SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 13E-3

RULE 13E-3 TRANSACTION STATEMENT UNDER SECTION 13(e)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

Tricon Residential Inc.

(Name of the Issuer)

 

 

Tricon Residential Inc.

Creedence Acquisition ULC

BCORE Preferred Holdco LLC

Blackstone Real Estate Partners X L.P.

Blackstone Real Estate Income Trust, Inc.

BREIT Operating Partnership L.P.

Creedence Intermediate Holdings Inc.

Blackstone Real Estate Associates X L.P.

(Names of Persons Filing Statement)

Common Shares, no par value

(Title of Class of Securities)

89612W102

(CUSIP Number of Class of Securities)

 

 

 

David Veneziano

Tricon Residential Inc.

7 St. Thomas Street, Suite 801

Toronto, Ontario

Canada, M5S 2B7

+1 416-925-7228

 

Jacob Werner

Creedence Acquisition ULC

c/o Blackstone Inc.

345 Park Avenue

New York, New York 10154

+1 212-583-5000

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Persons Filing Statement)

 

 

 


With copies to

 

Matthew W. Abbott

Christopher J. Cummings

Brian C. Lavin

Paul, Weiss, Rifkind,

Wharton & Garrison LLP

1285 Avenue of the

Americas

New York, New York

10019

+1 212-373-3000

 

Johnny Connon

Tara Hunt

Goodmans LLP

333 Bay St., Suite 3400

Toronto, Ontario

M5H 2S7

+1 416-979-2211

 

Brian M. Stadler

Matthew B. Rogers

Simpson Thacher &

Bartlett LLP

425 Lexington Avenue

New York, New York

10017

+1 212-455-2000

  

Vincent Mercier

Kevin Greenspoon

Joseph DiPonio

Davies Ward Phillips & Vineberg LLP

155 Wellington Street West

Toronto, Ontario

M5V 3J7

+1 416-863-0900

This statement is filed in connection with (check the appropriate box):

 

a. ☐

The filing of solicitation materials or an information statement subject to Regulation 14A (§§240.14a-1 through 240.14b-2), Regulation 14C (§§240.14c-1 through 240.14c-101) or Rule 13e-3(c) (§240.13e-3(c)) under the Securities Exchange Act of 1934 (“the Act”).

 

b. ☐

The filing of a registration statement under the Securities Act of 1933.

 

c. ☐

A tender offer.

 

d. ☒

None of the above.

Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: ☐

Check the following box if the filing is a final amendment reporting the results of the transaction: ☐

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION, PASSED UPON THE MERITS OR FAIRNESS OF THIS TRANSACTION, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS TRANSACTION STATEMENT ON SCHEDULE 13E-3. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

 


INTRODUCTION

This Rule 13E-3 Transaction Statement on Schedule 13E-3, together with the exhibits hereto (this “Schedule 13E-3” or “Transaction Statement”), is being filed with the Securities and Exchange Commission (the “SEC”) pursuant to Section 13(e) of the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the “Exchange Act”), jointly by the following persons (each, a “Filing Person,” and collectively, the “Filing Persons”): (i) Tricon Residential Inc., a corporation existing under the laws of the Province of Ontario and the issuer of the common shares, no par value (the “Shares”) that is subject to the Rule 13e-3 transaction (“Tricon” or the “Corporation”); (ii) Creedence Acquisition ULC, an unlimited liability company organized under the laws of the Province of British Columbia (“Creedence” or the “Purchaser”), an entity formed to effect the acquisition of the Corporation by Blackstone Real Estate Partners X L.P. (“BREP X”) and Blackstone Real Estate Income Trust, Inc. (“BREIT”, and collectively with BREP X and their respective affiliates, including the Purchaser, “Blackstone”); (iii) BCORE Preferred Holdco LLC, a Delaware limited liability company (“BREIT Shareholder”); (iv) BREP X, a Delaware limited partnership; (v) BREIT, a Maryland corporation; (vi) BREIT Operating Partnership L.P., a Delaware limited partnership; (vii) Creedence Intermediate Holdings Inc., a corporation organized under the laws of the Province of British Columbia; and (viii) Blackstone Real Estate Associates X L.P., a Delaware limited partnership.

On January 18, 2024, the Corporation and the Purchaser entered into an Arrangement Agreement (as amended, restated, supplemented or otherwise modified from time to time in accordance with its terms, the “Arrangement Agreement”), which provides for, among other things, the acquisition by the Purchaser of all of the issued and outstanding Shares of the Corporation through a Plan of Arrangement (the “Plan of Arrangement”) pursuant to Section 182 of the Business Corporations Act (Ontario) (“OBCA”), pursuant to which the Corporation would become a direct wholly owned subsidiary of the Purchaser (the “Arrangement”). A copy of the Plan of Arrangement is included as Appendix “B” to the Management Information Circular, which is attached as Exhibit (a)(2)(i) hereto (the “Circular”). A special meeting of the Corporation’s shareholders (the “Shareholders”) has been called for March 28, 2024 (the “Meeting”) to consider and, if thought advisable, pass a special resolution approving the Arrangement in the form attached as Appendix “A” to the Circular (the “Arrangement Resolution”). Capitalized terms used but not expressly defined in this Schedule 13E-3 are given the respective meanings given to them in the Circular.

The Circular is being provided to the Shareholders pursuant to applicable Canadian law. In order to become effective, the Arrangement must be approved by (i) at least two thirds (6623%) of the votes cast on the Arrangement Resolution by the Shareholders present or represented by proxy at the Meeting, voting as a single class and (ii) a simple majority (more than 50%) of the votes cast by the Shareholders present or represented by proxy at the Meeting, excluding for the purposes of (ii), the votes attached to the Excluded Shares required to be excluded under MI 61-101.

Under the terms of the Plan of Arrangement, each outstanding Share, other than (i) Shares owned by BREIT Shareholder and (ii) Shares with respect to which a Shareholder has duly and validly exercised Dissent Rights, shall, without any further action by or on behalf of a holder of such Shares, be deemed to be assigned and transferred by the holder thereof to the Purchaser, and be entitled to receive US$11.25 in cash for each Share held, subject to applicable withholdings.

The Arrangement remains subject to the satisfaction or waiver of the conditions set forth in the Arrangement Agreement, including the approval and adoption of the Arrangement Resolution by the Shareholders, the grant of the Final Order by the Ontario Superior Court of Justice (Commercial List) approving the Arrangement and the Required Regulatory Approvals.

The cross-references below are being supplied pursuant to General Instruction F to Schedule 13E-3 and show the location in the Circular of the information required to be included in response to the items of Schedule 13E-3. Pursuant to General Instruction F to Schedule 13E-3, the information contained in the Circular, including all appendices thereto, is incorporated herein by reference, in its entirety and the responses to each item in this Schedule 13E-3 are qualified in their entirety by the information contained in the Circular and the appendices thereto.

A special committee of the Board of Directors of the Corporation (the “Board of Directors” or the “Board”) consisting entirely of independent directors (the “Special Committee”), conducted, with the assistance of its independent financial and legal advisors, a review of the Corporation’s operations and


financing needs and alternatives available to the Corporation and obtained an independent formal valuation of the Shares. Following this process, and after careful consideration, the Board (other than Frank Cohen, being the director on the Board appointed by Blackstone, who recused himself from the deliberations regarding the transactions contemplated hereby), acting on the unanimous recommendation of the Special Committee and after receiving legal and financial advice, (i) determined it would be in the best interests of the Corporation to enter into the Arrangement Agreement and that the Arrangement and the transactions contemplated thereby are fair to the Shareholders (other than Blackstone), (ii) resolved to unanimously recommend that the Shareholders vote in favour of the Arrangement Resolution, and (iii) authorized the entering into the Arrangement Agreement and the performance by Corporation of its obligations under the Arrangement Agreement.

All information concerning the Corporation contained in, or incorporated by reference into this Schedule 13E-3 and the Circular was supplied by the Corporation. Similarly, all information concerning each other Filing Person contained in, or incorporated by reference into this Schedule 13E-3 and the Circular was supplied by such Filing Person. No Filing Person, including the Corporation, is responsible for the accuracy or completeness of any information supplied by any other Filing Person.


Item 1. Summary Term Sheet

The information set forth in the Circular under the following captions is incorporated herein by reference:

Summary of Arrangement

Questions and Answers About the Shareholder Meeting and the Arrangement

Item 2. Subject Company Information

(a) Name and Address.

The name of the subject company is Tricon Residential Inc. The address and telephone number of the subject company’s principal executive office are as follows:

7 St. Thomas Street, Suite 801

Toronto, ON

Canada, M5S 2B7

+1 416-925-7228

The information set forth in the Circular under the caption “Information Concerning Tricon – General” is incorporated herein by reference.

(b) Securities.

The subject class of equity securities is common shares, no par value, of the Corporation. The information set forth in the Circular under the following captions is incorporated herein by reference:

Information Concerning the Shareholder Meeting and Voting – Voting Common Shares

The Arrangement

The Arrangement – Company Shareholder Approvals of the Arrangement

Information Concerning Tricon – Description of Share Capital

(c) Trading Market and Price. The information set forth in the Circular under the following captions in incorporated herein by reference:

Special Factors – Certain Effects of the Arrangement

Information Concerning Tricon – Trading in Shares

Arrangement Agreement – Agreement to Take Certain Actions”

Certain Legal Matters – Securities Law Matters – Stock Exchange Delisting and Reporting Issuer Status

Certain Canadian Federal Income Tax Considerations – Holders Not Resident in Canada – Taxable Canadian Property

(d) Dividends. The information set forth in the Circular under the caption “Information Concerning Tricon – Dividend Policy” is incorporated herein by reference.


(e) Prior Public Offerings. The information set forth in the Circular under the caption “Information Concerning Tricon – Previous Distributions” is incorporated herein by reference.

(f) Prior Stock Purchases. The information set forth in the Circular under the caption “Information Concerning Tricon – Previous Purchases and Sales” is incorporated herein by reference.

Item 3. Identity and Background of Filing Person

(a) – (c) Name and Address; Business and Background of Entities; Business and Background of Natural Persons.

The information set forth in the Circular under the following captions is incorporated herein by reference:

Summary of Arrangement – Parties to the Arrangement”

Information Concerning the Purchaser and Blackstone

Information Concerning Tricon – General

Certain Legal Matters – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement – Ownership of Securities

Exhibit B – Directors, Executive Officers and Control Persons of the Blackstone Filing Parties

Exhibit “C” – Directors and Executive Officers of the Company

Item 4. Terms of the Transaction

(a)(1) Material Terms. Tender Offers.

Not applicable.

(a)(2) Material Terms. Mergers or Similar Transactions. The information set forth in the Circular under the following captions is incorporated herein by reference:

Questions and Answers About the Shareholder Meeting and the Arrangement

Summary of Arrangement – Purpose of the Shareholder Meeting

Summary of Arrangement – Summary of the Arrangement

Summary of Arrangement – Recommendation of the Special Committee”

Summary of Arrangement – Recommendation of the Unconflicted Company Board

Summary of Arrangement – Reasons for the Recommendation

Summary of Arrangement – Blackstone Filing Parties’ Purposes and Reasons for the Arrangement

Summary of Arrangement – Required Company Shareholder Approvals

Summary of Arrangement – MI 61-101 Requirements

Summary of Arrangement – Procedural Safeguards for Company Shareholders

Summary of Arrangement – Certain Canadian Federal Income Tax Considerations


Summary of Arrangement – Certain U.S. Federal Income Tax Considerations

Special Factors – Background to the Arrangement

Special Factors – Tricon’s Purposes and Reasons for the Arrangement

Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement

Special Factors – Scotia Capital Formal Valuation and Fairness Opinion

Special Factors – Morgan Stanley Fairness Opinion

Special Factors – Blackstone Filing Parties’ Purposes and Reasons for the Arrangement

Special Factors – Position of Blackstone Filing Parties as to the Fairness of the Arrangement

Special Factors – Certain Effects of the Arrangement

Information Concerning the Shareholder Meeting and Voting – Voting Common Shares

The Arrangement – Overview

The Arrangement – Company Shareholder Approvals of the Arrangement

The Arrangement – Implementation of the Arrangement

The Arrangement – Payment of Consideration

The Arrangement – Accounting Treatment of the Arrangement

Arrangement Agreement – Agreement to Take Certain Actions”

Risk Factors – Risks Related to the Arrangement – Rights of Former Company Shareholders after the Arrangement

Risk Factors – Risks Related to the Arrangement – The Resulting Tax Payable by Most Company Shareholders

Certain Legal Matters – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement – Ownership of Securities

Certain Canadian Federal Income Tax Considerations

Certain U.S. Federal Income Tax Considerations

(c) Different Terms. The information set forth in the Circular under the following captions is incorporated herein by reference:

Summary of Arrangement – Blackstone Filing Parties’ Purposes and Reasons for the Arrangement

Summary of Arrangement – Position of Blackstone Filing Parties as to the Fairness of the Arrangement

Summary of Arrangement – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement


Special Factors – Certain Effects of the Arrangement – Benefits and Detriments of the Arrangement for Directors and Executive Officers of the Company

Information Concerning the Purchaser and Blackstone

Risk Factors – Risks Related to the Arrangement – Interests of Certain Persons in the Arrangement

Certain Legal Matters – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement

(d) Appraisal Rights. The information set forth in the Circular under the following captions is incorporated herein by reference:

Questions and Answers About the Shareholder Meeting and the Arrangement

Summary of Arrangement – Implementation of the Arrangement

Summary of Arrangement – Dissent Rights

The Arrangement – Implementation of the Arrangement

Certain Canadian Federal Income Tax Considerations – Holders Resident in Canada – Dissenting Resident Holders of Common Shares

Certain Canadian Federal Income Tax Considerations – Holders Not Resident in Canada – Dissenting Non-Resident Holders

Certain U.S. Federal Income Tax Considerations – Consequences to Dissenting U.S. Company Shareholders

Dissenting Shareholders’ Rights

Appendix “E”: Interim Order

Appendix “G”: Section 185 of the Business Corporations Act (Ontario)

(e) Provisions for Unaffiliated Security Holders. The information set forth in the Circular under the following captions is incorporated herein by reference:

The Arrangement – Arrangements between Tricon and Security Holders

Provisions for Unaffiliated Security Holders

(f) Eligibility for Listing or Trading.

Not applicable.

Item 5. Past Contacts, Transactions, Negotiations and Agreements

(a)(1)-(2) Transactions. The information set forth in the Circular under the following captions is incorporated herein by reference:

“Special Factors – Background to the Arrangement”

“Information Concerning Tricon – Previous Purchases and Sales”

“Certain Legal Matters – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement”


(b) – (c) Significant Corporate Events; Negotiations or Contacts. The information set forth in the Circular under the following captions is incorporated herein by reference:

Special Factors – Background to the Arrangement

Summary of Arrangement – Support Agreement

The Arrangement – Support Agreement

The Arrangement – Intentions of Directors and Executive Officers

Certain Legal Matters – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement – Employment Arrangements

Appendix “B”: Plan of Arrangement Under Section 182 of the Business Corporations Act (Ontario)

(e) Agreements Involving the Subject Company’s Securities. The information set forth in the Circular Statement under the following captions is incorporated herein by reference:

Special Factors – Background to the Arrangement

Summary of Arrangement – Support Agreement

Summary of Arrangement – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement

The Arrangement – Support Agreement

The Arrangement – Intentions of Directors and Executive Officers

Information Concerning the Purchaser and Blackstone – Agreements Involving the Company Securities

Certain Legal Matters – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement

Appendix “B”: Plan of Arrangement Under Section 182 of the Business Corporations Act (Ontario)

Item 6. Purposes of the Transaction and Plans or Proposals

(b) Use of Securities Acquired. The information set forth in the Circular under the following captions is incorporated herein by reference:

Questions and Answers About the Shareholder Meeting and the Arrangement

Summary of Arrangement – Blackstone Filing Parties’ Purposes and Reasons for the Arrangement

Special Factors – Certain Effects of the Arrangement – Benefits and Detriments of the Arrangement for the Blackstone Filing Parties

The Arrangement – Implementation of the Arrangement”

Certain Legal Matters – Implementation of the Arrangement and Timing

(c)(1) – (8) Plans. The information set forth in the Circular under the following captions is incorporated herein by reference:

Summary of Arrangement – Stock Exchange Delisting and Reporting Issuer Status


Special Factors – Certain Effects of the Arrangement

The Arrangement – Arrangements between Tricon and Security Holders

Arrangement Agreement – Agreement to Take Certain Actions”

Arrangement Agreement – Employee Matters”

“Information Concerning Tricon – Material Changes in the Affairs of the Company”

“Certain Legal Matters – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement”

“Certain Legal Matters – Securities Law Matters – Stock Exchange Delisting and Reporting Issuer Status

Risk Factors – Risks Related to the Arrangement – Interests of Certain Persons in the Arrangement

Appendix “B”: Plan of Arrangement Under Section 182 of the Business Corporations Act (Ontario)

Item 7. Purposes, Alternatives, Reasons and Effects

(a) Purposes. The information set forth in the Circular under the following captions is incorporated herein by reference:

Questions and Answers About the Shareholder Meeting and the Arrangement

Summary of Arrangement – Reasons for the Recommendation

Summary of Arrangement – Blackstone Filing Parties’ Purposes and Reasons for the Arrangement

Special Factors – Background to the Arrangement

Special Factors – Tricon’s Purposes and Reasons for the Arrangement

Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement

Special Factors – Blackstone Filing Parties’ Purposes and Reasons for the Arrangement

Special Factors – Position of Blackstone Filing Parties as to the Fairness of the Arrangement

(b) Alternatives. The information set forth in the Circular under the following captions is incorporated herein by reference:

“Questions and Answers About the Shareholder Meeting and the Arrangement”

“Summary of Arrangement – Reasons for the Recommendation”

“Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement

Special Factors – Position of Blackstone Filing Parties as to the Fairness of the Arrangement

(c) Reasons. The information set forth in the Circular under the following captions is incorporated herein by reference:

Questions and Answers About the Shareholder Meeting and the Arrangement


Summary of Arrangement – Recommendation of the Special Committee

Summary of Arrangement – Recommendation of the Unconflicted Company Board

Summary of Arrangement – Reasons for the Recommendation

Summary of Arrangement – Blackstone Filing Parties’ Purposes and Reasons for the Arrangement

Summary of Arrangement – Position of Blackstone Filing Parties as to the Fairness of the Arrangement

Special Factors – Background to the Arrangement

Special Factors – Tricon’s Purposes and Reasons for the Arrangement

Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement

Special Factors – Blackstone Filing Parties’ Purposes and Reasons for the Arrangement

Special Factors – Position of Blackstone Filing Parties as to the Fairness of the Arrangement

(d) Effects. The information set forth in the Circular under the following captions is incorporated herein by reference:

Questions and Answers About the Shareholder Meeting and the Arrangement

Summary of Arrangement – Summary of the Arrangement

Summary of Arrangement – Reasons for the Recommendation

Summary of Arrangement – Blackstone Filing Parties’ Purposes and Reasons for the Arrangement

Summary of Arrangement – Position of Blackstone Filing Parties as to the Fairness of the Arrangement

Summary of Arrangement – Implementation of the Arrangement

Summary of Arrangement – Certain Canadian Federal Income Tax Considerations

Summary of Arrangement – Certain U.S. Federal Income Tax Considerations

Summary of Arrangement – Stock Exchange Delisting and Reporting Issuer Status

Summary of Arrangement – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement

Special Factors – Certain Effects of the Arrangement

The Arrangement – Implementation of the Arrangement

The Arrangement – Payment of Consideration

Arrangement Agreement – Agreement to Take Certain Actions”

Certain Legal Matters – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement

Certain Legal Matters – Securities Law Matters – Stock Exchange Delisting and Reporting Issuer Status


Risk Factors – Risks Related to the Arrangement – Rights of Former Company Shareholders after the Arrangement

Risk Factors – Risks Related to the Arrangement – The Resulting Tax Payable by Most Company Shareholders

Certain Canadian Federal Income Tax Considerations

Certain U.S. Federal Income Tax Considerations

Appendix “B”: Plan of Arrangement under Section 182 of the Business Corporations Act (Ontario)

Item 8. Fairness of the Transaction

(a), (b) Fairness; Factors Considered in Determining Fairness. The information set forth in the Circular under the following captions is incorporated herein by reference:

Questions and Answers About the Shareholder Meeting and the Arrangement

Summary of Arrangement – Recommendation of the Special Committee

Summary of Arrangement – Recommendation of the Unconflicted Company Board

Summary of Arrangement – Reasons for the Recommendation

Summary of Arrangement – Position of Blackstone Filing Parties as to the Fairness of the Arrangement

Special Factors – Background to the Arrangement

Special Factors – Tricon’s Purposes and Reasons for the Arrangement

Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement

Special Factors – Scotia Capital Formal Valuation and Fairness Opinion

Special Factors – Morgan Stanley Fairness Opinion

Special Factors – Position of Blackstone Filing Parties as to the Fairness of the Arrangement

Appendix “C”: Formal Valuation and Fairness Opinion of Scotia Capital Inc.

Appendix “D”: Fairness Opinion of Morgan Stanley & Co. LLC”

(c) Approval of Security Holders. The information set forth in the Circular under the following captions is incorporated herein by reference:

Questions and Answers About the Shareholder Meeting and the Arrangement

Summary of Arrangement – Purpose of the Shareholder Meeting

Summary of Arrangement – Reasons for the Recommendation

Summary of Arrangement – Position of Blackstone Filing Parties as to the Fairness of the Arrangement

Summary of Arrangement – Required Company Shareholder Approvals


Summary of Arrangement – MI 61-101 Requirements

Summary of Arrangement – Procedural Safeguards for Company Shareholders

Summary of Arrangement – Dissent Rights

Special Factors – Position of Blackstone Filing Parties as to the Fairness of the Arrangement

The Arrangement – Company Shareholder Approvals of the Arrangement

Certain Legal Matters – Securities Law Matters – Application of MI 61-101

Certain Legal Matters – Securities Law Matters – Minority Approval

(d) Unaffiliated Representative. The information set forth in the Circular under the following captions is incorporated herein by reference:

Special Factors – Background to the Arrangement

Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement –Recommendation and Reasons of the Special Committee

The Arrangement – Arrangements between Tricon and Security Holders

Provisions for Unaffiliated Security Holders

(e) Approval of Directors. The information set forth in the Circular under the following captions is incorporated herein by reference:

“Summary of Arrangement – Recommendation of the Special Committee”

“Summary of Arrangement – Recommendation of the Unconflicted Company Board”

“Summary of Arrangement – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement”

Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement

Special Factors – Tricon’s Purposes and Reasons for the Arrangement

Risk Factors – Risks Related to the Arrangement – Interests of Certain Persons in the Arrangement

(f) Other Offers. Not applicable.

Item 9. Reports, Opinions, Appraisals and Negotiations

(a) – (c) Report, Opinion or Appraisal; Preparer and Summary of the Report, Opinion or Appraisal; Availability of Documents. The information set forth in the Circular under the following captions is incorporated herein by reference:

Questions and Answers About the Shareholder Meeting and the Arrangement

Summary of Arrangement – Recommendation of the Special Committee

Summary of Arrangement – Recommendation of the Unconflicted Company Board


Summary of Arrangement – Reasons for the Recommendation

Summary of Arrangement – Formal Valuation and Fairness Opinions

Special Factors – Background to the Arrangement

Special Factors – Scotia Capital Formal Valuation and Fairness Opinion

Special Factors – Morgan Stanley Fairness Opinion

Information Concerning Tricon – Additional Information

Certain Legal Matters – Securities Law Matters – Formal Valuation

Consent of Scotia Capital Inc.

Consent of Morgan Stanley & Co. LLC

Appendix “C”: Formal Valuation and Fairness Opinion of Scotia Capital Inc.

Appendix “D”: Fairness Opinion of Morgan Stanley & Co. LLC

Item 10. Source and Amount of Funds or Other Consideration

(a), (b) Source of Funds; Conditions. The information set forth in the Circular under the caption “The Arrangement – Expenses of the Arrangement is incorporated herein by reference.

(c) Expenses. The information set forth in the Circular under the following captions is incorporated herein by reference:

The Arrangement – Expenses of the Arrangement

Arrangement Agreement – Financing Cooperation

(d) Borrowed Funds. The information set forth in the Circular under the caption “The Arrangement – Financing of the Arrangement is incorporated herein by reference.

Item 11. Interest in Securities of the Subject Company

(a) Securities Ownership. The information set forth in the Circular under the following captions is incorporated herein by reference:

Information Concerning the Shareholder Meeting and Voting – Principal Company Shareholders

The Arrangement – Company Shareholder Approvals of the Arrangement

Certain Legal Matters – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement – Ownership of Securities

(b) Securities Transactions. The information set forth in the Circular under the following captions is incorporated herein by reference:

Information Concerning Tricon – Previous Purchases and Sales

Information Concerning Tricon – Previous Distributions


Item 12. The Solicitation or Recommendation

(d) Intent to Tender or Vote in a Going-Private Transaction. The information set forth in the Circular under the following captions is incorporated herein by reference:

Summary of Arrangement – Support Agreement

The Arrangement – Support Agreement

The Arrangement – Intentions of Directors and Executive Officers

(e) Recommendation of Others. The information set forth in the Circular under the following captions is incorporated herein by reference:

Summary of Arrangement – Recommendation of the Special Committee

Summary of Arrangement – Recommendation of the Unconflicted Company Board

Summary of Arrangement – Position of Blackstone Filing Parties as to the Fairness of the Arrangement

Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement

Special Factors – Position of Blackstone Filing Parties as to the Fairness of the Arrangement

Item 13. Financial Statements

(a) Financial Information. The audited financial statements of the Corporation for the fiscal years ended December 31, 2022 and 2021 are incorporated herein by reference to the Corporation’s Amendment No. 1 to Form 40-F for the fiscal year ended December 31, 2022, filed on March 2, 2023 (see Exhibit 99.3 thereto). The interim financial statements of the Corporation are incorporated herein by reference to Exhibit 99.1 to the Corporation’s report on Form 6-K furnished on November 7, 2023.

The information set forth in the Circular under the following captions is incorporated herein by reference:

Information Concerning Tricon – Selected Historical Financial Information

Information Concerning Tricon – Net Book Value

Information Concerning Tricon – Additional Information

(b) Pro Forma Information. Not applicable.

(c) Summary Information. The information set forth in the Circular under the caption “Information Concerning Tricon– Selected Historical Financial Information” is incorporated herein by reference.

Item 14. Persons/Assets, Retained, Employed, Compensated or Used

(a) Solicitations or Recommendations. The information set forth in the Circular under the following captions is incorporated herein by reference:

Information Concerning the Shareholder Meeting and Voting – Solicitation of Proxies

The Arrangement – Expenses of the Arrangement

(b) Employees and Corporate Assets. The information set forth in the Circular under the following captions is incorporated herein by reference:

Information Concerning the Meeting and Voting – Solicitation of Proxies

The Arrangement – Expenses of the Arrangement


Certain Legal Matters – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement

Item 15. Additional Information

(b) Golden Parachute Compensation. Not applicable.

(c) Other Material Information. The entirety of the Circular, including all appendices thereto, is incorporated herein by reference.


Item 16. Exhibits

The following exhibits are filed herewith:

 

Exhibit

No.

 

 

Description

 

(a)(2)(i)   Management Information Circular of Tricon Residential Inc. dated February 15, 2024 (the “Circular”)
(a)(2)(ii)   Form of Proxy Card
(a)(2)(iii)   Voting Instruction Form
(a)(2)(iv)   Letter of Transmittal
(a)(2)(v)   Notice of Special Meeting of Shareholders of Tricon Residential Inc. (incorporated herein by reference to the Circular)
(a)(2)(vi)   Letter to Shareholders of Tricon Residential Inc. (incorporated herein by reference to the Circular)
(a)(5)(i)   Press release of Tricon Residential Inc. and Blackstone dated January  19, 2024 (incorporated herein by reference to Exhibit 99.1 to the report on Form 6-K furnished to the SEC on January 19, 2024)
(c)(i)   Formal Valuation and Fairness Opinion of Scotia Capital Inc. (incorporated herein by reference to Appendix “C” to the Circular)
(c)(ii)   Fairness Opinion of Morgan Stanley & Co. LLC (incorporated herein by reference to Appendix “D” to the Circular)
(c)(iii)   Board Discussion Materials Provided by Morgan Stanley & Co. LLC to the Board on October 24, 2023
(c)(iv)   Board Discussion Materials Provided by Morgan Stanley & Co. LLC to the Board on November 7, 2023
(c)(v)   Board Discussion Materials Provided by Morgan Stanley & Co. LLC to the Board on January 5, 2024
(c)(vi)   Board Discussion Materials Provided by Morgan Stanley & Co. LLC to the Board on January 12, 2024
(c)(vii)   Board Discussion Materials Provided by Morgan Stanley & Co. LLC to the Board on January 18, 2024
(c)(viii)   Special Committee Discussion Materials Provided by Scotia Capital Inc. to the Special Committee on January 12, 2024
(c)(ix)   Special Committee Discussion Materials Provided by Scotia Capital Inc. to the Special Committee on January 18, 2024
(d)(i)   Arrangement Agreement dated January  18, 2024, between Tricon Residential Inc. and Creedence Acquisition ULC (incorporated herein by reference to Exhibit 99.1 to the report on Form 6-K furnished to the SEC on January 22, 2024)
(d)(ii)   Support Agreement, dated January  18, 2024, among Creedence Acquisition ULC, BCORE Preferred Holdco LLC and Tricon Residential Inc. (incorporated herein by reference to Exhibit 99.2 to the report on Form 6-K furnished to the SEC on January  22, 2024)
(d)(iii)   Guaranty dated January 18, 2024 by Blackstone Real Estate Partners X L.P. in favour of Tricon Residential Inc.
(d)(iv)   Guaranty dated January 18, 2024 by BREIT Operating Partnership, L.P. in favour of Tricon Residential Inc.



SIGNATURES

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

TRICON RESIDENTIAL INC.

By:

 

/s/ David Veneziano

Name: David Veneziano

Title: Executive Vice President and Chief

   Legal Officer

Date: February 16, 2024


After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

CREEDENCE ACQUISITION ULC

By:

 

/s/ Jacob Werner

Name: Jacob Werner

Title: Director

Date: February 16, 2024


After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

BCORE PREFERRED HOLDCO LLC

By:

 

/s/ Jacob Werner

Name: Jacob Werner

Title: Senior Managing Director

Date: February 16, 2024


After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

BLACKSTONE REAL ESTATE

PARTNERS X L.P.

By: Blackstone Real Estate Associates X L.P., its general partner
By: BREA X L.L.C., its general partner

By:

 

/s/ Jacob Werner

Name: Jacob Werner

Title: Senior Managing Director

Date: February 16, 2024


After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

BLACKSTONE REAL ESTATE

INCOME TRUST, INC.

By:

 

/s/ Jacob Werner

Name: Jacob Werner

Title: Senior Managing Director

Date: February 16, 2024


After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

BREIT OPERATING PARTNERSHIP L.P.

By: Blackstone Real Estate Income Trust, Inc., its general partner

By:

 

/s/ Jacob Werner

Name: Jacob Werner

Title: Senior Managing Director

Date: February 16, 2024


After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

CREEDENCE INTERMEDIATE HOLDINGS INC.

By:

 

/s/ Jacob Werner

Name: Jacob Werner

Title: Director

Date: February 16, 2024


After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

BLACKSTONE REAL ESTATE ASSOCIATES X L.P.

By: BREA X L.L.C., its general partner

By:

 

/s/ Jacob Werner

Name: Jacob Werner

Title: Senior Managing Director

Date: February 16, 2024

Exhibit (a)(2)(i)

These materials are important and require your immediate attention. They require shareholders of Tricon Residential Inc. to make important decisions. If you are in doubt about how to make such decisions, please contact your financial, legal, tax or other professional advisors. If you are a shareholder of Tricon Residential Inc. and have any questions regarding the information contained in this management information circular or require assistance in completing your form of proxy, please contact our proxy solicitation agent and shareholder communications advisor, Laurel Hill Advisory Group, at 1-877-452-7184 (toll-free within North America) or by calling 1-416-304-0211 (outside of North America) or by email at assistance@laurelhill.com. Questions on how to complete the letter of transmittal should be directed to Tricon Residential Inc.’s transfer agent, TSX Trust Company, at 1-866-600-5869 (toll-free within North America) or at 416-342-1091 (outside of North America) or by email at txstis@tmx.com.

Company Shareholders in the United States should read the section “Notice to Company Shareholders in the United States” on page (iv) of the accompanying management information circular.

 

LOGO

ARRANGEMENT INVOLVING

TRICON RESIDENTIAL INC.

AND

CREEDENCE ACQUISITION ULC

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

to be held on Thursday, March 28, 2024 at 10:00 a.m. (Toronto time)

virtually via live audio webcast at https://web.lumiconnect.com/#/411155572

Password: tricon2024 (case sensitive) and Meeting ID: 411-155-572

AND

MANAGEMENT INFORMATION CIRCULAR

 

YOUR VOTE IS IMPORTANT. TAKE ACTION AND VOTE TODAY.

The Unconflicted Company Board, acting on the unanimous recommendation of the Special Committee, unanimously

recommends that Company Shareholders vote

FOR

the Arrangement Resolution

NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR THE SECURITIES REGULATORY AUTHORITY IN ANY STATE IN THE UNITED STATES HAS APPROVED OR DISAPPROVED OF THE ARRANGEMENT OR PASSED UPON THE FAIRNESS OR MERITS OF THE ARRANGEMENT, NOR HAS THE U.S. SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES REGULATORY AUTHORITIES OF ANY STATE IN THE UNITED STATES PASSED ON THE ADEQUACY OR ACCURACY OF THIS CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE. IN ADDITION, NEITHER THE TORONTO STOCK EXCHANGE NOR ANY CANADIAN SECURITIES REGULATORY AUTHORITY HAS IN ANY WAY PASSED UPON THE MERITS OF THE TRANSACTION DESCRIBED IN THIS CIRCULAR, AND ANY REPRESENTATION OTHERWISE IS AN OFFENCE.

February 15, 2024


LOGO

LETTER TO COMPANY SHAREHOLDERS

February 15, 2024

Dear Company Shareholders:

You are invited to attend a special meeting of holders of common shares (the “Company Shareholders”) of Tricon Residential Inc. (“Tricon” or the “Company”) to be held virtually on Thursday, March 28, 2024 at 10:00 a.m. (Toronto time) (the “Shareholder Meeting”). The purpose of the Shareholder Meeting is to allow Company Shareholders to consider the proposed acquisition by Creedence Acquisition ULC (the “Purchaser”), an entity formed to effect the acquisition of the Company by Blackstone Real Estate Partners X L.P. (“BREP X”) and Blackstone Real Estate Income Trust, Inc. (“BREIT”, and collectively with BREP X and their respective affiliates, including the Purchaser, “Blackstone”), of all of the common shares of Tricon (each, a “Common Share”) not currently owned by Blackstone pursuant to which each Company Shareholder (other than Blackstone and any dissenting Company Shareholders) will be entitled to receive US$11.25 in cash per Common Share (the “Consideration”) by way of a Court-approved statutory plan of arrangement (the “Arrangement”) pursuant to the provisions of the Business Corporations Act (Ontario).

A special committee of the Board of Directors of the Company (the “Company Board”) consisting entirely of independent directors (the “Special Committee”) conducted, with the assistance of its independent financial and legal advisors, a review of the Company’s operations and financing needs and alternatives available to the Company and obtained an independent valuation of the Common Shares. Following this process, and after careful consideration, the Special Committee unanimously recommended that the Unconflicted Company Board (as defined below) determine that the Arrangement is in the best interests of the Company and fair to the Company Shareholders (excluding Blackstone) and that the Company Board approve the Arrangement and recommend that the Company Shareholders vote FOR the Arrangement Resolution (as defined below).

The Company Board, with Frank Cohen (being the director on the Company Board appointed by Blackstone) having recused himself (the “Unconflicted Company Board”), after receiving the unanimous recommendation of the Special Committee and in consultation with its independent financial and legal advisors, determined that the Arrangement is in the best interests of the Company and fair to the Company Shareholders (excluding Blackstone) and unanimously recommends that the Company Shareholders vote FOR the Arrangement Resolution.

In reaching its recommendation, the Special Committee took into consideration, among other things, the following:

 

   

Significant premium to market price. The Consideration of $11.25 per Common Share in cash represents a premium of approximately 30% to the closing price of the Common Shares on the New York Stock Exchange (“NYSE”) as of January 18, 2024, the last trading day prior to the public announcement of the Arrangement, and a premium of approximately 42% to the volume weighted average share price on the NYSE over the 90-day period ended January 18, 2024.

 

   

Certainty of value of cash consideration. The Consideration to be received by Company Shareholders is payable entirely in cash, providing Company Shareholders with certainty of value and liquidity immediately upon the closing of the Arrangement, in comparison to the risks, uncertainties and longer potential timeline for realizing equivalent value from the Company Board-approved strategic plan or possible strategic alternatives involving transactions in which all or a portion of the consideration would be payable in equity or would require a series of transactions involving sales of properties to separate acquirors.


   

Transaction represents compelling value relative to alternatives. Prior to entering into the Arrangement Agreement, the Special Committee and the Unconflicted Company Board, with the assistance of their financial and legal advisors, and based upon their collective knowledge of the business, operations, financial condition, earnings and prospects of the Company, as well as their collective knowledge of the current and prospective environment in which the Company operates (including economic and market conditions), assessed the relative benefits and risks to the Company’s security holders, employees and residents of various alternatives reasonably available to the Company, including continued execution of the Company’s existing Company Board-approved strategic plan and the possibility of soliciting other potential buyers of the Company. As part of that evaluation process, the Special Committee unanimously was of the view that:

 

   

the Consideration represents greater value for the Company Shareholders than would reasonably be expected from the continued execution of the Company Board-approved strategic plan;

 

   

contacting other bidders before announcing a transaction would result in significant risks to the Company and its business, including the risk that it could jeopardize the availability of the Blackstone proposal and that market leaks and rumours regarding a potential transaction would disrupt relationships with joint venture partners, jeopardize transactions currently in the pipeline, risk employee turnover, increase turnover in the Company Shareholder base and lead to potential Common Share price volatility; and

 

   

there exists a limited universe of potential third parties with an interest in acquiring the Company, and it is unlikely that any other party would be willing to acquire the Company on terms that are more favourable to Company Shareholders, from a financial point of view, than the Arrangement, due to the size and varied nature of the Company’s portfolio and business lines, the Company’s cross border structure and the fact that leverage constraints could impact the price that public company bidders may be able to pay.

 

   

Rigorous arm’s length negotiation process. The Arrangement Agreement is the result of a rigorous arm’s length negotiation process that was undertaken with the oversight and participation of the Special Committee and the Unconflicted Company Board and their financial and legal advisors which included price increases by Blackstone from its initial proposed price of $11.00 per Common Share. The Special Committee concluded that $11.25 per Common Share is the highest price that Blackstone was willing to pay to acquire the Company.

 

   

Scotia Capital Formal Valuation and Fairness Opinion. The Special Committee received a formal valuation and fairness opinion from Scotia Capital Inc., which states that, as of the date thereof, and based upon and subject to the analyses, assumptions, limitations and qualifications set out therein: (i) the fair market value of a Common Share is in the range of $9.80 to $12.90 per Common Share, and (ii) the Consideration to be received by the Company Shareholders (excluding Blackstone) pursuant to the Arrangement is fair, from a financial point of view, to the Company Shareholders (excluding Blackstone).

 

   

Blackstone’s reputation and track record of closing transactions. The Special Committee concluded that it is likely that Blackstone will complete the Arrangement if all conditions are satisfied given (i) Blackstone’s proven ability to complete large acquisition transactions, including substantial experience with take-private transactions, (ii) Blackstone’s extensive experience in the real estate industry, (iii) Blackstone’s substantial available capital and (iv) the Purchaser Termination Fee of $526 million payable to the Company if the Arrangement Agreement is terminated in certain circumstances (representing approximately 15% of the Company’s equity value (assuming the exchange of all Preferred Units)), $466.843 million of which payment is guaranteed by BREP X and $59.157 million of which payment is guaranteed by BREIT Operating Partnership L.P.

