Skyline Apartment Real Estate

147 Pages·2015·6.31 MB·English

FORM45-106F2
OFFERINGMEMORANDUMFORNON-QUALIFYINGISSUERS
Date: April15,2015
TheIssuer
Name: SkylineApartmentRealEstateInvestmentTrust
(“SkylineApartmentREIT”)
Headoffice: Address: 5DouglasStreet,Suite301
Guelph,OntarioN1H2S8
Phone#: [phone].977.7348
E-mailaddress: [email protected]
Fax#: [phone]
Currentlylistedorquoted? Thesesecuritiesdonottradeonanyexchangeormarket.
Reportingissuer? No
SEDARfiler? No
TheOffering
Securitiesoffered: Units(the“REITUnits”)
Pricepersecurity: $13.50perREITUnit
Minimum/Maximumoffering: Themaximumoffering(the“Offering”)ofREITUnitsis$45,000,000
(3,333,333REITUnits).Thereisnominimum.Youmaybetheonly
purchaser. FundsavailableundertheOfferingmaynotbesufficient
toaccomplishourproposedobjectives.
Minimumsubscriptionamount: $50,000
Paymentterms: Cheque,bankdraftorwire
Proposedclosingdate(s): ClosingofsalesofREITUnitswilloccurinstagesasREITUnitsare
subscribedforuntilDecember15,2015.
Incometaxconsequences: Thereareimportanttaxconsequencestothesesecurities.SeeItem6–
IncomeTaxConsequencesandRRSPEligibility.
Sellingagent? Yes.SkylineWealthManagementInc.willactassellingagentin
connectionwiththisOffering.SeeItem7–CompensationPaidto
SellersandFinders.
SomedirectorsandofficersofSkylineWealthManagementInc.arealsoTrusteesofSkylineApartmentREIT.
These persons(aswellasother shareholdersof Skyline WealthManagementInc.) arealsodirectors, officers
and shareholders of Skyline Asset Management Inc. Skyline Wealth Management Inc. and Skyline Asset
Management Inc. provide services to and receive fees from Skyline Apartment REIT. Under applicable
securities legislation, Skyline Apartment REIT may be considered to be a connected issuer of Skyline
WealthManagementInc.SeeItem2.2–OurBusiness-ManagementofSkylineApartmentREIT–TheWealth
Manager.
Resalerestrictions
Youwillberestrictedfromsellingyoursecuritiesforanindefiniteperiod.SeeItem10–ResaleRestrictions.
Purchaser’srights
Youhave2businessdaystocancelyouragreementtopurchasethesesecurities.Ifthereisamisrepresentation
in this offering memorandum, you have the right to sue either for damages or to cancel the agreement. See
Item11–Purchasers’Rights.
Nosecuritiesregulatoryauthorityorregulatorhasassessedthemeritsofthesesecuritiesorreviewedthis
offering memorandum. Any representation to the contrary is an offence. This is a risky investment. See
Item8–RiskFactors.
