I overview of the market

i The Canadian landscape

The Canadian real estate market delivered a healthy overall performance in 2018. While the first quarter of 2019 saw the overall investment in the Canadian real estate market fall 15 per cent from the previous quarter, and 20 per cent from the first quarter of 2018, the decade-long trend in producing superior total returns continues to be present.2 Since the global economic market crash of 2008-2009, Canadian real estate has experienced fairly significant price increases. This is in part attributable to Canada's continued low interest-rate environment, as well as the capitalisation rate compression seen across all real estate classes and most urban geographies including Toronto, Vancouver and, more recently, Montreal.

The compression of industrial and multi-residential capitalisation rates have significantly affected Canada's commercial real estate market. While the demand for property in the industrial sector remained high in 2018, supply constraints limited the transaction volume for this sector to C$1.7 billion in 2018.3 Year to date in 2019, investment in industrial real estate declined by 20 per cent as compared to the first quarter of 2018, and by nearly 40 per cent from the fourth quarter of 2018. The historic lows in office space vacancy rates seen nationally (2.7 per cent in the first quarter of 2019), and, more specifically, in Toronto (2.6 per cent at the end of March 2019), Vancouver (1.9 per cent in the first quarter of 2019) and Montreal (8.6 per cent, the lowest vacancy rate seen since the fourth quarter of 2013),4 have stimulated the development of office towers in these cities. Taken altogether, these conditions provided a stable environment for both lease and sale transactions in all areas of the real estate sector, as evidenced by AutoCanada Inc.'s sale of two parcels of real estate to Automotive Properties REIT for C$23.95 million and its subsequent entering into two 19-year, triple-net leases with Automotive Properties REIT, as well as Summit Industrial Income REIT's acquisition of four properties in Edmonton, Calgary and Montreal in the first quarter of 2019 for C$130 million.

The low value of the Canadian dollar coupled with Canada's reputation as a stable nation and attractive place to live has, in recent years, attracted significant foreign investment in Canadian real estate and put increased pressure on the demand for new housing due to the significant pace of the population growth of Canada's major metropolises such as Toronto. In fact, the addition of over 77,000 persons in the City of Toronto for the 12 months ending July 2018 made it, in absolute numbers, the top growing city in all of North America and the second fastest growing urban region.5 This heightened demand for Canadian real estate has had a significant impact on residential properties in particular. The effect of foreign investment on the residential real estate market was most significantly experienced in Toronto and Vancouver, where residential real estate prices were accelerating at an unsustainable pace from 2015 through to 2017. It was only after the provincial governments of both cities intervened, by way of imposing a foreign buyers tax (and in Vancouver's case, a vacancy tax) and expanded rent-control rules, that a slight cooling of the markets, in the form of reduced sale volume and a tempering in the cost of a single family home, was seen. Perhaps unsurprisingly, following the implementation of those government interventions in Toronto and Vancouver, foreign investment in Montreal's real estate market surged 183 per cent in 2018 over the previous year.6 To date, foreign ownership of real estate has not been an issue in Alberta, Saskatchewan or Newfoundland. In fact, following the oil price downturn seen in 2015–2017, property valuations in the three provinces declined. While there has been some recovery of oil prices in 2018, prompting increased deal activity and a stabilisation of property prices, the occupancy levels observed across real estate sectors in these three provinces remain lower than those seen in the rest of Canada. In 2019, house prices are expected to continue to rise, albeit slowly. The national average price is expected to increase by 1.7 per cent year over year to C$496,800. Ontario, New Brunswick, and Quebec are expected to post the biggest annual rise in house prices at 3.3 per cent, 3 per cent, and 2.9 per cent respectively. In contrast, Saskatchewan, Newfoundland and Alberta are expected to see the biggest decline in year over year house prices by 3.5 per cent, 3.4 per cent and 2.5 per cent respectively. Actual sale activity is expected to increase 1.2 per cent in 2019, with rising interest rates and the B-20 mortgage stress-test offsetting the otherwise severe impact of continuing population growth. Year over year sales activity is expected to increase in New Brunswick, Quebec and Ontario by 3.2 per cent, 2.2 per cent and 1.4 per cent respectively. On the other hand, the year over year sales rates of Newfoundland, British Columbia and Nova Scotia are expected to decline by 7.1 per cent, 5.2 per cent and 4.3 per cent, respectively.7

ii The investor

Canadian domestic real estate investors can be broadly categorised as being one of three types: (1) institutional investors, consisting primarily of pension plans and life insurers, (2) public real estate entities, most significantly in the form of real estate investment trusts (REITS) with a smaller number of listed real estate operating corporations, and (3) private entities, such as family-owned businesses that develop or manage their own properties of varying scale and large scale Canadian private equity investors.

Institutional investors

Those Canadian pension plans which invest in real estate are typically comprised of (1) large, recognisable public pensions, which make direct investments in both domestic and global real estate, (2) smaller public plans that rely on funds and external managers for their investments, and (3) private corporate pensions that partake in both direct and indirect investing. Over the past three decades, Canadian pension plans have commenced, and subsequently increased, their investments in real estate. As of October 2017, the top 24 Canadian pension funds owned C$188 billion in real estate, which amounted to an allocation of 13 per cent of their C$1.5 trillion assets in the real estate sector.8 The real estate allocation targets of Canadian pension funds was projected to increase anywhere from 1–3 per cent from 2017 to 2022,9 fueling speculation that the trend towards continued investment by these pension plans in real estate, including Canadian real estate, will continue at a steady pace.

These large Canadian pension funds have assets across all real estate classes, with prominent investment historically focused on Class A office space, premier urban shopping centres and office tower retail spaces in the major metropolitan areas of Canada, with some indirect engagement in development activities. A number of the large public pension plans that invest on behalf of various public sector employees significantly increased their allocation to real estate by privatising several of Canada's largest real estate companies in 2000 and 2001.10 While these investments have become increasingly global in scope, the Canadian pension plans have continued to demonstrate a heavy inclination to invest in Canadian real estate. This may be in part due to the ability of pension plans to generally hold Canadian assets on a basis free from Canadian income tax under specific tax exemptions for Canadian registered pension plans or the favourable market conditions for promising returns in the Canadian real estate space.