 

   

Reasonable timeline to closing. The Arrangement is structured as a statutory plan of arrangement under the Business Corporations Act (Ontario). The completion of the Arrangement is expected to occur in the second quarter of this year, and is subject to customary closing conditions, including court approval, the approval of the Company Shareholders and required regulatory approvals under the Competition Act (Canada) and Investment Canada Act.

 

- ii -


The negotiations leading to the execution and announcement of the Arrangement Agreement were supervised by the Special Committee, which was comprised solely of independent directors and advised by experienced and qualified independent financial and legal advisors. The Arrangement is subject to the following approvals from Company Shareholders and the Ontario Superior Court of Justice (Commercial List) (the “Court”), which provides additional protection to the Company Shareholders (excluding Blackstone):

 

  (a)

a special resolution (the “Arrangement Resolution”), the full text of which is outlined in Appendix “A” of the accompanying management information circular (the “Circular”), must be approved by at least two-thirds (66 2/3%) of the votes cast by Company Shareholders present or represented by proxy at the Shareholder Meeting, voting as a single class;

 

  (b)

as the Arrangement constitutes a “business combination” for the purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”), the Arrangement Resolution must also be approved by a simple majority (more than 50%) of the votes cast by Company Shareholders present or represented by proxy at the Shareholder Meeting, excluding, for this purpose, the votes attached to the Common Shares held by Blackstone, David Berman, Gary Berman and any other Company Shareholders required to be excluded under MI 61-101; and

 

  (c)

the Arrangement must be approved by the Court, which will consider, among other things, the procedural and substantive fairness of the Arrangement to Company Shareholders (excluding Blackstone).

The 28,123,624 Common Shares beneficially owned or controlled, directly or indirectly, by BREIT, along with the 4,266,422 Common Shares and the 2,113,977 Common Shares beneficially owned or controlled, directly or indirectly, by David Berman and Gary Berman, respectively, collectively representing approximately 11.70% of the Common Shares as of the Record Date, will be excluded for the purposes of the “minority approval” required under MI 61-101. Frank Cohen (the director on the Company Board appointed by Blackstone) does not own any Common Shares and accordingly need not be excluded for the purposes of the “minority approval” required under MI 61-101.

In connection with the proposed Arrangement, all directors and executive officers of the Company have advised the Company that they intend to vote or cause to be voted all Common Shares beneficially held by them, if any, in favour of the Arrangement Resolution.

The Arrangement is currently expected to be completed in the second quarter of this year based on the assumption that all required Company Shareholder, Court and regulatory approvals are obtained and all other conditions to the Arrangement are satisfied or waived prior to such date.

The Shareholder Meeting will be held on Thursday, March 28, 2024 at 10:00 a.m. (Toronto time) in virtual format via live audio webcast at https://web.lumiconnect.com/#/411155572, Password: tricon2024 (case sensitive) and Meeting ID: 411-155-572. As the Company aims to maximize Company Shareholder participation, the Shareholder Meeting will be in a virtual-only format, which will be conducted via live audio webcast. All Company Shareholders, regardless of geographic location, will have an equal opportunity to participate at the Shareholder Meeting. Company Shareholders will not be able to attend the Shareholder Meeting in person. Registered Company Shareholders and duly appointed proxyholders will be able to attend, participate or vote at the Shareholder Meeting online. Guests and non-registered Company Shareholders (being shareholders who hold their Common Shares through a broker, investment dealer, bank, trust company, custodian, nominee or other intermediary) must duly appoint themselves as proxyholder in order to be able to vote or ask questions at the Shareholder Meeting. The online Shareholder Meeting will ensure that Company Shareholders who attend the Shareholder Meeting will be afforded the same rights and opportunities to participate as they would at an in-person meeting.

 

- iii -


Please arrange for your proxy to be received by the Company’s transfer agent, TSX Trust Company (“TSX Trust”), at 301-100 Adelaide Street West, Toronto, Ontario, M5H 4H1, Attention: Proxy Department, by no later than 10:00 a.m. (Toronto time) on Tuesday, March 26, 2024 (or, if the Shareholder Meeting is adjourned or postponed, 48 hours, excluding Saturdays, Sundays and statutory holidays, prior to the commencement of the reconvened Shareholder Meeting). Late proxies may be accepted or rejected by the Chair of the Shareholder Meeting at his or her discretion, subject to the terms of the Arrangement Agreement, and the Chair of the Shareholder Meeting is under no obligation to accept or reject any particular late proxy.

Company Shareholders should review the accompanying notice of special meeting of Company Shareholders and the Circular, which describes, among other things, the background to the Arrangement as well as the reasons for the determinations and recommendations of the Special Committee and the Company Board. The Circular contains a detailed description of the Arrangement and includes additional information to assist you in considering how to vote at the Shareholder Meeting. You are urged to read this information carefully and, if you require assistance, you are urged to consult your financial, legal, tax or other professional advisors.

Your vote is important regardless of the number of Common Shares you own. If you are unable to attend the Shareholder Meeting, we encourage you to take the time now to complete, sign, date and return the enclosed form of proxy or voting instruction form, as applicable, so that your Common Shares can be voted at the Shareholder Meeting in accordance with your instructions. If you are a registered Company Shareholder, we also encourage you to complete, sign, date and return the enclosed letter of transmittal, which will help the Company arrange for the prompt payment for your Common Shares if the Arrangement is completed.

If you have any questions about the information contained in this Circular or require assistance in completing your form of proxy please contact our proxy solicitation agent and shareholder communications advisor, Laurel Hill Advisory Group, at 1-877-452-7184 (toll-free in North America), or by calling 1-416-304-0211 (outside of North America) or by email at assistance@laurelhill.com. Questions on how to complete the letter of transmittal should be directed to the Company’s transfer agent, TSX Trust, at 1-866-600-5869 (toll-free within North America) or at 416-342-1091 (outside of North America) or by email at txstis@tmx.com.

On behalf of the Company Board, we would like to take this opportunity to thank you for the support you have shown as Company Shareholders.

 

Yours very truly,

 

(signed) David Berman

 

David Berman

Executive Chairman of the Board of Directors

 

 

- iv -


Voting is Easy. Vote Well in Advance of the Proxy Deadline of March 26, 2024 at

10:00 a.m. (Toronto time)

 

LOGO

Questions or Require Voting Assistance?

Contact our proxy solicitation agent:

 

LOGO

North America Toll Free: 1-877-452-7184

Outside North America: 1-416-304-0211

Email: assistance@laurelhill.com

 

- v -


TRICON RESIDENTIAL INC.

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

Toronto, Ontario, Canada, February 15, 2024

NOTICE IS HEREBY GIVEN that, in accordance with an interim order of the Ontario Superior Court of Justice (Commercial List) dated February 15, 2024 (the “Interim Order”), a special meeting (the “Shareholder Meeting”) of the holders (the “Company Shareholders”) of common shares (the “Common Shares”) of Tricon Residential Inc. (“Tricon” or the “Company”) will be held on Thursday, March 28, 2024 at 10:00 a.m. (Toronto time) in virtual format for the following purposes:

 

  1.

to consider, and, if deemed advisable, to pass, with or without variation, a special resolution (the “Arrangement Resolution”), the full text of which is outlined in Appendix “A” of the accompanying management information circular (the “Circular”), to approve an arrangement (the “Arrangement”) under section 182 of the Business Corporations Act (Ontario) (the “OBCA”) involving the Company and Creedence Acquisition ULC (the “Purchaser”) in accordance with the arrangement agreement between the Purchaser and the Company dated January 18, 2024, as it may be modified, supplemented or amended from time to time in accordance with its terms, and all the transactions contemplated thereby, pursuant to which, among other things, the Purchaser would acquire all of the issued and outstanding Common Shares, as more particularly described in the Circular; and

 

  2.

to transact such other business as may properly come before the Shareholder Meeting or any adjournment or postponement(s) thereof.

The Circular provides additional information relating to the matters to be addressed at the Shareholder Meeting, including the Arrangement. Company Shareholders are encouraged to read the Circular carefully when evaluating the matters to be considered at the Shareholder Meeting.

Shareholder Meeting

The Shareholder Meeting will be held on Thursday, March 28, 2024 at 10:00 a.m. (Toronto time) in virtual format via live audio webcast at https://web.lumiconnect.com/#/411155572, Password: tricon2024 (case sensitive) and Meeting ID: 411-155-572. As the Company aims to maximize Company Shareholder participation, the Shareholder Meeting will be in a virtual-only format, which will be conducted via live audio webcast. All Company Shareholders, regardless of geographic location, will have an equal opportunity to participate at the Shareholder Meeting. Company Shareholders will not be able to attend the Shareholder Meeting in person. Registered Company Shareholders and duly appointed proxyholders will be able to attend, participate and vote at the Shareholder Meeting online. Guests and non-registered Company Shareholders (being shareholders who hold their common shares through an Intermediary (as defined below)) must duly appoint themselves as proxyholder in order to be able to vote or ask questions at the Shareholder Meeting. The online Shareholder Meeting will ensure that Company Shareholders who attend the Shareholder Meeting will be afforded the same rights and opportunities to participate as they would at an in-person meeting.

You can participate online using your smartphone, tablet or computer. Confirm that the browser for whichever device you are using is compatible by visiting https://web.lumiconnect.com/#/411155572 in advance of the Shareholder Meeting. You will need the latest version of Chrome, Safari, Edge or Firefox (please do not use Internet Explorer). Internal networks, firewalls, as well as VPNs (virtual private networks) may block the audio webcast or access to the virtual platform for the Shareholder Meeting. If you experience issues, make sure your VPN is deactivated or that you are not using a computer connected to an enterprise network.

Company Shareholders are encouraged to submit their vote in advance by completing a form of proxy (in the case of registered Company Shareholders) or voting instruction form (in the case of non-registered Company Shareholders), or where advanced voting is not possible, to do so at the virtual Shareholder Meeting. Detailed voting instructions can be found in the section of the Circular entitled “Information Concerning the Shareholder Meeting and Voting – How to Vote”.


Appointment of Proxyholders

Company Shareholders who wish to appoint a person other than the management nominees identified in the form of proxy or voting instruction form, including non-registered (beneficial) Company Shareholders who wish to appoint themselves as proxyholder, must carefully follow the instructions in the accompanying Circular and on their form of proxy or voting instruction form. Detailed instructions for appointing proxyholders can be found in the section of the Circular entitled “Information Concerning the Shareholder Meeting and Voting How to Vote”.

Record Date

The Board of Directors of the Company (the “Company Board”) has set the close of business on Tuesday, February 13, 2024 as the record date (the “Record Date”) for determining the Company Shareholders who are entitled to receive notice of, and to vote their Common Shares at the Shareholder Meeting. Only persons who are shown on the register of Company Shareholders at the close of business on the Record Date, or their duly appointed proxyholders, will be entitled to attend the Shareholder Meeting and vote on the Arrangement Resolution.

As of the Record Date, there were 294,859,359 Common Shares issued and outstanding. Each Common Share entitles its holder to one (1) vote with respect to the matters to be voted on at the Shareholder Meeting.

Shareholder Approval

In order to become effective, the Arrangement must be approved by (i) at least two-thirds (66 2/3%) of the votes cast by Company Shareholders present or represented by proxy at the Shareholder Meeting, voting as a single class, and (ii) as the proposed transaction constitutes a “business combination” for the purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”), a simple majority (more than 50%) of the votes cast by Company Shareholders present or represented by proxy at the Shareholder Meeting, excluding, for the purposes of (ii), the votes attached to the Common Shares held by Blackstone, David Berman, Gary Berman and any other Company Shareholders required to be excluded under MI 61-101 (collectively, the “Excluded Shares”). The 28,123,624 Common Shares beneficially owned or controlled, directly or indirectly, by BREIT, along with the 4,266,422 Common Shares and the 2,113,977 Common Shares beneficially owned or controlled, directly or indirectly, by David Berman and Gary Berman, respectively, representing an aggregate of approximately 11.70% of the Common Shares as of the Record Date, will be Excluded Shares for purposes of such “minority approval” required under MI 61-101. Frank Cohen (the director on the Company Board appointed by Blackstone) does not own any Common Shares and accordingly need not be excluded for the purposes of the “minority approval” required under MI 61-101.

Letter of Transmittal

Accompanying this notice of meeting is the Circular, a proxy form and a letter of transmittal (for registered Company Shareholders) (the “Letter of Transmittal”). The accompanying Circular provides information relating to the matters to be addressed at the Shareholder Meeting and is incorporated into this notice of meeting. Any adjourned or postponed meeting resulting from an adjournment or postponement of the Shareholder Meeting will be held at a time and place to be specified either by the Company before the Shareholder Meeting or at the Chair’s discretion at the Shareholder Meeting.

For a registered Company Shareholder (other than BREIT Shareholder and any dissenting Company Shareholders) to receive US$11.25 in cash per Common Share (the “Consideration”) to which they may be entitled pursuant to the Arrangement, they must complete, sign and return the Letter of Transmittal together with their Share Certificate(s) and/or Direct Registration System advice(s), as applicable, and any other required documents and instruments to the depositary named in the Letter of Transmittal, in accordance with the procedures set out therein.

 

- ii -


Voting

Whether or not you are able to attend the Shareholder Meeting, the Company Board and management of the Company urge you to participate in the Shareholder Meeting and vote your Common Shares. If you are a registered Company Shareholder and cannot attend the Shareholder Meeting to vote your Common Shares, please vote in one of the following ways:

 

  i.

by following the instructions for internet voting in the accompanying proxy form at least 48 hours, excluding Saturdays, Sundays and holidays, prior to the Shareholder Meeting or related adjournment(s) or postponement(s); or

 

  ii.

by completing and signing the accompanying proxy form and returning it in the enclosed envelope, postage prepaid at least 48 hours, excluding Saturdays, Sundays and statutory holidays, prior to the Shareholder Meeting or related adjournment(s) or postponement(s); or

 

  iii.

by duly appointing someone as a proxy to participate in the Shareholder Meeting and vote your Common Shares for you.

The chair of the Shareholder Meeting reserves the right to accept late proxies and to extend or waive the proxy cut off at their discretion, with or without notice, subject to the terms of the Arrangement Agreement.

If you are a beneficial (non-registered) Company Shareholder, please refer to the section in the Circular entitled “Information Concerning the Shareholder Meeting and Voting – Non-Registered Company Shareholders” for information on how to vote your Common Shares. Beneficial (non-registered) Company Shareholders who hold their Common Shares through a broker, investment dealer, bank, trust company, custodian, nominee or another intermediary (an “Intermediary”), should carefully follow the instructions of their Intermediary to ensure that their Common Shares are voted at the Shareholder Meeting in accordance with such Company Shareholders’ instructions and, as applicable, to arrange for their Intermediary to complete the necessary transmittal documents and to ensure that they receive payment of the Consideration for their Common Shares if the Arrangement is completed.

Dissent Rights

Pursuant to the Interim Order, registered Company Shareholders have the right to dissent with respect to the Arrangement Resolution and, if the Arrangement becomes effective, to be paid the fair value of their Common Shares (less the amount of their entitlement to a pro rata portion of the return of capital distribution described in the accompanying Circular, if any) by the Purchaser in accordance with the provisions of Section 185 of the OBCA (the “Dissent Rights”), as modified by the Interim Order and/or the plan of arrangement pertaining to the Arrangement (the “Plan of Arrangement”). A registered Company Shareholder wishing to exercise Dissent Rights with respect to the Arrangement Resolution must provide a written notice of dissent (a “Dissent Notice”) to the Company, which the Company must receive, c/o David Veneziano, Executive Vice President and Chief Legal Officer, at 7 St. Thomas Street, Suite 801, Toronto, Ontario, M5S 2B7, Canada, with copies to each of:

 

  i.

Goodmans LLP, Bay Adelaide Centre, 333 Bay Street, Suite 3400, Toronto, Ontario, Canada, M5H 2S7, Attention: John Connon, email: jconnon@goodmans.ca and Tara Hunt, email: thunt@goodmans.ca; and

 

  ii.

Davies Ward Phillips & Vineberg LLP, 155 Wellington Street West, Toronto, ON M5V 3J7, Attention: Kevin Greenspoon, email: kgreenspoon@dwpv.com and Joseph DiPonio, email: jdiponio@dwpv.com.

by no later than 5:00 p.m. (Toronto time) on March 26, 2024 (or, if the Shareholder Meeting is adjourned or postponed, by no later than 5:00 p.m. on the second (2nd) business day, excluding Saturdays, Sundays and statutory holidays, prior to the commencement of the reconvened Shareholder Meeting), and must otherwise strictly comply with the dissent procedures described in the accompanying Circular, the Interim Order, the Plan of Arrangement and Section 185 of the OBCA, as modified by the Interim Order and the Plan of Arrangement. A Company Shareholder’s Dissent Notice sent with respect to the Arrangement shall be deemed to be and shall be automatically revoked if such Company Shareholder has voted (some or all of their Common Shares) FOR the Arrangement Resolution, whether online, virtually at the Shareholder Meeting or by proxy.

 

- iii -


Anyone who is a beneficial owner of Common Shares registered in the name of an Intermediary and who wishes to exercise Dissent Rights should be aware that only registered Company Shareholders are entitled to exercise Dissent Rights. A non-registered Company Shareholder who wishes to exercise Dissent Rights must make arrangements for the registered Company Shareholder of such Common Shares to exercise Dissent Rights on behalf of such Company Shareholder. A registered Company Shareholder who intends to exercise Dissent Rights must do so with respect to all of the Common Shares registered in the Company Shareholder’s name that either: (i) they hold on their own behalf; or (ii) they hold on behalf of any one beneficial Company Shareholder, and must deliver a Dissent Notice to the Company in the manner and within the time described above. There is no right to a partial Dissent Right.

It is recommended that you seek independent legal advice if you wish to exercise Dissent Rights. The Dissent Rights are more particularly described in the accompanying Circular, and copies of the Plan of Arrangement, the Interim Order and the text of Section 185 of the OBCA are set forth in Appendix “B”, Appendix “E” and Appendix “G”, respectively, of the Circular. Failure to strictly comply with the requirements set forth in Section 185 of the OBCA, as modified by the Interim Order and/or the Plan of Arrangement, may result in the loss of the Dissent Rights.

 

 

By order of the Company Board,

 

(signed) David Berman

 

David Berman

Executive Chairman of the Company Board

 

- iv -


TRICON RESIDENTIAL INC.

MANAGEMENT INFORMATION CIRCULAR

This management information circular (this “Circular”) is provided in relation to the solicitation of proxies by the management of Tricon Residential Inc. (“we”, “us”, “our”, “Tricon” and the “Company”) for use at the special meeting of Company Shareholders (the “Shareholder Meeting”) of the Company to be held on Thursday, March 28, 2024 at 10:00 a.m. (Toronto time) virtually via live audio webcast at https://web.lumiconnect.com/#/411155572 and at any adjournment or postponement thereof. Unless otherwise indicated, the information provided in this Circular is provided as of the Record Date of Tuesday, February 13, 2024.

All capitalized terms used in this Circular but not otherwise defined herein have the meanings set forth in the “Glossary of Terms”. In this Circular, unless there is something in the subject matter or context inconsistent therewith, words importing the singular number only (including defined terms) include the plural. Capitalized words and terms used in the Schedules attached to this Circular are defined separately therein.

CURRENCY AND EXCHANGE RATES

Unless otherwise indicated, references to “$” or “US$” refer to the lawful currency of the United States of America and references to “C$” refer to the lawful currency of Canada. On February 13, 2024, the daily average exchange rate as reported by the Bank of Canada was: C$1.00 = US$0.7377 and US$1.00 = C$1.3556.

CAUTIONARY STATEMENTS

We have not authorized any person to give any information or make any representation regarding the Arrangement or any other matters to be considered at the Shareholder Meeting other than those contained in this Circular. If any such information or representation is given or made to you, you should not rely on it as being authorized or accurate.

This Circular does not constitute an offer to buy, or a solicitation of an offer to sell, any securities, or the solicitation of a proxy, by any person in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such an offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such an offer or solicitation. The delivery of this Circular will not, under any circumstances, create any implication or be treated as a representation that there has been no change in the information set out herein since the date of this Circular.

Management is soliciting your proxy. The Company has retained Laurel Hill Advisory Group (“Laurel Hill”) as its proxy solicitation agent and shareholder communications advisor for assistance in connection with the solicitation of proxies for the Shareholder Meeting, and will pay Laurel Hill fees of C$175,000 for such services in addition to certain out-of-pocket expenses. Management requests that you sign and return the proxy form or voting instruction form so that your votes are exercised at the Shareholder Meeting. The solicitation of proxies will be conducted primarily by mail but may also be made by telephone, facsimile transmission or other electronic means of communication or in-person by the directors, officers and employees of Tricon. The Company will bear the cost of such solicitation and will reimburse Intermediaries for their reasonable charges and expenses incurred in forwarding proxy materials to non-registered Company Shareholders. The Purchaser and its affiliates may also participate in the solicitation of proxies.

Company Shareholders should not construe the contents of this Circular as legal, tax or financial advice and are urged to consult with their own legal, tax, financial or other professional advisors.

The information contained in this Circular concerning the Purchaser and its affiliates, including such information under the heading “Special Factors – Background to the Arrangement”, has been provided by the Purchaser and its affiliates for inclusion in this Circular. Although the Company has no knowledge that any statement contained herein taken from, or based on, such information and records or information provided by the Purchaser or its affiliates are untrue or incomplete, the Company assumes no responsibility for the accuracy of the information contained in such documents, records or information or for any failure by the Purchaser or its affiliates to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to the Company.


All summaries of and references to the Arrangement Agreement, the Plan of Arrangement, and Support Agreement in this Circular are qualified in their entirety by the complete text of such documents and Company Shareholders should refer to the full text for complete details of such documents. The Plan of Arrangement is attached as Appendix “B” to this Circular, and copies of the Arrangement Agreement and Support Agreement are available under Tricon’s profiles on SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov. You are urged to read the full text of the Arrangement Agreement and the Plan of Arrangement carefully.

NO CANADIAN SECURITIES REGULATORY AUTHORITY NOR THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS AN OFFENCE.

FORWARD-LOOKING INFORMATION

This Circular contains “forward-looking information” within the meaning of applicable Canadian Securities Laws, and Tricon intends that such forward-looking statements be subject to the safe harbours created thereby. Forward-looking statements are statements other than historical information or statements of current condition. Words such as may, expect, believe, plan, anticipate, intend, could, estimate, continue, or similar expressions or the negative of such expressions are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events and circumstances are considered forward-looking statements. They are not guarantees of future performance and these statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. More particularly and without restriction, this Circular contains forward-looking statements and information regarding: the Company Forecasts; the anticipated benefits of the Arrangement for the Company and Company Shareholders; the Company Shareholder Approvals, Court approval and Required Regulatory Approvals and other conditions required to complete the Arrangement; the anticipated timing of the completion of the Arrangement; future distributions by the Company and Company Subsidiaries; the de-listing of the Common Shares from the TSX and the NYSE, and the Company ceasing to be a reporting issuer in Canada; the consequences to Company Shareholders if the Arrangement is not completed; the anticipated expenses of the Arrangement; the Canadian and U.S. income tax consequences of the Arrangement and expected tax treatment of the Return of Capital Distribution, if any, and Common Share Acquisition Price; and such other statements regarding the Company’s expectations, intentions, plans and beliefs.

Forward-looking information is subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, the failure of the parties to obtain the necessary Company Shareholder Approvals, Court approval and Required Regulatory Approvals or to otherwise satisfy the conditions to the completion of the Arrangement or that the Arrangement Agreement will be amended or terminated; failure of the parties to obtain such approvals or satisfy such conditions in a timely manner or at all; the response of business partners, tenants and competitors to the announcement and pendency of the Arrangement; significant transaction costs or unknown liabilities; potential litigation relating to the Arrangement Agreement, including the effects of any outcomes related thereto; failure to realize the expected benefits of the Arrangement; the Arrangement Agreement restricting the Company from taking specified actions, without the consent of the Purchaser, until the Arrangement is completed; a material adverse change or other circumstance that could give rise to the termination of the Arrangement Agreement; material adverse changes in the business or affairs of the Company; competitive factors in the industries in which the Company operates; either party’s failure to consummate the Arrangement when required or on the terms as originally negotiated; interest rates, inflation rates, foreign exchange rates, prevailing economic conditions; and other risks and uncertainties identified under “Risk Factors” and “Information Concerning Tricon”. Failure to obtain the necessary Company Shareholder Approvals, Court approval and Required Regulatory Approvals, or the failure of the parties to otherwise satisfy the conditions to the completion of the Arrangement or to complete the Arrangement, may result in the Arrangement not being completed on the proposed terms, or at all. In addition, if the Arrangement is not completed, and the Company continues as a publicly traded entity, there are risks that the announcement of the Arrangement and the dedication of substantial resources of the Company to the completion of the Arrangement could have an impact on its business and strategic relationships (including with future and prospective employees, customers, suppliers and partners), operating results and activities in general, and could have a material adverse effect on its current and future operations, financial condition and prospects. Furthermore, pursuant to the terms of the Arrangement Agreement, the Company may, in certain circumstances, be required to pay the Company Termination Fee to the Purchaser, the result of which could have an adverse effect on its financial position.

 

- ii -


This list is not exhaustive of the factors that may affect any of the forward-looking statements of Tricon. The risks and uncertainties that could affect forward-looking statements are described further under the heading “Risk Factors”. Additional risks are further discussed in Tricon’s annual information form and annual report (Form 40-F) for the year ended December 31, 2022, the management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2022, as well as the management’s discussion and analysis of financial condition and results of operations for the three and nine months ended September 30, 2023, each of which has been filed under Tricon’s profiles on SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov.

Although Management has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that could cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Consequently, all of the forward-looking information contained herein is qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments that we anticipate will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business, financial condition or results of operation. Unless otherwise noted or the context otherwise indicates, the forward-looking information contained herein is provided as of the date hereof, and the Company does not undertake to update or amend such forward-looking information whether as a result of new information, future events or otherwise, except as may be required by applicable Securities Laws.

NON-IFRS MEASURES

In this Circular, the Company uses certain non-IFRS financial measures, non-IFRS ratios and certain real estate industry supplementary financial measures to measure, compare and explain the operating results and financial performance of the Company. These measures are commonly used by entities in the real estate industry as useful metrics for measuring performance. The Company utilizes these measures in managing its business, including performance measurement and capital allocation. In addition, certain of these measures are used in measuring compliance with the Company’s debt covenants. Management believes that providing these performance measures on a supplemental basis is helpful to Company Shareholders in assessing the overall performance of the Company’s business. However, these measures are not recognized under and do not have any standardized meaning prescribed by IFRS as issued by the IASB, and are not necessarily comparable to similar measures presented by other publicly-traded entities. These measures should be considered as supplemental in nature and not as a substitute for related financial information prepared in accordance with IFRS. Because non-IFRS financial measures, non-IFRS ratios and supplementary financial measures do not have standardized meanings prescribed under IFRS, applicable Securities Laws require that such measures be clearly defined, identified, and reconciled to their nearest IFRS measure. The definition, calculation and reconciliation of the non-IFRS financial measures and the requisite disclosure for non-IFRS ratios used in this document are provided in the sections titled “Non-IFRS Measures”, “Forward Looking Statements and Market”, “Industry Data” and “Appendix A - Reconciliations” in the Company’s management’s discussion and analysis of financial condition and results of operations for the three and nine months ended September 30, 2023, which has been filed under Tricon’s profiles on SEDAR+ at www.sedarplus.ca on November 7, 2023 and on EDGAR at www.sec.gov on November 7, 2023, and is hereby incorporated by reference in this Circular, as well as in “Exhibit “A”-Reconciliation of Certain Non-IFRS Measures”.

The non-IFRS financial measures, non-IFRS ratios and supplementary financial measures presented herein should not be construed as alternatives to net income (loss) or cash flow from the Company’s activities, determined in accordance with IFRS, as indicators of the Company’s financial performance. The Company’s method of calculating these measures may differ from other issuers’ methods and, accordingly, these measures may not be comparable to similar measures presented by other publicly-traded entities.

 

- iii -


The non-IFRS financial measures, non-IFRS ratios and real estate industry supplementary financial measures presented herein should not be considered in isolation or in lieu of the Company’s operating and other financial information that is publicly available. These measures should be read together with the Company’s published financial statements, the most recent of which are the unaudited condensed interim consolidated financial statements of the Company for the three and nine months ended September 30, 2023 and management’s discussion and analysis of financial condition and results of operations for the three and nine months ended September 30, 2023, each of which has been filed under Tricon’s profiles on SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov.

NOTICE TO COMPANY SHAREHOLDERS IN THE UNITED STATES

The transactions contemplated herein constitute a “going private” transaction under Rule 13e-3 promulgated under the United States Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”). In connection with these transactions, the Company, the Purchaser and certain related parties have filed with the U.S. Securities and Exchange Commission (the “SEC”) a transaction statement (the “Schedule 13E-3”) pursuant to Section 13(e) of the U.S. Exchange Act and Rule 13e-3 thereunder, which incorporates, by reference therein, this Circular. Copies of the Schedule 13E-3 are, and any other documents filed by the Company in connection with the Arrangement will be, available under Tricon’s profile on EDGAR at www.sec.gov.

Company Shareholders are advised to read this Circular and the Schedule 13E-3 in their entirety, including the exhibits or appendices hereto or thereto, as applicable, because they contain important information.

Tricon is a corporation existing under the laws of Ontario and is a “foreign private issuer” within the meaning of the rules promulgated under the U.S. Exchange Act. Section 14(a) of the U.S. Exchange Act and related proxy rules are not applicable to the Company nor to this solicitation and, therefore, this solicitation is not being effected in accordance with such laws. The solicitation of proxies and the transactions contemplated herein involve securities of a Canadian issuer and are being effected in accordance with (i) Canadian corporate laws and Canadian Securities Laws, which differ from disclosure requirements in the United States, and (ii) the requirements of Rule 13e-3 promulgated under the U.S. Exchange Act.

The unaudited condensed interim consolidated financial statements and audited consolidated annual financial statements of Tricon and other financial information included or incorporated by reference in this Circular have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and thus may differ from the U.S. generally accepted accounting principles. Company Shareholders that are U.S. taxpayers are advised to consult their independent tax advisors regarding the United States federal, state, local and foreign tax consequences to them by participating in the Arrangement.

The enforcement by investors of civil liabilities under United States federal and state securities laws may be affected adversely by the fact that Tricon is organized under the laws of a jurisdiction other than the United States, that some (or all) of its respective officers and directors are residents of countries other than the United States, that some or all of the experts named in this Circular may be residents of countries other than the United States, or that all or a substantial portion of the assets of Tricon and such directors, officers and experts may be located outside the United States. As a result, it may be difficult or impossible for Company Shareholders resident in the United States to effect service of process within the United States upon Tricon and its respective officers and directors or the experts named herein, or to realize against them on judgments of courts of the United States. In addition, Company Shareholders resident in the United States should not assume that the courts of Canada: (a) would enforce judgments of United States courts obtained in actions against such persons predicated upon civil liabilities under the U.S. Securities Laws or any state within the United States, including “blue sky laws” of any state within the United States; or (b) would enforce, in original actions, liabilities against such persons predicated upon civil liabilities under the U.S. Securities Laws, including “blue sky laws” of any state within the United States.

 

- iv -


Goodmans Draft: February 12, 2024

TABLE OF CONTENTS

 

CURRENCY AND EXCHANGE RATES

     I  

CAUTIONARY STATEMENTS

     I  

FORWARD-LOOKING INFORMATION

     II  

NON-IFRS MEASURES

     III  

NOTICE TO COMPANY SHAREHOLDERS IN THE UNITED STATES

     IV  

SUMMARY OF ARRANGEMENT

     1  

The Shareholder Meeting

     1  

Record Date

     1  

Purpose of the Shareholder Meeting

     1  

Summary of the Arrangement

     1  

Parties to the Arrangement

     2  

Tricon

     2  

Purchaser

     2  

BREP X

     2  

BREIT Shareholder

     2  

BREIT

     2  

Other Blackstone Filing Parties

     2  

Background to the Arrangement

     3  

Recommendation of the Special Committee

     3  

Recommendation of the Unconflicted Company Board

     3  

Reasons for the Recommendation

     3  

Blackstone Filing Parties’ Purposes and Reasons for the Arrangement

     4  

Position of Blackstone Filing Parties as to the Fairness of the Arrangement

     4  

Required Company Shareholder Approvals

     5  

Formal Valuation and Fairness Opinions

     5  

MI 61-101 Requirements

     6  

Implementation of the Arrangement

     6  

Procedural Safeguards for Company Shareholders

     10  

Support Agreement

     11  

Arrangement Agreement

     11  

Certain Canadian Federal Income Tax Considerations

     11  

Certain U.S. Federal Income Tax Considerations

     12  

Dissent Rights

     12  

Depositary

     13  

Stock Exchange Delisting and Reporting Issuer Status

     13  

Risk Factors

     13  

Interest of Certain Persons in the Arrangement; Benefits from the Arrangement

     13  

Notice to Company Shareholders in the United States

     13  

QUESTIONS AND ANSWERS ABOUT THE SHAREHOLDER MEETING AND THE ARRANGEMENT

     15  


SPECIAL FACTORS

     23  

Background to the Arrangement

     23  

Tricon’s Purposes and Reasons for the Arrangement

     34  

Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement

     35  

Recommendation and Reasons of the Special Committee

     35  

Recommendation and Reasons of the Unconflicted Company Board; Position of Tricon as to the Fairness of the Arrangement

     39  

Compensation of the Special Committee

     40  

Scotia Capital Formal Valuation and Fairness Opinion

     40  

Mandate and Professional Fees

     41  

Credentials and Independence of Scotia Capital

     42  

Prior Valuations

     43  

Summary of the Scotia Capital Formal Valuation and Fairness Opinion

     43  

Assumptions and Limitations

     44  

Definitions and Approach to Fair Market Value

     45  

Valuation Methodologies

     46  

Application of Valuation Methodologies to the Common Shares

     46  

Valuation Reference Points

     52  

Benefits to Blackstone of Acquiring the Shares Held by Company Shareholders

     53  

Formal Valuation Summary

     53  

Valuation Conclusion

     53  

Fairness Opinion Conclusion

     54  

General

     54  

Other Presentations by Scotia Capital

     55  

Morgan Stanley Fairness Opinion

     55  

Summary of Financial Analyses

     57  

Comparable Companies Analysis

     58  

Dividend Discount Model Analysis

     59  

Premiums Paid Analysis

     59  

Cash Levered Buyer Analysis

     60  

Additional Reference Points

     61  

Historical Trading Analysis

     61  

Research Analyst Price Targets and NAV Per Common Share Estimates

     61  

Preliminary Presentations by Morgan Stanley

     61  

General

     62  

RBC’s Advisory Role

     63  

Company Forecasts

     63  

Blackstone Filing Parties’ Purposes and Reasons for the Arrangement

     66  

Position of Blackstone Filing Parties as to the Fairness of the Arrangement

     67  

Certain Effects of the Arrangement

     70  

Effect of the Arrangement on the Company’s Net Book Value and Net Earnings

     70  

Benefits and Detriments of the Arrangement for the Company’s Unaffiliated Security Holders

     70  

Benefits and Detriments of the Arrangement for Directors and Executive Officers of the Company

     71  

Benefits and Detriments of the Arrangement for the Blackstone Filing Parties

     71  

INFORMATION CONCERNING THE SHAREHOLDER MEETING AND VOTING

     72  

Purpose of the Shareholder Meeting

     72  

Date, Time and Place of Shareholder Meeting

     72  

How to Vote

     73  

 

- ii -


Notice-and-Access

     75  

Solicitation of Proxies

     75  

What is a Proxy?

     75  

Appointment and Revocation of Proxyholders

     76  

Registered Company Shareholders

     76  

Non-Registered Company Shareholders

     76  

Voting Common Shares

     77  

Principal Company Shareholders

     77  

Other Business

     78  

THE ARRANGEMENT

     78  

Overview

     78  

Company Shareholder Approvals of the Arrangement

     79  

Support Agreement

     80  

Implementation of the Arrangement

     80  

Effective Date

     84  

Procedure for Exchange of Share Certificates or DRS Advices by Company Shareholders

     84  

Payment of Consideration

     85  

Payment of Consideration to Company Shareholders

     85  

Currency of Payment

     86  

Payments to Holders of Incentive Securities

     87  

Expenses of the Arrangement

     88  

Financing of the Arrangement

     88  

Intentions of Directors and Executive Officers

     89  

Accounting Treatment of the Arrangement

     89  

Arrangements between Tricon and Security Holders

     89  

INFORMATION CONCERNING THE PURCHASER AND BLACKSTONE

     89  

Identities of the Blackstone Filing Parties

     89  

Purchaser

     89  

Creedence Intermediate Holdings Inc.

     89  

BREP X

     90  

BREIT Shareholder

     90  

BREIT

     90  

BREIT OP

     90  

Blackstone Real Estate Associates X L.P.

     90  

Agreements Involving the Company Securities

     90  

INFORMATION CONCERNING TRICON

     91  

General

     91  

Description of Share Capital

     91  

Dividend Policy

     92  

Commitments to Acquire Securities of Tricon

     92  

Previous Purchases and Sales

     93  

Previous Distributions

     94  

Trading in Shares

     97  

Interest of Informed Persons in Material Transactions

     98  

 

- iii -


Material Changes in the Affairs of the Company

     98  

Selected Historical Financial Information

     98  

Consolidated Balance Sheets

     99  

Consolidated Statement of Income and Comprehensive Income

     100  

Consolidated Statements of Income

     100  

Consolidated Statements of Comprehensive Income

     101  

Consolidated Statement of Changes in Equity

     101  

Consolidated Statements of Equity

     102  

Consolidated Statement of Cash Flows

     103  

Consolidated Statements of Cash Flows

     103  

Net Book Value

     104  

Additional Information

     104  

ARRANGEMENT AGREEMENT

     105  

Effective Date

     105  

Representations and Warranties

     106  

Conduct of Business Pending the Arrangement

     108  

The Shareholder Meeting

     112  

Agreement to Take Certain Actions

     112  

Restriction on Solicitation of Acquisition Proposals

     114  

Obligation of the Company Board with Respect to its Recommendation and Fiduciary Out

     115  

Employee Matters

     117  

Dividend Reinvestment Plan

     118  

Tax Opinion

     118  

Distributions by the Company

     118  

Financing Cooperation

     119  

Pre-Closing Transactions

     121  

Insurance and Indemnification of Directors and Officers

     122  

Certain Other Covenants

     124  

Conditions to the Transaction

     126  

Termination of the Arrangement Agreement

     127  

Termination by Either the Company or the Purchaser

     127  

Termination by the Company

     127  

Termination by the Purchaser

     128  

Termination Fees

     129  

Termination Fee Payable by the Company

     129  

Termination Fee Payable by the Purchaser

     129  

Guaranty

     130  

Specific Performance

     130  

Amendment and Waiver

     130  

Support Agreement

     131  

CERTAIN LEGAL MATTERS

     131  

Implementation of the Arrangement and Timing

     131  

 

- iv -


Court Approvals and Completion of the Arrangement

     132  

Interim Order

     132  

Final Order

     132  

Required Regulatory Approvals

     133  

Competition Act Clearance

     133  

Investment Canada Act Approval

     134  

Interest of Certain Persons in the Arrangement; Benefits from the Arrangement

     135  

Ownership of Securities

     135  

Employment Arrangements

     138  

Indemnification and Insurance

     138  

Securities Law Matters

     138  

Application of MI 61-101

     138  

Formal Valuation

     139  

Minority Approval

     139  

Stock Exchange Delisting and Reporting Issuer Status

     141  

RISK FACTORS

     141  

Risks Relating to Tricon

     141  

Risks Related to the Arrangement

     141  

Conditions Precedent and Required Approvals

     141  

Termination in Certain Circumstances and Company Termination Fee

     142  

Occurrence of a Material Adverse Effect

     142  

Uncertainty Surrounding the Arrangement

     142  

The Significant Resources Dedicated in Connection with the Arrangement, Restrictions from Taking Specified Actions while the Arrangement is Pending and Negative Impact of a Failure to Complete the Arrangement on the Company’s Business

     142  

Impact on the Company’s Existing Business Relationships and Employees

     143  

The Volatility of the Relative Trading Price of Shares Prior to the Effective Date

     143  

The Possibility for the Company, the Purchaser and Blackstone to Become the Target of Securities Class Actions, Oppression Claims and Derivative Lawsuits Which Could Result in Costs and May Delay or Prevent the Arrangement from Being Completed

     143  

Rights of Former Company Shareholders after the Arrangement

     143  

The Absence of Verification by the Company of the Information Regarding the Purchaser and Blackstone Included in, or Which May Have Been Omitted From, this Circular

     143  

The Diversion of the Attention of the Company’s Management

     144  

Interests of Certain Persons in the Arrangement

     144  

The Resulting Tax Payable by Most Company Shareholders

     144  

No Solicitation of Other Potential Buyers of the Company

     144  

Restrictions on the Company’s Ability to Solicit Acquisition Proposals from Other Potential Purchasers

     144  

The Company Termination Fee and the right to match may discourage other parties from making a Superior Proposal

     144  

No right of specific performance

     144  

The Tax Treatment of the Return of Capital Distribution is Not Free From Doubt

     145  

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

     145  

Canadian Currency

     146  

Assumptions Regarding the Return of Capital Distribution

     146  

Holders Resident in Canada

     147  

The Return of Capital Distribution

     147  

Disposition of Common Shares under the Arrangement

     147  

Dissenting Resident Holders of Common Shares

     148  

Capital Gains and Capital Losses

     148  

 

- v -


Minimum Tax

     148  

Additional Refundable Tax

     148  

Holders Not Resident in Canada

     148  

The Return of Capital Distribution

     149  

Disposition of Common Shares under the Arrangement

     149  

Taxable Canadian Property

     149  

Dissenting Non-Resident Holders

     150  

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

     150  

Return of Capital Distribution

     151  

Disposition of Common Shares under the Arrangement

     152  

Passive Foreign Investment Company

     153  

United States Backup Withholding and Information Reporting

     154  

Consequences to Dissenting U.S. Company Shareholders

     154  

PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS

     154  

DISSENTING SHAREHOLDERS’ RIGHTS

     154  

DEPOSITARY

     157  

QUESTIONS AND FURTHER ASSISTANCE

     157  

APPROVAL BY THE DIRECTORS

     158  

GLOSSARY OF TERMS

     159  

CONSENT OF SCOTIA CAPITAL INC.

