milestone apartments real estate investment trust

272 Pages·2013·3.35 MB·English

Nosecuritiesregulatoryauthorityhasexpressedanopinionaboutthesesecuritiesanditisanoffencetoclaimotherwise.Thisprospectusconstitutesa
publicofferingofthesesecuritiesonlyinthosejurisdictionswheretheymaybelawfullyofferedforsaleandthereinonlybypersonspermittedtosellsuch
securities.Thesesecuritieshavenotbeen,andwillnotbe,registeredundertheUnitedStatesSecuritiesActof1933,asamended(the“U.S.SecuritiesAct”),
oranystatesecuritieslaws.ThesesecuritiesarebeingofferedandsoldintheUnitedStatesonlyto“qualifiedinstitutionalbuyers”asdefinedin,andin
accordancewith,Rule144AundertheU.S.SecuritiesAct,andoutsidetheUnitedStatesinaccordancewithRegulationSoftheU.S.SecuritiesAct.
PROSPECTUS
InitialPublicOffering February27,2013
MILESTONE APARTMENTS REAL ESTATE INVESTMENT TRUST
C$200,000,000
20,000,000 Units
This prospectus qualifies the distribution of 20,000,000 Units of Milestone Apartments Real Estate Investment Trust (the “REIT”), a
newly-created,unincorporated,open-endedrealestateinvestmenttrustestablishedunderthelawsoftheProvinceofOntario.
The REIT has been formed to own and operate a portfolio of multifamily properties in the United States. On closing of the offering
described in this prospectus (the “Closing”), the REIT will indirectly acquire (the “Acquisition”) a 52-property portfolioof multifamily
garden-styleresidentialproperties,comprising16,944units,locatedthroughouttheSoutheastandSouthwestUnitedStatescurrentlyheld,
indirectlythroughwholly-ownedsubsidiarylimitedliabilitycompaniesorlimitedpartnerships,byMilestoneMultifamilyInvestorsLP,a
Delaware limited partnership (the “Partnership”). These 52 properties are collectively referred to as the “Initial Properties”. See “The
InitialProperties”and“TheAcquisition”.PriortotheOffering,ownershipandprofitsinterestsinthePartnershipwereheldbyMileSouth
ApartmentPortfolioLP,anaffiliatedentityofInvescoLtd.(“Milesouth”)andbyMSTInvestors,LLC(“MSTInvestors”),anaffiliateof
MilestoneGroup,LLC.
TheobjectivesoftheREITareto:(i)generatestableandgrowingcashdistributionsonatax-efficientbasis;(ii)enhancethevalueofthe
REIT’s assets and maximize long-term Unitholder value through active management; and (iii) expand the asset base of the REIT and
increaseadjustedfundsfromoperations(“AFFO”)perUnitthroughaccretiveacquisitions.See“TheREIT–ObjectivesoftheREIT”.The
REIT initially intends to make monthly cash distributions of approximately C$0.05417 per Unit representing a payout ratio of
approximately90%offorecastAFFOoftheREITforthetwelve-monthperiodendingDecember31,2013.See“PresentationofFinancial
Information–Non-IFRSMeasures”.
AtClosing,theREITwillusetheproceedsoftheOfferingtoindirectlyacquireanownershipinterestinthecapitalofthePartnershipfrom
Milesouth. Milesouth will retain the remaining portion of its ownership interest in the Partnership resulting thereafter in Milesouth and
MST Investors (together, the “Retained Interest Holders”) holding an approximate 58.6% interest in the REIT on a fully diluted basis
(assumingallredeemablesecuritiesheldbytheRetainedInterestHoldersareredeemedforUnitsoftheREIT)(approximately52.4%ifthe
Over-Allotment Option is exercised in full) (the “Retained Interest”), representing an approximate 47.5% and 11.1% interest for
MilesouthandMSTInvestors,respectively.See“RetainedInterest”and“PlanofDistribution”.
TheREITwillhavethebenefitofaverticallyintegratedmanagementplatformprovidingexpertiseacrossthefullspectrumofrealestate
management disciplines including its internal property management subsidiary which manages a portfolioof approximately 36,000units
across 11 states and employs over 900 employees. TMG Partners, L.P., (“Milestone” or the “Asset Manager”, and together with The
MilestoneGroup,LLCanditsaffiliates,“TheMilestoneGroup”),willbetheexternalassetmanageroftheREIT,givingtheREITaccess
to The Milestone Group’s experienced management team and extensive network of relationships in the U.S. multifamily market. See
“VerticallyIntegratedInvestmentManagementPlatform”and“ArrangementswithMilestone”.
