Merger of Centurion Real Estate Opportunities Trust with Centurion Apartment Real Estate Investment Trust

October 27, 2020

Merger of Centurion Real Estate Opportunities Trust with Centurion Apartment...

Centurion Asset Management Inc., the asset manager of Centurion Real Estate Opportunities Trust (the ‘Trust”), with the unanimous support of the Independent Trustees, is proposing the merger of the Trust with Centurion Apartment Real Estate Investment Trust (the “REIT”). The merger of the funds will require Unitholder approval. An Information Circular, detailing the business drivers and the mechanics of the transaction, will be sent to all unitholders on October 27, 2020, with voting taking place on December 8, 2020.

The proposed merger will be completed on a qualifying exchange basis under a provision of the Income Tax Act (Canada) that permits mutual fund trusts to merge without a gain or loss being realized by unitholders of the fund itself for income tax purposes. The merger will be effected at the Net Asset Value of each Trust and will occur on a tax-deferred, roll-over basis.

The targeted effective date of the merger is December 31, 2020.

The proposed merger is to being made in order to take better advantage of the current and mutually complementary nature of the business of each trust and to capitalize on certain efficiencies and economies of scale to be achieved by combining the assets of the Trust and the REIT, thereby lowering the overall costs of the continuing Trust.

The primary business drivers in recommending the merger are as follows:

  1. Economies of Scale: The Continuing Trust will have a greater and more diversified level of assets, which may result in economies of scale for operating expenses as part of a larger combined trust.
  2. Consolidated Development Pipeline: The Continuing Trust will benefit from a consolidated development investment pipeline that we believe presents meaningful value creation opportunities.
  3. Increased Leverage Opportunities: Unitholders will benefit from the Continuing Trust’s ability to obtain more leverage at a better rate on the mortgage portfolio. We expect that the higher availability of cheaper leverage will give the Continuing Trust increased flexibility to complete transactions efficiently, compete more effectively in lower risk, and lower yield mortgage segments that the Trust currently cannot access efficiently, and reduce drag on returns without materially changing the risk profile.
  4. Better Liquidity Management: Unitholders will benefit from the Continuing Trust’s ability to use its larger operating facilities to better manage gaps between maturing mortgages and new investment opportunities, thereby decreasing cash drag on returns.
  5. Decreased Tax Leakage: Development properties that are ultimately sold by the Trust are often subject to land transfer taxes, which reduces development profitability, sometimes materially. The Continuing Trust will be able to reduce the drag of land transfer taxes, increase development profitability, and expand the pipeline of viable opportunities. Additionally, if the Continuing Trust retains, rather than sells the property from the Trust to REIT, as is currently the case, income and capital gains tax drag will decrease as there will not be a trigger of gains on sale.
  6. Proven Track Record: The REIT has a proven track record of stable returns.

An information session for financial advisors will be held on November 9th at 2:00 pm. Investors are encouraged to speak with their financial advisors for any questions they may have on the proposed merger.


Notice of Special Meeting and Management Information Circular