TABLEOFCONTENTS
Page
GLOSSARY................................................................................................................................................................1
FORWARD-LOOKINGSTATEMENTS................................................................................................................5
ITEM1USEOFAVAILABLEFUNDS..................................................................................................................6
1.1 Funds.............................................................................................................................................6
1.2 UseofAvailableFunds...............................................................................................................6
1.3 Reallocation...................................................................................................................................7
ITEM2BUSINESSOFSKYLINEAPARTMENTREIT.......................................................................................7
2.1 Structure........................................................................................................................................7
2.2 OurBusiness.................................................................................................................................9
2.3 DevelopmentofBusiness..........................................................................................................49
2.4 LongTermObjectives................................................................................................................50
2.5 ShortTermObjectivesandHowWeIntendtoAchieveThem............................................51
2.6 InsufficientFunds......................................................................................................................51
2.7 MaterialAgreements.................................................................................................................51
ITEM3INTERESTSOFTRUSTEES,MANAGEMENT,PROMOTERSANDPRINCIPAL
HOLDERS................................................................................................................................................62
3.1 CompensationandSecuritiesHeld.........................................................................................62
3.2 ManagementExperience...........................................................................................................63
3.3 Penalties,SanctionsandBankruptcy.......................................................................................65
3.4 Loans............................................................................................................................................65
ITEM4CAPITALSTRUCTURE...........................................................................................................................65
4.1 EquitySecurities.........................................................................................................................65
4.2 LongTermDebtSecurities........................................................................................................67
4.3 PriorSales....................................................................................................................................74
ITEM5SECURITIESOFFERED...........................................................................................................................74
5.1 TermsofSecurities.....................................................................................................................74
5.2 SubscriptionProcedure.............................................................................................................78
ITEM6INCOMETAXCONSEQUENCESANDRRSPELIGIBILITY............................................................79
ITEM7COMPENSATIONPAIDTOSELLERSANDFINDERS....................................................................83
ITEM8RISKFACTORS.........................................................................................................................................83
ITEM9 REPORTINGOBLIGATIONS...............................................................................................................88
ITEM10 RESALERESTRICTIONS....................................................................................................................88
10.1 GeneralStatement......................................................................................................................88
10.2 RestrictedPeriod........................................................................................................................89
10.3 ManitobaResaleRestrictions....................................................................................................89
ITEM11 PURCHASERS’RIGHTS......................................................................................................................89
ITEM12FINANCIALSTATEMENTS.................................................................................................................93
ITEM13DATEANDCERTIFICATE.................................................................................................................119
APPENDIX1PHOTOGRAPHSOFEXISTINGPROPERTIESANDRECENTPROPERTY
ACQUISITIONS....................................................................................................................................120
i
GLOSSARY
“Acquisition and Operating Facility” means a revolving credit facility in the amount of $29,500,000
arrangedforthepurposeoffundingworkingcapitalandmortgageprincipalrepayments.
“AdjustedGrossRevenues”meansallgrossrevenuesreceivedfromtheoperationsoftheProperties,not
includinganynon-recurringitems(includingwithoutlimitationrefinancingproceeds,saleproceeds,lease
buy-outsorsimilarpayments).
“Adjusted Unitholders’ Equity” means, at any time, the aggregate of: (i) the amount of Unitholders’
equity; and (ii) the amount of accumulated depreciation and amortization recorded on the books and
recordsofeachofSkylineApartmentREITanditsSubsidiariesinrespectoftheirproperties,ineachcase
calculatedinaccordancewithIFRS.
“AssetManagementAgreement”meansanassetmanagementagreementdatedJune1,2006betweenthe
AssetManagerandSkylineApartmentREIT.
“Asset Manager” means the asset manager engaged by Skyline Apartment REIT for the purpose of
managing the day-to-day operations of Skyline Apartment REIT pursuant to the Asset Management
Agreement,whichiscurrentlySkylineAssetManagementInc.,acorporationgovernedbythelawsofthe
ProvinceofOntario.
“AssetManagementAgreement”meansanassetmanagementagreementdatedJune1,2006betweenthe
AssetManagerandSkylineApartmentREIT.
“Base Rental Income” means the base or minimum rent payable pursuant to a lease and excludes any
additionalrent.
“BusinessDay”meansaday,otherthanaSaturdayorSunday,onwhichScheduleIcharteredbanksare
openforbusinessinToronto,Ontario.
“ClassALPUnits”meansClassAlimitedpartnershipunitsofSkylineLP.
“ClassBLPUnits”meansClassBmeansClassBlimitedpartnershipunitsofSkylineLP.
“Closing”meansclosingsofsalesofREITUnitspursuanttotheOffering.
“DeclarationofTrust”meansthedeclarationoftrustmadeasofJune1,2006,amendedasofOctober17,
2006 and amended and restated as of May 25, 2012 and November 5, 2014, governed by the laws of the
Province of Ontario and the federal laws of Canada applicable therein, pursuant to which Skyline
Apartment REIT was created, as further amended, supplemented or amended and restated from time to
time.
