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Boardwalk Real Estate Investment Trust
This information from:
Boardwalk's Management Information Circular - March 29, 2004
QUESTIONS AND ANSWERS ABOUT
THE ACQUISITION AND THE ARRANGEMENT
The following questions and answers are to help Securityholders understand the proposed Acquisition and Arrangement and the other matters described in this Circular. However, these questions and answers do not describe everything that Securityholders should consider before voting on the matters at the Meeting. Accordingly, Securityholders are encouraged to read this Circular and the Appendices hereto in their entirety. For an explanation of certain defined terms used in these questions and answers, please refer to the "Glossary of Terms and Expressions".
Q1. What are the Acquisition and the Arrangement?
The Acquisition and the Arrangement broadly contemplate the indirect transfer of all of the assets and undertakings of the Corporation to a new real estate investment trust to be named "Boardwalk Real Estate Investment Trust", and the indirect acquisition of the Corporation by BPCL through the exchange by Public Shareholders of their Common Shares for REIT Units on a one-for-one basis.
For more information, see "Description of the Acquisition and the Arrangement — Overview of the Arrangement".
Q2. What is Boardwalk REIT?
Boardwalk REIT is an open-ended real estate investment trust formed to acquire all of the Corporation’s assets and undertakings. Boardwalk REIT’s principal objectives are to provide its unitholders with monthly cash distributions, partially on a Canadian income tax-deferred basis and to increase the value of its units through the effective management of its residential multi-family revenue producing properties and the acquisition of additional properties.
For more information, see "Information Concerning Boardwalk REIT".
Q3. Why are the Acquisition and the Arrangement being proposed at this time?
The Board of Directors believes that shareholder value will be significantly enhanced by the ownership and management of the Corporation’s assets and undertakings through a real estate investment trust rather than a corporate structure, having regard to the attendant tax and commercial efficiencies of the real estate investment trust structure and other market considerations.
For more information, see "Description of the Acquisition and the Arrangement — Background to and Reasons for the Acquisition and the Arrangement".
Q4. If the Acquisition and the Arrangement are completed, what will Public Shareholders receive for their Common Shares?
Public Shareholders will receive one REIT Unit for each Common Share held. Each REIT Unit will give the holder an undivided beneficial interest in Boardwalk REIT and entitlement, pro rata, to distributions made by Boardwalk REIT.
For more information, see "Description of the Acquisition and the Arrangement — The Plan of Arrangement" and "Declaration of Trust and Description of REIT Units".
Q5. Will BPCL continue to be the largest single holder of REIT Units after the Acquisition and the Arrangement?
BPCL is currently, as the owner of approximately 28% of the outstanding Common Shares on a fully diluted basis, the largest single holder of Common Shares. If BPCL were not to sell any of its Common Shares prior to the closing of the Acquisition and the Arrangement, it is anticipated that immediately after the Acquisition and the Arrangement it would be (as the recipient of REIT Units in exchange for such shares) the largest single holder of REIT Units. BPCL has, however, indicated that, subject to market conditions and terms satisfactory to BPCL, it intends, prior to the Effective Time, to sell a significant portion of its Common Shares in the Secondary Offering and, to that extent, its percentage ownership of Boardwalk REIT will be less than its percentage ownership of the Corporation.
The Secondary Offering is expected to result in a substantive change in the indirect ownership of the Contributed Assets. Accordingly, it is expected that because of the Secondary Offering, Boardwalk REIT’s financial statements will reflect the acquisition of the Contributed Assets at their fair market value rather than their carrying amount to the Corporation. This treatment is consistent with that taken recently by several other income trusts and real estate investment trusts that purchased assets in a transaction that included a substantive change in the ownership of such assets, as is the case in substance here.
Irrespective of the number of Common Shares sold by BPCL in the Secondary Offering, BPCL will receive in connection with the Acquisition and the Arrangement, LP Class B Units representing an effective interest of approximately 8% in Boardwalk REIT (after the preferred partnership distribution and other entitlements of the LP C Units which BPCL will also receive).