Public real estate companies and REITs

Public real estate entities in Canada commonly exist in the form of a REIT. A REIT is a trust which, upon meeting the criteria outlined in Canada's Income Tax Act (ITA), acts as a flow-through vehicle for Canadian income tax purposes. The first Canadian public REITs emerged in the 1990s as a solution to the collapse of Canada's real estate market. In 1996, there were five publicly traded REITs on the Toronto Stock Exchange (TSX). As of June 2019, there are 39 TSX-listed REITs (of approximately 67 publicly listed real estate entities in Canada) with a total market capitalisation in excess of C$60 billion.11 Five of these REITs alone exceed a C$5 billion market capitalisation as of June 2019. While the Canadian REIT market remains small in comparison to its comparator market in the US, it is a continually evolving sector of the Canadian real estate landscape. In 2018, from January through to September, the S&P/TSX Capped REIT index recorded a total return of approximately 13 per cent.12 However, amid interest rate concerns, corrections in global equities and a sharp decline in prices, the S&P/TSX Capped REIT index fell to a total return of 6 per cent through the last quarter of 2018. Both 2017 and 2018 saw very limited real estate IPO activity, however, in that same period, the equity and debt offerings made by existing REITs have continued to increase. For example, 2018 saw C$4.8 billion in equity offerings made by existing REITs, which is more than has been seen in the four years prior.13 2019 is shaping up to be another active year in the Canadian market, from an equity issuance perspective, with C$1.5 billion in equity raised this year to date.14

The majority of Canadian REITs are the product of smaller IPOs (typically under C$300 million) as compared to their US counterparts. Interestingly, this has had the effect of attracting a number of US-based cross-border REITs (also known as foreign asset income trusts), which are typically also REITs for Canadian income tax purposes. Canadian REITs own a full range of asset classes, such as office, retail, industrial and multi-residential. However, amongst the office investments, relatively few REITs own Class A office towers. REIT activity in the retail class is largely concentrated within regional and local shopping centers. Recently, investment in multi-use developments has increased amongst the greater capitalised REITs.

The management of a REIT can be internally conducted, through the trust's own employees, or externally conducted, by way of a manager under contract. A number of Canadian REITs are externally managed and do not have their own employees. In these situations, the terms of the management agreement between the REIT and the external manager can be an important consideration in structuring an M&A transaction. Any acquirer of the REIT will have to be prepared to either assume those functions (if the management agreement is to be terminated) or make arrangements with the manager to continue in some capacity after the transaction closes. The real estate market tends to favour internalised arrangements, while sponsors typically prefer the fees flowing to them from the external management arrangement.

Whereas REITs make up a significant portion of public real estate entities, there are comparatively fewer public real estate companies in Canada. This is in part attributable to the fact that public real estate corporations, in order to compete with REITS in terms of cost of capital, require large-scale and sufficient tax attributes to defer taxes over an extended period of time. Consequently, real estate corporations tend to partake more actively in the development of real estate, particularly in the residential class.

Private entities

Family-based private investors in real estate have significant industrial, retail and multi-residential holdings, but tend not to hold Class A offices or premium retail properties.

Canadian private equity funds (other than pension plans) which partake in real estate investing tend to focus their investments solely on real estate and, generally, do not invest across all economic sectors. Moreover, the equity raised by these private equity funds tends to be in the hundreds of millions, as opposed to the billions seen with public pension plans.

Large-scale Canadian private equity investors in real estate still remain fewer in number and tend to manage funds that have a significant pension plan backing. For example, in 2019 RBC Global Asset Management announced a partnership with pension fund manager British Columbia Investment Management Corp (BCI) and real estate developer QuadReal Property Group. The partnership has a portfolio of over 40 assets worth over C$7 billion. Historically, these pension backed private equity investors invested in real estate that requires active management or repositioning, or that are in the office asset class (although it continues to be rare for them to hold Class A offices) or in the commercial asset class. However, the increased development of condominiums seen across Canada in the last decade has largely been driven by private equity capital and pension funds.

II RECENT MARKET ACTIVITY

Activity in the real estate market driven by REITs, private equity firms and foreign investors has continued to be a characteristic of the Canadian market in 2018 and into 2019. Total transaction volume (for assets over C$40 million) remained strong in 2018 at C$16.3 billion in 2018, but was a departure from the record-breaking C$18.4 billion seen in 2017.15 Activity in the multifamily, industrial and office sectors dominated market activity in 2018 with the hotel sector continuing to see little activity with no assets over C$40 million being traded in 2018. Privatisations and acquisitions by REITs accounted for C$10.3 billion worth of transaction volume in 2018. In 2018, the S&P/TSX Capped REIT index delivered a 6 per cent total return over the year,16 thus falling below the long-term average of 9 per cent total return. Holding steady, the industrial sector was the strongest performing sub-sector in 2018, delivering an 18.0 per cent average total return, followed by the multifamily sector with an average total return of 16.5 per cent. During the first quarter of 2019, Canadian REITs on an unweighted basis across all asset classes were up 14 per cent year to date. The best performing asset classes of the first quarter 2019 was industrial, which saw a 21 per cent return, followed by retirement residences (at a 17 per cent return), and retail (at a 16 per cent return).17

In the past five years, Canadian real estate entities have increased their focus on real estate development opportunities, as opposed to solely being engaged on acquisitions of existing properties. In 2018 and 2019 several large public REITs and pension funds, indirectly through their corporate real estate arms, began or completed the building of office towers or mixed-used projects throughout the downtown Toronto core. Cadillac Fairview, which is controlled by the Ontario Teachers' Pension Plan (OTPP), kicked off construction of its expected C$1 billion downtown Toronto office tower in 2019. Allied Properties REIT and RioCan REIT announced in 2018 their plans to proceed with full development of 'The Well', a mixed-use residential, commercial and retail development located in Toronto. Beyond development of real estate, real estate entities continue to engage in meaningful acquisitions. Examples include the sale in 2016 by Oxford Properties Group (Oxford), a premier global real estate investment company, owned wholly by the Ontario Municipal Employees Retirement System (OMERS), of a 50 per cent interest of office properties in Toronto and Calgary to the Canada Pension Plan Investment Board (CPPIB) and Ivanhoé Cambridge's sale of the Oakridge Centre shopping mall in Vancouver for C$961 million to QuadReal Property in 2017. In May 2019, Northview Apartment REIT announced a C$75 million equity offering, the net proceeds of which will be utilised, in part, to acquire a C$52 million property located in Guelph, Ontario. May 2019 also saw Allied Properties REIT acquire property in Toronto, Calgary and Vancouver for C$94 million. The acquisition of real estate by pension plans and real estate companies is not, however, limited to within Canada's border. An increasing number of Canadian real estate entities are pursuing global opportunities in real estate. In January 2018, the joint venture between CPPIB, Singapore's GIC sovereign wealth fund, and student housing operator, The Scion Group, acquired a student housing portfolio comprising 24 assets across 20 university campus markets in the US. In May 2019, Invesque REIT announced it entered into an acquisition to obtain a portfolio of 20 seniors housing properties, located in Virginia, from Commonwealth Senior Living for C$340 million.

