application and the recommendation of staff ofthe Commission;

AND UPON the Applicant having represented to the Commission as follows.

1. The Applicant was incorporated under the laws of British Columbia onNovember 25, 1999 for the purpose of developing the Development.

2. The Development will comprise 192 strata lots which will consist of 175 HotelUnits to be used for hotel accommodation, 8 commercial retail lots (the"Commercial Units") to be used for commercial retail purposes, a single spalot, a food and beverage lot (the "Restaurant Unit") to be used for restaurant,bar and food preparation purposes and 7 meeting and convention room lots(the "Convention Units") (collectively, the "Strata Lots"). Prior to deposit ofthe strata plan for the Development, the Applicant may reconfigure theCommercial Units, the Restaurant Unit and/or the Convention Unit and,accordingly, the number of Strata Lots may change.

3. The Development will be located within a high-rise concrete buildingconsisting of a two-storey mixed use base and a 16-storey hotel tower abovea level podium and three levels of underground parking.

4. Each owner of a Strata Lot will be entitled to a proportionate share of thecommon property (the "Common Property") of the Development as well asthe common facilities and other assets of the strata corporation (the "StrataCorporation") that will be created upon the deposit of a strata plan for theDevelopment in the British Columbia Land Title Office. Owners of StrataLots will own such assets as tenants in common.

5. The hotel operation (the "Hotel Operation") will form part of the Developmentand will comprise the 175 Hotel Units and the hotel administration area.

6. The hotel administration area will consist of the hotel front desk,administrative offices and closet storage areas which will be designated aslimited Common Property for the Hotel Units and will be leased, together withthe hotel lobby area, by the Strata Corporation to the manager of the HotelOperation (the "Manager").

7. Each purchaser of a Hotel Unit will be required to become a party to a hotelmanagement and rental pool agreement (the "Rental Pool Agreement") whichwill authorize the Manager to manage and operate the Hotel Operation for,and on behalf of, the Hotel Unit owners in accordance with the rental poolingarrangement (the "Rental Pool") established by the Rental Pool Agreement.

8. As a result of the Rental Pool established by the Rental Pool Agreement,each Hotel Unit owner will be entitled to receive payment each quarter of itsproportionate share of gross revenues from the Hotel Operation following thededuction of all expenses and certain capital and working capital cashreserves to be held by the Manager against future operational expenses orrepairs to capital items.

9. Each Hotel Unit owner is responsible for its proportionate share of theexpenses incurred in respect of the Hotel Operation which will include the feepayable to the Manager for its services and expenses related to themanagement and maintenance of all hotel common areas. The fee paid tothe Manager is based on gross revenues generated from the HotelOperation. Each owner will also be responsible for its own personalexpenses attributable to the ownership of a Hotel Unit. If revenues from theHotel Operation are insufficient to cover such expenses, each Hotel Unitowner will be responsible for funding the shortfall.

10. The Rental Pool Agreement will have an initial term of 20 years. Subject tothe Manager's right to top up any shortfall, the Rental Pool Agreement maybe terminated by Hotel Unit owners by way of a 51% majority vote if in anyoperating year following the third operating year, gross operating profit isless than $3.5 million provided the average occupancy rate of a competitiveset of hotels is greater than 65%. Following such a termination, the Managerwould be entitled to payment of a termination fee equal to 70% of the totalfees earned by the Manager during the previous operating year.

11. The Manager is entitled to terminate the Rental Pool Agreement under thefollowing circumstances:

(a) upon 60 days prior written notice to Hotel Unit owners if theHotel Unit owners fail to make, or authorize the Manager tomake, capital expenditures without which the Hotel Operationcannot be maintained as a first class hotel;

(b) upon 30 days written notice to Hotel Unit owners in the eventthat the owners of more than 10 of the Hotel Units are in defaultof any payment obligation under the Rental Pool Agreement atthe time the Manager exercises its right to terminate, providedthat a Hotel Unit owner will be deemed not to be in defaultunless the owner fails to cure any payment default alleged bythe Manager within a period of 15 days from receipt of theManager's default notice; or

(c) upon 60 days written notice to Hotel Unit owners in the eventthat the owners of more than 10 Hotel Units are in default ofany obligation (other than a payment obligation) under theRental Pool Agreement at the time the Manager exercises itsright to terminate, provided that a Hotel Unit owner will bedeemed not to be in default unless the owner fails to cure anydefault alleged by the Manager within a period of 60 days fromreceipt of the Manager's default notice.

12. The owner of a Hotel Unit, or a guest of the owner, may use the Hotel Unit onan unlimited basis, subject to availability, provided the owner makes priorreservations with the Manager not less than 90 days in advance of theintended use and the owner pays a prescribed usage fee. When the HotelUnit is being used by its owner or a guest thereof, the owner will not receiveany rental revenue allocation for the Hotel Unit.

13. Strata Lots, other than the Hotel Units, will not form part of, and will beoperated separately from, the Rental Pool.

14. As a result of the foregoing, an investment in a Hotel Unit provides thepurchaser thereof with a means to participate financially in the HotelOperation and a Hotel Unit is therefore a security for purposes of the Act.