Price C$10.00per Unit
Pricetothe Underwriters’
Public(1)(2) Fee NetProceeds(3)
PerUnit .............................................................. C$ 10.00 C$ 0.575 C$ 9.425
Total(4)(5).............................................................. C$200,000,000 C$11,500,000 C$188,500,000
www.milestonereit.com
Milestone_Prospectus-E_Jan25-printer.indd 1 25/01/13 11:43 AMFri, Jan 25, 2013
THE INITIAL PROPERTIES
Represents Number of Properties
UTAH
Salt Lake City
Units 768
% of Units 4.5%
TENNESSEE
Nashville
Units 1,858
SALT LAkE CITy 2
% of Units 11.0% • Benefit from a full-service,
vertically integrated
OHIO management platform
52 garden-style apartment
NASHvILLE 4
properties comprising 16,944 units • Strong demand expected
GEORGIA
from “Echo Boomer” renters
ARIZONA 3 PHOENIX ATLANTA 3 Atlanta
Phoenix 18 DALLAS/FORT WORTH Units 736 • Aligned management team with
Positioned in high-growth Southeast Units 1,370 % of Units 4.3% proven multifamily track record
2 AUSTIN
% of Units 8.1%
and Southwest U.S. markets 12 HOUSTON JACkSONvILLE 3 • I nsufficient supply of new
SAN ANTONIO 2
apartment units
TAmPA 3
Driving Deep market of TEXAS FLORIDA
occupancy acquisition Total Units - 10,190 % of Total - 60.1% Properties - 34 Total Units - 2,022 % of Total - 11.9% Properties - 6
and rental opportunities Dallas/ Houston Austin San Antonio Jacksonville(1) Tampa
Fort Worth
rate growth
Units 5,794 3,360 520 516 Units 1,390 632
% of Units 34.2% 19.8% 3.1% 3.0% % of Units 8.2% 3.7%
1. Includes one multifamily property consisting of 210 units
located in Melbourne, FL.
Milestone_Prospectus-E_Jan25-printer.indd 2 25/01/13 11:44 AMFri, Jan 25, 2013
Notes:
(1) Exceptasotherwisestatedinthisprospectus,alldollaramountsarestatedinU.S.dollars.
(2) ThepriceoftheUnitswasestablishedbynegotiationbetweentheREIT,MSTInvestorsandtheUnderwriters.
(3) BeforedeductingexpensesoftheOfferingestimatedatapproximatelyC$7,856,723which,togetherwiththeUnderwriters’fee,willbepaid
fromtheproceedsoftheOffering.
(4) TheREIThasgrantedtotheUnderwritersanoption,exercisableinwholeorinpartandatanytimeupto30daysafterClosing,topurchaseup
to an additional 3,000,000 Units on the same terms as set forth above solely to cover over-allotments, if any, and for market stabilization
purposes.IftheOver-AllotmentOptionisexercisedinfull,thetotalpricetothepublic,Underwriters’feeandnetproceedstotheREITwillbe
C$230,000,000, C$13,225,000 andC$216,775,000,respectively.See“PlanofDistribution”.Thisprospectusqualifiesthedistributionofthe
Over-AllotmentOptionandtheUnitsissuableontheexercisethereof.ApurchaserwhoacquiresUnitsformingpartoftheUnderwriters’over-
allocationpositionacquiresthoseUnitsunderthisprospectus,regardlessofwhetherthepositionisultimatelyfilledthroughtheexerciseofthe
Over-AllotmentOptionorsecondarymarketpurchases.
(5) OnClosing,14,000,000UnitswillbeissuedtoMilesouthasconsiderationundertheInvestmentAgreement.TherewillbenoUnderwriter’sfee
payableinrespectoftheseUnitsandtheseUnitsarenotqualifiedbythisprospectus.Accordingly,theydonotappearinthetableabove.