Foreign investment into Canadian real estate is not new. However, Asian-based, and in particular Chinese, investment into Canadian real estate surged from 2010 until 2017, when it began to experience a cooling off in response to, among other things, increased taxation. In 2018, increased regulation and taxation saw Asian investment in Vancouver fall from the C$1 billion-plus seen in 2016 and 2017 to almost C$350 million. In contrast, Toronto, which lacked the regulations Vancouver had put in place, took in C$526 million in Asian investment in 2018, up slightly from 2017.18 The manner in which the current political climate involving Chinese and Canada relations may impact on any foreign Asian-based investment in real estate has yet to be seen. An increased presence of US investors in Canadian real estate continued in 2018 with the C$3.8 billion acquisition of Pure Industrial Real Estate Trust (PIRET), a Canadian REIT, by Blackstone Property Brothers (Blackstone), one of the largest real estate private equity firms in the world based out of the US, and the acquisition of Milestone, a Canadian REIT with US assets, for C$1.7 billion by Starwood Capital, a US investment firm. While the first quarter of 2019 saw an increased interest from foreign capital sources in the retail asset class, in the multifamily asset class, foreign investment remained limited and foreign buyers remained mostly on the sidelines in the office asset class.

i M&A transactions

Canada's REIT market remains robust with over 39 publicly traded REITs with an aggregate market capitalisation in excess of C$60 billion, fuelling a significant portion of the M&A activity in the Canadian real estate space. 2018 was an active year in the real estate M&A market, with over C$16 billion in transaction volume (for assets over C$40 million).19

Early in 2018, an affiliate of Blackstone, together with Ivanhoé Cambridge as its acquisition consortium, acquired PIRET in an all-cash transaction. The transaction saw Blackstone acquire all outstanding units of PIRET for C$8.10 per unit, a 21 per cent premium over PIRET's 20-day vwap. The total value of the transaction was C$3.6 billion and a capitalisation rate of 4.9 per cent.

Also early in 2018, Choice Properties REIT (Choice) launched the acquisition, by way of a plan of arrangement, of Canadian Real Estate Investment Trust (CREIT) in a cash and stock transaction comprised of approximately C$1.65 billion in cash and the issuance of approximately 183 million units of Choice, representing a 21 per cent premium over CREIT's 20-day vwap, and implied a total of value of C$6 billion and a cap rate of 5.5 per cent. The successful completion of the acquisition saw the enterprise value of Choice reach approximately C$16 billion. REIT-to-REIT mergers like this are relatively rare in the Canadian REIT market.

Brookfield Property Partners also sold a 50 per cent interest in its two new Toronto towers to a foreign domiciled buyer Dadco Investments (reportedly related to Victor Dahdaleh) in March 2018 for C$850 million.

In the fall of 2018, Agellan Commercial Real Estate Investment Trust (Agellan) entered into an arrangement agreement with Elad Genesis Limited Partnership (El-Ad), an affiliate of El-Ad Group Ltd. The all-cash transaction saw El-Ad acquire all of Agellan's units for C$14.25 per unit, thus valuing Agellan at C$676 million. The transaction represented a 10 per cent premium over the 20-day vwap and a capitalisation rate of 7.4 per cent.

The end of 2018 gave witness to Oxford beating out its bidding war competitor, Blackstone, to close its C$3.4 billion privatisation acquisition of the Investa Office Fund. The deal saw Oxford raise its bid to C$5.50 a share, just enough to top Blackstone's last offer of C$5.4 per share. Investa Office shares traded at C$5.4 before the announcement.

The real estate M&A market in 2019 started strong with NWH Australia AssetCo Pty Ltd., as trustee for a controlled entity of NorthWest Healthcare Properties Real Estate Investment Trust, announcing the completion of an arrangement agreement to acquire 11 freehold hospital property assets from ASX-listed Healthscope Limited and its affiliates for approximately C$1.2 billion as part of a sale and leaseback transaction.

2019 has also been privy to ongoing disposition activity in its first quarter. In February, RioCan REIT disposed of a retail shopping center in suburban Victoria, BC, which was purchased by Crestpoint Real Estate Investments and Anthem Properties in a deal worth C$110 million. A few months later in May 2019, H&R REIT announced it had entered into an agreement to sell The Atrium, a 1.1 million square feet office and retail complex occupying a full city block in one of downtown Toronto's busiest intersections, for C$640 million. This represents a C$40 million gain relative to its fair value (as calculated using IFRS 13 standards). Also in May 2019, Plaza Retail REIT announced it had completed the sale of eight properties, totalling 19,309 square feet and located in Winnipeg, London, Ottawa and Halifax, for C$9.9 million.

ii Capital markets activity – public offerings

The Canadian REIT IPO market was relatively tame in 2018, however, two new REITs were introduced through initial listings on the TSX: Minto Apartment REIT and BSR REIT.

Minto Apartment REIT completed its initial public offering in July 2018 raising gross proceeds of C$230 million (including the full exercise of the underwriters' over-allotment option), comprised of an issuance of 15.863 trust units at a price of C$14.50 per unit. In connection with the offering, Minto Apartment REIT indirectly acquired a portfolio of 22 high-quality income-producing multi-residential rental properties, with 4,279 suites, from Minto Properties Inc., one of The Minto Group of companies. The net proceeds of the offering were used by the REIT to fund the indirect acquisition of the properties and reduce Minto Properties' retained interest. Following completion of the offering (including the exercise of the over-allotment), Minto Properties Inc. indirectly held a retained interest of approximately 56 per cent of the REIT.

BSR REIT completed its initial public offering in May 2018, issuing an aggregate of 13.5 million trust units at a price of C$10 per unit, raising gross proceeds of C$135 million. In connection with the offering, the REIT indirectly acquired a 48-property portfolio held indirectly by BSR Trust, LLC. The portfolio consisted of multifamily residential properties located across five bordering states in the Sunbelt region of the US. The net proceeds of the offering were used by the REIT to repay approximately C$122.3 million of indebtedness owing by BSR.

In March of 2019, NexPoint Hospitality Trust announced it had completed its initial public offering of 917,700 trust units at a price of C$5.00 per unit. The offering raised gross proceeds of C$4,588,500. NexPoint was created to acquire an initial portfolio of 11 hospitality assets located in the US and to raise capital to acquire hospitality assets in the US.