     1  

CONSENT OF MORGAN STANLEY & CO. LLC.

     2  

 

EXHIBIT “A”    RECONCILIATION OF CERTAIN NON-IFRS MEASURES
EXHIBIT “B”    DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS OF THE BLACKSTONE FILING PARTIES
EXHIBIT “C”    DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
APPENDIX “A”    ARRANGEMENT RESOLUTION
APPENDIX “B”    PLAN OF ARRANGEMENT UNDER SECTION 182 OF THE BUSINESS CORPORATIONS ACT (ONTARIO)
APPENDIX “C”    FORMAL VALUATION AND FAIRNESS OPINION OF SCOTIA CAPITAL INC.
APPENDIX “D”    FAIRNESS OPINION OF MORGAN STANLEY & CO. LLC.
APPENDIX “E”    INTERIM ORDER
APPENDIX “F”    NOTICE OF APPLICATION
APPENDIX “G”    SECTION 185 OF THE BUSINESS CORPORATIONS ACT (ONTARIO)

 

- vi -


SUMMARY OF ARRANGEMENT

The following is a summary of certain information contained in this Circular. This summary is not intended to be complete and is qualified in its entirety by the more detailed information contained elsewhere in this Circular and the attached Appendices, all of which are important and should be reviewed carefully. Capitalized terms used in this summary without definition have the meanings ascribed to them in the Glossary of Terms starting on page 159 of this Circular. Company Shareholders are urged to read this Circular and its Appendices carefully and in their entirety.

The Shareholder Meeting

The Shareholder Meeting will be held on Thursday, March 28, 2024 at 10:00 a.m. (Toronto time) in virtual format via live audio webcast at https://web.lumiconnect.com/#/411155572, Password: tricon2024 (case sensitive) and Meeting ID: 411-155-572.

Company Shareholders will be able to participate and vote at the Shareholder Meeting online regardless of their geographic location. See “Information Concerning the Shareholder Meeting and Voting – Date, Time and Place of Shareholder Meeting”.

In the event necessary or appropriate to address material comments from any securities regulatory authority, including from the SEC, on this Circular or the Schedule 13E-3, the Parties have agreed pursuant to the Arrangement Agreement that the Company may adjourn or postpone the Shareholder Meeting.

Record Date

The Company Shareholders entitled to vote at the Shareholder Meeting are those holders of Common Shares as of the close of business on Tuesday, February 13, 2024. See “Information Concerning the Shareholder Meeting and Voting”.

Purpose of the Shareholder Meeting

The purpose of the Shareholder Meeting is for Company Shareholders to consider and, if deemed advisable, approve the Arrangement Resolution, the full text of which is set forth at Appendix “A”.

To be effective, the Arrangement Resolution must be approved by (i) at least two-thirds (66 2/3%) of the votes cast by Company Shareholders present or represented by proxy at the Shareholder Meeting, voting as a single class and (ii) a simple majority (more than 50%) of the votes cast by Company Shareholders present or represented by proxy at the Shareholder Meeting, excluding, for the purposes of (ii), the votes attached to the Excluded Shares required to be excluded under MI 61-101 (the “Minority Approval”).

Company Shareholders may also be asked to consider other business that properly comes before the Shareholder Meeting or any adjournment(s) or postponement(s) thereof.

Summary of the Arrangement

The Arrangement Agreement provides for, among other things, the acquisition by the Purchaser of all of the issued and outstanding Common Shares by way of a plan of arrangement under Section 182 of the OBCA. Pursuant to the Plan of Arrangement, each holder of Common Shares (other than Blackstone and any Dissenting Shareholders) will be entitled to receive $11.25 in cash for each Common Share held, less any applicable withholdings. In addition, pursuant to the Plan of Arrangement, each Restricted Share (whether vested or unvested) will become immediately vested and represent a Common Share that will entitle the holder thereof to receive $11.25 in cash for each such Common Share, each holder of Deferred Share Units (whether vested or unvested) will receive a cash payment of $11.25 per Deferred Share Unit, each holder of Performance Share Units (whether vested or unvested) will receive a cash payment of $11.25 per Performance Share Unit and each holder of Stock Options (whether vested or unvested) will receive a cash payment per Stock Option equal to the amount by which $11.25 exceeds the exercise price of such Stock Option, in each case less any applicable withholdings. The Arrangement Agreement provides that the Consideration will be reduced by the amount of any dividends or other distributions paid to holders of Common Shares during the pendency of the Arrangement. Accordingly, the Company intends to suspend the payment of quarterly dividends on the Common Shares during the Interim Period. A copy of the Plan of Arrangement is attached to this Circular as Appendix “B”. See “The Arrangement”.


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Parties to the Arrangement

Tricon

Founded in 1988, Tricon is a corporation governed by the OBCA. The Company’s head and registered office is located at 7 St. Thomas Street, Suite 801, Toronto, Ontario, M5S 2B7, telephone: (416) 323-2482. The Company owns, operates, and develops a growing portfolio of approximately 38,000 single-family rental homes in the U.S. Sun Belt and multi-family apartments in Toronto, Canada and provides a superior resident experience through its tech-enabled platform and operating teams.

Purchaser

The Purchaser is a newly formed unlimited liability company organized under the laws of the Province of British Columbia. The Purchaser was formed to effect the acquisition of the Company by BREP X and BREIT and has conducted no business activities other than those related to the structuring and negotiation of the Arrangement and entering into the Arrangement Agreement. The Purchaser is a wholly owned subsidiary of Intermediate. The principal business address of the Purchaser is c/o Blackstone Inc., 345 Park Avenue, New York, New York 10154 and its telephone number is +1 212-583-5000.

BREP X

BREP X, a Delaware limited partnership, is a global real estate fund sponsored by Blackstone. Blackstone’s real estate business was founded in 1991 and has $337 billion of investor capital under management. Blackstone is the largest owner of commercial real estate globally, owning and operating assets across every major geography and sector, including logistics, multifamily and single-family housing, office, hospitality and retail. Blackstone’s opportunistic funds seek to acquire undermanaged, well-located assets across the world. The principal business address of BREP X is c/o Blackstone Inc., 345 Park Avenue, New York, New York 10154 and its telephone number is +1 212-583-5000.

BREIT Shareholder

BREIT Shareholder, a Delaware limited liability company, is a wholly owned subsidiary of BREIT and was formed for the purpose of holding Common Shares and Preferred Units. The principal business address of BREIT Shareholder is c/o Blackstone Real Estate Income Trust, Inc., 345 Park Avenue, New York, New York 10154 and its telephone number is +1 212-583-5000.

BREIT

BREIT, a Maryland corporation, is the ultimate parent of BREIT Shareholder. BREIT is a perpetual-life, institutional quality real estate investment platform that brings private real estate to income focused investors. BREIT invests primarily in stabilized, income generating U.S. commercial real estate across key property types and to a lesser extent in real estate debt investments. BREIT, under the oversight of its majority independent board of directors, is externally managed by a subsidiary of Blackstone Inc. (NYSE: BX), a global leader in real estate investing. Further information is available at www.breit.com. The principal business address of BREIT is 345 Park Avenue, New York, New York 10154 and its telephone number is +1 212-583-5000.

Other Blackstone Filing Parties

See “Information Concerning the Purchaser and Blackstone” below for more information regarding the Blackstone Filing Parties.

 


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Background to the Arrangement

The Arrangement and the provisions of the Arrangement Agreement are the result of arm’s length negotiations conducted between representatives of the Company and Blackstone. See “Special Factors – Background to the Arrangement” for a summary of certain relevant background information that informed the Special Committee’s deliberations as well as the principal events leading to the execution of the Arrangement Agreement and the public announcement of the Arrangement.

Recommendation of the Special Committee

The Special Committee, following careful consideration of, among other things, the Scotia Capital Formal Valuation and Fairness Opinion, the terms and conditions set forth in the Arrangement Agreement, the matters discussed under the heading “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Special Committee” and advice from its independent financial and legal advisors, unanimously recommended that the Unconflicted Company Board determine that entering into the Arrangement Agreement is in the best interests of the Company and that the Arrangement and the transactions contemplated by the Arrangement Agreement are fair to the Company Shareholders (excluding Blackstone) and recommend that the Company Shareholders vote FOR the Arrangement Resolution. See “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Special Committee”.

Recommendation of the Unconflicted Company Board

The Unconflicted Company Board, after receiving the unanimous recommendation of the Special Committee and following careful consideration of, among other things, the Scotia Capital Formal Valuation and Fairness Opinion and the Morgan Stanley Fairness Opinion, the terms and conditions set forth in the Arrangement Agreement, the matters discussed under the heading “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Unconflicted Company Board; Position of Tricon as to the Fairness of the Arrangement” and advice from financial and legal advisors, determined that entering into the Arrangement Agreement is in the best interests of the Company and that the Arrangement and the transactions contemplated by the Arrangement Agreement are fair to the Company Shareholders (excluding Blackstone) and unanimously recommends that the Company Shareholders vote FOR the Arrangement Resolution. Each of the directors and senior officers of the Company has advised the Company that they intend to vote or cause to be voted all Common Shares beneficially held by them, if any, in favour of the Arrangement Resolution. See “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Unconflicted Company Board; Position of Tricon as to the Fairness of the Arrangement”.

Reasons for the Recommendation

In recommending that the Unconflicted Company Board determine that the Arrangement is in the best interests of the Company and fair to the Company Shareholders (excluding Blackstone), the Special Committee, with the assistance of independent financial and legal advisors, carefully reviewed the proposed Arrangement and the terms and conditions of the Arrangement Agreement and related agreements and documents and considered and relied upon a number of substantive factors, including: (i) the significant premium the Consideration represents to the market price of the Common Shares prior to the public announcement of the Arrangement; (ii) the certainty of value and immediate liquidity offered by the all-cash Consideration; (iii) the relative benefits and risks to the Company’s security holders, employees and residents of various alternatives reasonably available to the Company, including continued execution of the Company’s existing Company Board-approved strategic plan and the possibility of soliciting other potential buyers of the Company; (iv) the Arrangement Agreement being the result of a rigorous arm’s length negotiation process; (v) the Scotia Capital Formal Valuation and Fairness Opinion; (vi) Blackstone’s reputation and track record of closing transactions; and (vii) subject to the approval of Company Shareholders and receipt of the Required Regulatory Approvals, the reasonable timeline to Closing.

 


- 4 -

 

In making their recommendations, the Special Committee and the Unconflicted Company Board also considered a number of potential risks and other factors resulting from the Arrangement and the Arrangement Agreement. For more information, see “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Special Committee”; “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Unconflicted Company Board; Position of Tricon as to the Fairness of the Arrangement”; and “Risk Factors”.

The foregoing summary of the information and factors considered by the Special Committee and the Unconflicted Company Board is not intended to be exhaustive, but includes the material factors considered by the Special Committee and the Unconflicted Company Board in making their respective recommendation and determinations with respect to the Arrangement. The Special Committee and the Unconflicted Company Board did not consider it practicable to, and did not, quantify or attempt to assign specific weights to the factors considered in reaching their respective recommendation and determinations. Furthermore, individual members of the Special Committee and the Unconflicted Company Board may have weighed certain factors differently. The Special Committee and the Unconflicted Company Board did not reach any specific conclusion with respect to any of the factors or reasons considered, and the above factors are not presented in any order of priority. The foregoing discussion includes forward-looking information and readers are cautioned that actual results may vary. See “Forward-Looking Information”.

Blackstone Filing Parties’ Purposes and Reasons for the Arrangement

Under SEC rules governing going-private transactions, each of the Blackstone Filing Parties is required to express its purposes and reasons for the Arrangement to the Company Shareholders (excluding Blackstone).

Each of the Blackstone Filing Parties is making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the U.S. Exchange Act. The views expressed by the Blackstone Filing Parties in this section and elsewhere in the Circular are not, and should not be construed to be, a recommendation by any of the Blackstone Filing Parties to any Company Shareholder as to how they should vote on the Arrangement Resolution.

For the Blackstone Filing Parties, the purpose for the Arrangement is to permit the Purchaser to acquire all of the Common Shares so that the Blackstone Filing Parties will bear the rewards and risks of the ownership of the entirety of the Company after the completion of the Arrangement. The Blackstone Filing Parties believe that becoming a private entity would provide the Company with (i) greater ability to simplify its operations, (ii) greater capital allocation flexibility as it relates to capital projects, distributions and leverage, (iii) freedom from the expectations by public investors of steady growth and (iv) greater access to available capital to pursue operational efficiencies. In addition, absent the reporting and other substantial burdens placed on public entities, the Blackstone Filing Parties believe that Management and the employees of the Company will be able to better execute on the Company’s future strategic plans.

The Blackstone Filing Parties believe that an Arrangement is preferable to other transaction structures because it will enable the Purchaser to acquire all of the outstanding Common Shares not owned by BREIT Shareholder at the same time, with price certainty in the form of the Consideration, while enabling the Return of Capital Distribution, if any, and a prompt and orderly transfer of ownership of the Company in a single step without the additional complexity of alternative transaction structures.

See “Special Factors – Blackstone Filing Parties’ Purposes and Reasons for the Arrangement”.

Position of Blackstone Filing Parties as to the Fairness of the Arrangement

Each Blackstone Filing Party is making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the U.S. Exchange Act. These statements are not, and should not be construed as, a recommendation to any Company Shareholder as to how that Company Shareholder should vote on the Arrangement Resolution.

 


- 5 -

 

The Blackstone Filing Parties believe that the Arrangement is fair to the Company’s unaffiliated security holders. In reaching this conclusion, the Blackstone Filing Parties considered that the Special Committee consists of independent directors and that the Plan of Arrangement must receive Minority Approval. The Blackstone Filing Parties further considered the unanimous recommendations of the Special Committee and the Unconflicted Company Board. The Blackstone Filing Parties further noted (i) the Consideration of $11.25 per Common Share in cash payable to the Company’s unaffiliated security holders represents a premium of approximately 30% to the closing price of the Common Shares on the NYSE as of January 18, 2024, the last trading day prior to the public announcement of the Arrangement, and a premium of approximately 42% to the volume weighted average share price on the NYSE over the 90-day period ended January 18, 2024, (ii) that the payment to the Company’s unaffiliated security holders is payable entirely in cash, providing the unaffiliated security holders with certainty of value and liquidity, (iii) the rigorous negotiation process overseen by the Special Committee of independent directors, consisting solely of directors who have no current or former relationship with Blackstone, and the Unconflicted Company Board negotiated price increases from the Blackstone Filing Parties’ initial proposed price of $11.00 per Common Share, (iv) the ability of the Company to terminate the Arrangement Agreement under the terms of the Arrangement Agreement in order to enter into a definitive agreement providing for the implementation of a Superior Proposal, and (v) the completion of the Arrangement is subject to the approval of the Court, after considering the procedural and substantive fairness of the Arrangement at a hearing at which the Company’s unaffiliated security holders and certain others are entitled to be heard.

See “Special Factors – Position of Blackstone Filing Parties as to the Fairness of the Arrangement.

Required Company Shareholder Approvals

At the Shareholder Meeting, pursuant to the Interim Order, the Company Shareholders will be asked to consider and, if thought advisable, pass the Arrangement Resolution to approve the Arrangement. The approval of the Arrangement Resolution will require the affirmative vote of at least: (i) two-thirds (66 2/3%) of the votes cast by Company Shareholders present or represented by proxy at the Shareholder Meeting, voting as a single class; and (ii) a simple majority (more than 50%) of the votes cast by Company Shareholders present or represented by proxy at the Shareholder Meeting, excluding, for the purposes of this Minority Approval, the votes attached to the Excluded Shares required to be excluded under MI 61-101.

Formal Valuation and Fairness Opinions

In making its recommendation that the Unconflicted Company Board determine that the Arrangement is in the best interests of the Company and fair to the Company Shareholders (excluding Blackstone), the Special Committee considered, among other things, the Scotia Capital Formal Valuation and Fairness Opinion.

On January 18, 2024, at a meeting of the Special Committee, Scotia Capital rendered its oral formal valuation, subsequently delivered to the Special Committee in writing (the full text of which is attached hereto as Appendix “C”), in accordance with the requirements of MI 61-101 which concluded that, as of January 18, 2024, and based upon and subject to Scotia Capital’s analyses, assumptions, limitations and qualifications set forth in the Scotia Capital Formal Valuation and Fairness Opinion, the fair market value of a Common Share is in the range of $9.80 to $12.90 per Common Share.

Scotia Capital also provided its oral fairness opinion, subsequently delivered to the Special Committee in writing (the full text of which is attached hereto as Appendix “C”), to the effect that, as of January 18, 2024, and based upon and subject to Scotia Capital’s analyses, assumptions, limitations and qualifications set forth in the Scotia Capital Formal Valuation and Fairness Opinion, the Consideration to be received by the Company Shareholders (excluding Blackstone) pursuant to the Arrangement is fair, from a financial point of view, to the Company Shareholders (excluding Blackstone).

Morgan Stanley provided the Morgan Stanley Fairness Opinion to the effect that, as of January 18, 2024 and based upon and subject to the assumptions, limitations and qualification set forth in the Morgan Stanley Fairness Opinion, the Consideration to be received by the Company Shareholders (excluding Blackstone) pursuant to the Arrangement is fair, from a financial point of view, to the Company Shareholders (excluding Blackstone).

 


- 6 -

 

See “Special FactorsScotia Capital Formal Valuation and Fairness Opinion” and “Special FactorsMorgan Stanley Fairness Opinion”.

MI 61-101 Requirements

The Arrangement constitutes a “business combination” for the purposes of MI 61-101 and requires that a formal valuation be prepared in accordance with MI 61-101. Scotia Capital was engaged to prepare such formal valuation and, in recommending that the Unconflicted Company Board determine that the Arrangement is in the best interests of the Company and fair to the Company Shareholders (excluding Blackstone), the Special Committee considered, among other things, the Scotia Capital Formal Valuation and Fairness Opinion. See “Special Factors – Scotia Capital Formal Valuation and Fairness Opinion”.

MI 61-101 also requires that, in addition to any other required security holder approval (e.g. under the applicable corporate law statute or the Interim Order), a “business combination” also requires “minority approval” (as defined in MI 61-101) of every class of “affected securities” (as defined in MI 61-101) of the issuer, in each case voting separately as a class. Consequently, in relation to the Arrangement, the approval of the Arrangement Resolution will require the affirmative vote of a simple majority (more than 50%) of the votes cast by Company Shareholders present or represented by proxy at the Shareholder Meeting, excluding, for the purposes of this Minority Approval, the votes attached to the Excluded Shares required to be excluded under MI 61-101.

The Excluded Shares (being the 28,123,624 Common Shares beneficially owned or controlled, directly or indirectly, by BREIT, along with the 4,266,422 Common Shares and the 2,113,977 Common Shares beneficially owned or controlled, directly or indirectly, by David Berman and Gary Berman, respectively), representing in the aggregate approximately 11.70% of the outstanding Common Shares as of the Record Date, will be excluded from the Minority Approval. The Conflicted Director does not own any Common Shares and accordingly need not be excluded for the purposes of the Minority Approval. See “Certain Legal Matters – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement” and “Certain Legal Matters – Securities Law Matters”.

Implementation of the Arrangement

The Arrangement will be implemented by way of a Court-approved plan of arrangement under the OBCA pursuant to the terms of the Arrangement Agreement. Pursuant to the Plan of Arrangement and in accordance with the Implementation Documents, where applicable, each of the following events shall occur and shall be deemed to occur sequentially in the order set out below, except where expressly stated otherwise below, without any further authorization, act or formality, in each case, except where expressly stated otherwise below, effective as at two minute intervals starting at the Effective Time, provided that all documentation to implement the following events will be in form and substance approved by the Purchaser:

 

  (a)

Each of the directors on the Company Board shall cease (and shall be deemed to have ceased) to be a director of the Company and the individuals specified by the Purchaser in the Pre-Closing Notice shall be appointed as directors of the Company effective as of the Effective Time;

 

  (b)

All Rights issued pursuant to the Shareholder Rights Plan shall be cancelled without any payment in respect thereof, the Shareholder Rights Plan shall terminate with the result that it will no longer have any force or effect, and thereafter no Person will have any further liability or obligation to the former holders of Rights under such Shareholder Rights Plan and the former holders of Rights will permanently cease to have any Rights under such Shareholder Rights Plan;

 


- 7 -

 

  (c)

Each Performance Share Unit credited to a holder’s PSU Account and reflected in such holder’s Adjusted PSU Number (as such terms are defined in the PSU Plan), whether vested or unvested, that is outstanding immediately prior to the Effective Time shall, notwithstanding the terms of the PSU Plan or any applicable grant agreement in relation thereto, automatically and without any further action by or on behalf of the holder thereof, be cancelled and terminated in exchange for a cash payment from the Company equal to the Consideration, less any amounts withheld and remitted in accordance with Section 4.5 of the Plan of Arrangement. As of the effective time of such cancellation and termination: (A) the holder thereof shall cease to be the holder of such Performance Share Unit, (B) the holder thereof shall cease to have any rights as a holder in respect of such Performance Share Unit, or under the PSU Plan, other than the right to receive the consideration to which such holder is entitled pursuant to Section 2.3(c) of the Plan of Arrangement, (C) such holder’s name shall be removed from the applicable register, and (D) all agreements, grants and similar instruments relating thereto shall be cancelled. For the avoidance of doubt: (x) no additional Performance Share Units shall be credited to a holder’s PSU Account in connection with the Return of Capital Distribution; and (y) each Performance Share Unit that is not credited to a holder’s PSU Account and reflected in such holder’s Adjusted PSU Number shall terminate without consideration immediately prior to the Effective Time;

 

  (d)

Each Deferred Share Unit, whether vested or unvested, that is outstanding immediately prior to the Effective Time, notwithstanding the terms of the DSU Plan or any applicable grant agreement in relation thereto, shall, automatically and without any further action by or on behalf of the holder thereof, be cancelled and terminated in exchange for a cash payment by the Company equal to the Consideration, less any amounts withheld and remitted in accordance with Section 4.5 of the Plan of Arrangement. As of the effective time of such cancellation and termination: (A) the holder thereof shall cease to be the holder of such Deferred Share Unit, (B) the holder thereof shall cease to have any rights as a holder in respect of such Deferred Share Unit or under the DSU Plan, as applicable, other than the right to receive the consideration to which such holder is entitled pursuant to Section 2.3(d) of the Plan of Arrangement, (C) such holder’s name shall be removed from the applicable register, and (D) all agreements, grants and similar instruments relating thereto shall be cancelled. For the avoidance of doubt, no additional Deferred Share Units shall be credited to a holder’s account in connection with the Return of Capital Distribution;

 

  (e)

Each Restricted Share, whether vested or unvested, that is outstanding immediately prior to the Effective Time, notwithstanding the terms of the Restricted Share Plan or any applicable grant agreement in relation thereto, shall, automatically and without any further action by or on behalf of the holder thereof, become immediately vested, and:

 

  (i)

the Custodian shall be deemed to cease to be the holder of the Restricted Share; and

 

  (ii)

the holder shall be deemed to be the holder of a Common Share and shall be entered in the register of the Common Shares maintained by or on behalf of the Company.

 

  (f)

If the Purchaser elects to proceed with the Return of Capital Transactions as specified in the Pre-Closing Notice:

 

  (i)

the articles of Tricon Canco shall be amended, and deemed to be amended, to the extent necessary to facilitate the Arrangement and the implementation of the steps and transactions described in the Plan of Arrangement, including the creation of an unlimited number of Tricon Canco Special Preferred Shares and Tricon Canco Multiple Voting Shares;

 

  (ii)

immediately after the transactions described in Section 2.3(f)(i) of the Plan of Arrangement, each then-issued and outstanding Tricon Canco Common Share held by the Company will be deemed to be exchanged (without any action on the part of the holder of such Tricon Canco Common Share) for one Tricon Canco Multiple Voting Share and one Tricon Canco Special Preferred Share and the Tricon Canco Common Shares so exchanged shall thereupon be cancelled, and: (A) an amount will be added to the stated capital account of the Tricon Canco Special Preferred Shares equal to the Preferred Share Redemption Amount; (B) an amount will be added to the stated capital account of the Tricon Canco Multiple Voting Shares equal to the amount by which the stated capital of the Tricon Canco Common Shares exchanged in accordance with Section 2.3(f)(ii) of the Plan of Arrangement exceeds the Preferred Share Redemption Amount;

 


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  (iii)

immediately following the exchange contemplated by Section 2.3(f)(ii) of the Plan of Arrangement, the Tricon Canco Special Preferred Shares held by the Company shall be redeemed by Tricon Canco in consideration of the payment in cash by Tricon Canco to the Company of the Preferred Share Redemption Amount, which amount shall be deemed to have been paid to the Company if received by the Depositary in accordance with Section 4.2(a) of the Plan of Arrangement; and

 

  (iv)

immediately following the redemption of the Tricon Canco Special Preferred Shares pursuant to Section 2.3(f)(iii) of the Plan of Arrangement, the stated capital maintained for the Common Shares shall be reduced by an amount equal to the Preferred Share Redemption Amount received by the Company in accordance with Section 2.3(f)(iii) of the Plan of Arrangement, and the Company shall make the Return of Capital Distribution to the Company Shareholders (including Dissenting Shareholders) by way of a distribution equal to the amount of such reduction of stated capital and not as a dividend, and to be paid in cash using the proceeds of the Preferred Share Redemption Amount received by the Company in accordance with Section 2.3(f)(iii) of the Plan of Arrangement, such that each Company Shareholder (including a Dissenting Shareholder) will receive a pro rata portion of the Return of Capital Amount, less any amounts withheld and remitted in accordance with Section 4.5 of the Plan of Arrangement.

 

  (g)

Each Stock Option, whether vested or unvested, that is outstanding immediately prior to the Effective Time, notwithstanding the terms of the Stock Option Plan or any applicable grant agreement in relation thereto, shall, automatically and without any further action by or on behalf of the holder thereof, be deemed to be surrendered by the holder thereof in exchange for a cash payment from the Company equal to the amount (if any) by which the Consideration exceeds the exercise price per Common Share of such Stock Option (provided that, in the case of a Stock Option with an exercise price denominated in Canadian dollars, such exercise price shall be converted into United States dollars using the Bank of Canada daily exchange rate in effect on the Business Day immediately preceding the Effective Date), multiplied by the number of Common Shares subject to such Stock Option, less any amounts withheld and remitted in accordance with Section 4.5 of the Plan of Arrangement, and each such Stock Option shall immediately be cancelled and terminated and, where such amount is zero or negative, for each such Stock Option, whether vested or unvested, such Stock Option shall be cancelled and terminated without any consideration and, with respect to each Stock Option that is cancelled and terminated pursuant to Section 2.3(g) of the Plan of Arrangement as of the effective time of such cancellation and termination: (A) the holder thereof shall cease to be the holder of such Stock Option, (B) the holder thereof shall cease to have any rights as a holder in respect of such Stock Option, other than the right to receive the consideration to which such holder is entitled pursuant to Section 2.3(g) of the Plan of Arrangement, (C) such holder’s name shall be removed from the applicable register, and (D) all agreements, grants and similar instruments relating thereto shall be cancelled and terminated.

 

  (h)

Each of the Common Shares (including, to the extent applicable, each Common Share described in Section 2.3(e)(ii) of the Plan of Arrangement) held by Dissenting Shareholders in respect of which Dissent Rights have been validly exercised shall be deemed to be transferred by the holder thereof, without any further act or formality on its part, free and clear of any Liens, to the Purchaser in consideration for a debt claim against the Purchaser for the amount determined in accordance with Section 3.1 of the Plan of Arrangement, and:

 

  (i)

such Dissenting Shareholders shall cease to be the holders of such Common Shares and to have any rights as holders of such Common Shares other than (A) their respective entitlements to the Return of Capital Distribution, if any, in accordance with Section 2.3(f)(iv) of the Plan of Arrangement, and (B) the right to be paid fair value for such Common Shares (less the amount of their entitlement to the Return of Capital Distribution) as set out in Section 3.1 of the Plan of Arrangement;

 


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  (ii)

such Dissenting Shareholders shall be deemed to have executed and delivered all consents, releases, assignments and waivers, statutory or otherwise, required to transfer and assign such Common Shares;

 

  (iii)

such Dissenting Shareholders’ names shall be removed as the holders of such Common Shares from the registers of Common Shares maintained by or on behalf of the Company; and

 

  (iv)

the Purchaser shall be deemed to be the transferee of such Common Shares free and clear of all Liens, and shall be entered into the registers of Common Shares maintained by or on behalf of the Company.

 

  (i)

Concurrently with the transactions in Section 2.3(h) of the Plan of Arrangement, each outstanding Common Share other than (A) the Common Shares that are held by Dissenting Shareholders who are ultimately entitled to be paid the fair value for such Common Shares, and (B) all of the Common Shares held by BREIT Shareholder, shall, without any further action by or on behalf of a holder of Common Shares, be deemed to be transferred and assigned by the holder thereof to the Purchaser (free and clear of any Liens) in exchange for a cash payment equal to the Common Share Acquisition Price, less any amounts withheld and remitted in accordance with Section 4.5 of the Plan of Arrangement, and:

 

  (i)

the holders of such Common Shares shall cease to be the holders thereof and to have any rights as holders of such Common Shares other than the right to receive from the Depositary the Consideration per Common Share in accordance with the Plan of Arrangement;

 

  (ii)

such holders’ names shall be removed from the register of the Common Shares maintained by or on behalf of the Company; and

 

  (iii)

the Purchaser shall be deemed to be the transferee of such Common Shares (free and clear of all Liens) and shall be entered in the register of the Common Shares maintained by or on behalf of the Company.

 

  (j)

Concurrently with the transactions in Section 2.3(i) of the Plan of Arrangement, each Common Share held by BREIT Shareholder shall be transferred by BREIT Shareholder to Intermediate in exchange for the Intermediate Rollover Consideration, on such terms and conditions as are set out in the BREIT Transfer Agreement and an amount equal to the aggregate of the Common Share Acquisition Price per Common Share so transferred to Intermediate minus the principal amount of the Intermediate Note shall be added to the stated capital of the common shares of Intermediate so issued, and:

 

  (i)

BREIT Shareholder shall cease to be the holder of such Common Shares and to have any rights as holders of such Common Shares other than (A) the right to receive from the Depositary the aggregate amount distributed in respect of such Common Shares in connection with the Return of Capital Distribution and (B) the right to receive from Intermediate the Intermediate Rollover Consideration, all in accordance with the Plan of Arrangement;

 

  (ii)

BREIT Shareholder’s name shall be removed from the register of the Common Shares maintained by or on behalf of the Company; and

 

  (iii)

Intermediate shall be deemed to be the transferee of such Common Shares (free and clear of all Liens) and shall be entered in the register of the Common Shares maintained by or on behalf of the Company.

 


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  (k)

Immediately following the transactions in Section 2.3(j) of the Plan of Arrangement, each Common Share held by Intermediate shall be transferred by Intermediate to the Purchaser in exchange for the Purchaser Rollover Consideration, on such terms and conditions as are set out in the Purchaser Contribution Agreement and an amount equal to the fair market value of the Common Shares transferred to the Purchaser minus the principal amount of the Purchaser Note shall be added to the stated capital of the common shares of the Purchaser issued pursuant to this Section 2.3(j) of the Plan of Arrangement, and:

 

  (i)

Intermediate shall cease to be the holder of such Common Shares and to have any rights as holders of such Common Shares other than the right to receive the Purchaser Rollover Consideration in accordance with the Plan of Arrangement;

 

  (ii)

Intermediate’s name shall be removed from the register of the Common Shares maintained by or on behalf of the Company; and

 

  (iii)

the Purchaser shall be deemed to be the transferee of such Common Shares (free and clear of all Liens) and shall be entered in the register of the Common Shares maintained by or on behalf of the Company.

 

  (l)

The Employee Incentive Plans and all grant agreements thereunder shall be terminated and be of no further force and effect.

This description of the steps is qualified in its entirety by the full text of the Plan of Arrangement annexed as Appendix “B” to this Circular.

The Plan of Arrangement is attached as Appendix “B” to this Circular, and a copy of the Arrangement Agreement is available under Tricon’s profiles on SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov. See “The Arrangement – Implementation of the Arrangement”.

Procedural Safeguards for Company Shareholders

The negotiations leading to the execution and announcement of the Arrangement Agreement were supervised by the Special Committee composed of independent directors, which was advised by experienced and qualified independent financial and legal advisors. The Arrangement is subject to the following Company Shareholder and Court approvals, which provide additional protection to the Company Shareholders (excluding Blackstone):

 

  (a)

the Arrangement Resolution must be approved by at least two-thirds (66 2/3%) of the votes cast by Company Shareholders present or represented by proxy at the Shareholder Meeting, voting as a single class;

 

  (b)

the Arrangement Resolution must be approved by a simple majority (more than 50%) of the votes cast by Company Shareholders present or represented by proxy at the Shareholder Meeting, excluding, for the purposes of this Minority Approval, the votes attached to the Excluded Shares required to be excluded under MI 61-101; and

 

  (c)

the Arrangement must be approved by the Court, after considering the procedural and substantive fairness of the Arrangement at a hearing at which Company Shareholders (excluding Blackstone) and certain others are entitled to be heard.

If the Arrangement does not proceed for any reason, including because it does not receive the Company Shareholder Approvals, approval of the Court, or Required Regulatory Approvals, Tricon will continue as a publicly-traded company.

 


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Support Agreement

BREIT, which made an initial $240 million exchangeable preferred equity investment in Tricon in 2020 and is maintaining its ownership stake, through its affiliate, BREIT Shareholder, entered into a Support Agreement pursuant to which it agreed, subject to the terms thereof, to vote all of its Common Shares FOR the Arrangement Resolution. Concurrently with the Arrangement Agreement, the Company entered into the Support Agreement. See “Arrangement Agreement – Support Agreement”.

Arrangement Agreement

On January 18, 2024, the Company and the Purchaser entered into the Arrangement Agreement, pursuant to which it was agreed, among other things, to implement the Arrangement in accordance with and subject to the terms and conditions contained therein and in the Plan of Arrangement. See “Arrangement Agreement”.

Certain Canadian Federal Income Tax Considerations

If the Purchaser elects to proceed with the Return of Capital Transactions as specified in the Pre-Closing Notice and assuming that the conditions in respect of the Return of Capital Distribution, as described below under “Certain Canadian Federal Income Tax Considerations – Assumptions Regarding the Return of Capital Distribution”, are satisfied, then a Company Shareholder’s respective share of the Return of Capital Distribution is expected to be treated as a non-taxable return of capital to the extent of the adjusted cost base of the Company Shareholder’s Common Shares on which the distribution is made and a capital gain to the extent, if any, that the amount of the distribution received by the Company Shareholder exceeds the adjusted cost base of such Common Shares and, if so treated, will reduce the adjusted cost base of the Company Shareholder’s Common Shares immediately following the Return of Capital Distribution and prior to the sale of such Common Shares pursuant to the Arrangement by an amount equal to the lesser of the amount of the distribution received by the Company Shareholder and the adjusted cost base of such Common Shares. If treated as a non-taxable return of capital, the payment of the Return of Capital Distribution to a Non-Resident Holder will not be subject to Canadian withholding tax. This characterization of the Return of Capital Distribution is not free from doubt and an advance tax ruling regarding the treatment of the Return of Capital is not being sought. See the discussion under “Risk FactorsRisks Related to the Arrangement – The Tax Treatment of the Return of Capital Distribution is Not Free From Doubt” below.

Subject to the discussion below under “Certain Canadian Federal Income Tax Considerations”, a Resident Holder who sells Common Shares to the Purchaser pursuant to the Arrangement and receives the Common Share Acquisition Price will realize a capital gain (or a capital loss) on such sale to the extent that such Company Shareholder’s proceeds of disposition, net of any reasonable cost of disposition, exceed (or are less than) the aggregate adjusted cost base to such Company Shareholder of their Common Shares at that time (as reduced by the Return of Capital Distribution). A Non-Resident Holder will not be subject to tax in Canada in respect of any capital gain realized on the sale of Common Shares to the Purchaser pursuant to the Arrangement provided the Common Shares do not constitute “taxable Canadian property” to the Non-Resident Holder.

The foregoing description is only a brief summary of certain Canadian federal income tax consequences of the Arrangement and is qualified in its entirety by the detailed discussion below under “Certain Canadian Federal Income Tax Considerations” which contains a summary of certain Canadian federal income tax considerations of the Arrangement generally applicable to a Resident Holder (including a Dissenting Resident Holder) or a Non-Resident Holder (including a Dissenting Non-Resident Holder). Neither this description nor the detailed discussion below is intended to be legal or tax advice to any particular Company Shareholder. Accordingly, Company Shareholders should consult their tax advisor with respect to their particular circumstances. Company Shareholders are strongly encouraged to consult their own tax advisors to determine the particular tax consequences to them of the Arrangement with respect to their particular circumstances, including in respect of the Return of Capital Distribution if the Purchaser elects to proceed with the distribution.

