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How are the REIT Units distributed?

Skyline Apartment REIT, Skyline Commercial REIT and Skyline Retail REIT (“the REITs”) Units are distributed through an Exempt Market Dealer (EMD). Skyline Wealth (Skyline Wealth Management Inc, or SWMI) is the exclusive EMD for Skyline Apartment REIT, Skyline Commercial REIT and Skyline Retail REIT, which are classified as Exempt Market Products (EMPs).

What are Exempt Market Dealers (EMDs)?

Exempt Market Dealers (EMDs) are exempt market securities dealers registered under provincial securities legislation in one or more jurisdictions in Canada. Skyline Wealth (Skyline Wealth Management Inc, or SWMI) is the exclusive EMD for Skyline’s REIT investment products. In accordance with securities law, Skyline Wealth’s team is comprised of registered Dealing Representatives, a Chief Compliance Officer and Ultimate Designated Person.

What are Exempt Market Products (EMPs)?

Exempt Market Products (EMPs), also known as Exempt Market Securities, are investment products that are distributed under prospectus exemptions laid out in National Instrument 45-106. Investors who wish to invest in an Exempt Market Product must qualify under specific exemptions. Exempt Market Products may only be sold by an Exempt Market Dealer; there is no secondary market for these products.

Related Questions

  • How can one qualify for these investments?
  • What is an “Accredited Investor”?
  • What are “OM Exemptions”?

How can one qualify for these investments?

Because the REITs do not file a Prospectus with the governing bodies, Units are distributed using other Exemptions available under securities law (National Instrument 45-106).  The most common Exemptions relied upon by Skyline’s REIT investors are the “Accredited Investor Exemption” and the “Offering Memorandum (OM) Exemptions”.

Related Questions

  • What is an “Accredited Investor”?
  • What are “OM Exemptions”?

What is an "Accredited Investor"?

An Accredited Investor, as defined by National Instrument 45-106, can have several definitions. Here are the most common definitions relied upon by the REITs’ individual investors.

To be an Accredited Investor you would need to meet one of the requirements below:

  • a) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1,000,000; (or)
  • b) an individual whose income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose income before taxes combined with that of a spouse exceeded $300 000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year; (or)
  • c) an individual who, either alone or with a spouse, has net assets of at least $5,000,000;

To be an Eligible Investor under the Offering Memorandum Exemption you would need to meet one of the below requirements:

  • a) an individual who, either alone or with a spouse has net assets of at least $400,000; (or)
  • b) an individual whose income before taxes exceeded $75,000 in each of the 2 most recent calendar years or whose income before taxes combined with that of a spouse exceeded $125,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year

 

If you are an institution, corporation, or other legal entity, read below for more qualification rules. Or visit the OSC website.

What are "OM Exemptions"?

Investors who do not qualify as “Accredited” may still qualify to invest under the Offering Memorandum (OM) Exemptions. Find out more about these exemptions here.

What is the minimum investment amount?

An Accredited Investor,  or an investor who qualifies under the OM Exemptions may invest a minimum of $50,000 as his or her first investment amount in any of the REITs; any subsequent investments in that same REIT must be a minimum of $5,000.

Related Questions

  • What is an “Accredited Investor”?
  • What are “OM Exemptions”?

How is the Unit price/value determined?

As per the Declaration of Trust (the rule book for the REITs), the Unit price must be evaluated at a minimum of once per year.  Management continually monitors Skyline Apartment REIT, Skyline Commercial REIT and Skyline Retail REIT’s key performance indicators, and reports on them at least quarterly to each REIT’s Board of Trustees in order to determine if a full evaluation is required.  A simplified explanation of the valuation process can be described in three steps, beginning with an evaluation of the REIT’s portfolio of assets. Next, the value of the outstanding debt (mortgages) is subtracted—this is the total equity of the REIT.  Lastly, the total equity is divided by the number of outstanding Units (currently held by Unitholders): this is the Unit value.

How often are the REIT Units re-evaluated?

The Unit price is evaluated at least annually when the REIT’s IFRS valuation and appraisals occur.  Each REIT’s Board of Trustees reviews the final numbers to make a determination as to the appropriate market value of the Units. In addition to the annual year-end evaluation, there are four other events that could trigger a Unit re-evaluation: 1. The launch of a new Offering Memorandum (OM) 2. The closing of an Offering Memorandum 3. When the REIT makes a purchase transaction of 10% or more of the value of the REIT 4. When the REIT makes a disposition (sale) transaction of 10% or more of the value of the REIT

Related Questions

  • How is the unit price/value determined?

How are the distributions funded?

Distributions are funded from the rental income that is generated from the properties within each REIT portfolio respectively.

How often are distributions paid?

The REITs’ distributions are paid monthly and are deposited directly into the investor’s bank account, unless he or she is enrolled in the DRIP.

Related Questions

  • What is the “DRIP” and how does it work?

What is the "DRIP" and how does it work?

The “DRIP”, or Distribution Re-Investment Plan, allows an investor to automatically re-invest his or her monthly distribution and purchase additional Units automatically.  As an alternative to the DRIP, the investor may receive monthly distributions directly into his or her bank account via EFT (electronic funds transfer).

Can I invest in my RRSPs and Tax-Free Savings Account through Skyline Apartment REIT, Skyline Commercial REIT and/or Skyline Retail REIT?