The first quarter of 2019 also saw significant public offering activity. In January, SmartCentres REIT announced it had closed its equity offering of 7.36 million voting units at a price of C$31.25 per unit for gross proceeds of C$230 million. The net proceeds from this offering were used to repay amounts drawn on credit facilities and to fund development programs in the Vaughan Metropolitan Centre, seniors housing, multifamily residential, retail and other initiatives. In April, Granite REIT closed its public offering of 3.749 million units at a price of C$61.50 per unit, for total gross proceeds of approximately C$230 million. The net proceeds from this offering were earmarked to partially fund the potential acquisition of two properties, one industrial income producing property in Ohio and one development property in Calgary, Alberta, as well as to fund development costs associated with future build-to-suit opportunities on a parcel of land in Indiana.

iii Investor activism

As previously noted, most publicly listed real estate entities in Canada exist in the form of a REIT. Most REITs, because they are trusts, do not provide to their unitholders those same rights and remedies as would be typically available to a corporate shareholder. However, the inability of unitholders to access such things as the oppression remedy, dissent rights and rights to call meetings or make proposals, have not gone unnoticed. Institutional governance groups have and continue to pressure REITs to adopt more uniform trust declarations, with rights comparable to those of a corporate shareholder. In light of this mounting pressure, an increasing number of REITs are adopting some of those rights.

Canadian corporate law allows shareholders with a 5 per cent stake in a company to call for a special meeting, compared to the 10 per cent required under US law. Furthermore, in Canada, a shareholder can solicit votes from 15 other investors without issuing a proxy circular under what is referred to as the 'quiet solicitation' exemption under the applicable rules. This allows a relatively small shareholder to gather powerful allies behind closed doors. Taken together, these circumstances give activists a more accessible basis from which to launch their campaigns. Canada's friendliness to shareholder activism helps explain why activism within the real estate market has been undergoing a paradigm shift in recent years.

Historically, the REIT market has seen a limited amount of unitholder activism, and driven largely by private equity where it has occurred. Over the last decade, there have been just under a dozen publicised instances of REIT unitholder activism. In 2014, Orange Capital Partners, together with Kingsett Capital (an existing unitholder of InnVest REIT), called a successful meeting of unitholders to expand and reconstitute the board of InnVest REIT with seven new independent trustees, all of whom were nominated by Orange Capital. Two years following the InnVest board reformation, InnVest REIT was sold at a 37 per cent premium to market.

With activism continuing its ramp-up in the Canadian marketplace, in 2017 alone, there were a number of prominent public unitholder activist campaigns launched against REIT management. Activist investors FrontFour Capital Group and Sandpiper Group, owners of approximately 6.2 per cent of the outstanding units of Granite REIT, called for a meeting of unitholders to replace the board. Ultimately, through activist efforts, the investor activist groups were able to not only to place three representatives on the board of Granite REIT, but also to remove the Chairman and Vice-Chairman of the board. Following significant public pressure from investors and in an effort to avoid a costly proxy contest, Agellan reached a settlement agreement with Sandpiper Group and ELAD Canada Inc., which involved board membership changes and the internalisation of management functions.

Another form of activism utilised in 2017 involved institutional investors joining forces to demand higher prices in takeover bid transactions. This is what transpired when unitholders of Milestone Apartments REIT demanded an increased premium from Starwood Capital Group, which had launched a takeover bid for Milestone Apartments REIT, and was eventually given an attractive 16 per cent premium over market. Early in 2019, Sandpiper Group announced it was set to overhaul five more Canadian real estate entities in the calendar year. While Sandpiper Group did not announce the names, or even identify the type of real estate entities it intends to pursue, it did make clear it was prepared to bridge the value gap created by underperforming REITs and further highlighted the expected level of activist activity REITs may face in the coming year.

REITs are vulnerable to activists in part because they are not governed by corporate statutes, but rather by their own declaration of trusts. Consequently, in response to increased shareholder activism in recent years, a large number of REITs have adopted an array of important corporate governance enhancements.20

III M&A TRANSACTIONS

i Legal framework and deal structures

There are numerous methods by which a public Canadian company can be acquired. With respect to M&A transactions in the real estate market, the two most commonly seen are structured either as a plan of arrangement or a takeover bid. An overview of these transaction structures, which are not unique to the public real estate M&A, is provided below.

Plan of arrangement

A statutory plan of arrangement is a voting transaction that can be effected by a Canadian corporation according to the laws of the jurisdiction in which the company was incorporated. A plan of arrangement is unique in that it can permit a buyer to acquire 100 per cent of the shares of a target company, without having to require a buyer to make an offer, or enter into a share purchase agreement, with each and every shareholder of the target company. Instead, the purchaser is required to enter into an arrangement agreement with the target company and when the plan of arrangement is completed, the purchaser acquires all of the outstanding securities of the target company in a single step. As such, it is unsurprising that a plan of arrangement is frequently utilised in friendly, non-hostile acquisitions.

The arrangement agreement is first negotiated with a target company's board of directors. Once the board of directors approves it, the target will apply to a court to begin the process of approving and effecting the arrangement. The initial appearance before a court will be to secure an interim order, which sets the procedural rules for the arrangement, including the manner in which the meeting of seurityholders will be called and held, setting out those classes of securityholders that are entitled to vote and the requisite levels required to approve the arrangement. The interim order is usually uncontested.

Once an interim order is provided, the plan of arrangement is presented to the target company's shareholders for their approval. The details of the transaction, including the specific steps contemplated by the plan of arrangement, are set forth for shareholders in an information circular, the content and form of which is governed by applicable securities laws. Although the requisite shareholder approval threshold is determinable by a court under an interim order, acquirers typically propose that they be obliged to seek the same approval threshold as would be required under the applicable corporate law statute governing the target company involved in the transaction if the transaction were effected outside the arrangement process. In most Canadian jurisdictions, the relevant corporate law statutes set out a threshold of two-thirds of the votes cast at the meeting of the target company's security holders. Convertible securities, such as warrants and convertible debentures, are typically not given the right to vote in a plan of arrangement, unless the rights of these securities holders are being altered by the arrangement in a manner that is unfair or is unreasonable.

If the requisite majority of shareholder approval is obtained, then the arrangement is presented to the court for its final approval. Disaffected stakeholders can, at this time, appear before the court to challenge the arrangement, although, practically speaking, the vast majority of arrangements are presented to a court without opposition. The court, in reviewing the plan of arrangement, is guided by considerations of fairness and reasonableness, with respect to the effect of the transaction on shareholders. If the plan of arrangement is approved by the court, it then becomes binding on all shareholders of the target company.