“Distributable Income” means, for any period, the taxable net income of Skyline Apartment REIT,
includingtaxableincomeearnedfromitsapplicableconsolidatedSubsidiariesforsuchperiodsetoutinits
consolidated financial statements as determined in accordance with IFRS, subject to certain adjustments,
including: (a) adding back the following items: depreciation, amortization (except for amortization of
deferred financing costs, future income tax expense, losses on dispositions of assets and amortization of
anynetdiscount onlong-termdebtassumed fromvendors of propertiesatratesof interest less thanfair
value);and(b)deductingthefollowingitems:futureincometaxcredits,interestonconvertibledebentures
to the extent not already deducted in computing net income, gains on dispositions of assets and
amortizationofanynetpremiumonlong-termdebtassumedfromvendorsofpropertiesatratesofinterest
greaterthanfairvalueandanyotheradjustmentsdeterminedbytheTrusteesintheirdiscretion.
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“Distribution Date” means, with respect to a distribution by Skyline Apartment REIT, a Business Day
determinedbytheTrusteesforanycalendarmonthtobeonoraboutthe15thdayofthefollowingmonth.
“Equity Under Management” means the market value of the total investor equity of Skyline Apartment
REIT,calculatedastheproductoftheoutstandingREITUnitsmultipliedbythethenmarketvalueofone
REITUnit.
“Exchange Agreement” means the exchange agreement dated May 28, 2012 entered into among Skyline
ApartmentREIT,theOperatingTrust,SkylineLPandsuchpersonswhofromtimetotimeholdClassBLP
Units.
“ExistingProperties”meansthe 129 multi-unitresidentialbuildingsand 7 commercialbuildingslocated
intheProvincesofOntario,SaskatchewanandNewfoundlandandLabrador,consistingof10,987unitsand
641,753squarefeetofcommercialspace.
“FinalClosing”meansDecember15,2015.
“FinanceCommittee”meansthefinancecommitteecreatedpursuanttotheDeclarationofTrust.
“Focus Activity” means the acquisition, holding, maintaining, improving, leasing or managing of multi-
unitresidentialrevenueproducingpropertiesandancillaryrealestateventuresinCanada.
“GeneralPartner”meansSkylineIncorporated,acorporationincorporatedunderthelawsoftheProvince
ofOntariotobethegeneralpartnerofSkylineLP,oranysuccessorgeneralpartnerofSkylineLP.
“Governance and Compensation Committee” means the Governance and Compensation Committee
createdpursuanttotheDeclarationofTrust.
“GrossBookValue”means,atanytime,thebookvalueoftheassetsofSkylineApartmentREIT,asshown
onitsmostrecentbalancesheetplustheamountofaccumulateddepreciationandamortizationthereon.
“IFRS” means International Financial Reporting Standards issued by the International Accounting
Standards Board, and asadopted by the Canadian Institute of Chartered Accountants, as amended from
timetotime.
“IndependentTrustee”meansaTrusteewhohasnodirectorindirectrelationshipwithSkylineApartment
REITwhichcould,intheviewoftheboardoftrustees,reasonablyinterferewithaTrustee’sindependent
judgement.
“InitialUnit”meansaunitofbeneficialinterestinSkylineApartmentREITissuedtoSkylineIncorporated
whichwasautomaticallyredeemedbySkylineApartmentREITupontheissuanceofthefirstREITUnit.
“InvestmentCommittee”meanstheinvestmentcommitteecreatedpursuanttotheDeclarationofTrust.
“MonthlyLimit”hasthemeaningascribedtheretoinItem5.1–TermsofSecurities–RedemptionofREIT
Units.
“NI45-106”meansNationalInstrument45-106ProspectusandRegistrationExemptions.
“Non-residentBeneficiary”meansPersonswhoarenon-residentsofCanadaforthepurposesoftheTax
Act.
