Retirement Residences Real Estate Investment Trust et al. - MRRS Decision

MRRS Decision

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO, BRITISH COLUMBIA, ALBERTA,

QUÉBEC AND NEWFOUNDLAND

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM FOR

EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

RETIREMENT RESIDENCES REAL ESTATE INVESTMENT TRUST

AND

IN THE MATTER OF

CIBC WORLD MARKETS INC.

HSBC SECURITIES (CANADA) INC.

TD SECURITIES INC.

RBC DOMINION SECURITIES INC.

MRRS DECISION DOCUMENT

WHEREAS the securities regulatory authority or regulator (the "Decision Maker") in each of Ontario, BritishColumbia, Alberta, Québec and Newfoundland (the "Jurisdictions") has received an application from CIBC World MarketsInc. ("CIBCWM"), HSBC Securities (Canada) Inc. ("HSBC"), TD Securities Inc. ("TDSI"), and RBC Dominion SecuritiesInc. ("RBCDS"), (collectively, the "Filers") for a decision, pursuant to the securities legislation of the Jurisdictions (the"Legislation") that the Filers are exempt from the requirements (the "Independent Underwriter Requirement") containedin the Legislation which restricts a registrant in acting as an underwriter in connection with a distribution of securities ofan issuer made by means of a prospectus where the issuer is a connected issuer (or the equivalent) of the registrants,shall not apply to the Filers in respect of the proposed initial public offering (the "Offering") of Units (the "Units") ofRetirement Residences Real Estate Investment Trust (the "REIT") pursuant to a prospectus;

AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System"), the Ontario Securities Commission is the principal regulator for this application;

AND WHEREAS the Underwriters have represented to the Decision Makers that:

1. Each of the Filers is registered as a dealer under the Legislation of the Jurisdictions.

2. The REIT was created by declaration of trust under the laws of the Province of Ontario on December 28, 2000.The REIT will not carry on operations until the closing of the Offering which is expected to be on or about March31, 2001.

3. The REIT's head office is located in Toronto, Ontario. An application will be filed with The Toronto StockExchange for the listing of the Units on that exchange.

4. The REIT currently has no material assets or liabilities. Upon the closing of the Offering, the REIT will own anumber of retirement homes in Canada and the United States.

5. The REIT has never been a "reporting issuer" under to the Legislation, however, it is expected that the REITwill become a reporting issuer (of the equivalent) in the Jurisdictions prior to the closing of the Offering throughthe filing of a final prospectus in each of the provinces and territories in Canada.

6. The net proceeds of the Offering to be received by the REIT after deduction of the Underwriters' fee and theestimated expenses of the Offering payable by the Company will be used to pay a portion of the purchase pricefor the retirement homes and the retirement home business to be acquired by the REIT from Central ParkLodges Limited and/or its subsidiaries ("CPL").

7. The REIT is expected to enter into an underwriting agreement with the Filers and certain other underwriters (the"Independent Underwriters") with respect to the Offering. The proportionate share of the Offering underwrittenby each of the underwriters is expected to be as follows:

Underwriter Proportionate Share

 

1. CIBCWM 25%

2. HSBC 23%

3. Merrill Lynch Canada Inc. 14%

4. RBCDS 14%

5. TDSI 14%

6. National Bank Financial Inc. 7%

7. Raymond James Ltd. 3%

8. The REIT filed a preliminary prospectus dated February 12, 2001 in each province and territory of Canada, andreceived a preliminary MRRS decision document therefore.

9. The preliminary prospectus contains and the final prospectus will contain, a certificate signed by each of theunderwriters including the Filers.

10. On the closing of the Offering the REIT will assume mortgages on the retirement homes acquired by the REITtotalling about $59.7 million and owing to Canadian Imperial Bank of Commerce, HSBC Bank Canada, TheToronto-Dominion Bank and the Royal Bank of Canada, or wholly-owned subsidiaries thereof, (the "Banks")in the respective amounts of about $46.7 million, $2.8 million, $6.8 million and $3.4 million. It is not intendedthat the proceeds of the Offering be used to repay any amounts owing under these mortgages. However, it isexpected that proceeds of the Offering will be used to repay all or part of credit facilities owing by CPL to theBanks totalling about $33.3. million as at January 31, 2001, which consisted of about $8.8 million, $10.5 millionand $14.0 million owing to, respectively, HSBC Bank Canada, The Toronto-Dominion Bank and the Royal Bankof Canada. In addition, Canadian Imperial Bank of Commerce, either on its own or as part of a group (whichmay include some or all of the other Banks) intends to directly or indirectly provide a revolving credit facility tothe REIT to finance its acquisitions and for other purposes described in the preliminary prospectus. Each of theFilers is a direct or indirect subsidiary of one of the Banks.

11. CPL took the initiative in organizing the business of the REIT and as such may be considered to be a "promoter"of the REIT as that term is used in the Legislation. Each of CPL and the REIT is in good financial condition andis not under any immediate financial pressure to proceed with the Offering.

12. In light of the financing to be provided by the Banks to the REIT, the REIT may be considered a connectedissuer (or the equivalent) under the Legislation in respect of the Filers.

13. The underwriters will not comply with the Independent Underwriter Requirement based on the proposedcomposition of the underwriting syndicate, since the portion underwritten by the Filers would exceed 50% ofthe amount of the Offering.

14. The REIT is not a related issuer (or the equivalent) of any underwriter and the REIT is not a "specified party"as defined in proposed Multi-jurisdictional Instrument 33-105 Underwriting Conflicts (the "ProposedInstrument").

15. The distribution will be made under a prospectus which contains the information required in Appendix C to theProposed Instrument.

16. The prospectus will identify the Independent Underwriters and disclose the role of the Independent Underwritersin the structuring and pricing of the Offering and in the due diligence activities performed by the underwritersin connection with the Offering.

17. The Banks did not participate in the decision to make the Offering or in the determination of the terms of thedistribution or the use of the proceeds.

18. The Filers will not benefit in any manner from the Offering other than by the payment of their fee in connectionwith the Offering.

AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of eachDecision Maker (collectively, the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe Decision Maker with the jurisdiction to make the Decision has been met;

THE DECISION of the Decision Makers pursuant to the Legislation is that the Independent UnderwriterRequirement shall not apply to the Filers in connection with the Offering provided the Issuer is not a related issuer, asdefined in the Proposed Instrument, to the Filers at the time of the Offering and is not a specified party, as defined in theProposed Instrument, at the time of the Offering.

March 30, 2001.

"J.A. Geller" R. Stephen Paddon"