MaximumSizeorNumberof
Underwriters’Position SecuritiesAvailable ExercisePeriod ExercisePrice
Over-AllotmentOption..... Optiontoacquireupto 30daysfromClosing C$10.00perUnit
3,000,000Units
ThereisnomarketthroughwhichtheUnitsmaybesoldandpurchasersmaynotbeabletoresellsecuritiespurchasedunder
this prospectus. This may affect the pricing of the Units in the secondary market, the transparency and availability of
tradingprices,theliquidityoftheUnitsandtheextentofissuerregulation.See“RiskFactors”.TheTorontoStockExchange
(the“TSX”)hasconditionallyapprovedthelistingoftheUnitsunderthesymbolMST.UN.ListingissubjecttotheREITfulfilling
alloftherequirementsoftheTSXonorbeforeMay22,2013.See“PlanofDistribution”.
A return on a purchaser’s investment in Units is not comparable to the return on an investment in a fixed income security. The
recovery of a purchaser’s initial investment is at risk, and the anticipated return on a purchaser’s investment is based on many
performanceassumptions.AlthoughtheREITintendstomakemonthlydistributionsfromAFFOtoUnitholders,thesedistributions
maybereducedorsuspended.Theactualamountdistributedwilldependonnumerousfactorsincludingthefinancialperformanceof
theREIT’sproperties,debtcovenantsandothercontractualobligations,workingcapitalrequirements,futurecapitalrequirements,
all of which are subject to a number of risks. The market value of the Units may decline if the REIT is unable to meet itsAFFO
targets in the future, and that decline may be material. See “Presentation of Financial Information – Non-IFRS Measures”. It is
importantforapurchaserofUnitstoconsidertheparticularriskfactorsdescribedinthe“RiskFactors”sectionofthisprospectus,
which may affect the REIT and its business, the real estate industry and the Offering, and therefore the availability of funds
necessarytomakedistributionstoapurchaserofUnits.
Because the REIT will be treated as a real estate investment trust for U.S. federal income tax purposes, distributions paid by the
REITtoCanadianinvestorsthataremadeoutoftheREIT’scurrentoraccumulatedearningsandprofits(asdeterminedunderU.S.
federalincometaxprinciples)generallywillbesubjecttoU.S.withholdingtaxatarateof15%forinvestorsthatqualifyforbenefits
under the United States-Canada Income Tax Convention(1980, as amended) (the “Treaty”). To the extent a Canadian investor is
subjecttoU.S.withholdingtaxinrespectofdistributionspaidbytheREITontheUnitsoutoftheREIT’scurrentoraccumulated
earnings and profits, the amount of such tax generally will be eligible for foreign tax credit or deduction treatment, subject tothe
detailedrulesandlimitationsundertheTaxAct.DistributionsinexcessoftheREIT’scurrentandaccumulatedearningsandprofits
that are distributed to Canadian investors that have not owned (or been deemed to own) more than 5% of the outstanding Units
generallywillnotbesubjecttoU.S.withholdingtax,althoughtherecanbenoassurancesthatwithholdingonsuchamountswillnot
berequired.TheREITestimatesthatnoneofitsmonthlycashdistributionstobepaidtoUnitholdersin2013willbemadeoutofthe
REIT’scurrentoraccumulatedearningsandprofitsand,accordingly,theREITexpectsthat2013distributionswillnotbesubjectto
U.S. withholding tax. The composition of distributions for U.S. federal income tax purposes may change over time, which may
affecttheafter-taxreturntoUnitholders.QualifiedresidentsofCanadathataretax-exemptentitiesestablishedtoprovidepension,
retirementorotheremployeebenefits(includingtrustsgovernedbyaRRSP,aRRIForaDPSP,butexcludingtrustsgovernedbya
TFSA, RESP or a RDSP) may be eligible for an exemption from U.S. withholding tax. The foregoing is qualified by the more
detailedsummaryinthisProspectus.See“CertainCanadianFederalIncomeTaxConsiderations”and“CertainU.S.FederalIncome
TaxConsiderations”.Seealso“RiskFactors–Tax-relatedRiskFactors”.