Given that plans of arrangement are voting transactions effecting corporations, the REIT-to-REIT M&A context necessitates the presence of a corporation somewhere in the REIT structure. To date, courts have been accommodating in the flexible use of the plan of arrangement structure, even where the transaction is primarily a REIT-to-REIT M&A transaction. Moreover, a unique feature of REIT-to-REIT mergers is that to achieve a tax deferral, if offering REIT units for consideration, the steps outlined in Section 132.2 of the ITA must be adhered to, and within those steps is the requirement for a plan of arrangement.

Takeover bid

A takeover bid, the substantive equivalent of a tender offer under US securities laws, is a transaction in which a purchaser makes an offer for the securities of a target company directly to the target company's securities holders. As the support of the target directors is not legally required, a takeover bid is the only practical means to effect an unsolicited or hostile acquisition.

Each Canadian province and territory has adopted a uniform regime under which takeover bids are regulated. The relevant legislation requires that a takeover bid be made to all registered holders of the class of voting or equity securities being purchased, and that the offer be sent to all registered holders of securities convertible into or exercisable for such voting or equity securities. Additionally, the offeror must make the same purchase offer to each securities holder in the class.

The takeover bid circular, delivered to all requisite securityholders, must contain prescribed information about the offer, the offeror and the target company. Where the consideration offered in exchange for the solicited securities consists, in whole or in part, of the securities of the offeror, the disclosure document must also include prospectus-level disclosure about the offeror. While the uniform regime adopted by the securities regulators in Canada sets out the minimum standards relating to the conduct of the bid, including disclosure requirements, it is generally unnecessary for an offeror to present the contents of its disclosure documents to securities regulators, nor is it likely that the takeover bid circular, unless a complaint is made, will be reviewed by the regulators once filed.

Once a takeover commences, the board of directors of the target company, or the trustees of the target REIT, have a duty to consider the offer and an obligation to make a recommendation to security holders regarding the adequacy of the offer. However, the ultimate determination as to whether to accept or reject a takeover bid is made by the securities holders.

The determination as to whether a triggering event for a takeover bid has occurred is based on objective factors. The most important factors, however, are the percentage of voting or equity securities beneficially owned or controlled by the offeror (and any of its joint actors) and the number of additional securities subject to the takeover bid. The threshold for triggering a takeover bid is 20 per cent of any class of voting or equity securities. When determining whether the threshold for triggering a takeover bid will be met, the number of securities beneficially owned by the offeror is interpreted to include both those securities which the offeror has a right or obligation, through options, warrants or convertible securities, to acquire within 60 days, as well as, any securities held by affiliates or joint actors in the takeover bid.

Effective 9 May 2016, changes were made to the Canadian takeover bid regime. Under this new regime, all non-exempt takeover bids (including partial bids) are subject to the following requirements:

  1. a mandatory, non-waivable minimum tender requirement of more than 50 per cent of the outstanding securities of the class that are subject to the bid, excluding those beneficially owned, or over which control or direction is exercised by the bidder and its joint actors (the Minimum Tender Requirement);
  2. following the satisfaction of the Minimum Tender Requirement and the satisfaction or waiver of all other terms and conditions, takeover bids will be extended for at least an additional 10-day period (the 10-Day Extension Requirement); and
  3. takeover bids must remain open for a minimum of 105 days, unless the target agrees to a lesser period for the bid or another transaction.

These updated provisions, by increasing the amount of time afforded to a target company to respond to a takeover bid, has important implications for strategic shareholder rights plans and will likely continue to influence how M&A activity is structured.

Takeover bids are infrequently utilised for friendly transactions in Canada. Among REIT-to-REIT transactions, they are even rarer. This is because most REIT-to-REIT transactions involve equity considerations, and cannot be tax-deferred consolidation transactions unless they conform to Section 132.2 of the ITA which requires the transaction to occur by way of plan of arrangement. As a result, nearly all REIT-to-REIT transactions occur by way of a plan of arrangement. Even the rare M&A deal which starts hostile generally ends up becoming a negotiated plan of arrangement transaction, albeit for an increased price.

ii Acquisition agreement terms

The overwhelming majority of real estate transactions and deals take place by way of a plan of arrangement. The significant difference observed in the context of real estate mergers is that the specific mechanics of the plan of arrangement must conform with the directions of Section 132.2 of the ITA to ensure a tax-deferred rollover for a trust unit offered in consideration by an acquirer REIT. Conditions in public real estate mergers are typically similar to any public merger transaction.

One common deal protection, typical to most public merger transactions, is a non-solicitation ('no shop') provision. By adopting this provision, a target company not only obliges to recommend the transaction to its securities holders, but also agrees not to solicit nor negotiate other acquisition offers and to pay a break fee if the agreement is terminated in certain circumstances. In accordance with the exercise of its fiduciary duties, however, a board of directors is permitted, despite the existence of a non-solicitation provision, to change its recommendation, engage with a rival bidder that makes an unsolicited acquisition proposal that is likely to result in a superior offering, or enter into an agreement that supports a superior offering. The determination as to what constitutes a superior offering is a matter of negotiation; although it is almost invariably defined according, at least in part, to whether the proposal is more favourable from a financial perspective to securities holders, than is the existing transaction. Break fees are permissible in Canada, provided that they permit a reasonable balance between their negative effect as an auction inhibitor and their potential positive effect as an auction stimulator (including if the fee was necessary to induce a bid). Reasonable break fees are typically understood to range from 1 per cent to 5 per cent of deal equity value.

When a target board of directors seeks to defend a company from a takeover bid, a number of defensive tactics are available. The most common is the use of a poison pill or shareholders rights plan. However, as discussed above, under the new legislation these types of plans will be void after 105 days. Additional defensive tactics include issuances of securities to dilute the bidder or potential bidder (often by placing the securities in friendly hands), the sale of assets, recapitalisations, the acquisition of a white knight and asset lock-ups.

iii Financing considerations

Considerations and conditions in public real estate transactions are typically similar to other public merger transactions. One distinct difference often found in real estate transactions, that would not be found in non-real estate transactions, is the potential presence of a condition addressing the necessary percentage level of mortgagee consents to the assumption of mortgages.

To finance their real estate merger transactions, private equity acquirers will often draw from the equity commitments of their limited partnerships. Pension funds, on the other hand, often finance the equity portion of their real estate transactions by drawing on their vast reserves of liquid securities and assuming underlying mortgages. For the most part, mortgagers tend to consent to the assumption of their mortgages, particularly where the acquirer is well regarded as a significant player in the real estate market. Where mortgages have a provision requiring repurchase upon a change of control, which is common, credit lines or fresh mortgage alternatives must be available to the acquirers.