“Offering” means the offering of a maximum of 3,333,333 REIT Units pursuant to this Offering
Memorandum.
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“OfferingMemorandum”meansthisconfidentialofferingmemorandum.
“Operating Trust” means Skyline Operating Trust, the trust created under the laws of the Province of
OntariobydeclarationoftrustdatedJune1,2006,asitmaybefurtheramended,supplementedorrestated
fromtimetotime.
“OperatingTrustNotes”meanstheSeries1NotesandtheSeries2NotesissuedbytheOperatingTrust.
“OperatingTrustUnit”meansaunitofinterestintheOperatingTrust.
“Person”meansanindividual,partnership,limitedpartnership,corporation,unlimitedliabilitycompany,
trust,unincorporatedorganization,association,government,oranydepartmentoragencythereofandthe
successors and assigns thereof or the heirs, executors, administrators or other legal representatives of an
individual,oranyotherentityrecognizedbylaw.
“Properties”meanscollectively,theExistingProperties,RecentPropertyAcquisitionsandPropertiesthat
maybeacquiredinthefuture.
“Properties Under Due Diligence” means the four multi-residential Properties under contract and in
variousstagesofduediligence.
“Purchase Agreements” means agreements entered into by Skyline Apartment REIT to acquire the
PropertiesUnderContract.
“RecentPropertyAcquisitions”meansthe6multi-unitresidentialPropertieslocatedinthe Provincesof
Ontario,Québec,AlbertaandBritishColumbia,consistingof949units.
“Redemption Price” hasthe meaningascribed thereto inItem5.1 –Terms of Securities – Redemptionof
REITUnits.
“REIT Unit” means a unit of beneficial interest in Skyline Apartment REIT (other than a Special Voting
Unit and the Initial Unit) authorized and issued under the Declaration of Trust as such and for the time
beingoutstandingandincludesafractionofaunitandanyotherclassesofunitsauthorizedbytheTrustees
assuch.
“RelatedParty”means,withrespecttoanyPerson,aPersonwhoisa“relatedparty”asthattermisdefined
inMultilateralInstrument61-101ProtectionofMinoritySecurityHoldersinSpecialTransactions,asamended
fromtimetotime(includinganysuccessorruleorpolicythereto).
“SkylineAppointees”meanstheTrusteesthatSkylineIncorporatedisentitledtoappoint.
“SkylineLP”meansSkylineRealEstateLimitedPartnership,alimitedpartnershipgovernedbythelaws
oftheProvinceofOntario.
“SkylineApartmentREIT”meansSkylineApartmentRealEstateInvestmentTrust.
“SpecialVotingUnit”meansaunitofinterestinSkylineApartmentREITissuedonlyinconnectionwith
theExchangeAgreementtoaholderofClassBLPUnits.
“Subscriber”meansaPersonpurchasingREITUnitspursuanttothisOffering.
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“SubscriptionAgreements”meanscollectively,thesubscriptionagreementsenteredintobetweenSkyline
Apartment REIT and one or more Subscribers setting out the contractual relationship between Skyline
ApartmentREITandtheSubscribersofREITUnitspursuanttotheOffering.
“Subsidiary”means, withrespecttoanyPerson(otherthananindividual),any other Person(otherthan
an individual) the financial results of which would be required to be consolidated with those of the first
Person’sinthepreparationofthefirstPerson’sconsolidatedfinancialstatementsifpreparedinaccordance
withIFRS.
“TaxAct”meanstheIncomeTaxAct,R.S.C.1985(5thSupp.),c.1,asamended.
“Trustees”meansthetrusteesofSkylineApartmentREIT.
“Units”means,collectively,theREITUnitsandtheSpecialVotingUnits.
“Unitholder”meansaholderofoneormoreUnits.
“Wealth Manager” means Skyline Wealth Management Inc., a corporation governed by the laws of the
Province of Ontario that is responsible for acting as exempt market dealer on all offerings of REIT Units
and providing other services to Skyline Apartment REIT, as described in Item 2.2 – Our Business -
ManagementofSkylineApartmentREIT–TheWealthManager.