 


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Certain U.S. Federal Income Tax Considerations

Subject to the discussion below under “Certain U.S. Federal Income Tax Considerations” a U.S. Company Shareholder who holds Common Shares as capital assets and who sells such Common Shares pursuant to the Arrangement and receives the amount of the Common Share Acquisition Price generally will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference between the amount received and the U.S. Company Shareholder’s adjusted U.S. federal income tax basis in the Common Shares. If the Purchaser elects to proceed with the Return of Capital Transactions as specified in the Pre-Closing Notice, the Return of Capital Distribution will be treated as a dividend to the extent such distribution is made out of current or accumulated earnings and profits of the Company (as determined under U.S. federal income tax principles). To the extent the Return of Capital Distribution exceeds the amount of the Company’s current and accumulated earnings and profits, it will be treated as a non-taxable return of capital to the extent of the U.S. Company Shareholder’s adjusted U.S. federal income tax basis in the Common Shares on which the distribution is made and gain to the extent that it exceeds such U.S. Company Shareholder’s adjusted U.S. federal income tax basis.

The foregoing description of U.S. federal income tax consequences of the Arrangement is qualified in its entirety by the detailed discussion below under “Certain U.S. Federal Income Tax Considerations”, and neither this description nor the detailed discussion below is intended to be legal or tax advice to any particular Company Shareholder residing in the United States. Accordingly, U.S. Company Shareholders should consult their tax advisor with respect to their particular circumstances.

Dissent Rights

Pursuant to the Interim Order, registered Company Shareholders have the right to exercise Dissent Rights with respect to the Arrangement Resolution and, if the Arrangement becomes effective, to be paid the fair value of their Common Shares (less the amount of their entitlement to a pro rata portion of the Return of Capital Distribution, if any) by the Purchaser in accordance with the provisions of Section 185 of the OBCA, as modified by the Interim Order and/or the Plan of Arrangement. A registered Company Shareholder wishing to exercise Dissent Rights with respect to the Arrangement Resolution must send to the Company a Dissent Notice, which the Company must receive, c/o David Veneziano, Executive Vice President and Chief Legal Officer, at 7 St. Thomas Street, Suite 801, Toronto, Ontario, M5S 2B7, Canada, with copies to each of:

 

  i.

Goodmans LLP, Bay Adelaide Centre, 333 Bay Street, Suite 3400, Toronto, Ontario, Canada, M5H 2S7, Attention: John Connon, email: jconnon@goodmans.ca and Tara Hunt, email: thunt@goodmans.ca; and

 

  ii.

Davies Ward Phillips & Vineberg LLP, 155 Wellington Street West, Toronto, ON M5V 3J7, Attention: Kevin Greenspoon, email: kgreenspoon@dwpv.com and Joseph DiPonio, email: jdiponio@dwpv.com.

by no later than 5:00 p.m. (Toronto time) on March 26, 2024 (or, if the Shareholder Meeting is adjourned or postponed, by no later than 5:00 p.m. on the second (2nd) Business Day, excluding Saturdays, Sundays and statutory holidays, prior to the commencement of the reconvened Shareholder Meeting), and must otherwise strictly comply with the dissent procedures described in this Circular, the Interim Order, the Plan of Arrangement and Section 185 of the OBCA, as modified by the Interim Order and/or the Plan of Arrangement. A Company Shareholder’s Dissent Notice sent with respect to the Arrangement shall be deemed to be and shall be automatically revoked if such Company Shareholder has voted (some or all of their Common Shares) in favour of the Arrangement Resolution, whether virtually or by proxy.

A Company Shareholder’s failure to follow exactly the procedures set forth in the Plan of Arrangement and the Interim Order may result in the loss of such Company Shareholder’s Dissent Rights. If you are a Company Shareholder and wish to dissent, you should obtain your own legal advice and carefully read the Plan of Arrangement, the Interim Order and the text of Section 185 of the OBCA, all of which are set forth in Appendix “B”, Appendix “E” and Appendix “G”, respectively, of this Circular. See “Dissenting Shareholders’ Rights”.

 


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Depositary

TSX Trust will act as the depositary for the receipt of Share Certificates and DRS Advices representing Common Shares and related Letters of Transmittal and the payments to be made to the Company Shareholders pursuant to the Arrangement. See “Depositary”.

Stock Exchange Delisting and Reporting Issuer Status

The Company and the Purchaser have agreed to use their commercially reasonable efforts to cause the Common Shares to be delisted from the TSX and the NYSE as promptly as practicable following the acquisition by the Purchaser of the Common Shares pursuant to the Arrangement. Following the Effective Date, it is expected that the Purchaser will cause the Company to apply to cease to be a reporting issuer under the securities legislation of each of the provinces and territories in Canada under which it is currently a reporting issuer (or equivalent) or take or cause to be taken such other measures as may be appropriate to ensure that the Company is not required to prepare and file continuous disclosure documents. Following the consummation of the Arrangement, the registration of the Common Shares under the U.S. Exchange Act will be terminated. See “Certain Legal Matters – Stock Exchange Delisting and Reporting Issuer Status”.

Risk Factors

Company Shareholders should carefully consider the risk factors described in the section “Risk Factors” in evaluating the approval of the Arrangement Resolution. Readers are cautioned that such risk factors are not exhaustive.

Interest of Certain Persons in the Arrangement; Benefits from the Arrangement

In considering the recommendation of the Unconflicted Company Board with respect to the Arrangement Resolution, Company Shareholders should be aware that certain of the directors and officers of the Company have interests in connection with the Arrangement that may be in addition to, or separate from, those of Company Shareholders (excluding Blackstone) generally in connection with the Arrangement. The Special Committee and the Unconflicted Company Board are aware of these interests and considered them along with other matters described herein. See “Certain Legal Matters Interest of Certain Persons in the Arrangement; Benefits from the Arrangement”.

Notice to Company Shareholders in the United States

THE ARRANGEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES REGULATORY AUTHORITIES OF ANY STATE, NOR HAS THE U.S. SECURITIES AND EXCHANGE COMMISSION OR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE PASSED ON THE FAIRNESS OR MERITS OF THE ARRANGEMENT OR UPON THE ADEQUACY OR ACCURACY OF THIS CIRCULAR OR THE SCHEDULE 13E-3. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Tricon is a corporation existing under the laws of Ontario and is a “foreign private issuer” within the meaning of the rules promulgated under the U.S. Exchange Act. Section 14(a) of the U.S. Exchange Act and related proxy rules are not applicable to the Company nor to this solicitation and, therefore, this solicitation is not being effected in accordance with such laws. The solicitation of proxies and the transactions contemplated herein involve securities of a Canadian issuer and are being effected in accordance with (i) Canadian corporate and securities laws, which differ from disclosure requirements in the United States, and (ii) the requirements of Rule 13e-3 promulgated under the U.S. Exchange Act.

The unaudited condensed interim consolidated financial statements and audited consolidated annual financial statements of Tricon and other financial information included or incorporated by reference in this Circular for Tricon have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and thus may differ from the U.S. generally accepted auditing standards.

 


- 14 -

 

The enforcement by investors of civil liabilities under the U.S. Securities Laws may be affected adversely by the fact that Tricon is organized under the laws of a jurisdiction other than the United States, that some (or all) of its respective officers and directors are residents of countries other than the United States, that some or all of the experts named in this Circular may be residents of countries other than the United States, or that all or a substantial portion of the assets of Tricon and such directors, officers and experts may be located outside the United States. As a result, it may be difficult or impossible for Company Shareholders resident in the United States to effect service of process within the United States upon Tricon and its respective officers and directors or the experts named herein, or to realize against them on judgments of courts of the United States. In addition, Company Shareholders resident in the United States should not assume that the courts of Canada: (a) would enforce judgments of United States courts obtained in actions against such persons predicated upon civil liabilities under the U.S. Securities Laws or any state within the United States, including “blue sky laws” of any state within the United States; or (b) would enforce, in original actions, liabilities against such persons predicated upon civil liabilities under the U.S. Securities Laws, including “blue sky laws” of any state within the United States.

Company Shareholders who are non-residents of Canada for income tax purposes should be aware that the Arrangement described in this Circular may have tax consequences both in Canada and such Company Shareholders’ jurisdiction of residence. Such consequences for Company Shareholders are not fully described in this Circular. Company Shareholders are advised to consult their tax advisors to determine the particular tax consequences to them of the transactions contemplated in this Circular. Company Shareholders who are or may be subject to United States federal income tax are urged to review the statements under “Certain U.S. Federal Income Tax Considerations”.

 


QUESTIONS AND ANSWERS ABOUT THE SHAREHOLDER MEETING AND THE ARRANGEMENT

Your vote is important. The following are key questions that you as a Company Shareholder may have regarding the Arrangement to be considered at the Shareholder Meeting. You are urged to carefully read the remainder of this Circular as the information in this section does not provide all of the information that might be important to you with respect to the Arrangement. All capitalized terms used herein have the meanings ascribed to them in the “Glossary of Terms” on page 159 of this Circular.

 

Q.

What is the proposed Arrangement?

 

A.

The Arrangement is the proposed acquisition of all of the issued and outstanding Common Shares of the Company by the Purchaser, an affiliate of Blackstone, through a series of transactions that will result in Company Shareholders (other than Blackstone and any Dissenting Shareholders) receiving $11.25 per Common Share in cash, less any applicable withholdings. In addition, pursuant to the Arrangement, each Restricted Share (whether vested or unvested) will become immediately vested and represent a Common Share that will entitle the holder thereof to receive $11.25 in cash for each such Common Share, each holder of Deferred Share Units (whether vested or unvested) will receive a cash payment of $11.25 per Deferred Share Unit, each holder of Performance Share Units (whether vested or unvested) will receive a cash payment of $11.25 per Performance Share Unit and each holder of Stock Options (whether vested or unvested) will receive a cash payment per Stock Option equal to the amount by which $11.25 exceeds the exercise price of such Stock Option, in each case less any applicable withholdings. For more information, see “The Arrangement” and “Arrangement Agreement”.

 

Q.

What am I being asked to approve at the Shareholder Meeting?

 

A.

At the Shareholder Meeting, Company Shareholders will be asked to consider and vote on the approval of the Arrangement Resolution, the full text of which is set forth in Appendix “A” to this Circular, to approve the proposed Arrangement under Section 182 of the OBCA whereby, among other things, the Purchaser would acquire all of the issued and outstanding Common Shares through a series of transactions that will result in Company Shareholders (other than Blackstone and any Dissenting Shareholders) receiving $11.25 per Common Share in cash, less any applicable withholdings. For more information, see “The Arrangement” and “Arrangement Agreement”.

 

Q.

As a Company Shareholder, what will I receive as a result of the completion of the Arrangement?

 

A.

Company Shareholders (other than Blackstone and any Dissenting Shareholders) will receive, for each Common Share they own, $11.25 in cash. All payments made to Company Shareholders and holders of Incentive Securities in connection with the Arrangement will be less any applicable withholdings. For more information, see “The Arrangement” and “Procedure for Exchange of Share Certificates or DRS Advices by Company Shareholders” and “Payment of Consideration”.

 

Q.

What will happen to the Common Shares that I currently own after completion of the Arrangement?

 

A.

In connection with the Arrangement, your Common Shares will be transferred to the Purchaser and, if you do not exercise your Dissent Rights, you will receive $11.25 per Common Share in cash, less any applicable withholdings. The Company expects that, following consummation of the Arrangement, the Common Shares will be de-listed from the TSX and the NYSE and the Company will cease to be a reporting issuer in each of the provinces and territories in Canada under which it is currently a reporting issuer. For more information, see “Certain Legal Matters – Stock Exchange Delisting and Reporting Issuer Status”.

 

Q.

When do you expect the Arrangement to be completed?

 

A.

If all of the conditions to completion of the Arrangement are satisfied, the Company anticipates that Closing will occur during the second quarter of 2024. For more information, see “Arrangement Agreement – Conditions to the Transaction”.


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Q.

If the Arrangement is completed when can I expect to receive my Consideration?

 

A.

You will be paid $11.25 in cash for each Common Share that you own, less any applicable withholdings, as soon as reasonably practicable after the Closing. For more information, see “The Arrangement” and “Procedure for Exchange of Share Certificates or DRS Advices by Company Shareholders” and “Payment of Consideration”.

 

Q.

Is my Consideration payable in U.S. or Canadian currency?

 

A.

If you are a registered Company Shareholder, you will receive the aggregate payments to which you are entitled under the Arrangement in U.S. dollars, less any applicable withholdings, unless you exercise your right to elect in the Letter of Transmittal to receive such payments in Canadian dollars by the time specified therein prior to the Effective Date.

If you are a beneficial Company Shareholder, you will receive the aggregate payments to which you are entitled in U.S. dollars unless you contact your Intermediary through which you hold your Common Shares and request that the Intermediary make an election to receive such payments in Canadian dollars on your behalf.

The exchange rate that will be used to convert payments from U.S. dollars into Canadian dollars will be the rate established by the Depositary, on the date the funds are converted, which rate will be based on the prevailing market rate on the date the funds are converted. The risk of any fluctuations in such rates, including risks relating to the particular date and time at which funds are converted, will be solely borne by the electing Company Shareholders and neither the Company, the Purchaser nor the Depositary are responsible for any such matter. See “The Arrangement – Payment of Consideration – Currency of Payment”.

 

Q.

Will the Company continue to pay dividends prior to the Closing of the Arrangement?

 

A.

The Arrangement Agreement provides that the Consideration will be reduced by the amount of any dividends or other distributions paid to holders of Common Shares during the pendency of the Arrangement. Accordingly, the Company intends that its regular quarterly dividend on the Common Shares during the pendency of the Arrangement will not be declared and has agreed that the Company’s Dividend Reinvestment Plan will be suspended. The Company intends to continue paying quarterly distributions on the Preferred Units in accordance with the terms of the PIPE LLC Agreement. If the Arrangement Agreement is terminated, the Company intends to resume declaring and paying regular quarterly dividends on the Common Shares and to reinstate the Dividend Reinvestment Plan. For more information, see “Arrangement Agreement – Dividend Reinvestment Plan” and “Information Concerning Tricon – Dividend Policy”.

 

Q.

Do any of the directors and executive officers or any other Persons have any interest in the Arrangement that is different than mine?

 

A.

The directors and executive officers have interests in the Arrangement, including as holders of Common Shares, Restricted Shares, Stock Options, Deferred Share Units and Performance Share Units, that may be different from, or in addition to, the interests of Company Shareholders generally. Members of the Special Committee and the Unconflicted Company Board were aware of and considered these interests, among other matters, in evaluating and negotiating the Arrangement Agreement and in recommending to Company Shareholders that they vote FOR the Arrangement Resolution. For more information, see “The Arrangement – Interest of Informed Persons in Material Transactions”.

 

Q.

What happens if the Arrangement is not completed?

 

A.

If the Arrangement is not completed for any reason, Company Shareholders will not receive payment for any of their Common Shares (and the Company will not make the Return of Capital Distribution), the Company will remain a reporting issuer and the Common Shares will continue to be listed and traded on the TSX and the NYSE. Upon termination of the Arrangement Agreement prior to consummation of the Arrangement, under certain circumstances, the Company will be required to pay to the Purchaser a termination fee of $122.8 million, except that the termination fee will be reduced to $61.3 million if the Arrangement Agreement is terminated by the Company prior to March 3, 2024 in order to enter into a definitive agreement providing for the implementation of a Superior Proposal. Upon termination of the Arrangement Agreement prior to consummation of the Arrangement, under certain other circumstances, the Purchaser will be required to pay the Company a termination fee of $526 million. For more information, see “Arrangement Agreement – Termination Fees”.


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Q.

Was a Special Committee formed to examine the Arrangement?

 

A.

Yes. On October 5, 2023, the Company Board resolved to form a special committee of independent directors (composed of Ira Gluskin, Camille Douglas, Renée Glover, and, as Chair, Peter Sacks) to supervise the Company’s response to Blackstone’s proposal(s), including evaluating and, if deemed advisable, negotiating and implementing the Arrangement or any reasonably available alternatives (including the status quo) thereto, determining whether the Arrangement or any potential alternative would be in the best interests of the Company, and considering the interests of the Company Shareholders (excluding Blackstone). For more information, see “Special Factors – Background to the Arrangement”.

 

Q.

What was the recommendation of the Special Committee?

 

A.

The Special Committee, after careful consideration and having received advice from its independent financial and legal advisors and the Scotia Capital Formal Valuation and Fairness Opinion, unanimously recommended that the Unconflicted Company Board determine that it would be in the best interests of the Company to enter into the Arrangement Agreement and that the Arrangement and the transactions contemplated thereby are fair to the Company Shareholders (excluding Blackstone). The Special Committee also unanimously recommended that the Unconflicted Company Board approve the entering into of the Arrangement Agreement by the Company and recommend that Company Shareholders vote FOR the Arrangement Resolution at the Shareholder Meeting. For more information, see “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Special Committee”.

 

Q.

What was the recommendation of the Unconflicted Company Board and how does the Unconflicted Company Board recommend I vote?

 

A.

The Unconflicted Company Board, after receiving the unanimous recommendation of the Special Committee and in consultation with its financial and legal advisors, determined that it would be in the best interests of the Company to enter into the Arrangement Agreement and that the Arrangement and the transactions contemplated thereby are fair to the Company Shareholders (excluding Blackstone). The Unconflicted Company Board approved the entering into of the Arrangement Agreement by the Company and unanimously recommends that Company Shareholders vote FOR the Arrangement Resolution at the Shareholder Meeting. Each of the directors and executive officers of the Company has advised the Company that they intend to vote or cause to be voted all Common Shares beneficially held by them, if any, in favour of the Arrangement Resolution. For more information, see “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Unconflicted Company Board; Position of Tricon as to the Fairness of the Arrangement”.


- 18 -

 

Q.

What were the Special Committee’s and Unconflicted Company Board’s reasons for their recommendations?

 

A.

The Special Committee and the Unconflicted Company Board based their recommendations upon the totality of the information presented to and considered by them in light of their knowledge of the business, operations, financial condition and prospects of the Company, after taking into account the advice from the Special Committee’s independent financial and legal advisors, the Company’s financial and legal advisors and the advice and input of Management. The Special Committee and the Unconflicted Company Board identified a number of factors in respect of their recommendations, which include, but are not limited to: (i) the significant premium the Consideration represents to the market price of the Common Shares prior to the public announcement of the Arrangement; (ii) the certainty of value and immediate liquidity offered by the all-cash Consideration; (iii) the relative benefits and risks to the Company’s security holders, employees and residents of various alternatives reasonably available to the Company, including continued execution of the Company’s existing Company Board-approved strategic plan and the possibility of soliciting other potential buyers of the Company; (iv) the Arrangement Agreement being the result of a rigorous arm’s length negotiation process; (v) the Scotia Capital Formal Valuation and Fairness Opinion; (vi) Blackstone’s reputation and track record of closing transactions; and (vii) subject to the approval of Company Shareholders and receipt of the Required Regulatory Approvals, the reasonable timeline to Closing. For more information, see “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Special Committee”, “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Unconflicted Company Board; Position of Tricon as to the Fairness of the Arrangement” and “Risk Factors”.

 

Q.

Was there a fairness opinion prepared in relation to the Arrangement?

 

A.

Yes. Each of Scotia Capital and Morgan Stanley prepared fairness opinions for the Special Committee and the Unconflicted Company Board, respectively, in exchange for certain fees. Scotia Capital was engaged by the Special Committee to prepare a formal valuation and to provide an independent fairness opinion and was paid for the delivery of its fairness opinion and formal valuation regardless of its conclusions and such fees were not contingent in any respect on the successful completion of the Arrangement. Morgan Stanley was engaged by the Company and will also receive fees for its advisory services, including a fixed fee, and additional fixed fees that will be paid contingent on the consummation of the Arrangement. Each fairness opinion concluded that, as of the date thereof, and subject to the assumptions, limitations and qualifications set out therein, the Consideration to be received by the Company Shareholders (excluding Blackstone) pursuant to the Arrangement was fair, from a financial point of view, to the Company Shareholders (excluding Blackstone). For more information, see “Special Factors – Scotia Capital Formal Valuation and Fairness Opinion” and “Special Factors – Morgan Stanley Fairness Opinion”.

 

Q.

Are there summaries of the material terms of the agreements relating to the Arrangement?

 

A.

Yes. This Circular includes a summary of the Arrangement Agreement and the terms of the Plan of Arrangement. For more information, see “Arrangement Agreement” and “ The Arrangement – Implementation of the Arrangement”.

 

Q.

What is the vote requirement to pass the Arrangement Resolution?

 

A.

The Arrangement Resolution must be approved by not less than (i) 66 2/3% of the votes cast by Company Shareholders present or represented by proxy and entitled to vote at the Shareholder Meeting; and (ii) a simple majority of the votes cast by Company Shareholders present or represented by proxy and entitled to vote at the Shareholder Meeting, excluding for this purpose votes attached to Common Shares beneficially owned or controlled, directly or indirectly, by Blackstone, along with Common Shares beneficially owned or controlled, directly or indirectly, by David Berman and Gary Berman excluded pursuant to MI 61-101. For more information, see “The Arrangement – Company Shareholder Approvals of the Arrangement” and “Certain Legal Matters – Securities Law Matters”.

 

Q.

What other approvals are required for the Arrangement?

 

A.

In addition to Company Shareholder Approvals, the Arrangement requires Court approval (via the Interim Order and the Final Order) and the Required Regulatory Approvals. For more information, see “The Arrangement – Company Shareholder Approvals of the Arrangement” and “Certain Legal Matters – Court Approvals and Completion of the Arrangement” and “Certain Legal Matters – Required Regulatory Approvals”.


- 19 -

 

Q.

Where and when will the Shareholder Meeting be held?

 

A.

The Shareholder Meeting will be held on Thursday, March 28, 2024, at 10:00 a.m. (Toronto time). The Shareholder Meeting will be held in virtual format via live audio webcast at https://web.lumiconnect.com/#/411155572, Password: tricon2024 (case sensitive) and Meeting ID: 411-155-572. Company Shareholders will be able to participate and vote at the Shareholder Meeting online regardless of their geographic location. The online Shareholder Meeting will ensure that Company Shareholders who attend the Shareholder Meeting will be afforded the same rights and opportunities to participate as they would at an in-person meeting. See “Information Concerning the Shareholder Meeting and Voting – Date, Time and Place of Shareholder Meeting”.

In the event necessary to address material comments from any securities regulatory authority, including from the SEC, on this Circular or the Schedule 13E-3, the Parties have agreed pursuant to the Arrangement Agreement that the Company may adjourn or postpone the Shareholder Meeting.

 

Q.

Am I entitled to vote?

 

A.

You are entitled to vote if you were a Company Shareholder as of the close of business on the Record Date, Tuesday, February 13, 2024. Each Common Share entitles its holder to one (1) vote with respect to the matters to be voted on at the Shareholder Meeting.

 

Q.

What constitutes quorum for the Shareholder Meeting?

 

A.

The Company’s by-laws provide that Company Shareholders holding 25% of the issued Common Shares entitled to vote at a meeting of Company Shareholders, whether present in person or represented by proxy, constitutes a quorum. If a quorum is present at the opening of a meeting of Company Shareholders, the Company Shareholders present may proceed with the business of the meeting notwithstanding that a quorum is not present throughout the Shareholder Meeting.

 

Q.

How many Common Shares are entitled to be voted?

 

A.

As at the Record Date of Tuesday, February 13, 2024, there were 294,859,359 Common Shares issued and outstanding. Each Common Share entitles its holder to one (1) vote with respect to the matters to be voted on at the Shareholder Meeting.

 

Q.

What if I acquire ownership of Common Shares after the Record Date?

 

A.

You will not be entitled to vote Common Shares acquired after the Record Date of Tuesday, February 13, 2024 on the Arrangement Resolution. Only persons owning Common Shares as of the Record Date are entitled to vote their Common Shares on the Arrangement Resolution.

 

Q.

What do I need to do now in order to vote on the Arrangement Resolution?

 

A:

Registered Company Shareholders can vote by internet, by mail, or virtually at the Shareholder Meeting. It is recommended that you vote by internet to ensure that your vote is received before the Shareholder Meeting. To cast your vote by internet, please have your form of proxy or voting instruction form on hand and carefully follow the instructions contained therein. Your internet vote authorizes the named proxies to vote your Common Shares in the same manner as if you mark, sign and return your form of proxy. You may also vote by mail by completing, dating and signing the enclosed form of proxy or voting instruction form and return it in the envelope provided for that purpose. To be valid, proxies must be received by TSX Trust Company, at 301-100 Adelaide Street West, Toronto, Ontario, Canada, M5H 4H1, by no later than 10:00 a.m. (Toronto time) on March 26, 2024 (or, if the Shareholder Meeting is adjourned or postponed, 48 hours, excluding Saturdays, Sundays and statutory holidays, prior to the commencement of the reconvened Shareholder Meeting). Late proxies may be accepted or rejected by the Chair of the Shareholder Meeting at his or her discretion, subject to the terms of the Arrangement Agreement, and the Chair of the Shareholder Meeting is under no obligation to accept or reject any particular late proxy.


- 20 -

 

Q:

If my Common Shares are held by my broker, investment dealer or other Intermediary, will they vote my Common Shares for me?

 

A:

No. Non-registered (beneficial) Company Shareholders who receive these materials through their broker or other Intermediary should complete and send the voting instruction form in accordance with the instructions provided by their broker or Intermediary.

Additionally, the Company may utilize the Broadridge QuickVoteTM system, which involves NOBOs being contacted by Laurel Hill, which is soliciting proxies on behalf of Management, to obtain voting instructions over the telephone and relaying them to Broadridge (on behalf of the NOBO’s Intermediary). While representatives of Laurel Hill are soliciting proxies on behalf of Management, Company Shareholders are not required to vote in the manner recommended by the Unconflicted Company Board. The QuickVoteTM system is intended to assist Company Shareholders in placing their votes, however, there is no obligation for any Company Shareholders to vote using the QuickVoteTM system, and Company Shareholders may vote (or change or revoke their votes) at any other time and in any other applicable manner described in this Circular. Any voting instructions provided by a Company Shareholder will be recorded and such Company Shareholder will receive a letter from Broadridge (on behalf of the Company Shareholder’s Intermediary) as confirmation that their voting instructions have been accepted.

 

Q.

Who is soliciting my proxy?

 

A.

Management is soliciting your proxy. The Company has retained Laurel Hill as its proxy solicitation agent and shareholder communications advisor for assistance in connection with the solicitation of proxies for the Shareholder Meeting, and will pay Laurel Hill fees of C$175,000 for such services in addition to certain out-of-pocket expenses. Management requests that you sign and return the form of proxy or voting instruction form so that your votes are exercised at the Shareholder Meeting. The solicitation of proxies will be conducted primarily by mail but may also be made by telephone, facsimile transmission or other electronic means of communication or in-person by the directors, officers and employees of Tricon. The Company will bear the cost of such solicitation and will reimburse Intermediaries for their reasonable charges and expenses incurred in forwarding proxy materials to non-registered Company Shareholders. The Purchaser and Blackstone may also participate in the solicitation of proxies.

 

Q.

Can I appoint someone other than those named in the enclosed proxy forms to vote my Common Shares?

 

A.

Company Shareholders who wish to appoint a person other than the management nominees identified in the form of proxy or voting instruction form, including non-registered (beneficial) Company Shareholders who wish to appoint themselves as proxyholder must carefully follow the instructions in the accompanying Circular and on their form of proxy or voting instruction form. Detailed instructions for appointing proxyholders can be found in the section of the Circular entitled “Information Concerning the Shareholder Meeting and Voting – Appointment and Revocation of Proxyholders”.

 

Q.

What if my Common Shares are registered in more than one name or in the name of a company?

 

A.

If your Common Shares are registered in more than one name, all registered persons must sign the form of proxy. If your Common Shares are registered in a company’s name or any name other than your own, you may be required to provide documents proving your authorization to sign the form of proxy for that company or name. For any questions about the proper supporting documents, contact TSX Trust before submitting your form of proxy.


- 21 -

 

Q:

Can I revoke my vote after I have voted by proxy?

 

A:

Yes. A proxy may be revoked by the person giving it to the extent that it has not yet been exercised. If you want to revoke your proxy after you have delivered it, you can do so by (i) delivering a written notice of revocation that is received by TSX Trust Company, at 301-100 Adelaide Street West, Toronto, Ontario, Canada, M5H 4H1, Attention: Proxy Department, no later than 10:00 a.m. (Toronto time) on Tuesday, March 26, 2024 (or, if the Shareholder Meeting is adjourned or postponed, 48 hours, excluding Saturdays, Sundays and statutory holidays, prior to the commencement of the reconvened Shareholder Meeting), or delivered to the person presiding at the Shareholder Meeting before it commences, (ii) signing a proxy bearing a later date and depositing it in the manner and within the time described above; (iii) attending the Shareholder Meeting and voting virtually if you were a registered Company Shareholder at the Record Date; or (iv) in any other manner permitted by Law. See “Information Concerning the Shareholder Meeting and Voting – Appointment and Revocation of Proxyholders”.

 

Q.

Are the shareholders of the Purchaser required to approve the Arrangement?

 

A.

No.

 

Q.

Who is responsible for counting and tabulating the votes by proxy?

 

A.

Votes by proxy are counted and tabulated by TSX Trust, Tricon’s transfer agent.

 

Q:

What are the Canadian federal income tax consequences of the Arrangement?

 

A:

If the Purchaser elects to proceed with the Return of Capital Transactions as specified in the Pre-Closing Notice and assuming that the conditions in respect of the Return of Capital Distribution as described below under “Certain Canadian Federal Income Tax Considerations – Assumptions Regarding the Return of Capital Distribution” are satisfied, then a Company Shareholder’s respective share of the Return of Capital Distribution, if any, is expected to be treated as a non-taxable return of capital to the extent of the adjusted cost base of the Company Shareholder’s Common Shares on which the distribution is made and a capital gain to the extent, if any, that the amount of the distribution received by the Company Shareholder exceeds the adjusted cost base of such Common Shares and, if so treated, will reduce the adjusted cost base of a Company Shareholder’s Common Shares immediately following the Return of Capital Distribution, and prior to the sale of such Shares pursuant to the Arrangement by an amount equal to the lesser of the amount of the distribution received by the Company Shareholder’s respective share of the Return of Capital Distribution and the adjusted cast base of such Common Shares. If treated as a non-taxable return of capital, the payment of the Return of Capital Distribution to a Non-Resident Holder will not be subject to Canadian withholding tax. This characterization of the Return of Capital Distribution is not free from doubt and an advance tax ruling regarding the treatment of the Return of Capital is not being sought. See the discussion under “Risk FactorsRisks Related to the Arrangement – The Tax Treatment of the Return of Capital Distribution is Not Free From Doubt” below.

Subject to the discussion below under “Certain Canadian Federal Income Tax Considerations”, a Resident Holder who sells Common Shares to the Purchaser pursuant to the Arrangement and receives the Common Share Acquisition Price will realize a capital gain (or a capital loss) on such sale to the extent that such Company Shareholder’s proceeds of disposition, net of any reasonable cost of disposition, exceed (or are less than) the aggregate adjusted cost base to such Company Shareholder of their Common Shares at that time (as reduced by the Return of Capital Distribution). A Non-Resident Holder will not be subject to tax in Canada in respect of any capital gain realized on the sale of Common Shares to the Purchaser pursuant to the Arrangement provided the Common Shares do not constitute “taxable Canadian property” to the Non-Resident Holder.

The foregoing description is only a brief summary of certain Canadian federal income tax consequences of the Arrangement and is qualified in its entirety by the detailed discussion below under “Certain Canadian Federal Income Tax Considerations” which contains a summary of certain Canadian federal income tax considerations of the Arrangement generally applicable to a Resident Holder (including a Dissenting Resident Holder) or a Non-Resident Holder (including a Dissenting Non-Resident Holder). Neither this description nor the detailed discussion below is intended to be legal or tax advice to any particular Company Shareholder. Company Shareholders are strongly encouraged to consult their own tax advisors to determine the particular tax consequences to them of the Arrangement with respect to their particular circumstances, including in respect of the Return of Capital Distribution if the Purchaser elects to proceed with the distribution.


- 22 -

 

Q:

What are the U.S. income tax consequences of the Arrangement?

 

A:

Subject to the discussion below under “Certain U.S. Federal Income Tax Considerations”, a U.S. Company Shareholder who holds Common Shares as capital assets and who sells such Common Shares pursuant to the Arrangement and receives the Common Share Acquisition Price generally will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference between the amount received and the U.S. Company Shareholder’s adjusted tax basis in the Common Shares. If the Purchaser elects to proceed with the Return of Capital Transactions as specified in the Pre-Closing Notice, the Return of Capital Distribution will be treated as a dividend to the extent such distribution is made out of current or accumulated earnings and profits of Company (as determined under U.S. federal income tax principles). To the extent the Return of Capital Distribution exceeds the amount of the Company’s current and accumulated earnings and profits, it will be treated as a non-taxable return of capital to the extent of the U.S. Company Shareholder’s adjusted U.S. federal income tax basis in the Common Shares on which the distribution is made and gain to the extent that it exceeds such U.S. Company Shareholder’s adjusted U.S. federal income tax basis.

The foregoing description of U.S. federal income tax consequences of the Arrangement is qualified in its entirety by the detailed discussion below under “Certain U.S. Federal Income Tax Considerations”, and neither this description nor the detailed discussion is intended to be legal or tax advice to any particular Company Shareholder residing in the United States. Accordingly, U.S. Company Shareholders should consult their tax advisor with respect to their particular circumstances.

 

Q:

Are Company Shareholders entitled to Dissent Rights?

 

A:

Pursuant to the Interim Order, registered Company Shareholders have the right to exercise Dissent Rights with respect to the Arrangement Resolution and, if the Arrangement becomes effective, to be paid the fair value of their Common Shares (less the amount of their entitlement to a pro rata portion of the Return of Capital Distribution, if any) by the Purchaser in accordance with the provisions of Section 185 of the OBCA, as modified by the Interim Order and/or the Plan of Arrangement. A registered Company Shareholder wishing to exercise Dissent Rights with respect to the Arrangement Resolution must send to the Company a Dissent Notice, which the Company must receive, c/o David Veneziano, Executive Vice President and Chief Legal Officer, at 7 St. Thomas Street, Suite 801, Toronto, Ontario, M5S 2B7, Canada, with copies to each of:

 

  i.

Goodmans LLP, Bay Adelaide Centre, 333 Bay Street, Suite 3400, Toronto, Ontario, Canada, M5H 2S7, Attention: John Connon, email: jconnon@goodmans.ca and Tara Hunt, email: thunt@goodmans.ca; and

 

  ii.

Davies Ward Phillips & Vineberg LLP, 155 Wellington Street West, Toronto, ON M5V 3J7, Attention: Kevin Greenspoon, email: kgreenspoon@dwpv.com and Joseph DiPonio, email: jdiponio@dwpv.com.

by no later than 5:00 p.m. (Toronto time) on March 26, 2024 (or, if the Shareholder Meeting is adjourned or postponed, by no later than 5:00 p.m. on the second (2nd) Business Day, excluding Saturdays, Sundays and statutory holidays, prior to the commencement of the reconvened Shareholder Meeting), and must otherwise strictly comply with the dissent procedures described in this Circular, the Interim Order, the Plan of Arrangement and Section 185 of the OBCA, as modified by the Interim Order and/or the Plan of Arrangement. A Company Shareholder’s Dissent Notice sent with respect to the Arrangement will be deemed to be and will be automatically revoked if such Company Shareholder has voted (some or all of their Common Shares) in favour of the Arrangement Resolution, whether online, virtually at the Shareholder Meeting or by proxy.


- 23 -

 

A Company Shareholder’s failure to follow exactly the procedures set forth in the Plan of Arrangement and the Interim Order may result in the loss of such Company Shareholder’s Dissent Rights. If you are a Company Shareholder and wish to dissent, you should obtain your own legal advice and carefully read the Plan of Arrangement, the Interim Order and the text of Section 185 of the OBCA, all of which are set forth in Appendix “B”, Appendix “E” and Appendix “G”, respectively, of this Circular. See “Dissenting Shareholders’ Rights”.

 

Q:

Who can help answer my questions?

 

A:

If you have any questions about the information contained in this Circular or require assistance in completing your form of proxy, please contact our proxy solicitation agent, Laurel Hill, at 1-877-452-7184 (toll-free in North America), or by calling 1-416-304-0211 (outside of North America) or by email at assistance@laurelhill.com. Questions on how to complete the Letter of Transmittal should be directed to the Company’s depositary, TSX Trust, at 1-866-600-5869 (toll-free within North America) or at 416-342-1091 (outside of North America) or by email at txstis@tmx.com.

SPECIAL FACTORS

Background to the Arrangement

The Arrangement Agreement is the result of arm’s length negotiations between Tricon and Blackstone and their respective advisors. The following is a summary of the background to the execution and public announcement of the Arrangement Agreement.

The Company Board regularly evaluates Tricon’s strategic direction and ongoing business plans and reviews possible ways to increase long-term shareholder value. As part of these evaluations, the Company Board periodically assesses the Company’s competitive position and actively monitors industry trends, the Company’s short- and long-term operating performance, its stock price performance and its net asset value. The Company Board and Management from time to time have also engaged in discussions with other participants in the real estate industry, including Blackstone, regarding various strategic alternatives, including potential acquisitions or dispositions of assets or portfolios of assets, as well as potential joint ventures.

On September 3, 2020, a syndicate of investors led by BREIT made a $300 million preferred equity investment in the Company through the purchase of newly-created Preferred Units issued by PIPE LLC, a Company subsidiary, that are exchangeable into Common Shares. BREIT indirectly acquired $240 million of the Preferred Units in the transaction, which represented approximately 11% of the then outstanding Common Shares, assuming the exchange of all of the Preferred Units. In connection with the investment, a representative of BREIT, Frank Cohen, was named to the Company Board.

Over the course of 2021, the Company Board observed that the Company’s Common Shares were trading at a discount to estimated NAV and to certain of its peers and also suffered from lower liquidity than certain of its peers. As a result, in 2021, Tricon considered a number of alternatives, including a potential re-domicile to the United States and reorganization as a U.S. REIT, in order to, among other things, expand its shareholder base and qualify for inclusion in the MSCI US REIT Index. Although a very substantial majority of the Company’s assets consist of single-family rental (“SFR”) homes in the United States, the Company is ineligible for inclusion in the MSCI US REIT Index due to its status as a Canadian corporation. The Company anticipated that inclusion of Tricon in the MSCI US REIT Index could result in increased liquidity and value for its shareholders; however, Tricon, in consultation with its legal and financial advisors, ultimately determined that the structural impediments, including material adverse tax implications, were too significant to proceed with a re-domicile to the United States and elected instead to expand its shareholder base through an initial public offering of its Common Shares in the United States on the NYSE.


- 24 -

 

On October 12, 2021, the Company announced the closing of its initial public offering of Common Shares in the United States (the “U.S. IPO”) and the listing of the Common Shares on the NYSE for aggregate gross proceeds to Tricon of approximately $570 million (inclusive of an approximately $57 million concurrent private placement of Common Shares to BREIT, which enabled BREIT to maintain its approximate proportionate ownership interest in the Company).

In March 2023, the Company recommenced its evaluation of a potential re-domicile to the United States in connection with its consideration of a potential combination with a NYSE-listed U.S. REIT (the “NYSE REIT”). Management held a preliminary introductory meeting with the NYSE REIT’s senior management in April 2023, which was facilitated by RBC Capital Markets, LLC (“RBC”). A potential combination with the NYSE REIT was of particular interest to Tricon due to the NYSE REIT’s significant cash resources, which could assist the Company in advancing its current Company Board-approved strategic plan, the potential pathway it offered for Tricon to become a U.S.-domiciled public company and certain other factors specific to the NYSE REIT, and was not part of a broader search by the Company for a potential business combination.

On May 17, 2023, representatives of Blackstone approached Gary Berman, Chief Executive Officer of the Company (“Mr. Berman”), to consider a possible combination of Tricon with part or all of Home Partners of America LLC (“HPA”), a Blackstone portfolio company that owns approximately 28,000 SFR homes in the United States. Mr. Berman promptly advised David Berman, Chairman of the Company Board, of his discussions with the representative of Blackstone. In a subsequent discussion held on May 31, 2023, a Blackstone representative indicated to Mr. Berman that Blackstone was interested in pursuing a potential combination transaction involving Tricon and part or all of HPA. Preliminary structuring discussions between Blackstone and the Company commenced the following week. The Company coordinated with Morgan Stanley (Tricon’s financial advisor on BREIT’s Preferred Unit investment in Tricon and the U.S. IPO) to assist in evaluating the strategic and financial merits of various structuring options and potential transactions with HPA.