Yes, Skyline Apartment REIT,  Skyline Commercial REIT and Skyline Retail REIT have Mutual Fund Trust statuses and are eligible to accept registered investments, including RRSPs, RRIFs, and Tax-Free Savings Accounts (TFSAs).

How are the distributions taxed?

We strongly suggest that an accountant or tax professional should be consulted prior to making an investment, and should be used on an ongoing basis once an investment is made. The REITs’ distributions are tax-deferred to the extent possible, and are primarily classified as Return of Capital (not interest, not dividends, not income, etc.). This means that investors have deferred any taxes until the time that they decide to redeem their units in the future. In some cases, if the REIT sells an existing property and has capital gains to pay on this disposition, this tax flows through to the unitholders, and a portion of the unitholders’ distributions in that year could be classified as Capital Gains.  Distributions received also reduce the unitholder’s cost base. This should be tracked and monitored – the REITs provide annual T3 slips each March that outline the tax breakdown of the distributions.

What is the process to redeem REIT Units? Are there any minimum hold periods or penalties/fees to redeem?

Historically, Skyline Apartment REIT, Skyline Commercial REIT and Skyline Retail REIT have generally provided funds for a requested redemption within 30 to 60 days.  Unlike many other exempt market products, the REITs do not have a minimum holding period (other than an initial legislated 4 month hold period that applies to all exempt market products at the time of purchase) and do not have an early withdrawal penalty or any other kind of hold back fee.  Redemptions are processed at 100% of the current market value. The printed policy (see the Offering Memorandum) toward redemptions across Skyline’s three REIT investments states that the REIT can limit redemptions to as little as $50,000 per month, paid pro rata.  The Board, at its discretion, can exceed this amount, as has been the historical practice.  This clause is common to REITs in Canada, and is intended as a protection for investors against a run-on-the-bank.  Skyline’s REIT investments have never relied upon this clause, and there are currently no redemption request that have gone past due.

Are there any account fees or other costs associated with setting up an investment account with Skyline Wealth?

No.  There are no fees charged directly to the client to set up or manage a cash investment account with Skyline Wealth. In addition to this, Skyline Wealth does not charge any transaction or purchase fees directly to the client.  As an investor in Skyline Apartment REIT, Skyline Commercial REIT or Skyline Retail REIT, 100% of the investor’s equity goes directly to work for him or her. The Skyline Management Companies are all paid directly by the REITs, as set out contractually (negotiated on a five-year basis between those companies and the independent Board members for each REIT).  Please refer to the Offering Memorandum for specific details on the fee structure, and how Skyline Asset Management Inc., Skyline Wealth, and Skyline Commercial Management Inc. are compensated for providing services to each REIT.

What are the key differences and advantages of being a private REIT versus a public REIT? Why don't Skyline's REIT investments go public?

The Skyline Group of Companies has a fundamental belief that real estate does not belong on the public market.  The value of real estate is not a volatile, ever-changing number – it is very stable and tends to change slowly over time.  By exposing the REITs to the public market, the volatility of the markets comes into play. Investors tend to avoid private REITs due to the false perception that they are illiquid, and investments cannot be redeemed within days. The Skyline Group of Companies maintains that real estate is a long-term investment, and encourages investors to understand this principle, so that urgent liquidity is not a primary concern.

What level of disclosure do the REITs offer unitholders?

Skyline Apartment REIT, Skyline Commercial REIT and Skyline Retail REIT attempt to mimic their public market counterparts, in order to provide as much transparency as possible through regular reporting and other key reports.  The REITs are not legislated or required to do so, but Skyline Wealth believes in providing this transparency to the REIT’s unitholders – the owners of the REITs.  Prospective investors can expect to review a Confidential Offering Memorandum and any audited financial statements that are available.  The REITs provide quarterly unaudited reports, as well as an audited Annual Report to unitholders that is distributed prior to each REIT’s Annual General Meeting. A Skyline Wealth Dealing Representative would be pleased to provide these documents to qualified prospective investors.

Disclaimer

The contents of this website do not constitute an offer of, or solicitation for, the purchase and sale of any securities under any circumstances. The information provided on this website is for informational purposes only and should not be relied on for purposes of making any investment decision to purchase or sell securities. In making any such investment decision, investors should rely solely on information contained in the private offering memorandum and related subscription documents for any investments offered by Skyline Wealth Management Inc.. Sales of interests in any investments offered by Skyline Wealth Management Inc. are only made to certain eligible investors pursuant to such private offering memorandum and related subscription documents. Such materials contain more complete information on any applicable investments, including fees and risk factors. Please read such materials carefully before making any investment. Prospective investors must make an independent assessment of such matters in consultation with their own professional advisors. Nothing in this website should be construed as investment, legal, tax, regulatory or accounting advice. The performance and other information contained in this website may be preliminary, subject to change, and does not constitute a complete description of our investment services or performance. Individual investor return will vary depending on the timing of investment, eligibility of new issue income and fee structure. Past performance is not necessarily indicative of future results. Some of the investment products offered by Skyline Wealth Management Inc., including in particular those related to Skyline Apartment Real Estate Investment Trust, Skyline Commercial Real Estate Investment Trust and Skyline Retail Real Estate Investment Trust, are from related issuers. A full list of issuers related to Skyline Wealth Management Inc. and details of the relationship between them is available upon request from Skyline Wealth Management Inc.