“Wealth Management Agreement” means the agreement dated January 1, 2012 between the Wealth
ManagerandSkylineApartmentREIT.
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FORWARD-LOOKINGSTATEMENTS
Certain information contained in this Offering Memorandum constitutes “forward-looking information”
within the meaning of applicable securities laws, including, among other things, statements concerning
future financial position, results of operations and forecasted future cash flows, statements concerning
objectives and strategies to achieve those objectives, statements with respect to management’s beliefs,
plans, estimates and intentions and statements concerning anticipated future events, circumstances,
expectations,results,operationsorperformancethatarenotstatementsofhistoricalfacts.Forward-looking
statements can be identified generally by the use of forward-looking terminology, such as “indicators”,
“outlook”, “objective”, “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”,
“plan”,“continue”,“aim”,“would”,“forecast”,“project”,“seek”orsimilarexpressionssuggestingfuture
outcomes or events. In particular, certain statements in Item 1 – Use of Available Funds and Item 2 –
BusinessofSkylineApartmentREITconstituteforwardlookinginformation.
Actualresultsmayvaryfromtheforward-lookinginformationcontainedinthisOfferingMemorandumas
such information is subject to a variety of risks, uncertainties and other factors that could cause actual
results to differ materially from expectations. Such forward-looking statements reflect management’s
current beliefs and are based on information currently available to management. The forward-looking
statementsinthisOfferingMemorandumarenotguaranteesoffutureresults,operationsorperformance
and are based on estimates and assumptions that are subject to risks and uncertainties, including those
described below under “Item 8 - Risks Factors”, which could cause actual results, operations or
performancetodiffermateriallyfromtheforward-lookingstatementsexpressedorimpliedinthisOffering
Memorandum.
Additionalfactorsthatcouldcauseactualresults,performanceorachievementstodiffermateriallyinclude,
but are not limited to, risks associated with: real property ownership; general economic conditions; local
real estate markets; future property acquisitions; competition for real property investments; revenue-
producingproperties;significantpropertyexpenditures;fluctuatingliquidityinrelationtodemandforand
the perceived desirability of investments; ability to vary portfolio promptly in response to changing
economicorinvestmentconditions;debtfinancing,includingtheriskthatexistingmortgageindebtedness
secured by the properties will not be able to be refinanced or that the terms of such refinancing; tenant
terminationsandfinancialstability;competitionfortenants;abilitytoleasespace;abilitytocompletefuture
property acquisitions; interest rates; general uninsured losses; availability of cash flow; environmental
matters; governmentregulation; Unitholder liability; dependence on keypersonnel; potentialconflictsof
interest; tax related risks; dilution; restrictions on potential growth and reliance on credit facilities; debt
financing, including the risk that Skyline Apartment REIT may be unable to make interest or principal
payments or meet loan covenants, the risk of defaults and cross defaults, and the risk that existing
indebtedness may not be able to be refinanced or that the terms of such refinancing may not be as
favourableasthetermsofexistingindebtedness;costofborrowing;andrisksassociatedwithholdingunits
ratherthanshares.
The forward-looking statements in this Offering Memorandum are based on numerous assumptions
regardingSkylineApartmentREIT’spresentandfuturebusinessstrategiesandtheenvironmentinwhich
SkylineApartmentREITwilloperateinthefuture,includingassumptionsregardingthestabilityoftarget
markets,thatacquisitioncapitalizationratesremainreasonablyconstant,thattheequityanddebtmarkets
continuetoprovideuswithaccesstocapitalatareasonablecosttofundourfuturegrowthandtorefinance
ourmortgagedebtasitmaturesandourabilitytooperateonaprofitablebasis.
Although the forward-looking statements contained in this Offering Memorandum are based on what
managementbelievesarereasonableassumptions,therecanbenoassurancethatactualresults,operations
orperformancewillbeconsistentwiththesestatements.