The nature of the Canadian bought deal underwriting structure, in which underwriters agree to purchase all of the offered securities under a prospectus, offers certainty of funding to a public REIT acquirer. As a result, a publicly traded REIT acquirer will often arrange a bought deal financing concurrently with the announcement of their acquisition transactions. Because bought deals can be through a subscription receipt structure, the acquirer's financing becomes contingent on the closing of the corresponding acquisition.

Public REIT-to-REIT merger transactions are typically in the form of unit-for-unit deals, with an assumption of the underlying mortgages of the target REIT. The equity portion of such a transaction can be sourced by way of available liquid funds, or can be financed through a bank facility, which would be subsequently repaid through a public debenture or the issuance of equity.

iv Directors' duties

Canadian corporate statutes impose two duties on directors: a duty of care and a duty of loyalty.

The Canada Business Corporations Act (CBCA) requires every director of a corporation, in exercising their powers and discharging their duties, to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. The applicable standard utilised by courts to determine whether a director has satisfied their duty of care is both objective and subjective in nature. Objectivity is used to determine how a reasonably prudent person ought to have acted, however, the circumstances surrounding the exercise of a director's duties modify the objectively reasonable person standard to account for the specific facts of the situation, as well as the subjective knowledge and experience of the particular director.

The duty of care imposed upon directors does not rise to the level of perfection. Rather, courts have generally deferred to the business decisions of directors where they have been satisfied that the directors exercised an appropriate degree of prudence and diligence. This deferential approach to directors decisions has become known as the business judgement rule (BJR). The BJR is a legal presumption that insulates directors from legal liability, so long as they act in an informed, prudent and diligent matter. In instances where the BJR is challenged, the onus is on the claimant to show that the directors' decision is fraudulent, illegal, or represented a conflict of interest. Some of the factors courts have considered to determine whether a director's decision should be reviewed are whether: an independent committee was used, an outside valuation was obtained, professional advice was sought, the decision was made over a sufficient amount of time, alternatives were considered, the transaction was negotiated, and proper documentation was prepared. The theme behind these factors is that they reflect the court's tendency to focus on the processes behind, rather than the outcome of, directors decisions. The courts have maintained that the judiciary should not seek to substitute its judgment for that of a board of directors, unless the circumstances surrounding a decision are so unusual and extreme to warrant such intervention. Consequently, if a director can demonstrate that their business decision was reasonable, in light of all the circumstances about which they knew or ought to have known, it is unlikely a court will have found them to have breached their duty of care. In fact, a director's failure to meet their duty of care often arises in situations where the director shows passivity to, and inattention towards, the business' activities.

The statutory duty of loyalty requires directors to 'act honestly, in good faith, and with a view to the best interests of the corporation'. A director's duty of loyalty is owed exclusively to the corporation, as a whole, rather than any individual group of stakeholders. In fact, the Supreme Court of Canada has held that directors, in determining what is in the best interests of a corporation, may look to the interests of, among others, shareholders, employees, creditors, consumers, and governments. While this approach encourages directors to consider the effect of their decisions on different groups of stakeholders within a corporation, it continues to remain the case that the interests of equity security holders are given significant weight. Accordingly, the determination of whether an acquisition proposal delivers the best value reasonably available to equity security holders remains a central focus in director deliberations.

Directors cannot contract out of their duties and can be held personally liable for a breach of their duties. Although REITs are trusts, and therefore not governed by the CBCA or its provincial equivalents, it is the case that the common law applies a similar, if not higher, standard of care and loyalty to the REIT trustees as it does to corporate directors. Moreover, REITs, in their trust instruments, have generally adopted similar standards of care and loyalty to those in Canada's corporate legislation. Furthermore, although no definitive decision on the matter has been made, Canadian courts have typically held trustees of public REITs to the standards expected of the directors of public companies.

v Tax considerations

Taxation in Canada is governed primarily by the ITA, a federal statute, as well as by sales tax, corporate tax, and provincial and territorial tax laws. The ITA imposes an annual income tax on the taxable worldwide income of: every 'person' resident in Canada (including corporations); those non-resident persons who carry on business in Canada; and any disposition of taxable Canadian property.

As of March 2019, the basic Canadian combined federal and provincial tax rate for income earned by a corporation ranged from as low as 26.5 per cent (Northwest Territories, Ontario and Quebec) to as high as 31 per cent (Prince Edward Island and Nova Scotia).

Non-residents of Canada may be subject to the ITA either by way of carrying on business in Canada or by disposing of taxable Canadian property. Consequently, the tax treatment of any investment made by a non-resident in Canadian real estate will depend on whether the investment is made directly by the investor or through a Canadian entity (i.e., a corporation). Ultimately, the determination as to whether an activity constitutes carrying on a business is a question of fact, determinable on the basis of the facts and circumstances. Even where it is not found that a business is being carried on, it may be the case that a withholding tax to non-residents is applied to the passive income gained.

What qualifies as taxable Canadian property, for the purposes of determining whether a tax on the disposition of that property should be applied, is determined according to the ITA and does not depend on the seller being resident in Canada. As such, non-residents may be subject to income tax in Canada through this channel.

Under the ITA, Canadian corporations that seek to make certain types of payments to non-residents, are required to withhold tax at a rate of 25 per cent. The types of payments which trigger a withholding tax include interest paid to non-arm's length parties, participating interest, certain administration/management fees, rents, royalties and dividends. Treaties can serve to provide extensive relief for dividends, reducing the withholding tax to 15 per cent or 5 per cent in situations where the non-resident recipient holds over 10 per cent of the voting shares of the issuing corporations. Most interest payments payable under a traditional loan held by a non-resident arm's length lender are also exempt from withholding tax. However, loans between non-arm's length parties are subject to withholding tax under the ITA. Where treaties are in place, however, the rate of tax withheld on the non-arm's length loan interest is, in most treaty jurisdictions, reduced to between 10 per cent and 15 per cent.

As previously discussed, REITs are designed to act as 'flow-through entities'. This means that, upon meeting the ITA qualifications to be a recognised as a REIT, a REIT will be exempt from paying Canadian income tax, so long as it distributes its annual taxable income to its unitholders. Where it happens that the unitholders of a REIT are non-residents, the REIT is required, upon distributing its income, to withhold tax at a 25 per cent rate (unless there is an applicable tax treaty). Generally, the gain realised upon the disposition of REIT units is not subject to Canadian tax consideration so long as the unitholder and those persons dealing with the unitholder hold less than 25 per cent of the units of the REIT.