For more information, see "Description of the Acquisition and the Arrangement — Overview of the Acquisition and the Arrangement" and "— Arrangements with BPCL".
Q6. Why will BPCL not receive REIT Units for all of its Common Shares?
Subject to market conditions (including the prevailing price for Common Shares) and terms satisfactory to BPCL (including underwriting fees negotiated with the underwriting syndicate involved in the Secondary Offering), BPCL intends, prior to the Effective Time, to sell for cash in the Secondary Offering approximately two-thirds of the Common Shares currently held by it. If the Secondary Offering is not completed in its entirety, BPCL and its affiliates will receive one REIT Unit for each Common Share held by it at the Effective Time, other than Common Shares in a number equal to approximately 8% of the total outstanding Common Shares that BPCL will continue to own. In accordance with Canadian securities laws, BPCL will issue a press release announcing the terms of any Secondary Offering once it has entered into an underwriting agreement in that regard. Alternatively, if BPCL makes a determination not to proceed with the Secondary Offering, it will issue a press release announcing such determination. Any such press release will be made prior to the Meeting.
In order to effect the Acquisition and the Arrangement for the benefit of all Shareholders, BPCL will indirectly acquire the Corporation and LP Class B Units and LP Class C Units. If the Secondary Offering is completed in its entirety, BPCL will indirectly own LP Class B Units and LP Class C Units, but no REIT Units. The LP Class B Units have been designed to be, as nearly as possible, the economic and voting equivalent of REIT Units (such LP Class B Units being exchangeable, on a one-for-one basis, into REIT Units). The LP Class C Units will provide the Corporation with partnership distributions in amounts that should be sufficient to permit the Corporation to pay certain liabilities that it will retain in relation to assets transferred to the Partnership. While BPCL will obtain a deferral on the income tax that would otherwise be payable on the exchange of its Common Shares, it will be subject indirectly, to significantly greater tax payable upon any subsequent disposition of its LP Class B Units. As well, capital tax will be payable indirectly by BPCL in respect of the LP Class B Units.
For more information, see "Description of the Acquisition and the Arrangement — Arrangements with BPCL" and "Information Concerning the Partnership — LP Units".
Q7. Will I be able to trade the REIT Units that I receive for my Common Shares?
Yes. The REIT Units which Shareholders will receive in exchange for their Common Shares have been conditionally approved for listing on the TSX and, subject to the satisfaction of all of the requirements of the TSX, will be listed on the TSX under the symbol "BEI.UN". The REIT Units will not be listed on the NYSE.
For more information, see "Description of the Acquisition and the Arrangement — Regulatory Approvals — Stock Exchange Listing" and "Procedure for Surrender of Common Shares — Resale of REIT Units".
Q8. On what am I being asked to vote at the Meeting?
At the Meeting, Securityholders will be asked to vote on a resolution approving certain transactions that are part of the Acquisition and the Arrangement. If the Acquisition and Arrangement Resolution is approved by the requisite majority of Securityholders, Shareholders will also be asked to vote on a resolution approving the adoption of the Rights Plan.
Q9. How should I vote in respect of the Acquisition and Arrangement Resolution?
The Board of Directors, on the recommendation of the Special Committee, and based on its own investigations, has determined that the Acquisition and the Arrangement are in the best interests of the Corporation and fair to Public Shareholders, Unaffiliated Shareholders and Optionholders and recommends that Public Shareholders and Optionholders vote in favour of the Acquisition and Arrangement Resolution. However, Securityholders should carefully review and consider the Acquisition and the Arrangement and reach their own conclusion as to whether to vote for the Acquisition and Arrangement Resolution.
For more information, see "Description of the Acquisition and the Arrangement — Background to and Reasons for the Acquisition and the Arrangement".
Q10. What votes are required to approve the Acquisition and Arrangement Resolution and the resolution approving the adoption of the Rights Plan?
