Clarification Regarding Previous Disclosure
As a result of the COVID-19 pandemic, the REIT experienced material decreases in revenues, results of operations and cash flows. The impact to the global economy caused by the response to the COVID-19 pandemic also negatively impacted the REIT's ability to obtain new financing. The Loans were advanced, in most cases, in critical moments to principally fund the REIT's ongoing operating expenses and to satisfy interest and principal payments due on third party debt. In certain situations, the proceeds from the Loans were used to fund acquisitions designed to improve the financial condition of the REIT. Without the Loans, the REIT would likely not have been able to continue its operations as a going concern.
Each of the Loans was unsecured, had a 20-year term and bore interest at rates ranging from 1.82% per year to 7.5% per year (which were market interest rates at the time of their issuance). Of those Loans, the COVID Loans bore interest at rates ranging from 2.25% per year to 7.5% per year. As of
Previous disclosure of the REIT stated that the Loans were, subject to approval of the TSXV, convertible at any time at the election of the REIT into Class
Supplemental Disclosure to Circular
As disclosed in the Circular, the COVID Loans were filed with the TSXV at various points during 2021 and 2022, as loan submissions pursuant to TSXV Policy 5.1 – Loans, Loan Bonuses, Finder's Fees and Commissions ("Policy 5.1"). The REIT filed in this manner as the Loans were not, as described above, convertible by the holder into publicly traded Units (Units were only issuable at the election of the REIT, subject to TSXV approval) and therefore, based on the guidance in Policy 5.1, were subject to filing under Policy 5.1.[1] As a result of filing under Policy 5.1, since any issuance of Units on a redemption of Class
There was no negotiation with the TSXV regarding the substance of the Amendments as the TSXV's position was simply that the COVID Loans had to be amended to comply with Policy 4.1. The REIT worked expeditiously to obtain consent to the Amendments from each of the lenders (the "Lenders") under each of the COVID Loans. With the Lenders' cooperation and desire to ensure the REIT's compliance with TSXV policies, the Lenders agreed to implement the Amendments. However, the REIT was not in a position to negotiate these amendments with the Lenders – it was seeking the cooperation of the Lenders to adjust the conversion provisions or remove them altogether to satisfy the TSXV policies. For one COVID Loan, the Lender agreed to remove the conversion right altogether. For the remaining COVID Loans, the Lenders opted to limit the conversion period to five years. The REIT did not enter into any other agreement, beyond the Amendments themselves, with the Lenders in connection with the Amendments. In that circumstance, the board of trustees of the REIT (the "Board") determined that the concessions obtained from the Lenders were fair and reasonable.
The Board undertook a thorough review of the terms of the Amendments to the COVID Loans and concluded that the Amendments were in the best interests of the REIT. As described in the Circular, the Board: (i) considered the terms of the Amendments to the COVID Loans; (ii) considered the need to comply with the requirements of the TSXV in order to maintain a listing for the Units; and (iii) consulted with its legal advisors, to reach this conclusion. In considering the terms of the Amendments under (i) above, the REIT and the Board considered that the Amendments would provide a clear benefit to the REIT and unitholders (including minority unitholders) by (i) shortening the time period in which the conversion right can be exercised from 20 years to five years (or removing the conversion right altogether); (ii) fixing conversion prices for the COVID Loans at prices greater than the current market price; and (iii) reducing the amount convertible from principal and interest to only principal. As a result of the Amendments, the potential dilution of the REIT's unitholders would be materially reduced. Further, as failure to implement the Amendments would potentially result in the delisting of the Units, the Board determined that the Amendments were in the best interests of unitholders due to the likely adverse impact of delisting on the liquidity and value of the Units.
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1 Policy 5.1 provides as follows: "…For the purposes of this Policy, the term "loan" will include any form of debt instrument issued by an Issuer that is not convertible into Listed Shares."
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