During the month of May 2023, Management (including Mr. Berman), RBC and representatives of the NYSE REIT continued their preliminary discussions regarding a potential stock-for-stock or other combination of Tricon and the NYSE REIT, which preliminary discussions focused on the potential merits of a combination and potential relative valuation methodologies for the companies. No substantial progress toward a potential transaction was made during this time.

At a Company Board meeting held on June 16, 2023, Mr. Berman provided an update to the Company Board regarding the two strategic initiatives then under consideration: (i) the potential combination with the NYSE REIT; and (ii) the potential combination with HPA. The Company Board was supportive of pursuing the proposed strategic initiatives and directed Management to continue its review of both transactions. The Company Board also noted that Mr. Cohen, the director nominated by Blackstone to the Company Board, could have a conflict of interest if the HPA opportunity were pursued and would therefore be required to recuse himself from any Company Board discussions relating to the strategic initiatives under consideration.

Through June and July, 2023, the Company, together with Paul, Weiss, Rifkind, Wharton & Garrison LLP (“Paul, Weiss”), Goodmans LLP (“Goodmans”), Morgan Stanley and RBC, considered various U.S. and Canadian tax, capital markets, structural and other implications of the potential NYSE REIT and HPA transactions, including a potential combination of all three companies.

By July 2023 it had become clear that there was no agreement in concept between representatives of the Company and representatives of the NYSE REIT with respect to any satisfactory relative valuation methodology for the companies due to, among other reasons, the fact that the NYSE REIT would not agree to value the Company at a premium to the price of its Common Shares. The discussions regarding a potential transaction with the NYSE REIT slowed down and ultimately ended by August 2023. During this same period, the Company also concluded that discussions regarding a potential combination with HPA were unlikely to advance due to the inherent difficulties in developing a structure that could minimize adverse tax consequences to the Company while remaining attractive from a capital markets perspective.


- 25 -

 

The Company Board met on August 8, 2023. Upon the discussion turning to the strategic initiatives that had been under consideration, Mr. Cohen recused himself. Management advised the Unconflicted Company Board that Management believed, based on input from its tax, legal and financial advisors, and after taking into account their discussions with representatives of HPA and the NYSE REIT, that pursuing a potential combination transaction of Tricon with either or both of HPA or the NYSE REIT would not be in the best interests of the Company and accordingly did not recommend proceeding with either potential transaction due to the tax, structural, relative valuation and capital markets issues described above. Representatives of Morgan Stanley, who had been invited to the meeting by Management to review several capital markets and M&A-oriented strategic alternatives with the Company Board, advised that they had concluded that the potential NYSE REIT and HPA transactions were likely not feasible in the near- or mid-term given the volatility in real estate values, interest rates, capitalization rates and stock prices, as well as complexities around structure, execution and relative valuation. Following the Unconflicted Company Board’s discussion and upon consideration of the views of Management and Morgan Stanley, the Unconflicted Company Board determined to not proceed with either transaction and instead directed Management to continue to pursue the Company Board-approved strategic plan, which included the creation of two new investment vehicles with third party institutional investors. The first new investment vehicle was intended to syndicate a portfolio of approximately 4,000 wholly-owned SFR homes, which would raise capital for the Company to reduce indebtedness and finance the acquisition of additional SFR homes in the United States through the second new investment vehicle, which would have been a follow-on joint venture with a number of Tricon’s existing private investors that was intended to assemble and manage a portfolio of SFR homes.

On September 6, 2023, at Blackstone’s request, Mr. Berman met with representatives of Blackstone who advised Mr. Berman that Blackstone wished to explore a potential acquisition of the Company. The interest rate on 10-year U.S. treasury bonds on this date closed at 4.30%.

On September 12, 2023, a representative of Blackstone contacted Morgan Stanley to advise that Blackstone intended to communicate an oral proposal for the acquisition of the Company. On September 14, 2023, Blackstone representatives advised Morgan Stanley that Blackstone was prepared to propose $11.00 in cash per Common Share on an indicative basis (representing a premium of approximately 34% over the closing price of the Common Shares on the NYSE on September 13, 2023, the prior trading day), subject to the completion of due diligence. Following consultation with Management, representatives of Morgan Stanley responded on behalf of the Company that Blackstone’s proposed price was inadequate and insufficient to present to the Company Board.

On September 29, 2023, Mr. Berman met with a representative of Blackstone, who advised him that Blackstone was considering increasing its price and submitting a written proposal to acquire the Company. The interest rate on 10-year U.S. treasury bonds on this date closed at 4.59%.

On October 2, 2023, the next trading day after the September 29, 2023 meeting, Blackstone sent a written proposal to Morgan Stanley to acquire all the Common Shares for $11.10 per Common Share in cash (the “October Blackstone Proposal”), which represented a 50% premium to the closing price of the Common Shares on the NYSE on September 29, 2023, the prior trading day. The $11.10 per Common Share price represented a significantly higher premium to the prior trading day’s closing price on the date the October Blackstone Proposal was delivered than the original verbal proposal due to a decline in the Common Share price over that period. The October Blackstone Proposal included Blackstone’s assumption that the Company would pay its quarterly dividend in October 2023 and would not declare any further dividends on the Common Shares. Blackstone indicated its belief that it could complete its confirmatory due diligence and agree to terms within two weeks. Blackstone conveyed verbally to Morgan Stanley that its proposal was contingent upon a customary “no-shop” provision with a two-tiered termination fee, where the termination fee would be lower during an initial period if Tricon were to terminate the agreement to enter into a transaction pursuant to a superior proposal. A copy of the October Blackstone Proposal was promptly provided to the members of the Unconflicted Company Board.

The Company Board convened a meeting on October 5, 2023 to consider, among other matters, the October Blackstone Proposal. Representatives of Morgan Stanley, Goodmans, counsel to the Company, and Paul, Weiss, U.S. counsel to the Company, were present at the meeting. Upon the discussion turning to the October Blackstone Proposal, Mr. Cohen declared a conflict and recused himself from further discussions. Mr. Berman reminded the Unconflicted Company Board of the events that had preceded the October Blackstone Proposal, including the preliminary discussions regarding the HPA and NYSE REIT strategic alternatives that had been considered earlier that summer and previously presented to the Company Board, neither of which had materialized. Mr. Berman also described Blackstone’s prior $11.00 per Common Share verbal proposal, which had been considered inadequate and insufficient to merit presentation to the Unconflicted Company Board.


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At this meeting, representatives of Morgan Stanley provided an update on the capital markets environment, including the current macroeconomic and volatile interest rate environment, discussions to date, and perspectives on the October Blackstone Proposal to the Unconflicted Company Board. Morgan Stanley’s representatives raised a number of factors for the Unconflicted Company Board to weigh in considering the October Blackstone Proposal and any further engagement with Blackstone, including the competitiveness of the proposal, deal certainty, confidentiality , continuing with the Company’s current Company Board-approved strategic plan and the possibility of soliciting other potential buyers of the Company. Representatives of Morgan Stanley also provided context for the October Blackstone Proposal in light of current market conditions and the Company’s trading price relative to a range of consensus analyst views on its net asset value. Representatives of Morgan Stanley reported that with the recent decline in stock prices across North American real estate issuers, including the Company, the premium represented by $11.10 per Common Share (the price included in the October Blackstone Proposal) had increased to 63% (based on the closing price of the Common Shares on the NYSE on October 4, 2023), a significantly higher premium than average premiums for comparable transactions. Representatives of Morgan Stanley also provided an overview of observed trading levels of the Company’s peers and identified the limited number of other potential strategic and financial acquirors in addition to Blackstone that could have the capacity to consider, and interest in considering, an acquisition of Tricon, taking into account the size and varied nature of the Company’s portfolio and business lines, the Company’s cross border structure and the fact that leverage constraints, access to capital and/or current stock prices of potential strategic bidders could impact the price that public company bidders may be able to pay in a transaction. Representatives of Morgan Stanley advised that the all-cash nature of the October Blackstone Proposal, the premium it represented to the current market price of the Common Shares and Blackstone’s substantial available capital would make it challenging for a superior competing offer to emerge from one of these potential acquirors.

Goodmans then provided a detailed overview of the Unconflicted Company Board’s fiduciary duties in the context of evaluating a potential change of control transaction, as well as guidance on the regulation of business combinations and related party transactions in Canada under MI 61-101, given that Blackstone is deemed to beneficially own more than 10% of the Common Shares (assuming the exchange of all Preferred Units held by BREIT Shareholder). Paul, Weiss then advised the Unconflicted Company Board with respect to the corresponding U.S. securities laws for going-private transactions governed by Rule 13e-3 of the Securities Exchange Act of 1934 (“Rule 13e-3”).

The Unconflicted Company Board then considered the risks and benefits associated with the October Blackstone Proposal relative to other potential acquirors that might be interested in pursuing a change of control transaction with Tricon, a continuation of the Company’s current Company Board-approved strategic plan and other potential alternatives. The Unconflicted Company Board also received advice from Morgan Stanley with respect to next steps and timing considerations, including the possibility that a delay in pursuing discussions with Blackstone could pose certain risks in the current volatile market environment because changing interest rates could affect the availability of Blackstone’s proposal, with rising interest rates making it more expensive for a potential buyer to finance a transaction.

Following input of counsel, and in light of the Unconflicted Company Board’s expectation that further substantive discussions with Blackstone were likely, the Unconflicted Company Board determined that it would be advisable to form a special committee consisting of independent directors that could, with the assistance of its own independent financial and legal advisors, further evaluate Blackstone’s proposal and potential alternatives, supervise any related negotiations, and make recommendations to the full Unconflicted Company Board with respect to those matters. The Unconflicted Company Board unanimously resolved to form a special committee comprised of Peter Sacks (Chair), Camille Douglas, Renée Glover and Ira Gluskin (the “Special Committee”). In selecting Mr. Sacks, Ms. Douglas, Ms. Glover and Mr. Gluskin to act as members of the Special Committee, the Unconflicted Company Board determined that each of them was (i) free from any conflict of interest with respect to the October Blackstone Proposal and (ii) independent to the extent required by applicable law and stock exchange requirements, including MI 61-101. None of Mr. Sacks, Ms. Douglas, Ms. Glover and Mr. Gluskin were or are directors, officers or employees of Blackstone and all of them were and are independent directors of the Company under National Instrument 52-110Audit Committees and National Instrument 58-101Disclosure of Corporate Governance Practices.


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The Special Committee’s mandate included, among other things: (i) examining, reviewing and evaluating the proposed transaction with Blackstone and its implications for Tricon and its stakeholders (including minority shareholders); (ii) conducting or supervising the conduct of negotiations of the structure and terms of the proposed transaction, including the terms of any definitive agreements relating thereto on behalf of the Company; (iii) identifying and evaluating any reasonably available alternatives to the October Blackstone Proposal (including maintaining the status quo) and determining whether any such alternative is more favourable to the Company and its stakeholders than the proposed transaction; (iv) determining whether a formal valuation pursuant to MI 61-101 is required in connection with the proposed transaction or any potential alternative, and selecting the independent valuator to provide such formal valuation; (v) determining whether to request a fairness opinion from one or more qualified and independent financial advisors as to the fairness from a financial point of view, of the consideration to be received by minority shareholders; (vi) retaining, overseeing and obtaining advice and opinions from professional advisors; (vii) determining whether any “collateral benefit” may arise in respect of the proposed transaction or any alternatives in accordance with MI 61-101; (viii) making recommendations to the Unconflicted Company Board regarding all arrangements relating to Management in connection with the October Blackstone Proposal or potential alternatives; (ix) reporting to the Unconflicted Company Board on its activities from time to time, including with respect to any recommendation the Special Committee may make (or determine not to make) with respect to a proposed transaction with Blackstone or a potential alternative; and (x) doing such other acts that may be necessary in the circumstances, including having regard to MI 61-101.

The Special Committee met a total of eight times; three times to consider the October Blackstone Proposal and five times to consider the January Blackstone Proposal (as defined below). The Special Committee convened for the first time immediately following the conclusion of the October 5, 2023 Company Board meeting. The Company’s Chief Legal Officer, David Veneziano, led a discussion with respect to potential next steps and the Special Committee’s engagement of independent legal and financial advisors, within the authority granted to the Special Committee in its mandate. Following a consideration of potential independent legal advisors, the Special Committee determined to engage Osler, Hoskin & Harcourt LLP (“Osler”) to act as its independent legal counsel.

On October 10, 2023, the Special Committee met with representatives of Osler to consider the engagement of an independent financial advisor to prepare a formal valuation and to advise the Special Committee in connection with any proposed transaction. Having obtained information regarding the independence, qualifications and terms of engagement proposed by Scotia Capital, and being satisfied as to such independence (including that Scotia Capital is an “independent valuator” and independent of all “interested parties” (in each case as defined in MI 61-101)), qualifications and the quantum and structure of Scotia Capital’s proposed fee, the Special Committee approved the appointment of Scotia Capital subject to Mr. Sacks finalizing satisfactory engagement terms with Scotia Capital. The Special Committee also reviewed the terms of its mandate with assistance from Osler and determined that its mandate was appropriate. The members of the Special Committee then confirmed the independence of each of the members of the Special Committee for purposes of serving on the Special Committee and received an overview of their duties from Osler with reference to the written materials previously provided to the Unconflicted Company Board by Goodmans. The Special Committee discussed the October Blackstone Proposal, whether to provide Blackstone with access to non-public information of the Company and whether to explore competing offers for the Company. The Special Committee determined that the Company should provide Blackstone with access to non-public information of the Company subject to entering into a suitable confidentiality agreement (including a standstill).

On October 10, 2023, the Special Committee entered into the Scotia Capital Engagement Agreement with Scotia Capital. The Scotia Capital Engagement Agreement provides that Scotia Capital’s compensation for providing a preliminary view of value and a subsequent formal valuation in accordance with MI 61-101 and fairness opinion are fixed fees payable at the time of delivery of the preliminary valuation and formal valuation and fairness opinion, respectively, regardless of the conclusions reached by Scotia Capital. In addition, Scotia Capital is entitled to recover reasonable out-of-pocket expenses and will be indemnified by the Company under certain circumstances for liabilities arising in connection with its engagement. See “Special Factors – Scotia Capital Formal Valuation and Fairness Opinion”.

On October 11, 2023, representatives of Morgan Stanley, upon instruction by the Unconflicted Company Board, advised Blackstone that the Unconflicted Company Board had formed a Special Committee, which had authorized Tricon to provide Blackstone with non-public information pursuant to a customary confidentiality agreement (including a standstill).


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The Company then negotiated the terms of a confidentiality agreement (the “Confidentiality Agreement”) with Blackstone, which the parties executed on October 12, 2023. The Confidentiality Agreement governs the disclosure and use of the Company’s confidential information by Blackstone and its representatives and includes customary “standstill” and non-solicitation provisions. Following execution of the Confidentiality Agreement, representatives of Blackstone were granted access to a virtual data room, which contained public and non-public information concerning the Company and its assets, along with access to Management to perform due diligence.

From approximately October 13, 2023 until October 28, 2023, Blackstone conducted an extensive due diligence investigation of the Company and its assets, which included nine diligence meetings with Management and tours of certain of Tricon’s properties.

On October 17, 2023, Jonathan Litt, the founder and Chief Investment Officer of Land & Buildings, an investor in the real estate space, made a presentation regarding Tricon at an annual investor conference in New York. Land & Buildings subsequently published a press release on the information presented at the conference and also publicly filed the presentation. The presentation noted Land & Buildings’ belief that Tricon’s Common Shares were “substantially undervalued” and offered various short-term value creation suggestions, including revenue generation and overhead reduction initiatives. The closing price of the Common Shares on the NYSE after the presentation on that date was $7.33 per Common Share, an approximately 4% increase over the prior trading day’s closing price.

On October 24, 2023, the Unconflicted Company Board convened with the Special Committee and their respective advisors to, among other things, receive an update on the previous week’s Land & Buildings investor presentation and the October Blackstone Proposal. Mr. Berman first provided an overview of Mr. Litt’s presentation, a copy of which had been circulated to the Unconflicted Company Board prior to the meeting. Representatives of Morgan Stanley then provided their views to the Unconflicted Company Board regarding the market’s reaction to the presentation. The representatives of Morgan Stanley noted that, while the closing price of the Common Shares on the day of Mr. Litt’s presentation had been elevated, the trading price of the Common Shares had since decreased to a price below the opening price of the Common Shares on the date of the presentation, although trading volume remained elevated.

The Unconflicted Company Board then received an update from representatives of Morgan Stanley regarding Blackstone’s extensive due diligence process to date and posed questions to Management regarding its Company Board-approved strategic plan for continuing to operate the Company should Blackstone not make a firm offer following the completion of its diligence process. Immediately following the Unconflicted Company Board meeting, the Special Committee met with representatives of Osler and Scotia Capital to discuss the process regarding the formal valuation to be undertaken by Scotia Capital.

On October 27, 2023, the interest rate on 10-year U.S. treasury bonds closed at 4.85%.

On October 28, 2023, Blackstone advised Morgan Stanley that, based on Blackstone’s due diligence review to date particularly in light of changes in economic conditions, it did not intend to further pursue discussions concerning the acquisition of the Company. Mr. Berman immediately advised the Unconflicted Company Board of this development, and the Company subsequently removed Blackstone’s access to the virtual data room.

On November 7, 2023, the Company Board met to review and approve the Company’s interim financial statements for the third quarter. The Company Board also received input from representatives of Morgan Stanley, who had been invited by Management to join the meeting to provide their thoughts on the termination of discussions with Blackstone. Mr. Cohen recused himself from these discussions. The representatives of Morgan Stanley provided an overview of the termination of discussions with Blackstone, and noted that, since the time of Blackstone’s initial indication of interest on September 14, 2023 through its notice of withdrawal on October 28, 2023, the price of the Common Shares had declined by 23% and interest rates had risen. Mr. Berman and other members of senior Management, together with representatives of Morgan Stanley, then engaged in a discussion with the Unconflicted Company Board regarding recently announced strategic REIT transactions and other strategic alternatives that might be available to the Company to reduce the gap between its net asset value and the Common Share price, such as by reducing the Company’s leverage or monetizing assets. The Unconflicted Company Board also discussed the possibility of exploring a share buy-back, the likely capital markets impact of a share buy-back and, in general terms, what such a transaction might look like from a timing and execution perspective. Following this discussion, the Unconflicted Company Board again directed Management to continue to pursue the Company Board-approved strategic plan.


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On December 22, 2023, at Blackstone’s request, Mr. Berman met with a representative of Blackstone, who expressed an interest in reviving their October discussions regarding a potential acquisition of the Company by Blackstone. The two discussed the circumstances surrounding Blackstone’s decision to terminate discussions regarding the October Blackstone Proposal and the changes in macroeconomic conditions since that time, including favourable changes in interest rates and assumptions regarding future changes in interest rates. The two met again on December 25, 2023 and the discussions included the Company’s valuation and potential transaction pricing, as well as Blackstone’s conceptual alignment with supporting the Company’s current Company Board-approved strategic plan. From December 27, 2023 through January 2, 2024, representatives of Blackstone and Morgan Stanley had several discussions regarding Blackstone’s remaining confirmatory due diligence, timing of a potential process, and parameters around price. During these discussions, the Blackstone representatives raised the possibility of proposing a price below $11.10 per Common Share, but were advised by Morgan Stanley, per Morgan Stanley’s prior discussions with the Unconflicted Company Board, that a reduced price would not be acceptable to Tricon.

On January 2, 2024, Blackstone submitted a new written proposal to acquire all the Common Shares for $11.10 per Common Share in cash (the “January Blackstone Proposal”), the same per Common Share price as in the October Blackstone Proposal. This price represented a 22% premium to the closing price of the Common Shares on the NYSE on December 29, 2023, the prior trading day. On this date, the interest rate on 10-year U.S. treasury bonds was 3.91%, a 19% decline from the rate of 4.85% on October 27, 2023, the day prior to the date when Blackstone provided notice that it did not intend to proceed with the October Blackstone Proposal. Similar to the October Blackstone Proposal, the January Blackstone Proposal included Blackstone’s assumption that the Company would pay its quarterly dividend in January 2024 and would not declare any further dividends on the Common Shares. Blackstone noted that it had conducted extensive due diligence to date and stated that it was prepared to complete its remaining confirmatory due diligence and concurrently negotiate definitive transaction documentation within seven business days. Blackstone conveyed orally to Morgan Stanley that its proposal was contingent upon the same “no-shop” provision and a two-tiered termination fee as had been previously conveyed at the time of the October Blackstone Proposal. A copy of the January Blackstone Proposal was promptly provided to the members of the Unconflicted Company Board.

On January 5, 2024, the Unconflicted Company Board convened to consider the January Blackstone Proposal. Representatives of Morgan Stanley, Goodmans and Paul, Weiss were present at the meeting, as were representatives of Osler and Scotia Capital. Mr. Berman summarized for the Unconflicted Company Board his discussions with Blackstone’s representatives over the course of the prior two weeks, which discussions had led to Blackstone’s delivery of the January Blackstone Proposal. A representative of Morgan Stanley then provided an overview of the developments in the macroeconomic environment between the October Blackstone Proposal and the January Blackstone Proposal, and reviewed the January Blackstone Proposal relative to the Company’s current Common Share price, which had increased significantly since Blackstone withdrew the October Blackstone Proposal on October 28, 2023. This representative from Morgan Stanley reported that the January Blackstone Proposal represented a similar premium to the then-current trading price as the premium implied by the $11.00 price per Common Share verbally proposed by Blackstone in its initial indication of interest on September 14, 2023, noting that the premium implied by the January Blackstone Proposal remained slightly above average for transactions of this nature in the real estate industry.

The Unconflicted Company Board proceeded to discuss and seek input from its legal and financial advisors on the terms of the January Blackstone Proposal and reviewed the relevant considerations and options for next steps. The Unconflicted Company Board discussed the timing for Scotia Capital, financial advisor to the Special Committee, to conduct a formal valuation (as required under MI 61-101), current cap rates, potential market reaction to an acquisition of the Company by Blackstone, the anticipated scope of Blackstone’s confirmatory due diligence and timing for a possible transaction. The Unconflicted Company Board received strategic and legal advice from representatives of Morgan Stanley, Paul, Weiss and Goodmans relating to these matters, including a review by Morgan Stanley of recent comparable transactions. The Unconflicted Company Board, with further input from advisors, then discussed the January Blackstone Proposal in light of the Company’s current Company Board-approved strategic plan and the volatile macroeconomic environment.


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The Unconflicted Company Board believed that it would be prudent as a next step to have Blackstone complete its confirmatory due diligence in respect of the Company before engaging in negotiations on price and specific deal terms, but also stressed that time was of the essence, given interest rate and other market volatility which could make it more expensive for a potential buyer to acquire the Company. The Unconflicted Company Board acknowledged that the Special Committee would convene immediately following the meeting to confirm next steps, including with respect to the valuation and opinion work to be done by the Special Committee’s financial advisors, to ensure that the Special Committee was able to evaluate the reasonableness and fairness of the January Blackstone Proposal on an informed basis.

Immediately following the Unconflicted Company Board meeting, the Special Committee met with representatives of Osler and Scotia Capital to consider the January Blackstone Proposal and receive an update regarding the status of Scotia Capital’s work in respect of a formal valuation and timing to be in a position to provide the Special Committee with its preliminary indication of value of the Company. At this meeting, the Special Committee reviewed its role and responsibilities in the circumstances, including an evaluation of the January Blackstone Proposal relative to other alternatives reasonably available to the Company and whether to contact other potential acquirors of the Company while pursuing a transaction with Blackstone. They noted that doing so could jeopardize the availability of the January Blackstone Proposal and increase risk of market leaks and rumors regarding a potential transaction. The Special Committee also considered the fact that the October 2023 presentation by Land & Buildings and its related press release did not result in any in-bound contacts to the Company or its financial advisors from any potential interested parties regarding a potential acquisition proposal. The Special Committee concluded that, while advice from Scotia Capital would be advisable, and ultimately a formal valuation prepared by Scotia Capital in accordance with MI 61-101 would be necessary, in order to reach a definitive view, it was supportive of proceeding with consideration of the January Blackstone Proposal.

Later that day, representatives of Blackstone were again granted access to the Company’s virtual data room, which contained public and non-public information concerning the Company and its assets, along with access to Management to perform due diligence. Blackstone’s representatives thereafter continued their due diligence review of the Company.

Late on January 9, 2024, representatives of Blackstone sent to Morgan Stanley the initial draft of the proposed arrangement agreement, which contemplated the transaction being implemented by way of a plan of arrangement under the Business Corporations Act (Ontario). The draft arrangement agreement included a price of $11.10 per Common Share; contemplated that the Company would pay its quarterly dividend in January 2024 and would not declare any further dividends on the Common Shares; included a customary “no-shop” provision; included a two-tiered termination fee (with a termination fee equal to 1.75% of the Company’s equity value (assuming the exchange of all Preferred Units) if the proposed arrangement agreement were terminated prior to the 40th day following signing to permit the Company to enter into a superior proposal with a bidder that had submitted its initial acquisition proposal prior to the 30th day following signing, which fee increased to 3.5% of equity value thereafter), along with matching rights if any superior proposal were received; included the payment by the Purchaser to Tricon of a reverse termination fee equal to 9% of the Company’s equity value (assuming the exchange of all Preferred Units) if the transaction failed to close in certain circumstances as an exclusive remedy with no specific performance remedy available to the Company; included customary closing conditions, including a material adverse change condition and a condition that the number of Common Shares held by the Company Shareholders exercising their dissent rights not, in the aggregate, exceed 10% of the issued and outstanding Common Shares; and included, subject to certain exceptions, the Company would be required to continue to operate in the ordinary course of business prior to closing.

On the morning of January 12, 2024, representatives of Blackstone verbally confirmed to Morgan Stanley that Blackstone had substantially completed its confirmatory due diligence and affirmed its offer price of $11.10 per Common Share.

Later on January 12, 2024, the Special Committee met with representatives of Osler and Scotia Capital to receive a draft presentation from representatives of Scotia Capital regarding its preliminary indication of value analysis regarding the value of the Company’s Common Shares based on its work performed to date. In connection with such presentation, representatives of Scotia Capital provided the Special Committee with an explanation of the analysis and assumptions underlying its preliminary indication of value analysis. The Special Committee discussed the preliminary indication of value analysis presented by representatives of Scotia Capital and noted that the offer price of $11.10 per Common Share was approximately at the midpoint of the range of values in the preliminary analysis presented by representatives of Scotia Capital. The Special Committee also received advice from Osler regarding the “no-shop” provision with a two-tiered termination fee proposed by Blackstone, and the difference between such a construct and a “go-shop”. The Special Committee determined that it would be comfortable recommending that the Company proceed with Blackstone on the basis of a “no-shop” provision with a two-tiered termination fee as opposed to seeking a “go-shop”.


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Immediately following the conclusion of the Special Committee meeting on January 12, 2024, the Unconflicted Company Board convened to receive an update on the negotiation of the January Blackstone Proposal. Representatives of Morgan Stanley, Goodmans, Paul, Weiss, Osler and Scotia Capital were in attendance at the meeting. A representative of Morgan Stanley summarized for the Unconflicted Company Board the status of discussions between representatives of Morgan Stanley and representatives of Blackstone regarding confirmatory due diligence and pricing. The representative of Morgan Stanley reported that Blackstone had verbally confirmed the completion of its confirmatory due diligence and had re-affirmed its offer price of $11.10 per Common Share.

Mr. Sacks then summarized for the Unconflicted Company Board the discussions held by the Special Committee at its meeting immediately preceding the Unconflicted Company Board meeting. He reviewed the oral reports received from representatives of Scotia Capital and reported that the Special Committee viewed the January Blackstone Proposal as a compelling opportunity for the Company, subject to continued negotiations on price, the size of the termination fee and reverse termination fee, and deal certainty. He confirmed the Special Committee would be comfortable recommending that the Company proceed with Blackstone on the basis of including a “no-shop” provision with a two-tiered termination fee in the proposed arrangement agreement.

Representatives of Scotia Capital then reviewed with the Unconflicted Company Board their preliminary indication of value. Representatives of Scotia Capital advised that it had reported to the Special Committee a preliminary conclusion of a range of value for the Common Shares based on the preliminary financial summary that representatives of Scotia Capital had reported to the Special Committee, subject to the analyses, assumptions and limitations set forth in the preliminary financial summary, in which the January Blackstone Proposal fell approximately within the midpoint of the range.

Following the presentation by representatives of Scotia Capital, representatives of Morgan Stanley then reviewed for the Unconflicted Company Board their preliminary valuation summary, as reflected in the materials circulated to the Unconflicted Company Board prior to the meeting. Representatives of Morgan Stanley walked the Unconflicted Company Board through the reference points Morgan Stanley considered, including trading performance, price targets, and net asset value per share estimates. Representatives of Morgan Stanley then summarized their approaches to valuation, including a comparable trading value, a dividend discount model, a precedent premiums and a cash levered buyer analysis and described the valuation price range under each approach.

During the meeting, Goodmans and Paul, Weiss provided an update regarding negotiations of the proposed arrangement agreement, including the terms of Blackstone’s latest proposal. Goodmans and Paul, Weiss also summarized the provisions governing non-solicitation, termination fee and reverse termination fee, Blackstone’s right to match, deal certainty, regulatory covenants with respect to obtaining Investment Canada Act Approval for the transaction and, together with representatives of Morgan Stanley, discussed the strategic merits of, and any risks associated with, the proposed arrangement agreement. In particular, Goodmans and Paul, Weiss discussed the risks associated with Blackstone’s termination fee proposal, whereby the Company’s sole and exclusive remedy for Blackstone’s failure to complete the proposed transaction in circumstances in which conditions to closing were otherwise satisfied would be a reverse termination fee equal to 9% of the Company’s equity value (assuming the exchange of all Preferred Units), rather than a specific performance remedy. With the assistance of its advisors, the Unconflicted Company Board considered and evaluated the risk associated with Blackstone’s desired approach to remedies for breach of the proposed arrangement agreement in the context of the leveraged buyout market generally, as well as recent transactions completed by Blackstone, including in Canada. The Unconflicted Company Board noted Blackstone’s proven ability to complete large acquisition transactions, including substantial experience with take-private transactions, including in Canada, its extensive experience in the real estate industry, and the amount of the reverse termination fee and the circumstances in which it would be payable. The Unconflicted Company Board also discussed the appropriate manner in which to respond to Blackstone’s latest proposal.


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Following a robust discussion with input from financial and legal advisors, the Unconflicted Company Board reached a consensus that it remained in the best interests of the Company to continue to pursue and review the January Blackstone Proposal, taking into account the concern that the time needed to solicit interest from other potential acquirors could jeopardize the availability of the January Blackstone Proposal and bearing in mind the two-tiered termination fee and the Company Board’s “fiduciary out” that kept open the ability of the Company to consider a superior proposal, should one emerge. Representatives of Morgan Stanley advised the Unconflicted Company Board that they believed Blackstone would agree to the Company’s proposed higher reverse termination fee if the Company agreed to Blackstone’s original proposed amounts for a two-tiered reverse termination fee. Following this discussion, the Unconflicted Company Board instructed Morgan Stanley and Management to seek improved deal terms from Blackstone, including an increase in offer price to $11.40 per Common Share, greater deal certainty for the Company and a higher reverse termination fee. Morgan Stanley was also instructed to advise Blackstone that the Unconflicted Company Board would not authorize the distribution of a revised draft of the arrangement agreement to Blackstone and its representatives until Blackstone indicated a willingness to improve its proposal on these deal terms.

Over the course of January 13 and 14, 2024, representatives of Morgan Stanley and Blackstone held a number of discussions with respect to price, closing certainty, the quantum of the termination fee and reverse termination fee, and the circumstances in which the lower termination fee would be payable.

On January 15, 2024, the Special Committee met with representatives of Management, Morgan Stanley, Osler and Scotia Capital. The Special Committee first received an update from Management and Morgan Stanley regarding the status of negotiations with Blackstone. A representative of Morgan Stanley summarized several discussions he had held with Blackstone over the weekend regarding the key deal points for the proposed transaction, including price, deal certainty, regulatory matters and termination fees. He reported that Blackstone had indicated a willingness to address certain of the concerns identified by the Special Committee and the Unconflicted Company Board and raised by Morgan Stanley with respect to the January Blackstone Proposal, including an increase in its offer price from $11.10 per Common Share to $11.15 per Common Share and the deletion of the closing condition related to the exercise of dissent rights by Tricon shareholders. With respect to termination fees, the Morgan Stanley representative reported that he expected Blackstone would agree to either: (i) a lower two-tier termination fee and a slightly higher reverse termination fee than the 9% fee originally proposed by Blackstone; or (ii) the original termination fee proposed by Blackstone but an even higher reverse termination fee. Representatives of Management and Morgan Stanley then recused themselves from the Special Committee’s meeting, and the Special Committee engaged in a robust discussion together with its independent advisors. The Special Committee determined to recommend that the Company instruct Morgan Stanley to respond to Blackstone with a request to increase its offer price and accept Blackstone’s original termination fee amounts, with the lower fee payable if the proposed arrangement agreement was terminated prior to the 45th day following signing to permit the Company to enter into a superior proposal with a third party, in exchange for a higher reverse termination fee equal to 15% of the Company’s equity value (assuming the exchange of all Preferred Units).

Immediately following the conclusion of the Special Committee meeting, the Unconflicted Company Board convened for an update from Management and its advisors.

A representative of Morgan Stanley provided the Unconflicted Company Board with the same update that had been previously provided to the Special Committee. Mr. Sacks then reported that the Special Committee, having received the update from representatives of Morgan Stanley and consulted with its independent advisors, recommended that the Company instruct Morgan Stanley to respond to Blackstone with a request to increase its offer price, accept Blackstone’s original termination fee amounts and propose a higher reverse termination fee of 15% of the Company’s equity value (assuming the exchange of all Preferred Units). Following receipt of the Special Committee’s recommendation, the Unconflicted Company Board raised various questions and a robust discussion ensued with input from Management and financial and legal advisors. Following this discussion, the Unconflicted Company Board unanimously agreed to accept the Special Committee’s recommendation and instructed Morgan Stanley and Management to respond to Blackstone accordingly.

On January 15 and 16, 2024, representatives of Morgan Stanley continued to negotiate with Blackstone, stressing the need for Blackstone to offer a higher price and enhanced deal certainty for the Company Shareholders. Following these negotiations, Blackstone communicated to Mr. Berman and Morgan Stanley that it would be willing to increase its offer price to $11.25 per Common Share and to accept a higher reverse termination fee of 15% in exchange for Tricon agreeing to Blackstone’s original proposal regarding the termination fee amounts.


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On January 16, 2024, Mr. Berman provided an email update to the Unconflicted Company Board that Blackstone would agree to an increased offer price of $11.25 per Common Share, an increased reverse termination fee equal to 15% of the Company’s equity value (assuming the exchange of all Preferred Units), while maintaining the two-tier termination fee amounts originally proposed by Blackstone, and the deletion of the closing condition in favour of Blackstone with respect to the maximum exercise of dissent rights by the Company Shareholders. In these discussions, Mr. Berman reported that, consistent with the Unconflicted Company Board’s prior direction, Tricon was willing to proceed with further negotiations with Blackstone and that its counsel had provided Simpson Thacher & Bartlett LLP, counsel to Blackstone, and Davies Ward Phillips & Vineberg LLP, Canadian counsel to Blackstone, with a revised draft of the arrangement agreement reflecting the proposed key terms, as well as certain other revisions to the original draft that had been prepared by Blackstone’s counsel.

On January 16, 2024, the Special Committee met with representatives of Osler and Scotia Capital to further discuss the analysis and assumptions underlying Scotia Capital’s preliminary indication of value, as well as the status of negotiations with Blackstone.

From January 16 through January 18, counsel to the Company and Blackstone’s counsel negotiated the final terms of the proposed arrangement agreement. The negotiations covered various aspects of the transaction, including, among others, the representations and warranties made by the parties, the restriction on the conduct of the Company’s business until completion of the transaction, the conditions to completion of the transaction, Blackstone’s obligations regarding regulatory approvals, the Company’s obligations to cooperate with Blackstone’s debt financing efforts and pre-closing restructuring transactions and provisions regarding the Company’s equity awards, employee benefits and other compensation matters. The parties’ counsel also negotiated other related documents, including a support agreement with BREIT Shareholder whereby BREIT Shareholder would agree to exchange a minimum number of Preferred Units into Common Shares prior to the Record Date and vote all of its Common Shares in favour of the Arrangement Resolution.

After the close of markets on January 18, 2024, the Special Committee met with representatives of Management, Morgan Stanley, Osler and Scotia Capital. The Special Committee first received an update from Management and Morgan Stanley regarding the status of negotiations with Blackstone. Management and Morgan Stanley then recused themselves from the Special Committee’s meeting. The Special Committee then received an update from Osler regarding the status of the final terms of the proposed arrangement agreement and the ancillary documents. Representatives of Scotia Capital then reviewed its analysis supporting its oral opinion (subsequently confirmed in writing) that, as of January 18, 2024, and subject to certain assumptions, limitations and qualifications, the fair market value of the Common Shares was in the range of $9.80 to $12.90 per Common Share. Representatives of Scotia Capital also provided its oral opinion (subsequently confirmed in writing) to the Special Committee that, as of January 18, 2024, and subject to certain assumptions, limitations and qualifications, the consideration to be received by the Company Shareholders (other than Blackstone) pursuant to the proposed arrangement is fair, from a financial point of view, to the Company Shareholders (other than Blackstone).

Immediately following the Special Committee meeting, the Unconflicted Company Board convened to hear from the Special Committee. The Unconflicted Company Board was advised that the Special Committee had received an update on the proposed final terms of the arrangement agreement from Osler, along with an oral formal valuation and fairness opinion from Scotia Capital, and following input from its legal and financial advisors, had unanimously resolved to recommend that the Unconflicted Company Board (i) determine that it is in the best interests of the Company to enter into the Arrangement Agreement; (ii) determine that the Arrangement and the transactions contemplated by the Arrangement Agreement are fair to the Company Shareholders (excluding Blackstone); (iii) authorize the Company to execute and deliver the Arrangement Agreement and other transaction documents; and (iv) recommend that the Company Shareholders vote for the Arrangement Resolution approving the Arrangement. See “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Unconflicted Company Board; Position of Tricon as to the Fairness of the Arrangement”.


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Goodmans then made a presentation regarding the proposed final terms of the arrangement agreement, including with respect to the Company Shareholder approval requirements, the suspension of the Company’s quarterly dividend, required regulatory approvals, non-solicit, the Unconflicted Company Board’s “fiduciary out” rights, Blackstone’s two-tiered termination fee and reverse termination fee, and closing conditions.

Following the legal discussion led by Goodmans, representatives of Morgan Stanley then provided Morgan Stanley’s views regarding its analysis of the fairness, from a financial point of view, of the consideration to be received by the Company Shareholders (excluding Blackstone) pursuant to the transaction. Following this discussion, Morgan Stanley provided its oral opinion (subsequently confirmed in writing) to the effect that, as of the date thereof and subject to the assumptions, limitations and qualifications described therein, the Consideration to be received by holders of Common Shares (other than Blackstone) pursuant to the arrangement agreement was fair, from a financial point of view, to the holders of Common Shares.