The Acquisition and Arrangement Resolution must be approved by at least 662/3% of the votes cast by all Shareholders and Optionholders who are represented at the Meeting, voting together as a single class. In addition, the Acquisition and Arrangement Resolution must be approved by a simple majority of the votes cast by all "Minority Shareholders" represented at the Meeting. The term "Minority Shareholders" excludes Shareholders such as BPCL, its affiliates and the directors and senior officers of the Corporation and BPCL.
As required by the TSX, the resolution approving the adoption of the Rights Plan must be approved by: (i) a majority of votes cast by Shareholders; and (ii) a majority of votes cast by Shareholders, other than those owned by any holder of Common Shares holding in excess of 20% of the outstanding Common Shares and their associates, affiliates and insiders. Accordingly, in respect of the second vote, the votes of Shareholders such as BPCL, its associates, affiliates and insiders will be excluded for the purposes of authorizing and approving this resolution.
Q11. When do you expect the Acquisition and the Arrangement to be completed?
The completion of the Acquisition and the Arrangement will occur as soon as practicable following the satisfaction of all of the required conditions to completion of the Acquisition and the Arrangement, including regulatory and court approvals. In addition to the approval of Securityholders at the Meeting, the Plan of Arrangement must be approved by the Court. The completion of the Acquisition and the Arrangement is also conditional upon various other conditions, including the receipt of certain other regulatory approvals and third party consents. Although we are working to satisfy all conditions to the completion of the Acquisition and the Arrangement, we cannot assure you that all such conditions will be satisfied.
If all conditions to the Acquisition and the Arrangement are satisfied or waived, the Corporation expects the Effective Date to be on or about May 3, 2004.
For more information, see "Description of the Acquisition and the Arrangement — Acquisition and Arrangement Agreement" and the full text of the Acquisition and Arrangement Agreement attached to this Circular as Appendix B.
Q12. What if all of the conditions to the Acquisition and the Arrangement are not satisfied?
If the conditions to which the Acquisition and the Arrangement are subject are not satisfied or waived, the Acquisition and the Arrangement will not be completed and the Corporation will continue to carry on its business as presently conducted.
Q13. What should I do now? How can I vote?
You should read and carefully consider the information contained in this Circular. You should also determine whether you hold Common Shares directly in your name or through an investment dealer, bank, trust company or other intermediary, since this will determine the procedures that you must follow in order to vote with respect to matters at the Meeting. If you determine that you are a registered Shareholder, you should either attend the Meeting or follow the instructions for completing and returning the enclosed Form of Proxy for Shareholders (blue form) described in this Circular and on the Form of Proxy for Shareholders. If you determine that you are a non-registered Shareholder, you should read the instructions of your intermediary to you regarding how to provide voting instructions with respect to your Common Shares. You may also wish to contact the intermediary through which you hold Common Shares in order to obtain information about how to vote your Common Shares.
If you are an Optionholder you should either attend the Meeting or follow the instructions for completing and returning the enclosed Form of Proxy for Optionholders (yellow form) described in this Circular and on the Form of Proxy for Optionholders.
For more information, see "The Meeting".
Q14. Is my vote important?
Yes. For this reason, you are urged to carefully consider and vote with respect to the matters described in this Circular.
Q15. If my Common Shares are held through an intermediary such as my investment dealer or bank, will my investment dealer or bank vote my Common Shares for me without my instructions?
No. If your Common Shares are held through an intermediary, such as an investment dealer, bank or trust company, your intermediary is prohibited from voting your Common Shares without instructions from you. As every investment dealer or other intermediary has its own procedures for obtaining voting instructions from Shareholders, you should carefully review and follow those procedures to ensure that your Common Shares are voted at the Meeting.
For more information, see "The Meeting — Advice to Beneficial Shareholders".
Q16. What happens if I don’t indicate how to vote on my form of proxy?
If you are a registered Shareholder or an Optionholder and you sign and deliver your proxy, but do not include instructions on how to vote, your Common Shares and Options will be voted FOR each matter referred to in the form of proxy.
For more information, see "The Meeting — Voting of Proxies".
Q17. If I have share certificates evidencing Common Shares, should I deliver them now?