Other tax considerations also need to be considered in circumstances where a non-resident investor in Canadian real estate earns passive income from their property (for example, rental income). Further Canadian real estate, and shares of corporations that largely derive their value from Canadian real estate are taxable under the ITA, with limited exceptions. Factors such as how the real estate is held and whether it was held for resale or trade purposes or otherwise will have a significant impact on the tax implications associated with any disposition of property.

In Canada, the transfer of real estate can have significant tax implications. For example, the disposition of real estate in Ontario can trigger the application of land transfer taxes, municipal taxes, foreign buyer taxes, and value added taxes. A land transfer tax is a form of provincial tax payable by the purchaser of real property, upon the closing of the transaction. Subject to certain exemptions, land transfer tax is payable on every registered conveyance of land tendered and every unregistered disposition of a beneficial interest in land. The rate of land transfer tax is not fixed, but rather stratified, and is determined according to the type of property being transferred and the total value of consideration paid. However, in certain circumstances, general anti-avoidance regimes put into place in the Land Transfer Tax Act ensure that the land transfer tax is payable on the fair market value of the real property, rather than on the total value of the consideration paid. The exemptions for the application of the land transfer tax include, but are not limited to, certain transfers between: spouses, an individual and their family business corporation, and family members whose farmed land is being conveyed.

In Ontario, municipalities are entitled to levy annual property taxes under the Municipality Act. In exchange for these taxes, municipal governments provide many city-based services. The calculation of municipal tax is dependent on the value of the property compounded by the 'mill rate', which is determined annually and based on the financial needs of the municipality. In the last decade, some municipalities, such as Toronto and Montreal, have introduced a municipal land transfer surtax. This municipal land transfer tax is paid, by the purchaser of real property, in addition to provincial land transfer taxes.

Following the rapid, unstainable rise of residential housing and rent, Ontario and British Columbia introduced a foreign buyer land transfer tax. This surtax is paid by foreign, non-resident purchasers of Canadian property when the transaction closes. British Columbia's 20 per cent foreign buyer land transfer tax is applied only to those properties purchased in the Metro-Vancouver area. Vancouver has also instituted an empty homes tax of 1 per cent annually and was introduced to return empty or under-used properties to the rental market in Vancouver. In Ontario, the 15 per cent 'non-resident speculation tax' only applies to property purchased by non-residents in the Greater Golden Horseshoe Area, Toronto.

The federal government imposes a value-added tax, known as the Goods and Services Tax (GST), at a rate of 5 per cent, on goods and services purchased in Canada. With limited exceptions, everyone is required to pay GST on purchases of taxable goods and services, including for real estate.

Where the seller of goods or services is a non-resident of Canada, the method by which they remit GST to the federal government varies. Non-residents of Canada who carry on business in Canada, and make taxable supplies in the course of that business, are required to register under Canadian GST legislation to collect and remit GST. Moreover, if these non-resident registrants do not have a permanent establishment in Canada, then they must, to meet collection and remittance obligations, post security with the Canada Revenue Agency. If a non-resident registrant does have a permanent Canadian establishment, then it can simply register for and collect GST on taxable goods and services. If a seller is a non-resident, is not a GST registrant, and is not carrying on a business in Canada, then the purchaser of the goods or services may be required to self-assess the GST payable on the transaction.

In Ontario, the federal GST is harmonised with the provincial sales tax and collected as a single tax known as Harmonised Sale Tax (HST). In 2019, Ontario charged HST at a rate of 13 per cent (which includes the 5 per cent GST). Generally, the application of HST mirrors that of GST. In those provinces and territories where HST is not applied, provincial sales tax is not applied to the purchase of real estate.

Investment in real estate in Canada (whether directly or indirectly, by a Canadian resident or non-resident) will have significant tax implications which vary depending on the individual or specific circumstances relevant to the particular situation. Investors (and real estate entities) are advised to seek independent tax advice in connection with any potential investments or dispositions.

vi Regulatory considerations

Foreign ownership

Property ownership falls under provincial, rather than federal, jurisdiction in Canada. Newfoundland, Nova Scotia and New Brunswick are the only remaining provinces in which there are no restrictions on foreign ownership of land.

Manitoba, Saskatchewan, Alberta and Quebec have legislation restricting foreign ownership of parcels of farm land. Manitoba restricts foreign ownership of farmland to 40 acres. Saskatchewan restricts the purchase of farmland by non-residents to 10 acres. Alberta legislation caps foreign ownership of agricultural land at two parcels containing 20 acres, however, the legislation does not apply to certain commercial uses of land. Quebec's legislation, the most restrictive of the bunch, prohibits non-Quebec residents from acquiring more than four adjacent hectares of farmland (roughly 10 acres). Prince Edward Island (PEI) restricts non-PEI residents (defined as persons who have not lived in PEI for at least 365 days over 24 months) from purchasing more than five acres of land, or 165 feet of shoreline. In 2016, British Columbia implemented an additional property transfer tax of 15 per cent on Metro Vancouver homes purchased by foreign buyers. When this foreign buyers' tax was initially introduced, however, there were concerns that it was too sweeping, penalising those recruited to Vancouver on work permits. As a result, the tax was amended in 2017. Since then, it has also been raised to 20 per cent. In 2017, Ontario, following in the footsteps of British Columbia, introduced a 15 per cent non-resident speculation tax on residential property purchased in the Greater Golden Horseshoe Area by anyone who is neither a citizen nor permanent resident of Canada.

Competition Act

Under the Competition Act, mergers and acquisitions of all sizes and in all sectors of the economy are subject to review by the Commissioner of Competition. The Competition Act requires companies to notify the Commissioner of Competition, by way of a pre-acquisition filing, if a proposed transaction meets, or exceeds, certain asset size or revenue criteria. Generally, a pre-acquisition filing must be submitted if:

  1. either the value of the assets to be acquired, or the value of the assets owned by the corporation being acquired, or the annual gross revenue of the business being acquired exceeds C$96 million (in 2019); and
  2. the parties to the transaction, together with their affiliates, have either assets in Canada, or annual gross revenues from sales in, from or into Canada, exceeding C$400 million (in 2019).

Upon receipt of the filing, the Commissioner of Competition has 30 days, although extensions are common, to review the filing so as to narrow and refine issues and to determine what, if any, additional information is required from the parties to assess anti-competition concerns. In particular, the Commissioner will consider what additional information is required to determine whether the proposed transaction is likely to lessen or prevent competition substantially. Real estate, historically, has not been a sector in which the Commissioner has given refusals or divestiture orders.