Theafter-taxreturnfromaninvestmentinUnitstoUnitholderssubjecttoCanadianfederalincometaxwilldepend,inpart,onthe
compositionforCanadianfederalincometaxpurposesofdistributionspaidbytheREIT,portionsofwhichmaybefullyorpartially
taxableormayconstitutetaxdeferredreturnsofcapital(i.e.,returnsthatinitiallyarenon-taxablebutwhichreducetheadjustedcost
baseoftheUnitholders’Units).TheREITestimatesthatapproximately100%ofthemonthlycashdistributionstobemadebythe
REIT to Unitholders will be tax deferred for Canadian federal income tax purposes in 2013. The composition of distributions for
Canadianfederalincometaxpurposesmaychangeovertime,thusaffectingtheafter-taxreturntoUnitholders.
i
BMONesbittBurnsInc.,CIBCWorldMarketsInc.,RBCDominionSecuritiesInc.,ScotiaCapitalInc.,TDSecuritiesInc.,National
Bank Financial Inc., Canaccord Genuity Corp., GMP Securities L.P. and Macquarie Capital Markets Canada Ltd., as principals,
conditionally offer the Units, subject to prior sale, if, as and when issued by the REIT and accepted by the Underwriters in
accordancewiththeconditionscontainedintheUnderwritingAgreementreferredtounder“PlanofDistribution”andsubjecttothe
approvalofcertainlegalmattersonbehalfoftheREITbyGoodmansLLPandVinson&ElkinsLLP(withrespecttoU.S.matters),
and on behalf of the Underwriters by Davies Ward Phillips &Vineberg LLPand Shearman &SterlingLLP(with respect toU.S.
matters). The Underwriters may engage in market stabilization activities as described under “Plan of Distribution”. Subscriptions
willbereceivedsubjecttorejectionorallotmentinwholeorinpartandtherightisreservedtoclosethesubscriptionbooksatany
time without notice. The Closing of the Offering isexpected tooccur onMarch 6,2013butinany event nolater than March 20,
2013. Registrations and transfers of Units will be effected electronically through the non-certificated inventory (“NCI”) system
administered by CDS Clearing and Depository Services Inc. Beneficial owners of Units will not, except in certain limited
circumstances, be entitled to receive physical certificates evidencing their ownership of Units. See “Plan of Distribution” and
“DeclarationofTrust–Non-CertificatedInventorySystem”.
TheUnderwritersmayoffertheUnitsatlowerpricesthanstatedabove.See“PlanofDistribution”.
MST Investors, which has acted as promoter, is organized under the laws of a foreign jurisdiction and resides outside Canada.
Although MST Investors will appoint GODA Incorporators, Inc., 333 Bay Street, Suite 3400, Toronto, Ontario M5H 2S7, as its
agent for service of process in Ontario, it may not be possible for investors to enforce judgments obtained in Canada against the
promoter.See“RiskFactors”.
TheREITisnotatrustcompanyandisnotregisteredunderapplicablelegislationgoverningtrustcompaniesasitdoesnotcarryon
or intend to carry on the business of a trust company. The Units are not “deposits” within the meaning of the Canada Deposit
InsuranceCorporationAct(Canada)arenotinsuredundertheprovisionsofthatstatuteoranyotherlegislation.
BMO Nesbitt Burns Inc. is an affiliate of a Canadian chartered bank that has committed to provide to the REIT certain
credit facilities at Closing. Consequently, the REIT may be considered a “connected issuer” of BMO Nesbitt Burns Inc.
under applicable Canadian securities laws. See “Debt Strategy and Indebtedness – Credit Facility” and “Plan of
Distribution”.
AllcapitalizedtermsreferredtoabovearedefinedelsewhereinthisprospectusincludingintheGlossary.
