Hey there,
Well for starters - I wouldn't worry too much about the market not liking the sale of the UDC portfolio. I think it has less to do with them, than the market for office properties itself. In our opinion, this is a very good thing for the company as it'll put them in a much better position financially and they'll be able to execute on their growth strategy. Also, the fact they got above IFRS value for it in this market is a bonus, and came in slightly higher than expected.
The idea of the open-end vs closed-end trust doesn't change its status as a REIT. All it really does is enable the company to be more flexible in how it operates. I'll drop these paragraphs here directly from them:
The purpose of the conversion to an open-end trust and the amendments to the Declaration of Trust are
to provide Allied with greater flexibility, consistent with most other Canadian public real estate investment
trusts (“REITs”), in its pursuit of value-enhancing investment opportunities for the benefit of Allied and
its Unitholders. An important objective of these changes is to ensure that Allied remains competitive in
the marketplace by ensuring the ability to take advantage of appropriate acquisition opportunities and to
conduct its activities without unnecessary restrictions.
CONVERSION FROM A CLOSED-END TO AN OPEN-END TRUST
Allied is currently a “mutual fund trust” that is a unit trust under paragraph 108(2)(b) of the Tax Act (as
defined herein), commonly referred to as a “closed-end” trust. As a result, at least 80% of its property
must consist of a combination of enumerated assets including shares, debt, marketable securities and real
property situated in Canada. At least 95% of its income (computed without regard to any distributions) for
the year must be derived from those assets, and generally no more than 10% of its holdings can be in any
one corporation or debtor.
ALLIED CONSENT AND PROXY SOLICITATION STATEMENT 17
In order to provide additional flexibility for Allied, the trustees of Allied (the “Trustees”) sought and
obtained the approval of Unitholders to amend the Declaration of Trust in order to allow Allied to become a
unit trust under paragraph 108(2)(a) of the Tax Act, commonly referred to as an “open-end” trust. An openend trust is generally not subject to the restrictions described above and therefore allows for maximum
flexibility to more actively pursue value enhancing opportunities and expand its current investment
strategies. However, a key feature of an open-end trust is that it must have units that are redeemable at the
demand of the holder at prices determined and payable in accordance with the conditions of the trust’s
units. If the trust has more than one class of units, the fair market value of those units that are redeemable
on demand must represent at least 95% of the fair market value of all issued units of the trust.