Following receipt of the Special Committee’s recommendation and Morgan Stanley’s oral fairness opinion (subsequently confirmed in writing) and after lengthy discussion of the Special Committee recommendation and the relative benefits and risks of the proposed transaction with Blackstone and various alternatives reasonably available to the Company, the members of the Unconflicted Company Board present at the meeting unanimously resolved (i) that it would be in the best interests of the Company to enter into the Arrangement Agreement and that the Arrangement and the transactions contemplated thereby are fair to the Company Shareholders (excluding Blackstone); (ii) to approve the entering into of the Arrangement Agreement and related transaction documents by the Company; and (iii) to recommend that the Company Shareholders vote for the Arrangement Resolution approving the Arrangement. Given that certain non-fundamental provisions of the proposed arrangement agreement had yet to be finally settled, the Unconflicted Company Board agreed to delegate to Mr. Sacks the final authority to authorize the Company to execute the proposed arrangement agreement and related agreements upon confirmation from Management and the Company’s legal advisors that such agreements had been settled on terms substantially as approved by the Unconflicted Company Board at the meeting.

Over the course of the evening of January 18, 2024, legal counsel to Tricon and Blackstone reached agreement on the remaining points of the proposed arrangement agreement. Mr. Sacks then exercised the authority delegated to him by the Unconflicted Company Board and directed the Company to execute the final agreements, following which Tricon and the Purchaser entered into the Arrangement Agreement and the related transaction documents.

On the morning of January 19, 2024 prior to the opening of trading on the TSX and the NYSE, the transaction was publicly announced.

Tricon’s Purposes and Reasons for the Arrangement

The Special Committee has recommended that the Unconflicted Company Board determine, and the Unconflicted Company Board has determined that the Arrangement is in the best interests of the Company and fair to the Company Shareholders (excluding Blackstone). In deciding to recommend the Arrangement to the Company Shareholders, the Unconflicted Company Board, following receipt of the unanimous recommendation of the Special Committee and in consultation with its independent financial and legal advisors, carefully considered, among other things, the benefits to the Company of the Arrangement, the Scotia Capital Formal Valuation and Fairness Opinion and the Morgan Stanley Fairness Opinion, the terms and conditions set forth in the Arrangement Agreement, the matters discussed below under the heading “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Special Committee”. As discussed below under “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Special Committee”, and that the Consideration to be paid to the Company Shareholders (excluding Dissenting Shareholders and Blackstone) of $11.25 in cash per Common Share represents a premium of approximately 30% to the closing price of the Common Shares on the NYSE as of January 18, 2024, the last trading day prior to the public announcement of the Arrangement, and a premium of approximately 42% to the volume weighted average share price on the NYSE over the previous 90 days. See “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Special Committee”. After weighing all of these factors, the Special Committee has recommended that the Unconflicted Company Board determine, and the Unconflicted Company Board determined that the Arrangement is in the best interests of the Company and that Company Shareholders should be given the opportunity to consider the Arrangement and that the Unconflicted Company Board would recommend that Company Shareholders vote in favour of the Arrangement Resolution.


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Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement

Recommendation and Reasons of the Special Committee

The Special Committee unanimously resolved to recommend that the Unconflicted Company Board (i) determine that it is in the best interests of the Company to enter into the Arrangement Agreement, (ii) determine that the Arrangement and the transactions contemplated by the Arrangement Agreement are fair to the Company Shareholders (excluding Blackstone), (iii) authorize the Company to execute and deliver the Arrangement Agreement and other transaction documents and (iv) recommend that the Company Shareholders vote FOR the Arrangement Resolution approving the Arrangement.

The Special Committee considered a number of factors in respect of its unanimous recommendation that the Unconflicted Company Board recommend that Company Shareholders vote FOR the Arrangement Resolution, including those set out below.

 

   

Significant premium to market price. The Consideration of $11.25 per Common Share in cash represents a premium of approximately 30% to the closing price of the Common Shares on the NYSE as of January 18, 2024, the last trading day prior to the public announcement of the Arrangement, and a premium of approximately 42% to the volume weighted average share price on the NYSE over the 90-day period ended January 18, 2024.

 

   

Certainty of value of cash consideration. The Consideration to be received by Company Shareholders is payable entirely in cash, providing Company Shareholders with certainty of value and liquidity immediately upon the closing of the Arrangement, in comparison to the risks, uncertainties and longer potential timeline for realizing equivalent value from the Company Board-approved strategic plan or possible strategic alternatives involving transactions in which all or a portion of the consideration would be payable in equity or would require a series of transactions involving sales of properties to separate acquirors.

 

   

Transaction represents compelling value relative to alternatives. Prior to entering into the Arrangement Agreement, the Special Committee and the Unconflicted Company Board, with the assistance of their financial and legal advisors, and based upon their collective knowledge of the business, operations, financial condition, earnings and prospects of the Company, as well as their collective knowledge of the current and prospective environment in which the Company operates (including economic and market conditions), assessed the relative benefits and risks to the Company’s security holders, employees and residents of various alternatives reasonably available to the Company, including continued execution of the Company’s existing Company Board-approved strategic plan and the possibility of soliciting other potential buyers of the Company. As part of that evaluation process, the Special Committee unanimously was of the view that:

 

   

the Consideration represents greater value for the Company Shareholders than would reasonably be expected from the continued execution of the Company Board-approved strategic plan;

 

   

contacting other bidders before announcing a transaction would result in significant risks to the Company and its business, including the risk that it could jeopardize the availability of the Blackstone proposal and that market leaks and rumours regarding a potential transaction would disrupt relationships with joint venture partners, jeopardize transactions currently in the pipeline, risk employee turnover, increase turnover in the Company Shareholder base and lead to potential Common Share price volatility; and


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there exists a limited universe of potential third parties with an interest in acquiring the Company, and it is unlikely that any other party would be willing to acquire the Company on terms that are more favourable to Company Shareholders, from a financial point of view, than the Arrangement, due to the size and varied nature of the Company’s portfolio and business lines, the Company’s cross border structure and the fact that leverage constraints could impact the price that public company bidders may be able to pay.

 

   

Rigorous arm’s length negotiation process. The Arrangement Agreement is the result of a rigorous arm’s length negotiation process that was undertaken with the oversight and participation of the Special Committee and the Unconflicted Company Board and their financial and legal advisors which included price increases by Blackstone from its initial proposed price of $11.00 per Common Share. The Special Committee concluded that $11.25 per Common Share is the highest price that Blackstone was willing to pay to acquire the Company.

 

   

Scotia Capital Formal Valuation and Fairness Opinion. The Special Committee received the Scotia Capital Formal Valuation and Fairness Opinion, which states that, as of the date thereof, and based upon and subject to the analyses, assumptions, limitations and qualifications set out therein: (i) the fair market value of a Common Share is in the range of $9.80 to $12.90 per Common Share, and (ii) the Consideration to be received by the Company Shareholders (excluding Blackstone) pursuant to the Arrangement is fair, from a financial point of view, to the Company Shareholders (excluding Blackstone).

 

   

Blackstone’s reputation and track record of closing transactions. The Special Committee concluded that it is likely that Blackstone will complete the Arrangement if all conditions are satisfied given (i) Blackstone’s proven ability to complete large acquisition transactions, including substantial experience with take-private transactions, (ii) Blackstone’s extensive experience in the real estate industry, (iii) Blackstone’s substantial available capital and (iv) the Purchaser Termination Fee of $526 million payable to the Company if the Arrangement Agreement is terminated in certain circumstances (representing approximately 15% of the Company’s equity value (assuming the exchange of all Preferred Units)), $466.843 million of which payment is guaranteed by BREP X and $59.157 million of which payment is guaranteed by BREIT OP.

 

   

Reasonable timeline to closing. The Arrangement is structured as a statutory plan of arrangement under the Business Corporations Act (Ontario). The completion of the Arrangement is expected to occur in the second quarter of this year, and is subject to customary closing conditions, including court approval, the approval of the Company Shareholders and Required Regulatory Approvals under the Competition Act (Canada) and Investment Canada Act.

The members of the Special Committee also considered a number of factors relating to the procedural safeguards that it believes were and are present to ensure the fairness of the Arrangement and to permit the Special Committee to effectively represent the interests of the Company’s unaffiliated security holders. The Special Committee believes these factors support its recommendations and provide assurance of the procedural fairness of the Arrangement to the Company’s unaffiliated security holders:

 

   

Independence. The Special Committee consists solely of independent and disinterested directors of the Unconflicted Company Board. In connection with appointing such directors to the Special Committee, the Unconflicted Company Board determined that each of them was (i) free from any conflict of interest with respect to the October Blackstone Proposal and (ii) independent to the extent required by (and subject to the exemptions and other provisions set out in) applicable law and stock exchange requirements, including MI 61-101. None of members of the Special Committee were or are directors, officers or employees of Blackstone and all of them were and are independent directors of the Company under National Instrument 52-110Audit Committees and National Instrument 58-101Disclosure of Corporate Governance Practices.

 

   

Independent advice. The Special Committee selected and engaged its own independent legal and financial advisors and received the advice of such advisors throughout its review, evaluation and negotiation of a potential acquisition of the Company.


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No obligation to recommend. The recognition by the Special Committee that it had no obligation to recommend to the Company Board the approval of the Arrangement Agreement and the Arrangement or any other transaction and had the authority to reject any proposals made.

 

   

Shareholder approval. The Arrangement Resolution must be approved by not less than (i) 66 2/3% of the votes cast by Company Shareholders present or represented by proxy and entitled to vote at the Shareholder Meeting, voting as a single class (each holder of Common Shares being entitled to one vote per Common Share) and (ii) a simple majority of the votes cast by Company Shareholders present or represented by proxy and entitled to vote at the Shareholder Meeting, excluding for this purpose votes attached to the Excluded Shares required to be excluded pursuant to MI 61-101.

 

   

Court approval. Completion of the Arrangement is subject to the approval of the Court, after considering the procedural and substantive fairness of the Arrangement at a hearing at which the Company’s unaffiliated security holders and certain others are entitled to be heard.

 

   

Ability to respond to and enter into superior proposals. Notwithstanding the Special Committee’s determination regarding the low likelihood of other potential acquirers emerging, the Company retains the ability, under the terms of the Arrangement Agreement, to consider and respond to unsolicited Acquisition Proposals, to furnish information to and conduct negotiations with third parties in certain circumstances, and to terminate the Arrangement Agreement under certain circumstances, in order to enter into a definitive agreement providing for the implementation of a Superior Proposal if the Company Board determines in good faith, after consultation with outside legal counsel and financial advisors, taking into account any changes to the Arrangement Agreement proposed in writing by the Purchaser, that the Superior Proposal continues to constitute a Superior Proposal, upon payment of the Company Termination Fee. In addition, the two-tiered Company Termination Fee of $122.8 million (representing approximately 3.5% of the Company’s equity value and approximately 2% of the Company’s enterprise value (in each case assuming the exchange of all Preferred Units)), and $61.3 million (representing approximately 1.75% of the Company’s equity value and approximately 1% of the Company’s enterprise value (in each case assuming the exchange of all Preferred Units)) if the Arrangement Agreement is terminated by the Company prior to March 3, 2024 in order to enter into a definitive agreement providing for the implementation of a Superior Proposal, was viewed by the Special Committee, based on advice received from Morgan Stanley, as reasonable under the circumstances and not likely to unduly deter a third party from pursuing a Superior Proposal. See “Arrangement Agreement – Restriction on Solicitation of Acquisition Proposals”.

 

   

Dissent Rights. Company Shareholders have the right to exercise Dissent Rights in connection with the Arrangement, subject to strict compliance with the requirements applicable to the exercise of Dissent Rights.

In the course of their deliberations, the members of the Special Committee also considered potentially negative factors associated with the Arrangement, potential risks and other factors resulting from the Arrangement and the Arrangement Agreement, including those set out below and described under “Risk Factors”.

 

   

Suspension of dividends. The Arrangement Agreement provides that the Consideration will be reduced by the amount of any dividends or other distributions paid to holders of Common Shares during the pendency of the Arrangement. Accordingly, the Company intends to suspend the payment of quarterly dividends during this period.

 

   

Non-solicitation covenants. While the terms of the Arrangement Agreement permit the Company to consider unsolicited Acquisition Proposals, the Arrangement Agreement contains limitations and restrictions on the Company’s ability to solicit additional interest from third parties and, if the Arrangement Agreement is terminated in certain circumstances, the Company will be required to pay a $122.8 million Company Termination Fee to the Purchaser (representing approximately 3.5% of the Company’s equity value and approximately 2% of the Company’s enterprise value (in each case assuming the exchange of all Preferred Units)), except that the Company Termination Fee will be reduced to $61.3 million (representing approximately 1.75% of the Company’s equity value and approximately 1% of the Company’s enterprise value (in each case assuming the exchange of all Preferred Units)) if the Arrangement Agreement is terminated by the Company prior to March 3, 2024 in order to enter into a definitive agreement providing for the implementation of a Superior Proposal.


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No participation by Company Shareholders in future growth of the Company. Following completion of the Arrangement, the Company will no longer exist as an independent public Company and Company Shareholders (excluding Blackstone) will not benefit from any appreciation in the value of, or dividends on, their Common Shares and will not participate in any future earnings or growth.

 

   

Interim period restrictions. The Arrangement Agreement contains restrictions on the conduct of the Company’s business prior to the completion of the Arrangement, which could delay or prevent the Company from undertaking business opportunities that may arise pending completion of the Arrangement without the Purchaser’s consent.

 

   

Satisfaction or waiver of conditions. The completion of the Arrangement is subject to customary conditions, some of which are outside the Parties’ control, including, among others, Court approval, the approval of the Company Shareholders and Required Regulatory Approvals under the Competition Act (Canada) and Investment Canada Act. There is no certainty that all such conditions will be satisfied or waived in a timely manner or at all.

 

   

Completion risks. There are significant costs involved in connection with entering into the Arrangement Agreement and completing the Arrangement and Management has expended substantial time and effort to consummate the Arrangement. If the Arrangement is not completed, these costs and related disruptions to the operation of the Company’s business could have an adverse impact on the Company’s existing and prospective business relationships with tenants and other third parties and its employees.

 

   

No specific performance. The fact that if the Purchaser fails, or threatens to fail, to satisfy its obligations under the Arrangement Agreement, the Company is not entitled to specifically enforce the Arrangement Agreement, and that the Company’s exclusive remedy, available if the Arrangement Agreement is terminated in certain circumstances, would be limited to the Purchaser Termination Fee in the amount of $526 million (the payment of which is guaranteed by BREP X and BREIT OP).

 

   

Tax treatment of Consideration. The Arrangement will be a taxable transaction for most Company Shareholders and, as a result, Taxes will generally be required to be paid by such Company Shareholders on any income and gains that result from receipt of the Consideration under the Arrangement. See “Certain Canadian Federal Income Tax Considerations” and “Certain U.S. Federal Income Tax Considerations. See also “Risk Factors – Risks Related to the Arrangement – The Tax Treatment of the Return of Capital Distribution is Not Free From Doubt”.

In arriving at its recommendation, the Special Committee also considered the information, data, and conclusions contained in the Scotia Capital Formal Valuation and Fairness Opinion. Given that the Special Committee received the Scotia Capital Formal Valuation and Fairness Opinion and the advice of Scotia Capital contained therein as to the most appropriate valuation methodologies for the Common Shares (being a going concern approach), it did not specifically consider other valuation measurements such as liquidation value, as the Company is an ongoing business, or net book value.

Except as set forth under “Special Factors – Background to the Arrangement”, “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement”, “Special FactorsScotia Capital Formal Valuation and Fairness Opinion” and “Special Factors – Morgan Stanley Fairness Opinion”, no director who is not an employee of the Company has retained an unaffiliated representative to act solely on behalf of “unaffiliated security holders” as defined in Rule 13e-3 under the U.S. Exchange Act for purposes of negotiating the terms of the Arrangement and/or preparing a report concerning the fairness of the Arrangement.

The Special Committee was not aware of any firm offer, proposal or indication of interest for a merger, sale of all or substantial part of the Company’s assets, or a purchase of a controlling amount of the Company’s securities having been received by the Corporation from affiliated persons or third parties during the two years preceding the signing of the Arrangement Agreement, other than the proposals from Blackstone as described herein. The Special Committee did not consider purchase prices previously paid for Common Shares in the past two years. Any such purchases would have been made at the then-current market or trading prices of such Common Shares and do not necessarily reflect the present market value of the Common Shares.


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Approval by a majority of the Company’s ‘unaffiliated security holders’, as defined in Rule 13e-3 under the U.S. Exchange Act, is not necessary for approval of the Arrangement. Such approval is not required by Canadian law and various safeguards and protective steps have been adopted to ensure the procedural fairness of the transactions contemplated by the Arrangement Agreement, including the fact that the consummation of the Arrangement requires the approval of a majority of the votes cast by Company Shareholders present or represented by proxy and entitled to vote at the Shareholder Meeting, excluding for this purpose votes attached to the Excluded Shares required to be excluded pursuant to MI 61-101, and the other procedural safeguards discussed above and in the section “Certain Legal Matters – Securities Law Matters – Application of MI 61-101 – Formal Valuation” and “Certain Legal Matters – Securities Law Matters – Application of MI 61-101 – Minority Approval”.

Recommendation and Reasons of the Unconflicted Company Board; Position of Tricon as to the Fairness of the Arrangement

The Unconflicted Company Board, acting upon the unanimous recommendation of the Special Committee, determined that the Arrangement is in the best interests of the Company and fair to the Company Shareholders (excluding Blackstone) and unanimously recommends that the Company Shareholders vote FOR the Arrangement Resolution.

Under the rules of the SEC governing “going private” transactions, the Company is required to express its belief as to the fairness of the Arrangement to the Company’s “unaffiliated security holders” as defined pursuant to Rule 13e-3 under the U.S. Exchange Act. The Unconflicted Company Board, on behalf of the Company, believes that the Arrangement is substantively and procedurally fair to the Company’s unaffiliated security holders.

The Unconflicted Company Board considered and relied upon the same factors and considerations that the Special Committee relied upon, as described above, and adopted as its own the Special Committee’s analysis and recommendations in their entirety. In addition, the Unconflicted Company Board identified a number of factors in respect of its unanimous recommendation that Company Shareholders vote FOR the Arrangement Resolution, including those set out below:

 

   

Special Committee’s analysis. The Special Committee’s analysis (as to both substantive and procedural aspects of the transaction) and recommendations, which the Unconflicted Company Board adopted, that the Unconflicted Company Board determine that entering into the Arrangement Agreement is in the best interests of the Company and that the Arrangement and the transactions contemplated by the Arrangement Agreement are fair to the Company Shareholders (excluding Blackstone), authorize the Company to execute and deliver the Arrangement Agreement and other transaction documents and recommend that the Company Shareholders vote FOR the Arrangement Resolution. See “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Special Committee” above.

 

   

Independent Special Committee. The procedural fairness of the transaction, including that the transaction was negotiated under the supervision of the Special Committee consisting of directors who are independent and disinterested, that the members of the Special Committee do not have an interest in the Arrangement different from, or in addition to, that of the Company’s unaffiliated security holders other than their interests described in the section titled “Certain Legal Matters – Certain Legal Matters” and that the Special Committee was advised by its own independent legal and financial advisors.

 

   

Special Committee’s receipt of the Scotia Capital Formal Valuation and Fairness Opinion. The fact that the Special Committee received the Scotia Capital Formal Valuation and Fairness Opinion which states that, as of the date thereof, and based upon and subject to the analyses, assumptions, limitations and qualifications set out therein: (i) the fair market value of a Common Share is in the range of $9.80 to $12.90 per Common Share, and (ii) the Consideration to be received by the Company Shareholders (excluding Blackstone) pursuant to the Arrangement is fair, from a financial point of view, to the Company Shareholders (excluding Blackstone).


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Morgan Stanley Fairness Opinion. The fact that the Unconflicted Company Board received the Morgan Stanley Fairness Opinion, which states that, as of the date thereof, and subject to the assumptions, limitations and qualifications set out therein, the Consideration to be received by the Company Shareholders (excluding Blackstone) pursuant to the Arrangement is fair, from a financial point of view, to the Company Shareholders (excluding Blackstone).

 

   

Fully empowered Special Committee. The fact that the Special Committee was fully empowered to review, evaluate and negotiate a potential transaction involving Blackstone or any alternative to such potential transaction and to definitively approve or reject any transaction.

The Unconflicted Company Board concluded that the uncertainties, risks and potentially negative factors as identified by the Special Committee described above were outweighed by the potential benefits of the Arrangement. See “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Special Committee”.

The foregoing discussion of the information and factors considered by the Special Committee and the Unconflicted Company Board is not intended to be exhaustive, but includes the material factors considered by the Special Committee and the Unconflicted Company Board in making their respective determinations and recommendations with respect to the Arrangement. The Special Committee and the Unconflicted Company Board did not consider it practicable to, and did not, quantify or attempt to assign specific weights to the factors considered in reaching their respective determinations and recommendations. Furthermore, individual members of the Special Committee and the Unconflicted Company Board may have weighed certain factors differently. The Special Committee and the Unconflicted Company Board did not reach any specific conclusion with respect to any of the factors or reasons considered, and the above factors are not presented in any order of priority. The foregoing discussion includes forward-looking information and readers are cautioned that actual results may vary. See “Forward-Looking Information”.

Compensation of the Special Committee

The Unconflicted Company Board has approved the following payments to the members of the Special Committee: (i) a fixed retainer of C$33,750 for each member, and (ii) the reimbursement of all reasonable expenses incurred in connection with their service as members of the Special Committee. Such payments are not conditional on completion of the Arrangement.

In recommending and approving the compensation structure, the Unconflicted Company Board considered, among other things, precedent compensation structures for special committees formed for purposes comparable to those for which the Special Committee was formed, the nature and scope of the privatization transaction proposed by Blackstone and the time expected to be required by the Special Committee members, and potential advantages and disadvantages of alternative compensation arrangements.

Scotia Capital Formal Valuation and Fairness Opinion

In making its recommendation that the Unconflicted Company Board determine that the Arrangement is in the best interests of the Company and fair to the Company Shareholders (excluding Blackstone), the Special Committee considered, among other things, the Scotia Capital Formal Valuation and Fairness Opinion prepared by Scotia Capital.

On January 18, 2024, at a meeting of the Special Committee, Scotia Capital rendered its oral formal valuation, subsequently delivered to the Special Committee in writing (the full text of which is attached hereto as Appendix “C”), in accordance with the requirements of MI 61-101 which concluded that, as of January 18, 2024, and based upon and subject to Scotia Capital’s analyses, assumptions, limitations and qualifications set forth in the Scotia Capital Formal Valuation and Fairness Opinion, the fair market value of a Common Share is in the range of $9.80 to $12.90 per Common Share.


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Scotia Capital also provided its oral fairness opinion, subsequently delivered to the Special Committee in writing (the full text of which is attached hereto as Appendix “C”), to the effect that, as of January 18, 2024, and based upon and subject to Scotia Capital’s analyses, assumptions, limitations and qualifications set forth in the Scotia Capital Formal Valuation and Fairness Opinion, the Consideration to be received by the Company Shareholders (excluding Blackstone) pursuant to the Arrangement is fair, from a financial point of view, to the Company Shareholders (excluding Blackstone).

MI 61-101 regulates certain transactions that raise the potential for conflicts of interest. The protections afforded by MI 61-101 apply to, among other transactions, “business combinations” (as defined in MI 61-101) in which the interest of holders of equity securities may be terminated without their consent and where a “related party” (as defined in MI 61-101) (i) would, as a consequence of the transaction, directly or indirectly acquire the issuer or the business of the issuer, or combine with the issuer, through an amalgamation, arrangement or otherwise, whether alone or with joint actors, (ii) is a party to a “connected transaction” (as defined in MI 61-101) to the transaction, or (iii)(a) is entitled to receive a “collateral benefit” (as defined in MI 61-101) or (b) is entitled to receive a consideration per equity security that is not identical in amount and form to the entitlement of the general body of holders in Canada of securities of the same class. See “Certain Legal Matters – Securities Law Matters”.

Pursuant to MI 61-101, a formal valuation of the Common Shares is required since the Arrangement is a “business combination” within the meaning of MI 61-101, BREIT is a “related party” of the Company (as defined in MI 61-101), and BREIT and BREP X may be considered to be “joint actors” within the meaning of MI 61-101 in respect of the Arrangement. Consequently, the Special Committee retained Scotia Capital to provide it with a formal valuation of the Common Shares in accordance with the requirements of MI 61-101. See “Certain Legal Matters – Securities Law Matters”.

The Scotia Capital Formal Valuation and Fairness Opinion has been prepared in accordance with the disclosure standards for formal valuations and fairness opinions of the Canadian Investment Regulatory Organization (“CIRO”), but CIRO has not been involved in the preparation or review of the Scotia Capital Formal Valuation and Fairness Opinion.

The following summary of the Scotia Capital Formal Valuation and Fairness Opinion is qualified in its entirety by reference to the full text of the Scotia Capital Formal Valuation and Fairness Opinion attached to this Circular as Appendix “C”. The Scotia Capital Formal Valuation and Fairness Opinion is not a recommendation as to how any Shareholder should vote or act on any matter relating to the Arrangement. The full text of the Scotia Capital Formal Valuation and Fairness Opinion sets out the assumptions made, procedures followed, information reviewed, matters considered, and limitations and qualifications on the review undertaken in connection with the Scotia Capital Formal Valuation and Fairness Opinion. Company Shareholders are urged to read the Scotia Capital Formal Valuation and Fairness Opinion carefully and in its entirety.

Mandate and Professional Fees

Scotia Capital, an investment dealer and wholly-owned subsidiary of The Bank of Nova Scotia (“BNS”), was first contacted regarding a potential transaction on October 5, 2023, and was subsequently engaged by the Special Committee pursuant to an engagement letter dated October 10, 2023 (the “Scotia Capital Engagement Agreement”) to prepare, if requested, a formal valuation of the Common Shares in accordance with MI 61-101 and, if requested, to provide to the Special Committee an opinion as to the fairness, from a financial point of view, of the Consideration to be received by the Company Shareholders (excluding Blackstone) pursuant to the Arrangement. Following several meetings with the Special Committee to discuss the proposed terms of the Arrangement and related matters, Scotia Capital delivered the Scotia Capital Formal Valuation and Fairness Opinion orally to the Special Committee on January 18, 2024, and subsequently in writing, the full text of which is attached hereto as Appendix “C” (the “Scotia Capital Formal Valuation and Fairness Opinion”). The form and content of the Scotia Capital Formal Valuation and Fairness Opinion were approved for release by a committee of professionals of Scotia Capital, each of whom is experienced in merger, acquisition, divestiture, opinion, valuation, and capital markets matters.


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The terms of the Scotia Capital Engagement Agreement provide that Scotia Capital would receive a fixed fee upon delivery of Scotia Capital’s preliminary valuation analysis of the Common Shares in an amount equal to $2,000,000 and a fixed fee upon delivery of the Scotia Capital Formal Valuation and Fairness Opinion in an amount equal to $1,400,000. The fee payable to Scotia Capital pursuant to the Scotia Capital Engagement Agreement is not contingent, in whole or in part, on whether the Arrangement is completed or upon the conclusions reached by Scotia Capital in the Scotia Capital Formal Valuation and Fairness Opinion, and is not financially material to Scotia Capital. In addition, the Scotia Capital Engagement Agreement requires the Company to reimburse Scotia Capital for any reasonable out-of-pocket expenses incurred in fulfilling its engagement and to indemnify Scotia Capital in certain circumstances in respect of any liabilities that might arise out of its engagement.

Credentials and Independence of Scotia Capital

Scotia Capital constitutes the global corporate and investment banking and capital markets business of BNS, one of North America’s premier financial institutions. In Canada, Scotia Capital is one of the country’s largest investment banking firms with operations in all facets of corporate and government finance, mergers and acquisitions, equity and fixed income sales and trading and investment research. Scotia Capital has participated in a significant number of transactions involving private and public companies and has extensive experience in preparing formal valuations and fairness opinions, including in connection with transactions that are subject to the formal valuation requirements of MI 61-101.

The Special Committee determined that Scotia Capital is qualified and competent to provide the services under the Scotia Capital Engagement Agreement. In addition, the Special Committee determined that Scotia Capital is independent within the meaning of MI 61-101 of all Interested Parties (as defined below) to the Arrangement and is an independent valuator (as defined in MI 61-101) as required by MI 61-101. The Special Committee was advised that neither Scotia Capital nor any of its affiliated entities (as such term is defined for the purposes of MI 61-101): (i) have been engaged to provide any financial advisory services, nor has Scotia Capital or any of its affiliated entities participated in any financing, involving the Company, Blackstone, or any other interested party (as defined in MI 61-101) or any of their respective associated entities or affiliated entities (collectively, the “Interested Parties”) within the past two years, other than pursuant to the Scotia Capital Engagement Agreement and as described in the following paragraph; (ii) is an insider, associate or affiliate (as those terms are defined in the Securities Act (Ontario)) of any Interested Party; (iii) is acting as financial advisor to an Interested Party in connection with the Arrangement (other than pursuant to the Scotia Capital Engagement Agreement); (iv) is a manager or co-manager of a soliciting dealer group formed in respect with the Arrangement; (v) is a member of a soliciting dealer group formed in respect with the Arrangement performing services beyond the customary soliciting dealer’s function or receiving more than the per security holder fees payable to other members of the dealer group; (vi) has a material financial incentive in respect of the conclusions reached in the Scotia Capital Formal Valuation and Fairness Opinion; or (vii) has a material financial interest in the completion of the Arrangement.

In the past two years, other than pursuant to the Scotia Capital Engagement Letter, Scotia Capital or its affiliated entities provided the following financial services to the following Interested Parties: (i) in 2023, Scotia Capital acted as a financial advisor to Blackstone in the acquisition of a portfolio of real estate assets unrelated to the Arrangement; (ii) in 2023, Scotia Capital acted as a financial advisor to Blackstone in the sale of a real estate asset unrelated to the Arrangement; (iii) in 2022, Scotia Capital acted as a financial advisor to Blackstone in the acquisition of a portfolio of real estate assets unrelated to the Arrangement; (iv) Scotia Capital has provided financing as a participant in a consortium, or acted as sole lender to Blackstone in connection with transactions unrelated to the Arrangement, and (v) Scotia Capital has provided debt financing as a participant in a consortium to the Company. The fees paid to Scotia Capital or its affiliated entities, as applicable, in connection with the foregoing advisory activities from Blackstone totalled approximately $1,800,000, and, other than pursuant to the Scotia Capital Engagement Agreement, there were no fees paid to Scotia Capital or its affiliated entities, as applicable, in connection with the foregoing advisory activities from the Company. The fees paid were customary and are not, in the aggregate, financially material to Scotia Capital and its affiliated entities. There are no understandings, agreements or commitments between Scotia Capital and the Interested Parties with respect to any future business dealings. Scotia Capital may in the future, in the ordinary course of its business, perform financial advisory or investment banking services for the Interested Parties. The information disclosed in this paragraph is based upon information provided by Scotia Capital.


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In addition, BNS, of which Scotia Capital is a wholly-owned subsidiary, or one or more affiliates of BNS may provide banking or other financial services to one or more of the Interested Parties in the ordinary course of business. Scotia Capital acts as a trader and dealer, both as principal and agent, in the financial markets in Canada, the United States and elsewhere and, as such, it and BNS may have had and may have positions in the securities of the Interested Parties from time to time and may have executed or may execute transactions on behalf of such companies or clients for which it may have received or may receive compensation. As an investment dealer, Scotia Capital conducts research on securities and may, in the ordinary course of business, provide research reports and investment advice to its clients on investment matters, including with respect to the Interested Parties, or with respect to the Arrangement.

Prior Valuations

The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have represented to Scotia Capital on behalf of the Company (and not in their personal capacities), that to the best of their knowledge, there have been no prior valuations (as defined in the MI 61-101) of the Company, its securities or its material assets prepared within the past twenty-four (24) months.

Summary of the Scotia Capital Formal Valuation and Fairness Opinion

The following summary is qualified in its entirety by the full text of the Scotia Capital Formal Valuation and Fairness Opinion attached to this Circular as Appendix “C”.

In preparing the Scotia Capital Formal Valuation and Fairness Opinion, Scotia Capital reviewed, considered and relied upon (without attempting to verify independently the completeness or accuracy of), among other things, the following:

 

   

the terms of the proposed Arrangement reflected in a draft of the Arrangement Agreement, dated January 18, 2024;

 

   

certain publicly available information concerning the Company, including its audited annual financial statements, annual management’s discussion and analysis and annual information forms for each of the years ended December 31, 2022, 2021 and 2020;

 

   

quarterly financial statements and related management’s discussion and analysis of the Company for the nine-month and three-month period ended September 30, 2023;

 

   

notice of meeting and management information circular for an annual general meeting of shareholders of the Company, dated May 9, 2023;

 

   

forward-looking projections provided by the Company as approved by the Special Committee for Scotia Capital’s use in connection with its financial analyses, a summary of the material portions of which (and the relevant underlying assumptions deemed material by the Company) is included in the Circular (the “Company Forecasts”);

 

   

discussions with Company management and the Special Committee with respect to various risks and opportunities, long-term prospects and other issues and matters considered relevant and appropriate by Scotia Capital for purposes of preparing the Scotia Capital Formal Valuation and Fairness Opinion;

 

   

discussions with representatives of Osler, Hoskin & Harcourt LLP, legal counsel to the Special Committee;

 

   

in-person property tours of key markets and select assets;

 

   

publicly available information relating to the business, operations, financial condition, and trading history of the Company, as well as other selected public companies that Scotia Capital considered relevant and appropriate for purposes of preparing the Scotia Capital Formal Valuation and Fairness Opinion;

 

   

selected reports published by equity research analysts and industry sources that Scotia Capital considered relevant and appropriate for purposes of preparing the Scotia Capital Formal Valuation and Fairness Opinion;


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public information with respect to select precedent transactions that Scotia Capital considered relevant and appropriate for purposes of preparing the Scotia Capital Formal Valuation and Fairness Opinion;

 

   

other financial studies, analyses, investigations and such other factors as Scotia Capital deemed relevant and appropriate for purposes of preparing the Scotia Capital Formal Valuation and Fairness Opinion;

 

   

trading statistics of the Company and other public companies that Scotia Capital deemed relevant and appropriate for purposes of preparing the Scotia Capital Formal Valuation and Fairness Opinion; and

 

   

representations contained in a certificate dated January 18, 2024 obtained by Scotia Capital from the Company’s CEO and CFO on behalf of the Company (and not in their personal capacities).

Scotia Capital has not, to the best of its knowledge, been denied access by the Company to any information requested by Scotia Capital.

Assumptions and Limitations

With the Special Committee’s approval and as provided in the Scotia Capital Engagement Agreement, Scotia Capital has relied upon the completeness, accuracy and fair presentation of all of the financial and other information, data, advice, documents, opinions, appraisals, valuations and representations obtained by it from public sources, or that was provided to Scotia Capital by the Company, and its associates and affiliates and advisors (collectively, the “Information”). The Scotia Capital Formal Valuation and Fairness Opinion are conditional upon the completeness, accuracy and fair presentation of the Information. Subject to the exercise of Scotia Capital’s professional judgment, Scotia Capital has not attempted to verify independently the completeness, accuracy or fair presentation of any of the Information.

Scotia Capital is not a legal, regulatory, accounting or tax expert and has relied on the assessments made by the Company and its other professional advisors with respect to such matters. Scotia Capital has assumed the accuracy and fair presentation of, and relied upon the Company’s audited financial statements and the reports of the auditors thereon. Scotia Capital has assumed that, to the extent the Information included forecasts, projections, estimates, budgets and other future-oriented financial information, they were reasonably prepared on bases reflecting the best currently available estimates and judgments of management of the Company as to the matters covered thereby.

The Company’s CEO and CFO represented to Scotia Capital on behalf of the Company (and not in their personal capacities) in a certificate delivered as at January 18, 2024, among other things, that (a) the Company has no information or knowledge of any facts public or otherwise not specifically provided to Scotia Capital relating to the Company or any of its subsidiaries which would reasonably be expected to affect the Scotia Capital Formal Valuation and Fairness Opinion in any material respect; (b) with the exception of budgets, forecasts, projections or estimates referred to in (d), below, the Information supplied or otherwise made available to Scotia Capital orally by or on behalf of, or in the presence of, an officer of the Company, or in writing by or on behalf of the Company or any of its subsidiaries, in connection with the Scotia Capital Formal Valuation and Fairness Opinion is or, in the case of historical Information, was, at the date of preparation, true and accurate in all material respects, and no additional material, data or information would be required to make the Information not misleading in light of the circumstances in which it was prepared; (c) to the extent that any of the Information identified in (b), above, is historical, there have been no changes in material facts or new material facts since the date of such Information which have not been disclosed to Scotia Capital or updated by more current Information or data disclosed; and (d) any portions of the Information provided to Scotia Capital which constitute budgets, forecasts, projections or estimates were prepared using the assumptions identified therein, which, in the reasonable opinion of management of the Company, are (or were at the time of preparation and continue to be) reasonable in the circumstances and are not, in the reasonable belief of management of the Company, misleading in any material respect.


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In preparing the Scotia Capital Formal Valuation and Fairness Opinion, Scotia Capital has made several assumptions, including that the final executed version of the Arrangement Agreement would be identical in all material respects to the most recent draft thereof reviewed by Scotia Capital, that the Arrangement will be consummated substantially in accordance with the terms set forth in the Arrangement Agreement without any waiver or amendment of any material terms or conditions. In addition, Scotia Capital has assumed that the conditions precedent to the completion of the Arrangement can be satisfied in due course, all required consents, permissions, exemptions or orders of relevant third parties or regulatory authorities will be obtained without materially adverse condition or qualification, and the procedures being followed to implement the Arrangement will comply with all applicable laws.

The Scotia Capital Formal Valuation and Fairness Opinion are rendered on the basis of the securities markets and economic, financial and general business conditions prevailing as at the date hereof and the conditions and prospects, financial and otherwise, of the Company and its subsidiaries and affiliates, as they were reflected in the Information and as they have been represented to Scotia Capital in discussions with management of the Company and its representatives. In its financial analyses and in preparing the Scotia Capital Formal Valuation and Fairness Opinion, Scotia Capital made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Scotia Capital or any party involved in the Arrangement.

The Scotia Capital Formal Valuation and Fairness Opinion has been provided for the use and benefit of the Special Committee and the Company Board in connection with, and for the purpose of, the Special Committee’s consideration of the Arrangement. The Scotia Capital Formal Valuation and Fairness Opinion are not intended to be, and do not constitute, a recommendation to the Special Committee or the Company Board as to whether they should approve the Arrangement Agreement or recommend the Arrangement Resolution for approval by any Shareholder, or as to how any Shareholder should vote or act with respect to the Arrangement or any Common Shares. The Scotia Capital Formal Valuation and Fairness Opinion does not address the relative merits of the Arrangement as compared to other transactions or business strategies that might be available to the Company or the Company’s underlying business decision to effect the Arrangement.

Scotia Capital has based the Scotia Capital Formal Valuation and Fairness Opinion upon a variety of factors. Scotia Capital believes that its analyses must be considered as a whole and that selecting portions of its analyses and specific factors, without considering all factors and analyses together, could create a misleading view of the considerations underlying the Scotia Capital Formal Valuation and Fairness Opinion. The preparation of formal valuations and opinions are complex processes and are not necessarily susceptible to partial analyses or summary description. Any attempt to do so could lead to undue emphasis on any particular factor or analysis.

The following is a summary of the material financial analyses performed by Scotia Capital in connection with the Scotia Capital Formal Valuation and Fairness Opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses used by Scotia Capital, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. This summary is qualified in its entirety by reference to the full text of the Scotia Capital Formal Valuation and Fairness Opinion attached to this Circular as Appendix “C”. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before January 18, 2024, and is not necessarily indicative of current market conditions.

Definitions and Approach to Fair Market Value

The valuation is based upon techniques and assumptions that Scotia Capital considered appropriate in the circumstances for the purpose of arriving at an opinion as to the range of fair market values of the Common Shares. Scotia Capital approached the valuation in accordance with MI 61-101, which, in the case of a “business combination” such as the Arrangement, requires the valuator to make a determination as to the “fair market value” of the affected securities (i.e., the Common Shares). MI 61-101 defines “fair market value” as the monetary consideration that, in an open and unrestricted market, a prudent and informed buyer would pay to a prudent and informed seller, each acting at arm’s length with the other and under no compulsion to act. In accordance with MI 61-101, Scotia Capital made no downward adjustment to the fair market value of the Common Shares to reflect the liquidity of the Common Shares, the effect of the Arrangement, or whether or not the Common Shares held by Company Shareholders (excluding Blackstone) form part of a controlling interest.