ii
TABLEOFCONTENTS
Page Page
MEANINGOFCERTAINREFERENCES ..... 1 INVESTMENTGUIDELINESAND
OPERATINGPOLICIES ................. 123
ELIGIBILITYFORINVESTMENT .......... 1
MARKETANDINDUSTRYDATA .......... 1 DECLARATIONOFTRUST ................ 126
CERTAININFORMATION ................. 2 USHOLDCO ............................ 136
RELIANCE .............................. 2 GENERALPARTNER ..................... 136
PRESENTATIONOFFINANCIAL THEPARTNERSHIP ...................... 136
INFORMATION ........................ 2
DISTRIBUTIONPOLICY .................. 140
FORWARDLOOKINGSTATEMENTS ....... 3
UNITHOLDERS’RIGHTSPLAN ............ 141
EXCHANGERATEINFORMATION ......... 3
CERTAINCANADIANFEDERALINCOME
PROSPECTUSSUMMARY................. 4
TAXCONSIDERATIONS ................ 144
THEOFFERING .......................... 16
CERTAINU.S.FEDERALINCOMETAX
THEREIT ............................... 18
CONSIDERATIONS..................... 149
MARKETOPPORTUNITY ................. 18
PLANOFDISTRIBUTION ................. 160
GROWTHSTRATEGIESOFTHEREIT ...... 21
USEOFPROCEEDS ...................... 162
BENEFITOFVERTICALLYINTEGRATED
INVESTMENTMANAGEMENT RISKFACTORS .......................... 163
PLATFORM ........................... 23
MATERIALCONTRACTS ................. 184
MULTIFAMILYREALESTATEMARKET
INTERESTSOFMANAGEMENTAND
CHARACTERISTICS.................... 24
OTHERSINMATERIAL
THEINITIALPROPERTIES ................ 36 TRANSACTIONS....................... 184
ASSESSMENTANDVALUATIONOFTHE
PROMOTER ............................. 185
INITIALPROPERTIES .................. 49
PRINCIPALUNITHOLDERS ............... 185
DEBTSTRATEGYANDINDEBTEDNESS.... 52
PRIORSALES ........................... 185
CURRENCYHEDGINGARRANGEMENTS .. 54
LEGALPROCEEDINGS ................... 185
THEACQUISITION....................... 54
RETAINEDINTEREST .................... 57 EXPERTS ............................... 185
POSTCLOSINGSTRUCTURE .............. 59 AUDITORS,TRANSFERAGENTAND
REGISTRAR ........................... 185
TRUSTEESANDEXECUTIVEOFFICERSOF
THEREIT ............................. 60 PURCHASERS’STATUTORYRIGHTS ...... 185
ARRANGEMENTSWITHMILESTONE ...... 71 GLOSSARYOFTERMS ................... 186
EXECUTIVECOMPENSATION ............ 74
INDEXTOFINANCIALSTATEMENTS ...... F-1
CAPITALIZATIONOFTHEREIT ........... 83
AUDITORS’CONSENT ................... F-2
FINANCIALFORECAST .................. 83
CHARTEROFTHEAUDITCOMMITTEE .... A-1
FORECASTNON-IFRSRECONCILIATION... 95
CERTIFICATEOFTHEREITANDTHE
MANAGEMENT’SDISCUSSIONAND
PROMOTER ........................... C-1
ANALYSISOFFINANCIALCONDITION
ANDRESULTSOFOPERATIONS ........ 96 CERTIFICATEOFTHEUNDERWRITERS ... C-2
iii
MEANINGOFCERTAINREFERENCES
In this prospectus, it is assumed that the Offering has been completed and the transactions described under “The
Acquisition” have been completed, except where the context otherwise requires. References to the “REIT” in this
prospectusincludeitsSubsidiaries,unlessthecontextotherwiserequires.Exceptasotherwisestatedinthisprospectus,
alldollaramountsinthisprospectus,includingthepriceperUnit,arestatedinU.S.dollarsandreferencestodollarsor
“$”aretoU.S.currencyandreferencestoCanadiandollarsor“C$”aretoCanadiancurrency.
Certaintermsusedinthisprospectusaredefinedunder“Glossary”.
Unless otherwise indicated, the disclosure in this prospectus assumes that the Over-Allotment Option is
notexercised.
References to “management” in this prospectus means the persons acting in the capacities of the REIT’s Chief
Executive Officer, ChiefFinancial Officer andChiefOperating Officer. Anystatements inthisprospectusmadebyor
on behalf of management are made in such persons’ capacities as officers of the REIT and not in their personal
capacities.
ELIGIBILITYFORINVESTMENT
IntheopinionofGoodmansLLP,counseltotheREIT,andDaviesWardPhillips&VinebergLLP,counseltothe
Underwriters, based on the current provisions of the Tax Act, and subject to the provisions of any particular Exempt
Plan,providedthattheREITqualifiesatalltimesasa“mutualfundtrust”(asdefinedintheTaxAct)ortheUnitsare
listed on a “designated stock exchange” (as defined in the Tax Act, which includes the TSX), the Units will be a
qualified investment fortrusts governedbyanRRSP,RESP,RRIF,DPSP,RDSPandaTFSA(collectively, “Exempt
Plans”).