While you are not required to deliver the share certificates representing your Common Shares at this time, if you have share certificates, you must deliver them together with your completed Letter of Transmittal and all other required documents in order to receive the certificates representing the REIT Units to which you will be entitled upon the successful completion of the Acquisition and the Arrangement.
If you are a registered Shareholder, certificates representing the REIT Units, will, as soon as practicable after the successful completion of the Acquisition and the Arrangement, be forwarded to you at the address specified in your Letter of Transmittal by insured first class mail or will be available for you to pick-up at the offices of Computershare Trust Company of Canada at the address set forth in the Letter of Transmittal, if requested in your Letter of Transmittal. However, no certificates for REIT Units will be delivered to, or for the account of, any Shareholder who is a resident of the State of New York. See "Information for United States Shareholders — Notice to the residents of the State of New York".
If you are a registered Shareholder and the share certificate representing your Common Shares has been lost or destroyed, you should complete the Letter of Transmittal as fully as possible and forward it, together with a letter describing the loss, to Computershare Trust Company of Canada. Computershare Trust Company of Canada will respond with the replacement requirements, which must be properly completed and returned prior to effecting the exchange.
If you are a non-registered Shareholder, you may not have to complete a Letter of Transmittal in order to obtain your REIT Units upon the successful completion of the Acquisition and the Arrangement. However, you should read your intermediary’s instructions to you regarding the procedures for obtaining those units and also consider contacting your intermediary if you have any questions regarding this process.
For more information, see "Procedure for Surrender of Common Shares".
Q18. What are the income tax consequences to me of the Arrangement?
A Shareholder resident in Canada will generally realize a capital gain (or sustain a capital loss) on the disposition of the Shareholder’s Common Shares equal to the amount by which the total of the fair market value of the REIT Units received by the Shareholder exceeds (or is exceeded by) the adjusted cost base of the Shareholder’s Common Shares, net of any reasonable costs of making the disposition. One-half of any such capital gain must be included in income and one-half of any such capital loss may be utilized to offset taxable capital gains in accordance with the provisions of the Income Tax Act (Canada).
The transactions under the Acquisition and the Arrangement will generally not give rise to any tax being payable under the Income Tax Act (Canada) by Shareholders (other than Dissenting Shareholders) who are nonresidents.
The U.S. federal income tax consequences of the transactions comprising the Acquisition and Arrangement are not certain. If they constitute a tax-free reorganization, then an exchange of Common Shares for REIT Units pursuant to the Acquisition and the Arrangement would not be taxable.
For more information, see "Material Canadian Federal Income Tax Considerations" and "Material United States Federal Income Tax Considerations".
Q19. Are there risks I should consider in deciding whether to vote for the Acquisition and the Arrangement?
Yes. There are a number of risk factors that you should consider in connection with the Acquisition and the Arrangement and with respect to the ownership of REIT Units which are described in this Circular in the section entitled "Risk Factors".
Q20. Where can more information about the Corporation be found?
As required by applicable securities legislation and regulatory requirements, the Corporation periodically files information with various securities regulatory authorities in Canada. This information can be viewed at or copied from the System for Electronic Document Analysis and Retrieval (SEDAR) website at www.sedar.com or the Corporation’s website at www.bwalk.com. Until February 23, 2004, the Corporation also filed reports with the SEC, which can be reviewed and copied at that agency’s Public Reference Room in Washington D.C. Prior reports and other information about the Corporation are also available on the EDGAR Database on the SEC’s Internet site at www.sec.gov, and copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing to the SEC’s Public Reference Section, Washington D.C. 20549-0102. The Corporation ceased to file reports with the SEC upon the delisting of the Common Shares from the NYSE.
Q21. Who should I contact with questions regarding the Acquisition and the Arrangement?
You may call Madeleine Baerg, Corporate Communications for the Corporation, at (403) 206-6808. Alternatively, you may fax the Corporation at (403) 261-9269 or e-mail the Corporation at investor@bwalk.com.
