AX.PR.E : No Conversion to FloatingReset

Artis Real Estate Investment Trust has announced (on September 18):

that it has determined, based upon the election of holders of Preferred Units, Series E (“Series E Units”) (AX.PR.E), that less than 500,000 Series F Units would be issued on September 30, 2018 and consequently, no holders of Series E Units are entitled to reclassify their Series E Units to Series F Units on September 30, 2018.

Accordingly, all 4,000,000 Series E Units will remain issued and outstanding following September 30, 2018 and during the subsequent five year period commencing October 1, 2018, holders will be entitled to receive distributions, if, as and when declared by the Board of Trustees of Artis, in an annual amount per Series E Unit determined by multiplying the Annual Fixed Distribution Rate of 5.472% per annum by $25.00, payable quarterly on the last business day of each of March, June, September and December in each year during such period.

It will be recalled that AX.PR.E will reset at 5.472% effective October 1.

AX.PR.E is a FixedReset, 4.75%+330, that commenced trading 2013-3-31 after being announced 2013-3-12. It must be remembered that these are not actually preferred shares, as the term is usually used; they are preferred units and the distributions will be characterized in the same manner as distributions to the Capital units. The company publishes the characterization of the distributions on its website. Because of the company’s structure, conversion between the FixedReset and FloatingReset is probably (!) a taxable event; i.e., investors will take a capital gain or loss for tax purposes on conversion and reset the Adjusted Cost Base on their new position.

I recommended against conversion.

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