All forward-looking statements in this Offering Memorandum are qualified in their entirety by this
forward-looking disclaimer. Without limiting the generality of the foregoing, the discussion in Item 1 –
5
UseofAvailableFundsandItem2–BusinessofSkylineApartmentREITisqualifiedinitsentiretybythis
forward-lookingdisclaimer.ThesestatementsaremadeasofthedateofthisOfferingMemorandum,and,
except as required by applicable law, we undertake no obligation to update publicly or revise any such
statementstoreflectnewinformationortheoccurrenceoffutureeventsorcircumstances.
The following section of this Offering Memorandum contains forward-looking information,
particularlystatementsrelatedtoamountstoberaisedbythisOfferingandtheintendedusesofavailable
funds,butnotlimitedtothosestatements. Thediscussioninthissectionisqualifiedinitsentiretybythe
cautionarylanguageundertheheading“Forward-LookingStatements”inthisOfferingMemorandum.
ITEM1USEOFAVAILABLEFUNDS
1.1 Funds
ThefollowingtablesetsforththefundsavailableasaresultoftheOffering.
Assumingmin. Assumingmax.
offering(1) offering
A Amounttoberaisedbythisoffering $0 $45,000,000
B Sellingcommissionsandfees(2) $0 $450,000
C Estimatedofferingcosts(e.g.,legal,accounting, $0 $20,000
audit.)
D Availablefunds:D=A-(B+C) $0 $44,530,000
E Additionalsourcesoffundingrequired $0 $0
F Workingcapitaldeficiency $0 $0
G Total:G=(D+E)–F $0 $44,530,000
Notes:
(1) ThereisnominimumamountoffundstoberaisedpursuanttothisOffering.
(2) Assumesthemaximumequityfeeraiseequalto1%ofthegrossproceedsofthisOfferingmaybe
paidtotheWealthManager. SeeItem7–CompensationPaidtoSellersandFinders.
1.2 UseofAvailableFunds
ThefollowingtablesetsforthabreakdownofhowSkylineApartmentREITwillusetheavailable
funds.
Descriptionofintendeduseofavailablefundslisted Assumingmin. Assumingmax.
inorderofpriority offering(1) offering
RepaymentofAcquisitionandOperatingFacility(2) $0 $25,826,833
Futureaccretivepropertyacquisitions(3) $0 $18,703,167
Total: $0 $44,530,000
Notes:
(1) ThereisnominimumamountoffundstoberaisedpursuanttothisOffering.
(2) TheAcquisitionandOperatingFacilityhasfacilitatedacquisitionsbySkylineApartmentREITbyenablingit
toenterintonegotiationsforthepurchaseofpropertieswithouttheneedforanequityfinancingcondition. Asatthe
datehereof,thereiscurrently$25,826,833outstandingundertheAcquisitionandOperatingFacility.Thesefundswere
borrowedandsecuredagainstExistingProperties.
6
(3) FutureaccretivepropertyacquisitionsmayincludethePropertiesUnderDueDiligence. SeeItem2.2–Our
Business–PropertiesUnderDueDiligence. SkylineApartmentREIThasnotwaivedtheconditionstoclosingofthe
PropertiesUnderDueDiligence. Asaresult,therecanbenoassurancethattheacquisitionofthePropertiesUnder
DueDiligencewillbecompletedascurrentlycontemplatedoratall.
1.3 Reallocation
Weintendtospendtheavailablefundsasstated.Wewillreallocatefundsonlyforsoundbusiness
reasons.
The following section of this Offering Memorandum contains forward-looking information,
particularly statements related to the management and investment strategy of Skyline Apartment REIT,
theobjectivesofSkylineApartmentREITandtheachievementofthoseobjectives,butnotlimitedtothose
statements. Thediscussioninthissectionisqualifiedinitsentiretybythecautionarylanguageunderthe
heading“Forward-LookingStatements”inthisOfferingMemorandum.