Notwithstanding the foregoing, if the Units are a “prohibited investment” (as defined in the Tax Act) for a trust
governed by a TFSA, RRSP or RRIF, the holder or annuitant thereof will be subject to a penalty tax as set out in the
TaxAct.TheUnitswillnotbeaprohibitedinvestmentforaTFSA,RRSPorRRIFprovidedtheholderorannuitantof
such Exempt Plan, as the case may be, (i) deals at arm’s length with the REIT, for purposes of the Tax Act, (ii) does
nothavea“significantinterest”(asdefinedintheTaxAct)intheREIT,and(iii)doesnothavea“significantinterest”
(as defined in the Tax Act) in a corporation, partnership or trust with which the REIT does not deal at arm’s length.
Generally,aholderorannuitantwillhaveasignificantinterestintheREITiftheholderorannuitantand/orpersonsnot
dealingatarm’slengthwiththeholderorannuitantown,directlyorindirectly,10%ormoreofthefairmarketvalueof
the Units. The Minister of Finance (Canada) released draft legislation on December 21, 2012 (the “December 2012
Proposals”) that proposes to delete the condition in (iii) above.Inaddition, pursuant totheDecember 2012Proposals,
Units will not be a “prohibited investment” if the Units are “excluded property” as defined in the December 2012
Proposals for trusts governed by a TFSA, RRSP and RRIF. Prospective purchasers who intend to hold Units in a
TFSA,RRSPorRRIFareadvisedtoconsulttheirpersonaltaxadvisors.
MARKETANDINDUSTRYDATA
This prospectus includes market and industry data and forecasts that were obtained from third-party sources,
industrypublicationsandpubliclyavailableinformationaswellasindustrydatapreparedbymanagementonthebasis
of its knowledge of the multifamily/apartment industry in which the REIT will operate (including management’s
estimates and assumptions relating to the industry based on that knowledge). Management’s knowledge of the United
States real estate industry has been developed through its experience and participation in the industry. Management
believes that its industry data is accurate and that its estimates and assumptions are reasonable, but there can be no
assurance as to the accuracy or completeness of this data. Third-party sources generally state that the information
contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the
accuracy or completeness of included information. Although management believes it to be reliable, neither the REIT
northeUnderwritershaveindependentlyverifiedanyofthedatafrommanagementorthird-partysourcesreferredtoin
thisprospectus,oranalyzedorverifiedtheunderlyingstudiesorsurveysrelieduponorreferredtobysuchsources,or
ascertainedtheunderlyingeconomicassumptionsrelieduponbysuchsources.
1
CERTAININFORMATION
Graphs and tables demonstrating the historical performance of the Initial Properties contained in this prospectus
areintendedonlytoillustratepastperformanceandarenotnecessarilyindicativeoffutureperformance.
RELIANCE
Prospectiveinvestorsshouldrelyonlyoninformationcontainedinthisprospectusandshouldnotrelyonpartsof
the information contained in this prospectus to the exclusion of others. None of the REIT, MST Investors nor the
Underwriters has authorized any other person to provide prospective investors with different information. If a
prospective investor is provided with different or inconsistent information, the prospective investor should notrelyon
suchinformation.NeithertheREITnortheUnderwritersismakinganoffertosellUnitsinanyjurisdictionwheresuch
an offer or sale is prohibited. Unless otherwise stated, the information contained in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of Units. The REIT’s
business,financialcondition,resultsofoperationsandprospectusmayhavechangedsincethedateofthisprospectus.
PRESENTATIONOFFINANCIALINFORMATION
Non-IFRSMeasures
Funds from operations (“FFO”), adjusted funds from operations (“AFFO”), earnings before interest, taxes,
depreciationandamortization(“EBITDA”)andnetoperatingincome(“NOI”)arenotmeasuresrecognizedunderIFRS
and do not have standardized meanings prescribed by IFRS. FFO, AFFO, EBITDA and NOI are supplemental
measuresofaCanadianrealestateinvestmenttrust’sperformanceandtheREITbelievestheyarerelevantmeasuresof
the ability of the REIT to earn and distribute cash returns to investors in the Units and to evaluate the REIT’s
performance. The IFRS measurement most directly comparable to FFO, AFFO,and EBITDAand NOI is net income.
See“ForecastNon-IFRSReconciliation”forareconciliationofFFO,AFFO,EBITDAandNOItonetincome.