In arriving at its opinion as to the fair market value (as defined in MI 61-101) of the Common Shares, Scotia Capital did not attribute any particular quantitative weighting to the individual valuation methodologies, but rather made qualitative judgments based upon its experience in rendering such opinions and on prevailing circumstances as to the significance and relevance of each valuation methodology. Fair market value of the Common Shares was analyzed on a going concern basis, as Tricon is expected to continue as a going concern, and expressed as an amount per Common Share.


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Valuation Methodologies

In particular, the selection of comparable companies and comparable transactions is subjective and requires the exercise of professional judgment, informed by the independent valuator’s experience and expertise. In the context of the Scotia Capital Formal Valuation and Fairness Opinion, Scotia Capital prepared a discounted cash flow (referred to in this section as “DCF”) analysis and direct capitalization (referred to in this section as “Direct Capitalization”) analysis to value the single family rental portfolio (referred to in this section as “SFR Portfolio”) as part of the net asset value analysis approach (referred to in this section as “NAV Analysis”). Additionally, Scotia Capital also reviewed and considered the premiums / discounts to unaffected share price and consensus NAV from selected precedent transactions (referred to in this section as “Precedent Transaction Analysis”). Furthermore, Scotia Capital reviewed and considered forward trading multiples of funds from operations (referred to in this section as “FFO”) and premiums / discounts to consensus NAV involving selected publicly listed companies (referred to in this section as “Comparable Trading Analysis”). Lastly, as discussed below, Scotia Capital reviewed and considered valuation reference points informed by 52-week historical trading range and equity research analysts’ price targets, but did not rely on these analyses to arrive at its conclusion regarding the fair market value of the Common Shares. The following is a summary of the range of fair market values of the Common Shares resulting from the NAV Analysis, Precedent Transaction Analysis and the Comparable Trading Analysis.

Application of Valuation Methodologies to the Common Shares

NAV Analysis and Approach

The NAV approach ascribes a separate value for each asset and liability category, utilizing the methodology appropriate in each case. The sum of total assets less total liabilities equals NAV.

Scotia Capital has considered a variety of valuation techniques and, in its professional judgement, believes the NAV approach is the most appropriate methodology for estimating the “en bloc” value of the Common Shares.

For the purposes of determining the Company’s overall NAV, Scotia Capital separated the NAV into the following components:

 

   

SFR Portfolio;

 

   

Adjacent Residential Businesses;

 

   

Strategic Capital Business;

 

   

Debt;

 

   

Present Value of Deferred Taxes Liability;

 

   

Capitalized Value of Corporate Overhead; and

 

   

Corporate Net Other Assets / Liabilities.

SFR Portfolio

To value the SFR Portfolio, Scotia Capital utilized a DCF approach and a Direct Capitalization approach.


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DCF Approach

Scotia Capital’s DCF analysis involved deriving a value range by discounting the projected unlevered free cash flows from the Company Forecasts (referred to in this section as “UFCF”) to a present value, using an appropriate weighted average cost of capital (referred to in this section as “WACC”) range of 9.0% – 10.0% as the discount rate. The WACC was calculated based on the Company’s cost of debt and cost of equity, weighted based upon an assumed optimal capital structure for Tricon. Tricon’s assumed optimal capital structure was determined based upon a review of the capital structures of comparable companies in the SFR sector, and the risks inherent in Tricon’s business and the real estate industry. The cost of debt was based on guidance from Company management to Scotia Capital. The Capital Asset Pricing Model (referred to in this section as “CAPM”) calculates the cost of equity based on the risk-free rate of return (referred to in this section as the “Risk Free Rate”), the volatility of equity prices relative to a benchmark (referred to in this section as “Beta”), and the equity risk premium (referred to in this section as “Equity Risk Premium”). Scotia Capital selected a range of unlevered Betas based on comparable companies that have risks similar to Tricon in the SFR sector. The selected unlevered Beta was levered using the assumed optimal capital structure and used to calculate the cost of equity.

The following is a summary of the assumptions and calculations used to estimate WACC for Tricon:

 

        Low           High     

Cost of Equity

    

Levered Beta

     0.73       1.08  

Selected Equity Risk Premium(1)

     6.0%  

Risk Free Rate(2)

     4.4%  
  

 

 

 

Cost of Equity (excl. Size Premium)

     8.8%       10.9%  

Add: Size Premium(3)

     1.0%  

 

  

 

 

 

Cost of Equity

     9.9%       11.9%  

Cost of Debt

     6.0%  
  

WACC Calculation

    

Cost of Equity

     9.9%       11.9%  

Equity / Total Capitalization

     75.0%       65.0%  

Cost of Debt

     6.0%  

Debt / Total Capitalization

     25.0%       35.0%  

 

  

 

 

   

 

 

 

WACC

     8.9%       9.9%  
    

Selected WACC Range

     9.0% - 10.0%  

 

  

 

 

 

Notes:

(1)

Midpoint of selected Equity Risk Premium range of 5% – 7% based on review of estimates from Kroll, Damodaran and other sources considered relevant.

(2)

20-year U.S. Treasury benchmark yield as of January 17, 2024.

(3)

Based on Kroll’s Cost of Capital guide.

As part of the DCF analysis, Scotia Capital also capitalized subsequent projected results at the end of the cash flow period from the Company Forecasts utilizing a terminal year net operating income (referred to in this section as “NOI”) value and applying a terminal capitalization rate ranging from 5.25% to 5.75% and discounted to a present value using the WACC. Scotia Capital’s DCF analysis was performed based on Company Forecasts, which are presented on a proportionate ownership basis.


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The value of the SFR Portfolio using the DCF approach ranged from $5,797 million to $6,519 million.

Direct Capitalization Approach

Scotia Capital utilized a Direct Capitalization approach to value the SFR Portfolio. The nominal capitalization rate range of 5.25% to 5.75% was selected based on, among other factors, review of comparable transactions and public companies, capitalization rates based on Tricon’s historical acquisitions, independent market sources, Company management guidance and Scotia Capital’s knowledge of the current real estate market.

As part of the Direct Capitalization approach, Scotia Capital utilized the Company’s stabilized NOI estimate of $334 million. The figure is based on in-place rents, stabilized occupancy, a stabilized margin as well as a normalized ancillary revenue profile for the SFR Portfolio. Scotia Capital applied a one-year growth factor to arrive at a forward twelve-month estimate.

The value of the SFR Portfolio using the Direct Capitalization approach ranged from $5,806 million to $6,359 million.

Adjacent Residential Businesses

In addition to the SFR Portfolio value, Scotia Capital has assigned values to Tricon’s Adjacent Residential Businesses – Canadian development properties, Canadian multi-family rental properties and investments in U.S. residential properties. Scotia Capital ascribed a value of $689 million based on their proportionate carrying value as per the Company’s financial statements, which are supported by third-party appraisals.

Strategic Capital Business

The Company earns fees from managing third-party capital co-invested in its real estate assets. Activities of the aforementioned include providing asset management, property management and development management services.

Scotia Capital valued the Strategic Capital Business by applying a percentage factor to the Company’s third-party AUM. In selecting an appropriate Enterprise Value (referred to in this section as “EV”) / AUM percentage to apply to the Company’s third-party AUM, Scotia Capital reviewed EV / AUM percentages of North American asset manager precedent transactions.

The value of the Strategic Capital Business using a 3% to 5% EV / AUM percentage based on the Company’s third-party AUM of $8,125 million as per the Company’s quarterly financial statements and related management’s discussion and analysis of the Company for the nine-month and three-month period ended September 30, 2023, ranged from $244 million to $406 million.

Debt

The Company’s total debt was included in Scotia Capital’s assessment based upon the outstanding principal amount and a mark-to-market adjustment. As per the Company’s financial statements, Tricon has total outstanding debt of $3,103 million with a weighted average interest rate of 4.5%. Based on prevailing U.S. Treasury yields and real estate lending spreads, the total fixed-rate debt recorded under IFRS in the Company’s financial statements is higher than fair market value. Scotia Capital reviewed and utilized the Company’s mark-to-market adjustment associated with the Company’s fixed-rate debt. This adjustment resulted in a reduction of $110 million to the total outstanding debt, resulting in an indicative value of $2,993 million for the Company’s total debt.


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Deferred Income Taxes Liability

Scotia Capital utilized the December 31, 2028 net deferred income tax liability as per Company Forecasts to calculate a present value range of $286 million to $413 million. The calculation was based on a WACC range of 9.0% to 10.0% and a factor range applied to the December 31, 2028 net deferred income tax liability balance.

Capitalized Value of Corporate Overhead

Scotia Capital utilized normalized total corporate overhead General & Administrative (referred to in this section as “G&A”) expenses of $28 million, which reflect public company cost savings of $7 million, based on guidance from Company management to Scotia Capital. For the purposes of the NAV calculation, a multiple range of 6.0x to 7.0x was applied to capitalize the corporate overhead G&A expenses, which resulted in a range of $167 million to $195 million.

Corporate Net Other Assets / Liabilities

For the purposes of the NAV calculation, the Company’s Net Other Assets / Liabilities, including net working capital, were valued at their carrying value as per the Company’s financial statements.

NAV Summary

The following table summarizes Scotia Capital’s NAV Analysis of the Company, applying the DCF approach and Direct Capitalization Approach to the SFR Portfolio:

 

     DCF Approach    Direct Capitalization
Approach
(US$ millions)      Low        High        Low        High  

SFR Portfolio(1)

       $5,797            $6,519            $5,806            $6,359    

Adjacent Residential Businesses

       $689            $689            $689            $689    

Strategic Capital Business

       $244            $406            $244            $406    

Debt

       ($2,993 )            ($2,993 )            ($2,993 )            ($2,993 )    

Present Value of Deferred Taxes Liability(2)

       ($413 )            ($286 )            ($413 )            ($286 )    

Capitalized Value of Corporate Overhead

       ($167 )            ($195 )            ($167 )            ($195 )    

Corporate Net Other Assets / (Liabilities)(3)

       ($100 )            ($104 )            ($100 )            ($103 )    

 

    

 

 

      

 

 

      

 

 

      

 

 

 

Net Asset Value

       $3,056            $4,036            $3,066            $3,877    

Fully Diluted Shares Outstanding

       311              312              311              312      

 

    

 

 

      

 

 

      

 

 

      

 

 

 

Net Asset Value per Share

       $9.82            $12.94            $9.85            $12.44    

Notes:

(1)

Includes pro-rata gross proceeds from the sale of an interest in a portfolio of SFR expected to close in 2024 under the DCF approach; Company Forecasts reflect proportionate ownership.

(2)

Includes present value range of taxes payable of $25 million to $28 million based on estimated taxes payable per Company Forecasts and WACC range of 9.0% to 10.0%.

(3)

Includes cash settlement of performance share units based on implied Net Asset Value per Common Share.

Based on the foregoing, by subtracting the sum of the Company’s total liabilities from the sum of its total assets, Scotia Capital determined a range of $9.82 per Common Share to $12.94 per Common Share using the DCF Approach for the SFR Portfolio, and a range of $9.85 per Common Share to $12.44 per Common Share using the Direct Capitalization Approach for the SFR Portfolio.


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NAV Sensitivity Analysis

In completing the NAV analysis, Scotia Capital performed a variety of sensitivities. With respect to the DCF approach, terminal capitalization rate and WACC were sensitized. For the Direct Capitalization approach, stabilized NOI and direct capitalization rate were sensitized. A summary of the results are as follows:

 

(US$ per Share)          Impact on NAV per Share  

Variable

     Sensitivity         Negative         Positive    

DCF Approach

      

Terminal Capitalization Rate

     +/- 0.125%       ($0.37)       $0.38  

WACC

     +/- 0.50%       ($0.37)       $0.37  

Direct Capitalization Approach

      

Stabilized NOI

     +/- 2.50%       ($0.48)       $0.48  

Direct Capitalization Rate

     +/- 0.125%       ($0.43)       $0.45  

Precedent Transaction Analysis

Scotia Capital reviewed and considered public market all-cash M&A precedent transactions in the North American real estate sector that exhibited certain characteristics considered, in Scotia Capital’s professional judgement, to be comparable to the Company. The following table illustrates the premiums / discounts to unaffected share price and consensus NAV at which selected transactions have been completed involving U.S. SFR, U.S. multi-family and TSX-listed public real estate entities in North America since 2015, based on information in public filings, press releases and investor relations documents:

 

(US$ billions)              Premium Paid (%)  

Date
Announced

  

Target

  

Acquiror

   Enterprise
Value
   Unaffected(1)
Price
  Consensus(2)
NAV
 

U.S. SFR

 

 

Oct-2020

   Front Yard Residential    Pretium & Ares    $2.4    63%     22  

Feb-2017

   Silver Bay Realty Trust Corp    Tricon Capital Group    $1.4    19%     (11 %)   

Mean

            41%     6  

U.S. Multi-Family

 

 

Feb-2022

   Preferred Apartment Communities    Blackstone    $5.8    39%     26  

Dec-2021

   Bluerock Residential    Blackstone    $3.6    57%     48  

Jul-2017

   Monogram Residential Trust    Greystar Growth and Income Fund    $3.4    22%     3  


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(US$ billions)                       Premium Paid (%)  

Date
Announced

  

Target

  

Acquiror

   Enterprise
Value
     Unaffected(1)
Price
   Consensus(2)
NAV
 

Jun-2015

   Home Properties    Lone Star Global Acquisitions      $7.6           9%           6  

Apr-2015

   Associated Estates Realty    Brookfield Asset Management      $2.5           65%            24  

Mean

                 39%           21  

TSX-Listed

 

 

Nov-2022

   Summit Industrial Income REIT    GIC / Dream Industrial REIT      C$5.9           31%           20  

Oct-2021

   Cominar REIT    Canderel-led Consortium      C$5.7           13%           (8 %)   

Aug-2021

   WPT Industrial REIT    Blackstone REIT (BREIT)      $3.1           17%           32  

Feb-2020

   Northview Apartment REIT    Starlight / KingSett      C$4.9           12%           25  

Sep-2019

   Dream Global REIT    Blackstone      C$6.2           18%           2  

Jun-2019

   Pure Multi-Family REIT    Cortland Partners      $1.2           15%           5  

Nov-2018

   Agellan Commercial REIT    Elad Genesis (El-Ad)      C$0.7           5%           4  

Jan-2018

   Pure Industrial Real Estate Trust    Blackstone Property Partners      C$3.8           21%           27  

Jan-2017

   Milestone Apartments REIT    Starwood Capital Group      $2.9           9%           5  

May-2016

   InnVest REIT    Bluesky Hotels and Resorts      C$2.1           33%           35  

Sep-2015

   Amica Mature Lifestyles    BayBridge Seniors Housing      C$1.0           113%           90  

Jun-2015

   Regal Lifestyle Communities    HealthCare REIT / Revera      C$0.8           27%           29  

Mean

                 26%           22  

Mean (Excluding Amica)

           18%           16  

Notes:

(1)

Based on unaffected share price of target the date prior to being affected by M&A related news, inclusive of activism campaigns and publicly-disclosed unsolicited offers.

(2)

Per consensus analyst estimates.

In selecting the appropriate premiums / discounts to the unaffected share price and consensus NAV to apply to the Company, Scotia Capital considered the characteristics of the targets involved in the transactions above including, among other considerations, type, location, and quality of their assets. Based on the foregoing, Scotia Capital selected the ranges outlined below. As of January 17, 2024, the consensus NAV, based on the average of the NAV published by research analysts, per Common Share was $11.71 and the Common Share price was $8.72.

 

       Selected Premiums       Implied Value per Share  
     Low   High   Low    High

Premium / (Discount) to Unaffected Price

   10.0%   30.0%    $9.59    $11.34

Premium / (Discount) to Consensus NAV

   (10.0%)   20.0%   $10.54    $14.05


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Comparable Trading Analysis

In applying this valuation methodology to the Company, Scotia Capital identified and reviewed publicly traded companies that exhibited certain characteristics considered, in Scotia Capital’s professional judgement, to be comparable to the Company. The following table illustrates the premiums / discounts to consensus NAV and forward trading FFO multiples for U.S. SFR and multi-family peers based on their Sun Belt region exposure based on information in public filings, press release and investor relations documents:

 

(US$ billions)

 

Comparable Company

   Market
  Capitalization(1)  
   Price /
 2024E FFO(2)
   Premium /
 (Discount) to NAV(2)

U.S. SFR

            

Invitation Homes

       $20.4    17.7x        (15.7 %) 

AMH

       $14.6    20.1x        (9.2 %)
            

U.S. Multi-Family

            

Camden Property Trust

       $10.7    14.2x        (21.4 %)

Mid-America Apartment Communities

       $15.9    14.5x        (15.3 %)

UDR, Inc.

       $13.4    15.0x        (13.0 %)

Independence Realty Trust Inc.

       $3.4    12.9x        (2.4 %)

Overall Minimum

        12.9x        (21.4 %)

Overall Maximum

        20.1x        (2.4 %)

Notes:

(1)

Closing share prices as of January 17, 2024.

(2)

Per consensus analyst estimates.

In selecting the appropriate premiums / discounts to consensus NAV and forward trading multiples of FFO to apply to the Company, Scotia Capital considered, among other factors, operating characteristics, growth profile, size, type and location of assets, and exposure to the Sun Belt region. Based on the foregoing, Scotia Capital selected the ranges outlined below. As of the date herein, the consensus NAV per Common Share was $11.71 and consensus 2024E FFO per Common Share was $0.60.

 

       Selected Range       Implied Value per Share  
     Low   High   Low    High

Price to Consensus FFO Multiple

   12.9x   20.1x   $7.79    $12.11

Premium / (Discount) to Consensus NAV

   (21.4%)   (2.4%)   $9.20    $11.43

Valuation Reference Points

Scotia Capital also reviewed and took into consideration the following valuation reference points but did not rely on this analysis to arrive at its conclusion regarding the fair market value of the Common Shares.


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Historical Trading Analysis

Scotia Capital reviewed historical trading prices of the Common Shares on the NYSE for the twelve months ended January 17, 2024. Over this twelve-month period, the Common Shares traded in a band achieving a twelve-month low of $6.53 and a twelve-month high of $9.56 per Common Share. As of January 17, 2024, the trading price and 20-day volume-weighted average trading price (referred to in this section as “VWAP”) of the Common Shares on the NYSE were $8.72 and $9.02 per Common Share, respectively.

Research Analyst Target Prices

Scotia Capital reviewed public market trading price targets for the Common Shares. Equity research analyst price targets reflect an analyst’s estimate of the one-year public market trading price of the Common Shares at the time the price target is established. As of January 17, 2024, the low and high of the latest publicly available one-year price targets of equity research analysts were $7.97 to $11.00 per Common Share, respectively.

Benefits to Blackstone of Acquiring the Shares Held by Company Shareholders

Based on discussions with Company management, Scotia Capital reviewed and considered whether any distinctive material value would accrue to Blackstone as a result of the Arrangement. Based on these discussions, Scotia Capital concluded that there would be synergies associated with a normalized corporate overhead profile of $28 million, reflective of public company cost savings, valued at 6.0x – 7.0x. No other synergies were captured in Scotia Capital’s analysis.

Formal Valuation Summary

The following is a summary of the range of fair market values of the Common Shares resulting from the NAV Analysis, Precedent Transaction Analysis and Comparable Trading Analysis:

 

(US$ per Share)      Low        High  

NAV Analysis - DCF Approach

    $9.82    $12.94

NAV Analysis - Direct Capitalization Approach

    $9.85    $12.44

Precedent Transactions Analysis - Premium / (Discount) to Consensus NAV

   $10.54    $14.05

Precedent Transaction Analysis - Premium / (Discount) to Unaffected Trading Price

    $9.59    $11.34

Comparable Trading Analysis - Premium / (Discount) to Consensus NAV

    $9.20    $11.43

Comparable Trading Analysis - FFO Multiple

    $7.79    $12.11

In arriving at its opinion as to the fair market value of the Common Shares, Scotia Capital did not attribute any particular quantitative weighting to the individual valuation methodologies, but rather made qualitative judgments based upon its experience in rendering such opinions and on prevailing circumstances as to the significance and relevance of each valuation methodology.

Valuation Conclusion

Based upon and subject to the analyses, assumptions, and limitations set out in the Scotia Capital Formal Valuation and Fairness Opinion, Scotia Capital is of the opinion that, as of January 18, 2024, the fair market value of the Common Shares is in the range of $9.80 to $12.90 per Common Share.


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Fairness Opinion Conclusion

In considering the fairness, from a financial point of view, of the Consideration to be received by the Company Shareholders (other than Blackstone) pursuant to the Arrangement, Scotia Capital observes the following:

 

  (a)

The Consideration offered pursuant to the Arrangement is within the range of fair market values as determined in the valuation;

 

  (b)

The Consideration offered implies a 29.0% and 42.1% premium to the closing price and 90-day VWAP on the NYSE as of January 17, 2024, respectively; and

 

  (c)

The Arrangement provides the Company Shareholders (other than Blackstone) full liquidity and certainty of value.

Based upon and subject to the foregoing, Scotia Capital is of the opinion that, as of January 18, 2024, the Consideration to be received by the Company Shareholders (other than Blackstone) pursuant to the Arrangement is fair, from a financial point of view, to the Company Shareholders (other than Blackstone).

General

Scotia Capital conducted the analyses described above (excluding the Historical Trading Analysis and the Research Analyst Target Prices) as part of its analysis of the fairness of the Consideration to be received pursuant to the Arrangement by the Company Shareholders (excluding Blackstone) and in connection with the delivery of the Scotia Capital Formal Valuation and Fairness Opinion to the Special Committee. These analyses do not purport to be appraisals.

No company utilized in the comparable company trading multiples analysis is identical to the Company. In evaluating the comparable companies, Scotia Capital made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the Company, such as the impact of competition on the business of the Company and the industry generally, industry growth and the absence of any adverse material change in the financial condition and prospects of the Company or the industry or in the financial markets in general. Mathematical analysis (such as determining the mean or median) is not in itself a meaningful method of using comparable company data.

No company or transaction utilized in the precedent transactions analysis is identical to the Company or the transaction. In evaluating the precedent transactions, Scotia Capital made judgments and assumptions with regard to industry performance, general business, market and financial conditions and other matters, which are beyond the control of the Company, such as the impact of competition on the business of the Company or the industry generally, industry growth and the absence of any adverse material change in the financial condition of the Company or the industry or in the financial markets in general, which could affect the public trading value of the companies and the aggregate value and equity value of the transactions to which they are being compared. Scotia Capital considered a number of factors in analyzing the Consideration to be received pursuant to the Arrangement by the Company Shareholders (excluding Blackstone). The fact that points in the range of implied present value per Common Share of the Company derived from the valuation of precedent transactions were less than or greater than the Consideration is not necessarily dispositive in connection with Scotia Capital’s analysis of the Consideration, but one of many factors considered.

Except as described above, the Special Committee imposed no other instruction on Scotia Capital with respect to the investigations made or the procedures followed by Scotia Capital in rendering its Scotia Capital Formal Valuation and Fairness Opinion. The terms and conditions of the Arrangement Agreement and the related terms and conditions of the transaction were determined through negotiations between the Company and the Purchaser. Scotia Capital did not recommend any specific consideration to the Special Committee or recommend that any specific consideration constituted the only appropriate consideration in the Arrangement. The Scotia Capital Formal Valuation and Fairness Opinion was only one of many factors considered by the Special Committee in its evaluation of the Arrangement and should not be viewed as determinative of the views of the Special Committee with respect to the Arrangement or the Consideration.


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The Scotia Capital Formal Valuation and Fairness Opinion were provided for the use and benefit of the Special Committee and the Company Board in connection with, and for the purpose of, its consideration of the Arrangement. The Scotia Capital Formal Valuation and Fairness Opinion were not intended to be, and do not constitute, a recommendation to any Company Shareholder of the Company as to how such Company Shareholder should vote or act with respect to the Arrangement or any Common Shares.

The Scotia Capital Formal Valuation and Fairness Opinion were given as of the date thereof and, except as required by MI 61-101, Scotia Capital has expressly disclaimed any undertaking or obligation to advise any person of any change in any fact or matter affecting the Scotia Capital Formal Valuation and Fairness Opinion which may come or be brought to Scotia Capital’s attention after the date thereof. Without limiting the foregoing, in the event that there is any material change in any fact or matter after the date thereof affecting the Scotia Capital Formal Valuation and Fairness Opinion, Scotia Capital reserves the right to, but has no obligation to, change, modify, amend, supplement or withdraw the Scotia Capital Formal Valuation and Fairness Opinion. Scotia Capital expresses no opinion herein concerning the future trading prices of the Common Shares and makes no recommendations to any Company Shareholders with respect to the Arrangement.

Other Presentations by Scotia Capital

A preliminary version of Scotia Capital’s valuation analyses was shared with the Special Committee on January 12, 2024 (referred to in this section as the “January 12, 2024 Presentation”) and is filed as an exhibit to the Schedule 13E-3. The January 12, 2024 Presentation consisted of various summary data and analyses that Scotia Capital utilized in formulating its preliminary perspective on the valuation of the Common Shares. The January 12, 2024 Presentation did not make any recommendations or constitute an opinion of Scotia Capital in any respect. The financial analyses in the January 12, 2024 Presentation were substantially similar to those in the final presentation of Scotia Capital’s valuations shared with the Special Committee on January 18, 2024 (referred to in this section as the “January 18, 2024 Presentation”), which is filed as an exhibit to the Schedule 13E-3, and in the Scotia Capital Formal Valuation and Fairness Opinion, subject to refinement and update. The January 12, 2024 Presentation did not present Scotia Capital’s opinion as to the value of the Common Shares and, as summarized above, the January 18, 2024 Presentation and the Scotia Capital Formal Valuation and Fairness Opinion presented a value of the Common Shares that ranged from $9.80 to $12.90. In addition, the procedures followed by Scotia Capital in preparing the analyses in the January 12, 2024 Presentation was substantially similar to the procedures used by Scotia Capital to prepare the updated analysis in the January 18, 2024 Presentation and in the Scotia Capital Formal Valuation and Fairness Opinion.

The foregoing summary does not purport to be a complete description of the January 12, 2024 Presentation or of the preliminary financial analyses performed by Scotia Capital. The January 12, 2024 Presentation does not form the basis of an opinion of Scotia Capital with respect to the consideration payable under the Arrangement Agreement, and the preliminary illustrative financial analyses therein were based on economic, monetary, market and other conditions as in effect on, and the information made available to Scotia Capital as of, the date of such presentation.

Morgan Stanley Fairness Opinion

In deciding to approve the Arrangement, the Company Board considered, among other things, the Morgan Stanley Fairness Opinion. The Company initially contacted Morgan Stanley regarding a potential advisory assignment in October 2023. Morgan Stanley was formally engaged through an engagement letter executed on January 13, 2024 and effective October 4, 2023 between the Company and Morgan Stanley to provide financial advice and assistance to the Company Board in evaluating the Arrangement, including the preparation and delivery to the Company Board of a fairness opinion in connection therewith. The Company Board selected Morgan Stanley to act as financial advisor to the Company Board based on Morgan Stanley’s qualifications, expertise and reputation, its knowledge and involvement in recent transactions in the real estate sector as well as its knowledge of the business and affairs of the Company. On January 18, 2024, at a meeting of the Company Board, Morgan Stanley rendered its oral opinion, which was subsequently confirmed in writing, to the Company Board to the effect that, as of that date, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in Morgan Stanley’s written opinion, the Consideration to be received by the Company Shareholders pursuant to the Arrangement Agreement (excluding Blackstone) was fair, from a financial point of view, to the Company Shareholders (excluding Blackstone).


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The full text of the Morgan Stanley Fairness Opinion is attached hereto as Appendix “D”. The Morgan Stanley Fairness Opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering the Morgan Stanley Fairness Opinion. Company Shareholders are urged to, and should, read the Morgan Stanley Fairness Opinion carefully and in its entirety. The Morgan Stanley Fairness Opinion is directed to the Company Board and addresses, as of the date of the Morgan Stanley Fairness Opinion, only the fairness, from a financial point of view, to the Company Shareholders (excluding Blackstone) of the Consideration to be received by such Company Shareholders pursuant to the Arrangement Agreement. The Morgan Stanley Fairness Opinion did not address any other aspect of the transaction contemplated by the Arrangement Agreement and does not constitute a recommendation to Company Shareholders as to how to vote at the Shareholder Meeting. The summary of the Morgan Stanley Fairness Opinion set forth in this Circular is qualified in its entirety by reference to the full text of the Morgan Stanley Fairness Opinion. Morgan Stanley was not requested to opine as to, and the Morgan Stanley Fairness Opinion did not in any manner address the relative merits of, the transactions contemplated by the Arrangement Agreement as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available, nor did it address the underlying business decision of the Company to enter into the Arrangement Agreement or proceed with any other transaction contemplated by the Arrangement Agreement.

For purposes of rendering the Morgan Stanley Fairness Opinion, Morgan Stanley, among other things:

 

   

reviewed certain publicly available financial statements and other business and financial information of the Company;

 

   

reviewed certain internal financial statements and other financial and operating data concerning the Company;

 

   

reviewed certain financial projections prepared by the management of the Company;

 

   

reviewed information relating to certain strategic, financial and operational benefits anticipated from the Arrangement, prepared by the management of the Company;

 

   

discussed the past and current operations and financial condition and the prospects of the Company with senior executives of the Company;

 

   

discussed the past and current operations and financial condition and the prospects of Purchaser with senior executives of the Purchaser;

 

   

reviewed the reported prices and trading activity for the Common Shares;

 

   

compared the financial performance of the Company and the prices and trading activity of the Common Shares with that of certain other publicly-traded companies comparable with the Company and their securities;

 

   

reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;

 

   

participated in certain discussions and negotiations among representatives of the Company and the Purchaser and their financial and legal advisors;

 

   

reviewed the Arrangement Agreement and certain related documents;


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reviewed a certificate addressed to Morgan Stanley, dated as of January 18, 2024, signed by a senior officer of the Company as to the completeness, accuracy and fair presentation of the information provided to Morgan Stanley by the Company upon which this opinion is based; and

 

   

performed such other analyses, reviewed such other information and considered such other factors as Morgan Stanley deemed appropriate.

In arriving at its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to Morgan Stanley by the Company, and formed a substantial basis for this opinion. A senior officer of the Company has represented to Morgan Stanley, in a certificate delivered as of the date of the Morgan Stanley Fairness Opinion, among other things, that the information, data, advice, opinions, representations and other materials (verbal or written) (which is collectively referred to as “Information” in this section) provided to Morgan Stanley on behalf of the Company and relating to the Company are complete and correct in all material respects as at the date the Information was provided to Morgan Stanley and that, since that date, there has been no material change, financial or otherwise, in the position of the Company, or in its assets, liabilities (contingent or otherwise), business or operations and there has been no change in any material fact or no new material fact which is of a nature as to render the Information or any part thereof untrue or misleading in any material respect or which could reasonably be expected to have a material effect on the Morgan Stanley Fairness Opinion. With respect to the financial projections, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company of the future financial performance of the Company. In addition, Morgan Stanley assumed that the Arrangement would be consummated in accordance with the terms set forth in the Arrangement Agreement without any waiver, amendment or delay of any terms or conditions, and that the definitive Arrangement Agreement would not differ in any material respect from the draft thereof furnished to Morgan Stanley. Morgan Stanley assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the proposed Arrangement, no delays, limitations, conditions or restrictions will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the proposed Arrangement. Morgan Stanley relied upon, without independent verification, the assessments of the respective managements of the Company and the Purchaser of: (i) the strategic, financial and other benefits expected to result from the Arrangement, and (ii) the timing and risks associated with the integration of the Company and the Purchaser. Morgan Stanley is not a legal, tax or regulatory advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessment of the Company and its legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to be received by any of the Company’s officers, directors or employees, or any class of such persons, relative to the Consideration to be paid to the Company Shareholders (excluding Blackstone) in the transactions contemplated by the Arrangement Agreement. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of the Company, nor was Morgan Stanley furnished with any such valuations or appraisals. The Morgan Stanley Fairness Opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Morgan Stanley as of the date of the Morgan Stanley Fairness Opinion. Events occurring after such date may affect the Morgan Stanley Fairness Opinion and the assumptions used in preparing it, and Morgan Stanley does not assume any obligation to update, revise or reaffirm the Morgan Stanley Fairness Opinion.

Summary of Financial Analyses

The following is a summary of the material financial analyses performed by Morgan Stanley in connection with the preparation of the Morgan Stanley Fairness Opinion. The following summary is not a complete description of the Morgan Stanley Fairness Opinion or the financial analyses performed and factors considered by Morgan Stanley in connection with the Morgan Stanley Fairness Opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. Except as otherwise noted, to the extent that the Morgan Stanley Fairness Opinion is based on market data, it is based on market data as it existed on or before January 16, 2024, and is not necessarily indicative of current market conditions.

Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering all financial analyses or factors or the full narrative description of the analyses or factors, including the methodologies and assumptions underlying the analyses or factors, could create a misleading or incomplete view of the process underlying the financial analyses and the Morgan Stanley Fairness Opinion.


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Comparable Companies Analysis

Morgan Stanley reviewed and compared certain publicly available and Company management-provided financial information, ratios and multiples relating to the Company with equivalent publicly available data for companies that share similar business characteristics with the Company to derive implied per Common Share equity value reference ranges for the Company based on various metrics. Morgan Stanley reviewed the following publicly-traded companies (which are referred to as “selected companies” in this section): American Homes 4 Rent and Invitation Homes Inc.

For purposes of this analysis, Morgan Stanley calculated and analyzed certain statistics for each of these companies for comparison purposes, including: (i) the ratios of share or unit price to Wall Street research analyst consensus (which is referred to as “Street consensus” in this section) estimated funds from operations (which is referred to as “FFO” in this section) for calendar years 2024 and 2025; (ii) the ratios of share or unit price to Street consensus estimated adjusted funds from operations (which is referred to as “AFFO” in this section) for calendar years 2024 and 2025; (iii) the ratio of aggregate value (which is referred to as “AV” in this section), which Morgan Stanley defined as fully-diluted equity market value, plus pro-rata share of consolidated and unconsolidated debt, plus preferred securities at liquidation preference, plus non-controlling interest, minus pro-rata share of cash and cash equivalents, to estimated earnings before interest, taxes, depreciation and amortization (which is referred to as “EBITDA” in this section) for calendar year 2024; and (iv) the premium or discount represented by the ratio of share or unit price to Street consensus estimated net asset value (which is referred to as “NAV” in this section) per share or unit as of January 16, 2024.

The multiples and ratios for each of the comparable companies were calculated using their respective closing prices on January 16, 2024, and were based on the most recent publicly available information and Street consensus estimates as of January 16, 2024. Morgan Stanley derived a range of multiples or discounts/premiums, as applicable, for each metric based on its professional judgment after reviewing the comparable companies’ high and low multiples or discounts/premiums, as applicable, for each metric. Morgan Stanley then adjusted the range of multiples or discounts/premiums, as applicable, by taking into account the last three-year average historical trading discount of the Common Shares of the Company compared to the selected companies.

Morgan Stanley then used these adjusted ranges of multiples or discounts/premiums, as applicable, to derive separate implied per Common Share equity value reference ranges for the Company using each of the metrics reviewed by applying the range derived from the comparable companies for FFO, AFFO and EBITDA, to the corresponding financial projections prepared by the management of the Company and, for NAV, to the median Street consensus. The following table reflects the results of this analysis:

 

Calendar Year Financial Statistic

      Reference Range       Implied
  Common Share Price  

Price / 2024E FFO

   13.6x – 15.6x    $8.09 - $9.28

Price / 2025E FFO

   12.6x – 14.6x    $8.31 - $9.63

Price / 2024E AFFO

   18.2x – 20.2x    $8.69 - $9.64

Price / 2025E AFFO

   17.2x – 19.2x    $9.29 - $10.37

AV / 2024E EBITDA

   18.2x – 20.7x    $8.41 - $10.94

Premium / (Discount) to Median Street Consensus NAV

   (27%) - (22%)    $8.65 - $9.24

No company utilized in the comparable company analysis is identical to the Company. In evaluating comparable companies, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the Company’s control, such as the impact of competition on the Company and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of the Company or the industry, or in the financial markets in general.


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Dividend Discount Model Analysis

Morgan Stanley performed a dividend discount model analysis using four-year dividend projections of a constant quarterly dividend of $0.058 per Common Share, from January 1, 2024 through December 31, 2027, as provided by management of the Company. In this approach, dividend per Common Share projections are discounted at a specific rate to determine the present value of the dividend stream. The present value of a terminal value, representing the value of dividends beyond the end of the forecast period, is added to arrive at a total equity value. Morgan Stanley also analyzed dividend payout ratios based on four-year FFO projections, from January 1, 2024 through December 31, 2027, as provided by management of the Company.

Morgan Stanley calculated a range of implied terminal values of the Company as of December 31, 2027 by applying a range of forward FFO multiples to calendar year 2028’s estimated FFO per Common Share as provided by management of the Company. A forward FFO multiple range of 13.6x to 15.6x was selected based on Morgan Stanley’s professional judgment, which included an analysis of the historical and current forward FFO multiples of the Company and the comparable companies referred to in the “Comparable Companies Analysis” above. Morgan Stanley then discounted the resulting terminal value, along with the dividends over the four-year forecast period, to present value using equity discount rates ranging from 11.2% to 13.2%, representing the Company’s cost of equity. These equity discount rates were the result of a capital asset pricing model approach, which generates a cost of equity as a function of the risk-free rate of return, the volatility of equity prices in relationship to a benchmark and a premium that represents the financial and non-diversifiable business risk of a stock.

Based on the foregoing, this analysis implied a valuation reference range per Common Share of approximately $7.43 to $9.00, as compared to the Consideration of $11.25 per Common Share.

Premiums Paid Analysis

Morgan Stanley considered, based on publicly available transaction information, the premiums paid in twelve selected U.S. and Canadian all-cash residential real estate transactions since 2015 with an aggregate value above $1 billion, for which sufficient information was available as of the date of the Morgan Stanley Fairness Opinion based on Morgan Stanley’s professional judgment.

Selected Precedent Transactions

 

Transaction

Announcement Date

   Target    Acquiror
           

April 19, 2022

   American Campus Communities, Inc.    Blackstone Inc.

February 16, 2022

   Preferred Apartment Communities, Inc.    Blackstone Inc.

October 19, 2020

   Front Yard Residential Corporation    Ares Management LLC, Pretium Partners, LLC

February 20, 2020

   Northview Apartment REIT    Starlight Investments, KingSett Capital

July 18, 2019

   Pure Multi-Family REIT    Cortland Partners, LLC

June 25, 2018

   Education Realty Trust, Inc.    Greystar Real Estate Partners


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July 4, 2017

   Monogram Residential Trust, Inc.    APG Asset Management N.V., GIC Pte Ltd., Greystar Real Estate Partners, Ivanhoe Cambridge

February 27, 2017

   Silver Bay Realty Trust Corp.    Tricon Capital Group Inc.

January 19, 2017

   Milestone Apartments Real Estate Investment Trust    Starwood Capital Group

October 16, 2015

   Campus Crest Communities, Inc.    Harrison Street Real Estate Capital, LLC

June 22, 2015

   Home Properties, Inc.    Lone Star Funds

April 22, 2015

   Associated Estates Realty Corporation    Brookfield Asset Management Inc.

Morgan Stanley calculated the premiums paid in these transactions over the applicable unaffected stock price of the target company (i.e., the amount by which the price that the purchaser paid for the shares of the target exceeded the unaffected market price of such shares), which represents the closing stock price for the last trading day prior to the earlier of the date of announcement of such transaction, or the date on which market rumors or other relevant news impacted the target’s share price prior to transaction announcement (including through activism or a publicly-disclosed unsolicited offer).