15. Hotel Units are being offered for sale, and sold, in British Columbia throughreal estate agents licensed under the Real Estate Act (British Columbia) ( the"BC Real Estate Act") in reliance upon exemptions from the dealerregistration and prospectus requirements of the Securities Act (BritishColumbia) (the "BC Act") that are available pursuant to sections 31(2)(5) and55(2)(4) of the BC Act, and in accordance with real estate securitiesdisclosure requirements which require the preparation of an offeringmemorandum in accordance with Form 43B under the BC Act.

16. Form 43B under the BC Act requires an offering memorandum for real estatesecurities to be in the form of either a disclosure statement or a prospectusrequired under the BC Real Estate Act and by the British ColumbiaSuperintendent of Real Estate and it also provides that the additionalinformation prescribed by Form 43B must be included in the body of thedisclosure statement or prospectus as a separate section entitled "RealEstate Securities Aspects of the Offering".

17. The Applicant has prepared a disclosure statement for the Development (the"Disclosure Statement") in accordance with the form and contentrequirements of Form 43B and the Disclosure Statement has been filed withthe British Columbia Superintendent of Real Estate.

18. Hotel Units are to be offered for sale, and sold, in Ontario by LicensedAgents in reliance upon the exemptions from the dealer registration andprospectus requirements of the Act that are available pursuant to thecombined effect of paragraphs 35(1)(5) and 72(1)(d) of the Act, section 3.1 ofOSC Rule 45-501, and subject to the terms of this order. Each prospectivepurchaser of a Hotel Unit will be provided with a copy of the DisclosureStatement as well as a "wrapper" which will describe, among other things, thecontractual rights of action which will be granted to every purchaser of aHotel Unit by the Applicant in accordance with OSC Rule 45-501.

19. Prospective purchasers of Hotel Units will not be provided with rental or cashflow guarantees or any other form of financial commitment on the part of theApplicant or the Manager.

20. The Rental Pool Agreement requires the Manager to provide each Hotel Unitowner with the following:

(a) annual audited financial statements (including statements for the priorcomparative year) with respect to the operation of the Rental Pool foreach operating year;

(b) unaudited interim (quarterly) financial statements for the Rental Pool;

(c) quarterly statements of gross revenue, expenses, capital expendituresand reserves for the Hotel Operation and any personal expenses foran owner's Hotel Unit paid by the Manager; and

(d) an annual summary of the operating plan and budget for the HotelOperation once approved by Hotel Unit owners.

21. The Rental Pool Agreement requires the Manager to deliver to a subsequentprospective purchaser, upon reasonable notice of an intended sale by theowner of a Hotel Unit, and before an agreement of purchase and sale isentered into the most recent audited annual financial statements (whichinclude financial statements for the prior comparative year) and, if applicable,interim unaudited financial statements for the Rental Pool (collectively the"Financial Statements").

22. The Rental Pool Agreement requires:

(a) the Applicant to deliver the Disclosure Statement to a subsequentprospective purchaser of a Hotel Unit upon receiving reasonablenotice of a proposed sale of the Hotel Unit that is to take place eitherprior to, or within 12 months of, the issuance by the City of Vancouverof permission to occupy the relevant Hotel Unit; and

(b) the Manager to deliver a summary of the Disclosure Statement (the"Disclosure Statement Summary") to a subsequent prospectivepurchaser of a Hotel Unit upon receiving reasonable notice of aproposed sale of the Hotel Unit that is to take place any time followingthe expiration of a period of 12 months from the date of issuance bythe City of Vancouver of permission to occupy the relevant Hotel Unit.

23. The Disclosure Statement Summary that is delivered to a prospectivepurchaser of a Hotel Unit which is subject to a Rental Pool Agreement willinclude:

(a) items 1, 3(1), 6,7, 9(1), (2), (3) and (4), 10(b) and 16 of Form 43B withrespect to the proposed sale, modified as necessary to reflect theoperation of the Rental Pool and the form of disclosure, and

(b) items 12(2), (3) and (4) of Form 43B with respect to the Managerunder the Rental Pool Agreement modified so that the period ofdisclosure runs from the date of the certificate attached to theDisclosure Statement Summary,

and will be certified by the Manager in the form of the certificate requiredpursuant to item 19 of Form 43B.

24. The Rental Pool Agreement requires each owner of a Hotel Unit to provide:

(a) the Manager with notice of a proposed sale of the Hotel Unit; and

(b) a subsequent prospective purchaser of a Hotel Unit with notice of his,her or its right to obtain from the Applicant or the Manager theFinancial Statements and the Disclosure Statement or DisclosureStatement Summary, as the case may be.

AND UPON the Commission being satisfied that to do so would not beprejudicial to the public interest;

IT IS ORDERED, pursuant to section 211 of the Regulation that LicensedAgents are exempted from the provisions of subsection 206(1) of the Regulation inconnection with trades by the Licensed Agents of Hotel Units, provided that:

(i) each Hotel Unit sold in reliance upon this Exemption has an aggregateacquisition cost to each purchaser thereof of not less than $250,000;

(ii) each prospective purchaser of a Hotel Unit provides a representation that thepurchaser has access to investment advice from a person or company who isa registered adviser or a registered dealer who is able to evaluate aprospective investment in a Hotel Unit based upon information available fromthe Manager, and for such purpose a Licensed Agent may rely upon relatedrepresentations of the prospective purchaser unless the Licensed Agent hasreason to believe otherwise; and

(iii) this exemption shall expire, and be of no further force or effect, as of andfrom the third anniversary of the date hereof.

June 27^th, 2000.

"Howard I. Wetston"     "Robert W. Davis"