ITEM2 BUSINESSOFSKYLINEAPARTMENTREIT
2.1 Structure
Skyline Apartment Real Estate Investment Trust (“Skyline Apartment REIT”) is an
unincorporated open-end investment trust created by a declaration of trust made as of June 1, 2006,
amendedasofOctober17,2006andamendedandrestatedasofMay25,2012andNovember5,2014(the
“Declaration of Trust”) and governed by the laws of the Province of Ontario and the federal laws of
Canadaapplicabletherein.SeeItem2.7–MaterialAgreements–DeclarationofTrust.
TheobjectivesofSkylineApartmentREITare:(i)toprovideUnitholderswithstableandgrowing
cashdistributions,payablemonthlyand,totheextentreasonablypossible,taxdeferred,frominvestments
inadiversifiedportfolioofincome-producingmulti-unitresidentialandcommercialpropertieslocatedin
Canada; and (ii) to maximize REIT Unit value through the ongoing management of Skyline Apartment
REIT’sassetsandthroughthefutureacquisitionofadditionalresidentialproperties.
The trustees of Skyline Apartment REIT (the “Trustees”) are responsible for the general control
and direction of Skyline Apartment REIT. The day-to-day management of Skyline Apartment REIT is
carried out by the Asset Manager, the Properties will be managed internally under the direction of the
AssetManagerandofferingsofREITUnitswillbeconductedbytheWealthManager.
The Existing Properties and Recent Property Acquisitions currently consist of 142 properties
located in 46 communities across 6 Canadian provinces containing an aggregate of 11,936 suites and
approximately641,753 square feetof commercialspace. See Item2.2 –Our Business- Properties. Future
acquisitionswillbesubjecttospecificinvestmentrestrictionsandtheoperationofSkylineApartmentREIT
will be subject to specific operating policies. See Item 2.7 – Material Agreements – Declaration of Trust -
InvestmentRestrictionsandOperatingPolicies. TheheadofficeofSkylineApartmentREITislocatedat:5
DouglasStreet,Suite301,Guelph,Ontario,N1H2S8.
7
ThefollowingsetsforththeprincipaloperatingstructureofSkylineApartmentREIT:
Skyline Apartment REIT will hold all of its interest in the Existing Properties, Recent Property
AcquisitionsandallfutureacquisitionsinthenameofSkylineRealEstateHoldingsInc.,SkylineRealEstate
Holdings(II)Inc.,SkylineRealEstateHoldings(III)Inc.,orinthenameofothernomineecorporations,on
behalf of Skyline Real Estate Limited Partnership (“Skyline LP”), all of the shares of which nominee
corporationsareowned,directlyorindirectly,bySkylineApartmentREIT.
Skyline Apartment REIT owns, indirectly through Skyline Operating Trust (the ”Operating
Trust”), allof the ClassA LPUnitsof Skyline LP. In connection withthe internalization of the property
managementfunctioninJanuary2014bywayofapurchaseoftheassetsofSkylineManagementInc.(the
“Assets”),ClassBLPUnitsofSkylineLPandacorrespondingnumberofSpecialVotingUnitsofSkyline
ApartmentREITwereissuedtoSkylineManagementInc.inpartialpaymentofthepurchaseprice ofthe
Assets. See Item2.3 – Developmentof the Business– Internalization of Property Management Function.
AsaresultoftheacquisitionoftheHighstreetPortfolioinFebruary2015,ClassB LPUnitsofSkylineLP
and a corresponding number of Special Voting Units of Skyline Apartment REIT were issued to certain
vendors in partial payment of the purchase price. See Item 2.2 – Our Business – Properties – Existing
PropertiesandRecentPropertyAcquisitions. ClassBLPUnitsshallbeexchangeableforREITUnitsona
onetoonebasispursuanttotheExchangeAgreement,onthetermsandsubjecttotheDeclarationofTrust,
the Exchange Agreement and the limited partnership agreement governing Skyline LP. As Class B LP
UnitsareexchangedforREITUnitsinaccordancewiththeExchangeAgreement,thecorrespondingSpecial
8