Based on the results of this analysis and the unaffected share price premiums paid in precedent transactions as outlined above, Morgan Stanley applied a premium range of 12.1% to 37.0% based on the observed bottom and top quartiles to the unaffected price of the Common Shares as of January 16, 2024, resulting in an implied price per Common Share reference range of $10.03 to $12.26, as compared to the Consideration of $11.25 per Common Share.

No company or transaction utilized in the premiums paid analysis is identical to the Company or the Arrangement. In evaluating the selected acquisitions, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, market and financial conditions and other factors beyond the control of the Company, such as the impact of competition on the business of the Company or the industry generally, industry growth and the absence of any adverse material change in the financial condition of the Company or the industry or in the financial markets in general, which could affect the public trading value of the companies and the aggregate value and equity value of the transactions to which they are being compared.

Cash Levered Buyer Analysis

Morgan Stanley performed a hypothetical take-private analysis to determine the prices at which a levered buyer might effect a cash acquisition of the Company under current market conditions. In preparing this analysis, Morgan Stanley utilized the projected levered free cash flows included in projections prepared by the management of the Company for the period from January 1, 2024 through December 31, 2028. Morgan Stanley assumed an illustrative valuation date of December 31, 2023 and a December 31, 2028 (five-year) exit at a range of market capitalization rates for its SFR assets of 5.5% to 6.0% applied to calendar year 2029’s estimated net operating income calculated based on guidance from management of the Company for the growth rate from 2028, and added the estimated terminal values of the Company’s adjacent businesses as of December 31, 2028, calculated based on Morgan Stanley’s professional judgement using third-party reference data points and inputs from management of the Company, with respect to valuations of the adjacent businesses.

In addition, Morgan Stanley assumed that (i) the buyer assumes certain of the Company’s existing debt, issues new debt on unencumbered assets, and refinances certain of the Company’s existing debt in connection with the transaction, with such new issuance and refinancing occurring at a loan-to-value ratio of 65%, (ii) the buyer incurs approximately $125 million in transaction costs and (iii) the buyer targets a gross internal rate of return of 15.0% to 20.0%.


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Based upon these assumptions, Morgan Stanley calculated the implied per-share value reference range for the Common Shares as $8.70 to $11.26, as compared to the Consideration of $11.25 per Common Share.

Additional Reference Points

Morgan Stanley also presented to the Company Board certain additional information with respect to the Company and the Consideration that was not considered part of Morgan Stanley’s financial analysis with respect to the Morgan Stanley Fairness Opinion but was noted for reference purposes, including the following:

Historical Trading Analysis

Morgan Stanley reviewed the stock price performance of the Common Shares during the 52 weeks ended on January 16, 2024 and the volume-weighted average price (which is referred to as “VWAP” in this section) of the Common Shares over the 30, 60 and 90 trading days, respectively, ended January 16, 2024. Based on this review, Morgan Stanley noted that the Common Shares had (i) traded in the range of $6.53 to $9.56 over the 52 weeks ended January 16, 2024; (ii) a 30-day VWAP of $8.79; (iii) a 60-day VWAP of $8.13; and (iv) a 90-day VWAP of $7.90, as compared to the Consideration of $11.25 per Common Share.

Research Analyst Price Targets and NAV Per Common Share Estimates

Morgan Stanley reviewed the most recent public market trading price targets for Common Shares by the thirteen active equity research analysts that provided recent price targets for the Company prior to January 16, 2024. These targets reflect each analyst’s estimate of the future public market trading price of the Common Shares at the time the price target was published. Based on this review, Morgan Stanley noted that the research analyst price targets for the Common Shares were in the range of $8.17 to $11.06 with a consensus median of $10.00, as compared to the Consideration of $11.25 per Common Share.

Morgan Stanley reviewed the most recent estimates of NAV per Common Share published by the same thirteen analysts prior to January 16, 2024 (of which eight provided such metric). Based on this review, Morgan Stanley noted that research analyst estimates of NAV per Common Share were in the range of $10.00 to $13.25 with a consensus median of $11.86, as compared to the Consideration of $11.25 per Common Share.

The public market trading price targets and estimates of NAV per Common Share published by securities research analysts do not necessarily reflect current market trading prices for the Common Shares and these targets and estimates are subject to uncertainties, including the future financial performance of the Company and future financial market conditions.

Preliminary Presentations by Morgan Stanley

In addition to the Morgan Stanley Fairness Opinion and January 18, 2024 presentation to the Company Board and the underlying financial analyses performed in relation thereto, Morgan Stanley also delivered preliminary presentation materials to the Company Board on October 24, 2023, November 7, 2023, January 5, 2024, and January 12, 2024 (which are referred to as the “Preliminary Presentation Materials” in this section). The preliminary financial considerations and other information in the Preliminary Presentation Materials were based on information and data that were available as of the dates of the respective presentations. Morgan Stanley also continued to refine various aspects of its financial analyses. Accordingly, the results and other information presented in the Preliminary Presentation Materials differ from the January 18, 2024 financial analyses.

The Preliminary Presentation Materials were for discussion purposes only and did not present any findings or make any recommendations or constitute an opinion of Morgan Stanley with respect to the fairness of the Consideration or otherwise. The financial analyses performed by Morgan Stanley in relation to the Morgan Stanley Fairness Opinion, as described above under “Summary of Financial Analyses,” superseded all analyses and information presented in the Preliminary Presentation Materials. Copies of such Preliminary Presentation Materials have been filed as exhibits to the Schedule 13E-3 filed with the SEC in connection with the Arrangement.


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General

In connection with the review of the Arrangement by the Company Board, Morgan Stanley performed a variety of financial and comparative analyses for purposes of rendering the Morgan Stanley Fairness Opinion. The preparation of a financial opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Morgan Stanley believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Morgan Stanley may have given various analyses and factors more or less weight than other analyses and factors and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley’s view of the actual value of the Company. In performing its analyses, Morgan Stanley made numerous assumptions with regard to industry performance, general business, regulatory, economic, market and financial conditions and other matters, which are beyond the control of the Company. These include, among other things, the impact of competition on the business of the Company and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of the Company and the industry, and in the financial markets in general. Any estimates contained in Morgan Stanley’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favourable than those suggested by such estimates.

Morgan Stanley conducted the analyses described above solely as part of its analysis of the fairness, from a financial point of view, to the Company Shareholders (excluding Blackstone) of the Consideration to be received by such Company Shareholders pursuant to the Arrangement Agreement, and in connection with the delivery of the Morgan Stanley Fairness Opinion to the Company Board. These analyses do not purport to be appraisals or to reflect the prices at which Common Shares might actually trade.

Except as described above, the Company Board imposed no other instruction or limitation on Morgan Stanley with respect to the investigations made or the procedures followed by Morgan Stanley in rendering the Morgan Stanley Fairness Opinion. The Consideration was determined through arm’s length negotiations between the Company and the Purchaser, rather than by any financial advisor, and was approved by the Company Board. Morgan Stanley provided advice to the Company Board during these negotiations. Morgan Stanley did not, however, recommend any specific consideration to the Company Board or that any specific consideration constituted the only appropriate consideration for the transaction. The decision by the Company to enter into the Arrangement Agreement was solely that of the Company Board. In addition, Morgan Stanley was not requested to opine as to, and its opinion does not in any manner address, the underlying business decision of the Company to proceed with or effect the Arrangement or the likelihood of consummation of the Arrangement, nor does it address the relative merits of the Arrangement contemplated by the Arrangement Agreement as compared to other business or financial strategies that might be available to the Company, nor does it address the underlying business decision of the Company to enter into the Arrangement Agreement or proceed with any other transaction contemplated by the Arrangement Agreement, and Morgan Stanley’s opinion expressed no opinion or recommendation as to how the Company Shareholders should vote at the Shareholder Meeting.

As described in the section entitled “Special Factors – Recommendation of the Special Committee and the Unconflicted Company Board; Position of Tricon as to Fairness of the Arrangement – Recommendation and Reasons of the Unconflicted Company Board; Position of Tricon as to the Fairness of the Arrangement”, the Morgan Stanley Fairness Opinion and Morgan Stanley’s presentation to the Company Board was one of many factors taken into consideration by the Company Board in deciding to approve the execution, delivery and performance by the Company of the Arrangement Agreement and the transactions contemplated thereby. Consequently, the analyses as described above should not be viewed as determinative of the opinion of the Company Board or management of the Company with respect to the Arrangement or the Consideration to be received by Company Shareholders (excluding Blackstone) pursuant to the Arrangement or of whether the Company Board would have been willing to agree to different consideration.


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In the two years prior to the date of the Morgan Stanley Fairness Opinion, Morgan Stanley has not provided financial advisory and financing services for the Company (excluding customary sales and trading and asset management services). In the two years prior to the date of the Morgan Stanley Fairness Opinion, Morgan Stanley has provided financial advisory and financing services for the Purchaser and its affiliates and received aggregate fees of between $80 million and $120 million in connection with such services. Morgan Stanley and its affiliates in the past have provided, currently are providing, and/or in the future may provide, certain investment banking and other financial services to the Purchaser and its affiliates and their portfolio companies and have received and/or in the future may receive compensation for the rendering of these services. Morgan Stanley may seek to provide financial advisory and financing services to any of the Company, the Purchaser or their respective affiliates in the future and would expect to receive fees for the rendering of these services. The information disclosed in this paragraph is based upon information provided to us by Morgan Stanley.

Morgan Stanley is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Its securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, prime brokerage, as well as providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for their own account or the accounts of its customers, in debt or equity securities or loans of the Purchaser, the Company or any other company, or any currency or commodity, that may be involved in the Arrangement, or any related derivative instrument.

The Morgan Stanley Fairness Opinion was approved by a committee of Morgan Stanley investment banking and other professionals in accordance with its customary practice.

Under the terms of its engagement letter, Morgan Stanley provided the Company’s Board with financial advisory services and an opinion, described in this section and attached to this Circular as Appendix “D”, in connection with the Arrangement, and the Company has agreed to pay Morgan Stanley an aggregate fee of up to $45 million, of which $2 million was earned following delivery of the opinion described in this section and attached to this Circular as Appendix “D” and the balance composed of other fees, including a transaction fee and structuring fee, contingent upon the consummation of the Arrangement. In addition, the Company has agreed to reimburse Morgan Stanley for its reasonable out-of-pocket expenses and has agreed to indemnify Morgan Stanley and its affiliates, their respective directors, officers, agents and employees and each person, if any, controlling Morgan Stanley or any of its affiliates against certain liabilities related to or arising out of Morgan Stanley’s engagement.

RBC’s Advisory Role

RBC is expected to receive advisory fees from the Company in connection with the Arrangement. RBC was not asked by the Company to, and did not, deliver any report, opinion or appraisal in connection with the Arrangement. See “The Arrangement – Expenses of the Arrangement”.

Company Forecasts

The Company does not as a matter of course make public projections as to future revenues, earnings or other results due to, among other things, the inherent difficulty of predicting financial performance for future periods and the likelihood that the underlying assumptions and estimates may not be realized. However, Management has prepared the Company Forecasts summarized below and provided such Company Forecasts to Morgan Stanley, in connection with its preparation of the Morgan Stanley Fairness Opinion, Scotia Capital, in connection with its preparation of the Scotia Capital Formal Valuation and Fairness Opinion, and Blackstone, in connection with its due diligence review of the Company. Neither Morgan Stanley, Scotia Capital nor Blackstone participated in the preparation of the Company Forecasts. The Company Forecasts were not prepared with a view to public disclosure or with a view to complying with the published guidelines of the SEC or Canadian securities regulators regarding projections and forecasts or accounting rules, standards and procedures for preparation and presentation of projections and forecasts, but, in the view of Management, were prepared on a reasonable basis, reflect Management’s best available estimates and judgments regarding the Company’s expected future financial performance at the time they were prepared. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this document are cautioned not to place undue reliance on the Company Forecasts. Some or all of the assumptions that have been made in connection with the preparation of the Company Forecasts may have changed since the date the financial projections were prepared. Neither the Company’s independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the Company Forecasts, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the Company Forecasts. The Company Forecasts are included in this Circular not to influence a reader’s decision as to whether to vote for or against the Arrangement Resolution, but because the Company Forecasts were made available to the Company Board, the Special Committee, Morgan Stanley, Scotia Capital and Blackstone.


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The Company Forecasts are subjective in many respects, and in developing the Company Forecasts, Management made numerous judgements, estimates and assumptions with respect to the Company for the relevant forecast period (the period from January 1, 2024 through December 31, 2028). The Company’s near-term forecast is in accordance with the Company Board-approved strategic plan, and the longer-term forecast assumes growth across the Company’s residential business in the context of modest economic growth and stable interest rates. Key assumptions underlying the Company Forecasts include: growing the SFR portfolio by 12,000 homes over the forecast horizon; achieving same-home NOI growth of 4-5% per year; continuing to co-invest in SFR and Canadian multifamily developments (largely funded by third-party investors); and realizing cash distributions from legacy for-sale housing investments of approximately $140 million and performance fees of approximately $135 million over the forecast horizon, in accordance with the Company Board-approved strategic plan. The Company’s growth projections are assumed to be funded with internal cash flow, its corporate credit facility and long-term debt, while gradually reducing its leverage metrics over time. The Company’s overhead costs are assumed to increase with the growth of the business, while being increasingly offset with fee revenue earned from managing new investment vehicles on behalf of third-party investors. The assumptions and estimates underlying the Company Forecasts are inherently uncertain and, though considered reasonable by Management as of the date of their preparation, are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the Company Forecasts, including, without limitation, the impact of general economic conditions on the Canadian and U.S. real estate market, the cyclical nature of the real estate industry, rising interest rates, inflation, the degree to which the Company is leveraged and the Company’s portfolio concentration in the Canadian and U.S. residential real estate markets. See the risk factors described in Tricon’s annual information form and annual report (Form 40-F) for the year ended December 31, 2022, the management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2022, as well as the management’s discussion and analysis of financial condition and results of operations for the three and nine months ended September 30, 2023, each of which have been filed on SEDAR+ at www.sedarplus.ca and/or on EDGAR under Tricon’s profile at www.sec.gov. Accordingly, there can be no assurance that the prospective results are indicative of the future performance of the Company or that actual results will not differ materially from those presented in the Company Forecasts. Inclusion of the Company Forecasts in this Circular should not be regarded as a representation by any person that the results contained in the Company Forecasts will be achieved.

The Company Forecasts do not take into account any circumstances or events occurring after the date they were prepared, and the Company Forecasts are not necessarily indicative of current values or future performance, which may be significantly more favourable or less favourable than as set forth below and should not be regarded as a representation that the Company Forecasts will be achieved. Without limiting the generality of the foregoing , the Company Forecasts do not take into account the entering into of the Arrangement Agreement or the potential completion of the Arrangement and assume that the Company will continue with its current Company Board-approved strategic plan. Except as may be required in order to comply with applicable Law, none of the Company or, to the Company’s knowledge, any of its Representatives, intends to, and each of them disclaims any obligation to, update, or otherwise revise the Company Forecasts, or the specific portions presented herein, to reflect circumstances existing after the date when they were made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error (even in the short term). The Company Forecasts also reflect assumptions as to certain business decisions that are subject to change. In addition, our future financial performance may be affected by our ability to successfully implement a number of initiatives to improve our operations and financial performance and our ability to achieve strategic goals, objectives and targets over the applicable periods. Neither the Company nor any of its affiliates or Representatives considers the Company Forecasts to be necessarily predictive of actual future events, and the Company Forecasts should not be relied on as such an indication. No one has made or makes any representation to any person regarding the ultimate performance of the Company compares to the information contained in the Company Forecasts.


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Because the Company Forecasts reflect subjective judgment in many respects, they are susceptible to multiple interpretations and frequent revisions based on actual experience and business developments. The Company Forecasts also cover multiple years, and such information by its nature becomes less predictive with each succeeding year. The estimates and assumptions underlying the Company Forecasts involve judgments with respect to, among other things, economic, competitive and financial market conditions and future business decisions that may not be realized and that are inherently subject to significant business, economic and competitive uncertainties and contingencies, including, among other things, the inherent uncertainty of the business and economic conditions affecting the industries in which we operate. The Company Forecasts included below should not be considered in isolation or in lieu of the Company’s operating and other financial information that is publicly available. In addition, the Company Forecasts may not be comparable to similarly titled measures of other companies. The Company Forecasts should be read together with the Company’s published financial statements, the most recent of which are the unaudited condensed interim consolidated financial statements of the Company for the three and nine months ended September 30, 2023 and the management’s discussion and analysis of financial condition and results of operations for the three and nine months ended September 30, 2023, each of which has been filed under Tricon’s profiles on SEDAR+ at www.sedarplus.ca on November 7, 2023 and EDGAR at www.sec.gov on November 7, 2023.

 

Projected Financials(1)
         Fiscal Year Ending December 31,
    

Q3 YTD 2023

 

2024E

 

2025E

 

2026E

 

2027E

 

2028E

Net Income(2)    157   -   -   -   -   -
Total Capital Expenditures(2)    (141)   -   -   -   -   -
NOI from Single-Family Rental Properties(3)(4)    229   318   325   351   399   432
Adjusted EBITDAre(3)(5)    311   317   339   416   418   449
Recurring Capital Expenditures(3)(6)    (26)   (37)   (38)   (40)   (42)   (44)
Core FFO Per Share(3)(7)    $0.41   $0.60   $0.66   $0.86   $0.79   $0.81
AFFO Per Share(3)(8)    $0.33   $0.48   $0.54   $0.73   $0.66   $0.67
Weighted Average Common Shares Outstanding (diluted)(9)    310,497,125(10)   311,788,309   313,549,116   316,964,582   316,190,042   312,270,628

Notes:

(1)

All amounts are in US$ millions, except for per share amounts, which are in US$, and Common Shares outstanding, which are absolute numbers of Common Shares. Projected financials are shown at the Company’s proportionate share of each portfolio or business. The presentation on a proportionate basis reflects only the portion attributable to Company Shareholders based on the Company’s ownership percentage of the underlying entities and excludes the percentage associated with non-controlling and limited partners’ interests. The amounts set out in this chart under Q3 YTD 2023 are presented for the nine months ended September 30, 2023 (other than Adjusted EBITDAre, which is a normalized, annualized figure), based on the Company’s most recently published financial statements. The projected amounts for all future fiscal years are presented as estimated annualized figures.

(2)

Pursuant to National Instrument 52-112Non-GAAP and Other Financial Measures Disclosure, in connection with the disclosure of any non-IFRS measure that is forward-looking information, the Company is required to disclose (a) the equivalent historical non-IFRS measure and (b) the most directly comparable IFRS measure that is disclosed in the primary financial statements of the Company to which the equivalent historical non-IFRS measure relates, Net Income is the most directly comparable IFRS measure to the non-IFRS measures of NOI from Single-Family Rental Properties, EBITDAre, Adjusted EBITDAre, Core FFO and AFFO included in the Company Forecasts. Total Capital Expenditures is the most directly comparable IFRS measure to the non-IFRS measure Recurring Capital Expenditures. See “Non-IFRS Measures”, “Exhibit “A” – Reconciliation of Certain Non-IFRS Measures” and the management’s discussion and analysis of financial condition and results of operations for the three and nine months ended September 30, 2023, which has been filed under Tricon’s profiles on SEDAR+ at www.sedarplus.ca on November 7, 2023 and EDGAR at www.sec.gov on November 7, 2023.

(3)

Non-IFRS measure; see “Non-IFRS Measures”.

(4)

Net operating income (“NOI”) represents the Company’s share of total revenue from rental properties, less direct operating expenses and property management expenses. NOI excludes non-property specific and indirect overhead expenses, interest expense and non-core income or expenses such as gains or losses on the disposition of rental properties. Tricon believes NOI is a helpful metric to evaluate the performance of its rental business and compare it to industry peers.

(5)

Adjusted EBITDAre is a normalized, annualized figure and is defined as EBITDAre before stock-based compensation, unrealized and realized foreign exchange gains and losses, transaction costs and other non-recurring items, and reflects only the Company’s share of results. EBITDAre represents net income from continuing operations, excluding the impact of interest expense, income tax expense, amortization and depreciation expense, fair value changes on rental properties, fair value changes on derivative financial instruments and adjustments to reflect the entity’s share of EBITDAre of unconsolidated entities. See “Exhibit “A” – Reconciliation of Certain Non-IFRS Measures”.

(6)

Recurring capital expenditures represent ongoing costs associated with maintaining and preserving the quality of a property after it has been renovated. Capital expenditures related to renovations or value-enhancement are excluded from recurring capital expenditures.

(7)

Core Funds From Operations (“Core FFO”) presents Funds From Operations (“FFO”) as a normalized figure, adjusting for items which are not likely to occur on a regular basis or are otherwise not representative of the ongoing operating performance of the Company. These adjustments can include, but are not limited to transaction costs, interest on Due to Affiliate, fees eliminated upon consolidation, non-cash items, enterprise risk management system implementation costs, initial set-up fees of information technology infrastructure, SOX-related implementation and consulting costs, costs incurred to process COVID-19 pandemic-related backlogs, business restructuring expenses, legal reorganization costs, implementation costs of new initiatives (e.g. sustainability, reporting, business lines), office expansion or relocation expenses, corporate brand-building costs and one-time donations. The Company’s definition of FFO reflects all adjustments that are specified by the National Association of Real Estate Investment Trusts (“NAREIT”). In addition to the adjustments prescribed by NAREIT, the Company excludes any fair value gains that arise as a result of reporting under IFRS, except for fair value gains arising from the Company’s U.S. residential developments business which are intended to act as a proxy for cash generation.


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(8)

Adjusted Funds From Operations (“AFFO”) represents Core FFO less recurring capital expenditures.

(9)

Core FFO and AFFO per share amounts are calculated based on the weighted average Common Shares outstanding in the period, assuming the full conversion of all potentially dilutive securities (including Stock Option, Deferred Share Units and Preferred Units) to Company Shareholders. The projected amounts of weighted average Common Shares outstanding for all future fiscal years assume the continuation of the Company’s share-based incentive plans, including the Stock Option Plan, DSU Plan and the Dividend Reinvestment Plan.

(10)

For the three and nine months ended September 30, 2023, all outstanding Stock Options, Deferred Share Units and Preferred Units were dilutive.

Non-IFRS measures are presented to illustrate alternative relevant measures to assess the Company’s performance. See “Non-IFRS Measures”. See also “Forward-Looking Information, as the figures presented above are considered “financial outlook” for purposes of applicable Securities Laws, they may not be appropriate for purposes other than to understand Management’s expectations relating to the future of the Company under the status quo as of the date of such Company Forecasts. Although the Company believes that its anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information.

Blackstone Filing Parties’ Purposes and Reasons for the Arrangement

The information under this heading has been provided by Blackstone for inclusion in this Circular in order to satisfy the requirements of Rule 13e-3 under the U.S. Exchange Act.

Under the rules of the SEC governing “going private” transactions, each of the Blackstone Filing Parties is required to describe its purposes and reasons for the Arrangement to the Company’s “unaffiliated security holders” as defined pursuant to Rule 13e-3 under the U.S. Exchange Act. Each of the Blackstone Filing Parties is making the statements in this section of the Circular solely for the purpose of complying with those requirements of Rule 13e-3 and related rules under the U.S. Exchange Act. The views expressed by the Blackstone Filing Parties in this section or elsewhere in this Circular are not, and should not be construed to be, a recommendation by any of the Blackstone Filing Parties to any of the Company Shareholders as to how they should vote on the Arrangement Resolution.

For the Blackstone Filing Parties, the purpose for the Arrangement is to permit the Purchaser to acquire all of the Common Shares in a transaction in which the Company’s unaffiliated security holders will be entitled to receive cash consideration of $11.25 per Common Share, so that the Blackstone Filing Parties will bear the rewards and risks of ownership of the entirety of the Company after the completion of the Arrangement and the Common Shares cease to be publicly traded. The Blackstone Filing Parties believe that becoming a private entity would provide the Company with greater ability to simplify its operations, as well as greater capital allocation flexibility as it relates to capital projects, distributions and leverage. As a private entity, the Company would be free of the expectation by public investors of steady growth. Further, the Blackstone Filing Parties considered what they believed were competitive advantages of the Company ceasing to be a public entity, including by having access to a greater amount of available capital and being able to pursue operational efficiencies. In addition, absent the reporting and other substantial burdens placed on public entities, the Blackstone Filing Parties believe that Management and the employees of the Company will be able to better execute on the Company’s future strategic plans, including the Company’s plans to complete its $1 billion development pipeline of new SFR homes in the U.S. and $2.5 billion of new apartments in Toronto, Canada (together with its existing joint venture partners), as well as its plan to enhance the quality of existing SFR homes in the U.S. through an additional $1 billion of planned capital projects over the next several years.

The Blackstone Filing Parties have undertaken to pursue the Arrangement at this time for the reasons described above, as well as due to their desire to maximize long-term investment returns for the Blackstone Filing Parties’ investors.

Although the Blackstone Filing Parties believe that there will be certain opportunities associated with their investment in the Company if the Arrangement is completed, the Blackstone Filing Parties realize that there are also substantial risks (including the risks and uncertainties relating to the prospects of the Company) and that such opportunities may never be fully realized.


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The Blackstone Filing Parties believe that an Arrangement is preferable to other transaction structures because the Arrangement (i) will enable the Purchaser to acquire all of the outstanding Common Shares not owned by BREIT Shareholder at the same time, (ii) will enable the Company to effect other steps in the transaction, such as the Return of Capital Distribution, if any, in an orderly and efficient manner, and (iii) represents an opportunity for the Company’s unaffiliated security holders to receive price certainty at a premium for their Common Shares in the form of the Consideration representing a premium of approximately 30% to the closing price of the Common Shares on the NYSE as of January 18, 2024, the last trading day prior to the public announcement of the Arrangement, and a premium of approximately 42% to the volume weighted average share price on the NYSE over 90-day period ended January 18, 2024. Furthermore, the Blackstone Filing Parties believe that structuring the transaction as an Arrangement provides a prompt and orderly transfer of ownership of the Company in a single step, without the necessity of financing separate purchases of Common Shares in a tender offer and implementing a second-step amalgamation or other transaction to acquire any Common Shares not tendered in any such tender offer, and without incurring any additional transaction costs associated with such activities.

Position of Blackstone Filing Parties as to the Fairness of the Arrangement

The information under this heading has been provided by the Blackstone Filing Parties for inclusion in this Circular in order to satisfy the requirements of Rule 13e-3 under the U.S. Exchange Act.

Under the rules of the SEC governing “going private” transactions, each of the Blackstone Filing Parties is required to express its belief as to the fairness of the Arrangement to the Company’s “unaffiliated security holders” as defined in Rule 13e-3 under the U.S. Exchange Act. The Blackstone Filing Parties are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the U.S. Exchange Act. These statements are not, and should not be construed as, a recommendation to any Company Shareholder as to how that Company Shareholder should vote on the Arrangement Resolution.

Neither the Blackstone Filing Parties nor the Conflicted Director, who was nominated by the BREIT Shareholder, participated in the Special Committee’s deliberations regarding the transactions contemplated by the Arrangement Agreement nor did the Blackstone Filing Parties have access to the work of Scotia Capital, the independent financial advisor and valuator retained by the Special Committee. The Conflicted Director recused himself from all deliberations of the Company Board regarding the transactions contemplated by the Arrangement Agreement. Furthermore, the Blackstone Filing Parties did not engage a financial advisor for the purpose of assessing the fairness of the Arrangement, including in particular the fairness of the Arrangement to the Company’s unaffiliated security holders. The Blackstone Filing Parties believe, however, that the Arrangement is substantively and procedurally fair to the Company’s unaffiliated security holders based on the following factors, among others:

 

   

the Consideration of $11.25 per Common Share in cash payable to the Company’s unaffiliated security holders represents a premium of approximately 30% to the closing price of the Common Shares on the NYSE as of January 18, 2024, the last trading day prior to the public announcement of the Arrangement, and a premium of approximately 42% to the volume weighted average share price on the NYSE over 90-day period ended January 18, 2024;

 

   

the payment to the Company’s unaffiliated security holders pursuant to the Arrangement is payable entirely in cash, providing such Company Shareholders with certainty of value and liquidity immediately upon the closing of the Arrangement;

 

   

the rigorous negotiation process overseen by the Special Committee of independent directors, consisting solely of directors who have no current or former relationship with Blackstone, and the Unconflicted Company Board, which negotiated price increases from the Blackstone Filing Parties’ initial proposed price of $11.00 per Common Share;

 

   

Blackstone did not participate in or have any influence on the deliberative process of, the negotiating positions of, or the recommendations and determinations reached by, the Special Committee and the Unconflicted Company Board, respectively. The Conflicted Director on the Company Board, who is a nominee of the BREIT Shareholder, recused himself from the deliberations regarding the transactions contemplated by the Arrangement Agreement;


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the fact that the Special Committee, consisting entirely of independent directors who are not employees of the Company, unanimously recommended that the Unconflicted Company Board (i) determine that it is in the best interests of the Company to enter into the Arrangement Agreement, (ii) determine that the Arrangement and the transactions contemplated by the Arrangement Agreement are fair to the Company Shareholders (excluding Blackstone), (iii) authorize the Company to execute and deliver the Arrangement Agreement and other transaction documents and (iv) recommend that the Company Shareholders vote FOR the Arrangement Resolution approving the Arrangement;

 

   

the fact that the Unconflicted Company Board, all but two of which are not employees of the Company, determined that the Arrangement is in the best interests of the Company and fair to the Company Shareholders (excluding Blackstone) and unanimously recommends that the Company Shareholders vote FOR the Arrangement Resolution;

 

   

the fact that the Special Committee and the Unconflicted Company Board received the Scotia Capital Formal Valuation and Fairness Opinion from Scotia Capital which states that, as of the date thereof, and subject to the assumptions, limitations and qualifications set out therein: (i) the fair market value of the Common Shares is $9.80 to $12.90 per Common Share, and (ii) the Consideration to be received by the Company Shareholders (excluding Blackstone) pursuant to the Arrangement is fair, from a financial point of view, to the Company Shareholders (excluding Blackstone);

 

   

the Special Committee selected and engaged its own independent legal and financial advisors and received the advice of such advisors throughout its review, evaluation and oversight of negotiations of a potential acquisition of the Company;

 

   

the fact that the Unconflicted Company Board received the Morgan Stanley Fairness Opinion, which states that, as of the date thereof, and subject to the assumptions, limitations and qualifications set out therein, the Consideration to be received by the Company Shareholders (excluding Blackstone) pursuant to the Arrangement is fair, from a financial point of view, to the Company Shareholders (excluding Blackstone);

 

   

the ability of the Company to terminate the Arrangement Agreement under the terms of the Arrangement Agreement in order to enter into a definitive agreement providing for the implementation of a Superior Proposal, subject to compliance with the terms and conditions of the Arrangement Agreement;

 

   

each of BREP X and BREIT OP has provided a guaranty to the Company which, in the aggregate, guaranteed the obligations of the Purchaser under the Arrangement Agreement to pay the Purchaser Termination Fee if the Arrangement Agreement is terminated under certain circumstances;

 

   

the completion of the Arrangement is subject to the approval of the Court, after considering the procedural and substantive fairness of the Arrangement at a hearing at which the Company’s unaffiliated security holders and certain others are entitled to be heard;

 

   

the Arrangement is conditioned upon the approval of (i) at least two-thirds (6623%) of the votes cast by Company Shareholders present or represented by proxy at the Shareholder Meeting, voting as a single class; and (ii) a simple majority (more than 50%) of the votes cast by Company Shareholders present or represented by proxy at the Shareholder Meeting, excluding, for the purposes of this Minority Approval, the votes attached to the Excluded Shares; and

 

   

registered Company Shareholders who do not vote in favour of the Arrangement Resolution and who comply with certain procedural requirements will, in accordance with the Interim Order, be entitled to exercise Dissent Rights under the OBCA.


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In the course of reaching its determination as to the fairness of the Arrangement to the Company’s unaffiliated security holders, the Blackstone Filing Parties also considered a variety of risks and other countervailing factors related to the Arrangement Agreement and the Arrangement, including the following:

 

   

following completion of the Arrangement, the Company will no longer exist as an independent public Company and the Company’s unaffiliated security holders will not benefit from any appreciation in the value of, or dividends on, their Common Shares and will not participate in any future earnings or growth;

 

   

the risk, if the Arrangement is not consummated, that the costs of pursuing the Arrangement and related disruptions to the operation of the Company’s business could have an adverse impact on the Company’s existing and prospective business relationships with residents and other third parties;

 

   

the Arrangement Agreement contains limitations and restrictions on the Company’s ability to solicit additional interest from third parties and, if the Arrangement Agreement is terminated in certain circumstances, the Company will be required to pay a $122.8 million Company Termination Fee to the Purchaser, except that the Company Termination Fee will be reduced to $61.3 million if the Arrangement Agreement is terminated by the Company prior to March 3, 2024 in order to enter into a definitive agreement providing for the implementation of a Superior Proposal; and

 

   

the Arrangement will result in a taxable transaction for most Company Shareholders.

The Blackstone Filing Parties did not consider the Company’s net book value, which is an accounting concept, as a factor because they did not believe net book value was a material indicator of the value of the Company as a going concern since it does not take into account the future prospects of the Company, market trends and conditions, or business risks inherent in a competitive environment. In evaluating the substantive fairness of the Arrangement to the Company’s unaffiliated security holders, the Blackstone Filing Parties did not consider the prices paid in any past transactions in which any Common Shares were purchased, since any such purchases were made at then-current market or trading prices of such Common Shares and do not necessarily reflect the present market value of the Common Shares. Furthermore, the Blackstone Filing Parties did not establish, and did not consider, a going concern value for the Company as a public company to determine the fairness of the Consideration to the Company’s unaffiliated security holders because, following the Arrangement, the Company will have a different ownership structure. To the extent the pre-merger going concern value was reflected in the price per Common Share on January 18, 2024, the last trading day prior to the public announcement of the Arrangement, the Consideration represents a premium to the going concern value of the Company. The Blackstone Filing Parties also did not consider liquidation value, as the Company is an ongoing business and will continue to operate its business following the Arrangement.

The Blackstone Filing Parties are not aware of any firm offer for a merger, consolidation, sale of all or a substantial part of the Company’s assets, or a purchase of Common Shares that would enable the holder to exercise control of the Company, from anyone other than Blackstone in the two years preceding the signing of the Arrangement Agreement.

The Blackstone Filing Parties concluded that approval by a majority of the Company’s unaffiliated security holders, as defined in Rule 13e-3 under the U.S. Exchange Act, is not necessary for approval of the Arrangement. Such approval is not required by Canadian law and various safeguards and protective steps have been adopted to ensure the procedural fairness of the transactions contemplated by the Arrangement Agreement, including the fact that the consummation of the Arrangement requires the approval of a majority of the votes cast by Company Shareholders present or represented by proxy and entitled to vote at the Shareholder Meeting, excluding for this purpose votes attached to the Excluded Shares required to be excluded pursuant to MI 61-101, and the other procedural safeguards discussed above and in the section “Certain Legal Matters – Securities Law Matters – Application of MI 61-101”, “Formal Valuation” and “Minority Approval”.

The foregoing discussion of the information and factors considered by the Blackstone Filing Parties in connection with the fairness of the Arrangement is not intended to be exhaustive, but includes the material factors considered by the Blackstone Filing Parties. The Blackstone Filing Parties did not consider it practicable to, and did not, quantify or attempt to assign specific weights to the factors considered in reaching their determinations as to the fairness of the Arrangement. The Blackstone Filing Parties did not reach any specific conclusion with respect to any of the factors or reasons considered, and the above factors are not presented in any order of priority. Rather, the determination was made after consideration of all of the foregoing factors, among others, taken together as a whole.


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Certain Effects of the Arrangement

Following the consummation of the Arrangement, the registration of the Common Shares under the U.S. Exchange Act will be terminated. Due to this termination, the Company will no longer be required to file annual, quarterly and current reports with the SEC. Similarly, the Company will apply to terminate its status as a reporting issuer under Canadian Securities Laws, and will cease to file reports with Canadian securities regulatory authorities.

The Common Shares are currently registered under the U.S. Exchange Act and traded on the TSX and the NYSE under the trading symbol “TCN”. If the Arrangement is successful, the Company will become a privately held Company and an indirect wholly owned Subsidiary of Blackstone and there will be no public market for its Common Shares. Following the consummation of the Arrangement, the Company intends to have its Common Shares delisted from any stock exchange or quotation system, including the TSX and NYSE.

Effect of the Arrangement on the Company’s Net Book Value and Net Earnings

The Blackstone Filing Parties beneficially own 35,182,448 Common Shares, representing approximately 11% of the issued and outstanding Common Shares, as of the Record Date, in each case assuming the exchange of all of the issued and outstanding Preferred Units. Immediately after the closing of the Arrangement, the Blackstone Filing Parties will beneficially own 100% of the outstanding Common Shares. The table below sets forth the direct or indirect interest of the Blackstone Filing Parties in the Company’s net book value and net earnings as of the Record Date and immediately after the Arrangement, based on the Company’s historical net book value and net earnings as of and for the nine months ended September 30, 2023 and assuming the exchange of all of the issued and outstanding Preferred Units.

 

(US$ millions)    Ownership as of the Record Date   Ownership After the Arrangement
     Net Book Value   Earnings   Net Book Value   Earnings

Name

   $    %   $    %   $    %   $    %

Blackstone Filing Parties

   $444    11%   $17    11%   $3,895    100%   $157    100%

Benefits and Detriments of the Arrangement for the Company’s Unaffiliated Security Holders

Benefits

The primary benefits of the Arrangement to the Company’s unaffiliated security holders include, without limitation, the following:

 

   

the right of such security holders to receive the consideration of $11.25 in cash per Common Share, as described above, representing a premium of approximately 30% to the closing price of the Common Shares on the NYSE on January 18, 2024, the last trading day prior to the announcement of the Arrangement, and a premium of approximately 42% to the volume weighted average share price on the NYSE over the 90-day period ended January 18, 2024; and

 

   

such Company Shareholders will avoid the risk of any possible decrease in the future growth or value of the Company.

Detriments

The primary detriments of the Arrangement to the unaffiliated security holders of the Company include, without limitation, the following:

 

   

such Company Shareholders will no longer participate in the Company’s potential growth or value, if any; and


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the Arrangement generally will be a taxable transaction for Company Shareholders and, as a result, Taxes will generally be required to be paid by such Company Shareholders on any income and gains that result from receipt of the Consideration under the Arrangement, as described in more detail under “Certain Canadian Federal Income Tax Considerations” and “Certain U.S. Federal Income Tax Considerations”. See also “Risk Factors – Risks Related to the Arrangement – The Tax Treatment of the Return of Capital Distribution is Not Free From Doubt”.

Benefits and Detriments of the Arrangement for Directors and Executive Officers of the Company

Benefits

In connection with the Arrangement, the Company’s directors and executive officers will receive benefits and be subject to obligations that may be different from, or in addition to, the benefits and obligations of the Company Shareholders generally, as described in more detail under “Certain Legal Matters – Interest of Certain Persons in the Arrangement; Benefits from the Arrangement”. The primary benefits of the Arrangement to the Company’s directors and executive officers (other than the Conflicted Director) include, without limitation, the following:

 

   

the continued indemnification rights, rights to advancement of fees and D&O insurance;

 

   

the compensation of members of the Special Committee in exchange for their services in such capacity at a fixed retainer of C$33,750 for each member and the reimbursement of all reasonable expenses incurred in connection with their service as members of the Special Committee, in each case the payment of which is not contingent upon the completion of the Arrangement or the Special Committee’s or Company Board’s recommendation of the Arrangement; and

 

   

the beneficial treatment of Incentive Securities under the Plan of Arrangement.

Detriments

The primary detriments of the Arrangement to the Company’s directors and executive officers (other than the Conflicted Director) include, without limitation, the following:

 

   

such directors and executive officers will no longer participate in the Company’s potential growth or value, if any; and