Investment Canada Act

Under the Investment Canada Act (ICA), certain acquisitions by non-Canadians of Canadian businesses are subject to pre-closing review. The application of the ICA is limited to those investments made by non-Canadians that involve an acquisition of control over a Canadian business. Whether a pre-closing filing for a control transaction will need to be submitted to the Minister of Industry will depend on:

  1. the enterprise value of the Canadian business (if the acquirer is not a state-owned entity);
  2. the book value of the Canadian business (if the acquirer is a state-owned enterprise, or is not a world trade organisation state member); and
  3. whether the business is in a sensitive sector.21

For acquirers who are not a state-owned entity, the financial threshold that triggers the requirement for a pre-closing review under the ICA depends on the nationality of the investor. Nationals of a specified free trade party22 that directly acquire control of a Canadian business are only subject to a pre-closing review under the ICA if the enterprise value23 of the Canadian business exceeds C$1.568 billion (in 2019). Investors who hail from World Trade Organisation member state are subject to a pre-closing review under the ICA if the enterprise value of the Canadian business exceeds C$1.045 billion (in 2019).

For acquirers who are state-owned entities, the book value threshold required to trigger a pre-closing review will depend on the nationality of the state-owned entity. State-owned entities from WTO nations are only required to file a pre-closing review under the ITA if the book value of the Canadian business they are acquiring meets or exceeds C$416 million (in 2019). Non-WTO state-entities directly purchasing Canadian businesses are required to submit a pre-closing review if the book value of the Canadian business exceeds 5 million dollars. An indirect control transaction by a non-WTO state-entity for a Canadian business will require a pre-closing review only if the book value of the business exceeds C$50 million (in 2019).

In those transactions where a non-Canadian investor gains control of a Canadian business that does not meet nor exceed the financial threshold required to trigger the submission of a pre-closing filing, a notice of investment must be filed, within 30 days of closing.

The ICA reserves a residual right to review any non-resident acquisition of a Canadian business on nation security grounds. This right of review is unique in that it is not conditional on value or quality thresholds being met. As such, even investments which do not involve high asset values, or an acquisition of control over the business may be subject to review on national security grounds.

The ICA defines a Canadian business to mean a business carried on in Canada that has: (1) a place of business in Canada, (2) an individual, or individuals, in Canada who are employed, or self-employed in connection with the business, and (3) assets in Canada used in carrying on the business. Whether Canadian real estate assets can be considered a Canadian business for this purpose is a question of fact, determined primarily by the second criterion – specifically, whether there are individuals employed in connection with the real estate. Consequently, a hotel that has employed staff in Canada to render their services would be considered to be carrying on a business, whereas an office tower that has outsourced all of its services would not.

IV OUTLOOK

The year of 2018 was marked by uncertainty, as evidenced by the number of largely unanticipated macroeconomic and geopolitical developments. For example, the end of the North American Free Trade Agreement (NAFTA) has shaken up global trading patterns and affected commodity prices, which can have the effect of raising the costs of real estate development in Canada and putting further pressure on affordability. One real estate trend that emerged in 2018 and the first part of 2019 was the increased diversification of assets. For example, developers and investors are entering partnerships and joint ventures to reduce risk by making the most of a partner's skills and resources.24 Moreover, it seems that real estate entities are starting to redirect additional development funds to the US, where taxes are lower, regulations are fewer and markets are larger.25 Looking forward to the last six months of 2019, the markets continue to face a highly uncertain economic environment. This is attributable to a range of concerns, including fast-paced technological growth, the potential for interest rate hikes, rising household debt levels, and fears over the pace of global growth. Any of these developments could have a significant impact on the Canadian real estate sector. Despite these uncertainties, the investment demand for Canadian commercial real estate continues to be strong across Canada. Investor confidence in industrial and office assets is expected to remain high amid land shortages and high occupancy rates. Similarly, with continued developments in lifestyle trends, retail assets are presenting themselves as capable of creating new opportunities due to their prime location. Finally, the ongoing housing affordability saga seen in major metropolitan cities, coupled with the ongoing population growth, is likely to encourage investors to continue to chase opportunities within those markets.


Footnotes

1 Brenda Gosselin and Stephen Pincus are partners at Goodmans LLP. They wish to thank Nargis Fazli, student-at-law, for her assistance in the preparation of this chapter.

2 Jones Lang LaSalle (JLL) 'Canada Investment Outlook – Q1 2019 Report'.

3 CIBC '2018 Canadian Real Estate Year in Review'.

4 CBRE Group Inc. 'Q1 2019, Industrial Market Report'.

5 Clayton, Frank & Hong Yun (Eva) Shi. 'WOW! Toronto Was the Second Fastest Growing Metropolitan Area and the Top Growing City in All of the United States and Canada.' (31 May 2019) Ryerson Centre for Urban Research and Land Development.

6 Sharma, Neil. 'Canadian City Sees 183 per cent Surge in Foreign Buyer Investment.' Mortgage Broker News (5 May 2019).

7 Canadian Real Estate Association, 'Quarterly Forecast- Q1 2019' (14 June 2019).

8 Marr, Garry. 'Canadian Pension Funds Have Amassed C$188B in Real Estate Assets. And They Are Hungry for More.' Financial Post (5 October 2017).

9 ibid.

10 Specific examples include the privatisation of Oxford by OMERS; and Cadillac Fairview by Ontario Teachers' Pension Plan.

11 Chandler, Michele. 'Canada's REIT Industry Turns 25.' NaREIT (19 July 2018).

12 Supra note 2.

13 Chris Murray & Jack Silverson, The Real Estate M&A and Private Equity Review Canada, Third Edition (The Law Reviews, 2018) at 72.

14 CI Financial Company 'First Asset Canadian REIT ETF Manager Commentary' (9 May 2019).

15 Supra note 2.

16 Supra note 2.

17 CIBC, 'Canadian REITs Monthly'(6 June 2019).

18 Wong, Natalie, et al. 'Chinese Real-Estate Investors Wary of Vancouver Head to Toronto' (12 April 2019) Financial Post.

19 Supra note 2.

20 Wes Hall et al, '2018 Proxy Season Review: Encountering the Changing Expectations of Investors' Kingsdale Advisors, 2018.

21 Real estate is not a sensitive sector under the Investment Canada Act.

22 The European Union, the United States, Mexico, Chile, Colombia, Honduras, Panama, Peru, South Korea, Japan, Vietnam, Singapore, Australia or New Zealand.

23 The enterprise value of a business is calculated differently.

24 PricewaterhouseCoopers, 'Emerging Trends in Real Estate 2019' (2019).

25 ibid.