BCSC

Exemption Orders (Discretionary)

CANADIAN HOTEL INCOME PROPERTIES REAL ESTATE INVESTMENT TRUST

2001 BCSECCOM 673

IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418

AND

IN THE MATTER OF CANADIAN HOTEL INCOME PROPERTIES REAL ESTATE INVESTMENT TRUST, CHIP HOSPITALITY LIMITED PARTNERSHIP, O'NEILL HOTELS & RESORTS LTD. AND OHR INVESTMENTS LTD.

Exemption Order Under Sections 48 and 76

[para 1]
WHEREAS Canadian Hotel Income Properties Real Estate Investment Trust (“CHIP REIT”) and CHIP Hospitality Limited Partnership (“CHIP LP”) have applied to the Executive Director for an order under sections 48 and 76 of the Securities Act, R.S.B.C. 1996, c. 418 (the ”Act”), that certain intended trades in securities to and by OHR Investments Ltd. (“Newco”) are exempt from the requirements of sections 34(1)(a) and 61 of the Act;

[para 2]
AND WHEREAS CHIP REIT has represented to the Executive Director that:

1. CHIP REIT is a real estate investment trust established under the laws of British Columbia which, through its subsidiaries and affiliates, owns a portfolio of hotel properties located in Canada;

2. CHIP REIT is a reporting issuer under the Act and is not in default of any requirement of the Act or the Securities Rules, B.C. Reg. 194/97;

3. CHIP REIT is authorized to issue an unlimited number of trust units (the “CHIP REIT Units”), of which there were 37,810,697 CHIP REIT Units issued and outstanding as of May 10, 2001;

4. the CHIP REIT Units are listed and posted for trading on The Toronto Stock Exchange;

5. CHIP Management Ltd. (“Hotelco”) is a company incorporated under the laws of Saskatchewan and is a wholly owned subsidiary of CHIP REIT;

6. the authorized share capital of Hotelco consists of an unlimited number of Class A Common shares and an unlimited number of Class B Preferred shares (the “Hotelco Preferred Shares”), of which 100,003 Class A Common shares and no Hotelco Preferred Shares were issued and outstanding as of May 10, 2001; all of the Class A Common shares are owned by CHIP REIT;

7. CHIP LP is a limited partnership organized under the laws of British Columbia; Hotelco is the general partner of CHIP LP;

8. CHIP LP is authorized to issue up to 1,717,791 Class A limited partnership units (the “Class A LP Units”) and up to 2,000,000 Class B limited partnership units (the “Class B LP Units”), of which 1,717,791 Class A LP Units and 1,263,805 Class B LP Units were issued and outstanding as of May 10, 2001; all of the Class A LP Units are owned by O’Neill Hotels & Resorts Ltd. (“OHR”); 1,257,669 Class B Units are owned by Hotelco and 6,136 Class B LP Units are owned by CHIP LP Holdings Ltd., a wholly owned subsidiary of CHIP REIT;

9. each holder of Class A LP Units is entitled to receive partnership cash flow distributions equal to the cash which is actually paid by CHIP REIT on CHIP REIT Units and will be allocated taxable income in an amount equal to the amount of such cash flow distributions; the Class A LP Units do not carry rights to vote on matters to be voted upon by CHIP REIT unitholders, nor do they carry any rights otherwise available to CHIP REIT unitholders;

10. OHR is a company amalgamated under the laws of British Columbia and is at arm’s length to CHIP REIT and its subsidiaries and affiliates;

11. Newco is a wholly owned subsidiary of OHR, incorporated under the laws of British Columbia and is at arm’s length to CHIP REIT and its subsidiaries and affiliates;

12. each of OHR and Newco is currently a private issuer under the Act; each of CHIP LP and Hotelco may no longer be a private issuer under the Act;