“FFO” is defined as net income in accordance with IFRS, (i) plus or minus fair value adjustments on investment
properties; (ii) plus or minus gains or losses from sales of investment properties; (iii) plus or minus other fair value
adjustments; (iv) minus acquisition costs expensed as a result of the purchase of a property being accounted for as a
business combination; (v) plus distributions onredeemable orexchangeable unitstreated asinterest expense; (vi) plus
orminusanynegativegoodwillorgoodwillimpairment; and(vii)plusdeferredincometaxexpense,afteradjustments
forequityaccounted entities andjoint ventures calculated toreflect FFOonthesamebasisasconsolidated properties.
FFOhasbeenpreparedconsistentlywiththedefinitionpresentedintheWhitePaperonfundsfromoperationsprepared
bytheRealPropertyAssociationofCanada(“REALpac”)forallperiodspresented.
“AFFO”isdefinedasFFOsubjecttocertainadjustments,including:(i)amortizationoffairvaluemark-to-market
adjustments on long term debt and amortization of financing costs, (ii) adjusting for any differences resulting from
recognizing property rental revenues or expenses on a straight-line basis, (iii) amortization of grant date fair value
related to compensation incentive plans, (iv) adjusting for any non-cash compensation expense; and (v) deducting a
reserve fornormalized maintenance capitalexpenditures, asdetermined bytheREIT.Otheradjustments maybemade
toAFFOasdeterminedbyourTrusteesintheirsolediscretion.
“NOI”isusedbyindustryanalysts,investorsandmanagementtomeasureoperatingperformanceofCanadianreal
estate investment trusts. NOI represents revenue from properties less property operating expenses as presented in the
combined statements of income prepared in accordance with IFRS, with operating expenses being adjusted for an
estimatedgrossmarginof12%onpropertymanagementrevenues.
FFO,AFFO,EBITDAandNOIshouldnotbeconstruedasalternatives tonetincomeandcomprehensiveincome
determinedinaccordancewithIFRSasindicatorsoftheREIT’sperformance.TheREIT’smethodofcalculatingFFO,
AFFO,EBITDAandNOImaydifferfromotherissuers’methodsandaccordinglymaynotbecomparabletomeasures
usedbyotherissuers.
2
FORWARDLOOKINGSTATEMENTS
This prospectus contains forward-looking statements which reflect management’s expectations regarding
objectives, plans, goals, strategies, future growth, results of operations, performance and business prospects and
opportunities of the REIT. The words “plans”, “expects”, “does not expect”, “scheduled”, “estimates”, “intends”,
“anticipates”, “doesnotanticipate”,“projects”,“believes”orvariationsofsuchwordsandphrasesorstatementstothe
effect that certain actions, events or results “may”, “will”, “could”, “would”, “might”, “occur”, “be achieved” or
“continue” and similar expressions identify forward-looking statements. Some of the specific forward-looking
statementsinthisprospectusinclude,butarenotlimitedto,statementswithrespecttothefollowing:
Š theclosingoftheAcquisition;
Š theclosingoftheothertransactionsexpectedtooccuronClosing,whicharedescribedinthisprospectus;
Š theintentionoftheREITtopay,preserve,protectandgrowUnitholders’distributions;
Š theabilityoftheREITtoexecuteitsgrowthstrategies;
Š the forecasted financial results of the REIT for the periods set out in the financial forecast section of this
prospectus;
Š theexpectedtaxtreatmentoftheREITandoftheREIT’sdistributionstoUnitholders;and
Š theexpectedindustryanddemographictrends.
Forward-looking statements are necessarily based on a number of estimates and assumptions that, while
considered reasonable by management of the REIT as of the date of this prospectus, are inherently subject to
significant business, economic and competitive uncertainties and contingencies. The REIT’s estimates, beliefs and
assumptions, which may prove to be incorrect, include the various assumptions set forth herein, including, but not
limited to, the REIT’s future growth potential, results of operations, future prospects and opportunities, the
demographic and industry trends remaining unchanged, no change in legislative orregulatory matters, future levels of
indebtedness, the tax laws as currently in effect remaining unchanged, the continual availability of capital and the
currenteconomicconditionsremainingunchanged.
When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue
reliance on these statements, as forward-looking statements involve significant risks and uncertainties, should not be
read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not
thetimesatorbywhichsuchperformanceorresultswillbeachieved.Anumberoffactorscouldcauseactualresultsto
differmaterially fromtheresultsdiscussedintheforward-lookingstatements,including,butnotlimitedto,thefactors
discussed under “Risk Factors”. These forward-looking statements are made as of the date of this prospectus and,
except as expressly required by applicable law, the REIT assumes no obligation to publicly update or revise any
forward-lookingstatement,whetherasaresultofnewinformation,futureeventsorotherwise.
