Investment Structure

The Net Subscription Proceeds will be invested as follow:

• 30% will be loaned to the Investment Company by way of an Investment Loan.  The Investment Loan will be for a term of 5 years and may be renewed by the Trust for successive terms of one year each thereafter.
• 70% of the Net Subscription Proceeds will be used to acquire shares in the Investment Company

The Investment Company will invest the proceeds in limited partnership units (Property LP Units) of the US Limited Partnership (Property LP).  The Property LP will invest the proceeds in multifamily apartment properties in the United States of America. Pending such investment, the Net Subscription Proceeds will be invested in Authorized Interim Investments. The Manager will use its best efforts to make suitable investments of the Net Subscription Proceeds as soon as possible following each Closing.

Taxation of Proceeds

Because we are going into the US there is slightly more complicated investment structure than used in the Canadian Apartment Fund to minimize taxes. The cross-border nature of the investment strategy requires the insertion of  the Canadian Investment Company (CanInvesco).  By using the CanInvesco it ensures that we are dealing with an eligible investment for a mutual fund trust and WE ARE ON very safe grounds to satisfy the criteria for RRSP eligibility. 

This structure minimizes withholding taxes and the major benefit is that it avoids Series C Unitholders having to obtain a US tax # or file US tax returns and avoids U.S. estate tax implications.

Income from the US Master LP flows back to CanInvesco.  CanInvesco distributes proceeds in three ways:

1. by making interest and principal payments on the loan;
2. by repaying original equity through redemption of preferred shares; and,
3. by paying dividends on the common shares

CanInvesco files Canadian and US tax returns and pays any withholding taxes.

THE RESULT -- We end up with a very tax efficient structure and get as close as we can to having the same tax efficiency as a pure flow through model we would have in Canada.

USAOF 2008 investment structure minimizes withholding taxes and avoids Series C Unitholders having to obtain a US tax # or file US tax returns and avoids U.S. estate tax implications.

Organizational Structure