13. pursuant to a Put and Call Option Agreement between OHR and Hotelco (the ”First Exchange Agreement”) dated March 1, 1999, Hotelco and OHR have granted to each other certain put and call rights to exchange Class A LP Units for Hotelco Preferred Shares which OHR may exercise, in certain circumstances, at any time prior to March 1, 2009, and which Hotelco may exercise, in certain circumstances, at any time after March 1, 2009;

14. pursuant to a Put and Call Option Agreement between OHR and CHIP REIT (the ”Second Exchange Agreement”) dated March 1, 1999, CHIP REIT and OHR have granted to each other certain put and call rights to exchange Hotelco Preferred Shares for CHIP REIT Units which they may exercise, in certain circumstances, at any time after the issuance of the Hotelco Preferred Shares;

15. OHR is proposing to transfer to Newco certain Class A LP Units and to assign OHR’s rights and obligations under the First Exchange Agreement and the Second Exchange Agreement with respect to such units and Hotelco Preferred Shares to Newco; in addition, Newco may in the future acquire more such units and associated rights and obligations under the First Exchange Agreement and the Second Exchange Agreement from OHR;

16. immediately following the transfer of any Class A LP Units to Newco, Newco intends to exchange such units for Hotelco Preferred Shares pursuant to the First Exchange Agreement and to then exchange such shares for CHIP REIT Units pursuant to the Second Exchange Agreement;

17. upon completion of the exchange of Hotelco Preferred Shares held by Newco for CHIP REIT Units, Newco will hold a total of 1,717,791 CHIP REIT Units, representing approximately 4.35% of the then issued and outstanding CHIP REIT Units;

18. the trades by OHR of the Class A LP Units to Newco will be made in reliance on the registration and prospectus exemptions contained in sections 89(h) and 128(i) of the Rules;

19. the assignment to and assumption and subsequent exercise by Newco of the put and call options under the First Exchange Agreement and the Second Exchange Agreement are not within the registration and prospectus exemptions in sections 46(j) and 75(a) of the Act because Hotelco and CHIP REIT may be members of the public in relation to Newco and because Hotelco may no longer qualify as a private issuer under the Act; the registration and prospectus exemptions contained in sections 45(2)(12)(iii) and 74(2)(11)(iii) of the Act are not available for the trades by Newco of the Class A LP Units and the Hotelco Preferred Shares to Hotelco and CHIP REIT, respectively, because the Class A LP Units and Hotelco Preferred Shares are not securities of Newco’s own issue (collectively, the ”Non-Exempt Trades”);

AND WHEREAS the Executive Director considers that to do so would not be prejudicial to the public interest;

[para 3]
IT IS ORDERED:

1. under sections 48 and 76 of the Act, that the Non-Exempt Trades are exempt from the requirements of sections 34(1)(a) and 61 of the Act; and

2. under section 76 of the Act, that a trade in Class A LP Units or Hotelco Preferred Shares acquired under this order by Hotelco or CHIP REIT, respectively, is deemed to be a distribution unless:

(a) the issuer of the security is a reporting issuer, and

(i) if the issuer is listed on an exchange with recognized resale requirements, the seller has held the security for the time required by the recognized resale requirements, or

(ii) if the issuer is not listed on an exchange with recognized resale requirements, the issuer has been a reporting issuer for the 12 months immediately preceding the trade;

(b) if the seller is an insider of the issuer of the security, other than a director or senior officer of the issuer, the seller has filed all records required to be filed under sections 87 and 90 of the Act;

(c) if the seller is a director or senior officer of the issuer of the security, the seller has filed all records required to be filed under sections 87 and 90 of the Act and the issuer has filed all records required to be filed under Part 12 of the Act and of the Rules;

(d) the trade is not a distribution from the holdings of a control person;

(e) no unusual effort is made to prepare the market or create a demand for the security; and

(f) no extraordinary commission or other consideration is paid in respect of the trade.

[para 4]
DATED June 20, 2001.

Derek E. Patterson
Acting Director