EXCHANGERATEINFORMATION
The Initial Properties consist of properties located in the states of Arizona, Florida, Georgia, Tennessee, Texas,
and Utah. Accordingly, the REIT is exposed to the impact of fluctuations in the Canadian/U.S. dollar exchange rate.
TheREITdisclosesallfinancialinformationcontainedinthisprospectusinU.S.dollars.Thefollowingtablesetsforth,
for the periods indicated, the high, low, average and period-end noon spot rates of exchange for U.S.$1.00, expressed
inCanadiandollars,publishedbytheBankofCanada.
YearendedDecember31
2012 2011 2010
(C$) (C$) (C$)
Highestrateduringtheperiod ................................................ 1.0418 1.0604 1.0778
Lowestrateduringtheperiod ................................................. 0.9710 0.9449 0.9946
Averageratefortheperiod ................................................... 0.9996 0.9891 1.0299
Rateattheendofperiod ..................................................... 0.9949 1.0170 0.9946
ThefinancialforecastwaspreparedassuminganexchangerateofU.S.$1equalsC$1.
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PROSPECTUSSUMMARY
The following is a summary of the principal features of the Offering and should be read together with the more
detailedinformationandfinancialdataandstatementscontainedelsewhereinthisprospectus.
THEREIT
Overview
Milestone Apartments Real Estate Investment Trust is a newly-created, unincorporated, open-ended real estate
investment trust established pursuant to the Declaration of Trust under the laws of the Province of Ontario. TheREIT
hasbeencreated forthepurposeofacquiringandowningmultifamily properties inselecttargetmarketsintheUnited
States.
ObjectivesoftheREIT
TheREIT’sobjectivesareto:(i)preserve,protectandgrowUnitholders’cashdistributionsonatax-efficientbasis
from investments in the United States multifamily real estate sector; (ii) enhance the value of the REIT’s assets and
maximize long-term Unitholder value through active management; and (iii) expand the asset base of the REIT and
increasetheREIT’sAFFOperUnit,throughrevenueenhancement,expenserationalizationandaccretiveacquisitions.
See“TheREIT–ObjectivesoftheREIT”.
MarketOpportunity
The REIT will invest in multifamily income producing properties located in the United States. Management
believes that investment in a vertically integrated multifamily real estate platform has the potential to deliver superior
risk-adjusted returns compared to other real estate asset classes. Management also believes that certain characteristics
of and trends in the United States multifamily market make for an attractive investment opportunity, including
compelling population, demographic and job growth characteristics, declining homeownership rates and favourable
supply and demand fundamentals. Furthermore, when comparing the U.S. market to the Canadian market, the U.S.
market is characterized by larger multifamily transaction volumes and external growth opportunities, the absence of
rentcontrolpoliciesandtheexistenceofregulatoryframeworksthattendtobemorelandlord-friendly.Thesefeatures,
combined with the relative position of the U.S. real estate cycle which is at a less advanced stage of its recovery than
theCanadianrealestatemarkets,makeforanattractiveinvestmentopportunityforCanadianinvestors.UponClosing,
theREITwillbethelargestrealestateinvestmenttrustinCanadatofocusontheU.S.multifamilysector.
In addition to providing investors with exposure toanattractive portfolio ofInitial Properties, theREITwillalso
benefit from the proven investment track record of its Asset Manager and the operational expertise of its internalized
property management platform. The REIT intends to leverage management’s longstanding relationships, experience
and track record in identifying and acquiring multifamily assets in key U.S. markets where the REIT’s operating
platformcancreatevalueandmaximizeassetperformancetodeliverstable,attractivereturnstoinvestors.
See“MarketOpportunity”.
InvestmentHighlights
Š AttractiveandStableYield.TheREITintendstopaystableandgrowingmonthlycashdistributions,initially
expectedtoprovideUnitholderswithanannualyieldofapproximately6.5%,basedonanAFFOpayoutratio
of90%.See“DistributionPolicy”and“PresentationofFinancialInformation–Non-IFRSMeasures”.
Š Aligned Management TeamwithProvenMultifamily TrackRecord.TheREITwillbemanaged byateam
of talented senior professionals with an average of more than 20 years of experience in the multifamily real
estate sector, with particular expertise in areas such as asset management, property management,
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