Starlight’s Big Bet on BC Rentals Gets a Regulatory Fast-Track

TORONTO, ON – December 04, 2025 – In a move that signals a strategic push for scale in one of Canada’s most dynamic real estate markets, Starlight Western Canada Multi-Family (No. 2) Fund has received a crucial green light from regulators to streamline a major consolidation. The Ontario Securities Commission (OSC) granted the fund exemptive relief from key minority protection rules, allowing it to proceed with a single unitholder vote on a proposal to merge its assets with a sister fund, the Starlight Western Canada Multi-Family Limited Partnership.

This decision paves the way for the creation of a unified real estate entity controlling a portfolio of 1,413 multi-family units across 15 properties in British Columbia, with an aggregate value of approximately $639.4 million. While the transaction itself represents a significant strategic play, the regulatory nuance is where the real story lies. By waiving the standard requirement for separate class-by-class voting, the OSC has placed its confidence in the fund's governance structure, setting a noteworthy precedent at the intersection of corporate efficiency and investor protection.

The Strategic Blueprint: Consolidating for Scale

At its core, the proposed transaction is a calculated move to build a more formidable and efficient platform in the competitive Western Canadian rental market. The plan is to combine the assets of two distinct but complementary Starlight funds on a net-asset-value for net-asset-value basis. The Starlight Western Canada Multi-Family (No. 2) Fund, which currently holds 944 suites, will absorb the portfolio of the Starlight Western Canada Multi-Family Limited Partnership, which holds 469 units in Kelowna and on Vancouver Island.

The strategic rationale, as articulated by Starlight, centers on the classic benefits of scale. By creating a larger, more diversified asset pool, the consolidated entity aims to unlock significant advantages. These include enhanced access to capital markets, potentially leading to more favorable financing and lower borrowing costs—a critical edge in a capital-intensive industry. Furthermore, operational synergies are expected to emerge, from streamlined management to greater bargaining power with suppliers, driving down costs and improving net operating income.

This consolidation will create a single, publicly reporting entity with an approximate 60.3% ownership stake in the combined assets. For Starlight Investments, which already manages a formidable 9,500 multi-family suites in the region valued at over $3.2 billion, this maneuver sharpens its competitive edge. The goal is clear: build a superior investment vehicle with the size and scale necessary to not only weather market fluctuations but also to position for a more lucrative, scaled exit in the future.

A Regulatory Crossroads: Bypassing the Class-by-Class Vote

The most disruptive aspect of this deal is not the consolidation itself, but how it’s being approved. Typically, a transaction of this nature would fall under Multilateral Instrument 61-101 (MI 61-101), a set of rules designed to protect minority security holders from potentially coercive or unfair deals, especially when related parties are involved. A cornerstone of MI 61-101 is the requirement for a “majority of the minority” vote, often conducted on a class-by-class basis. This ensures that a deal cannot be pushed through if it benefits one class of investors at the expense of another.

However, Starlight successfully argued for an exemption. The fund contended that its own declaration of trust allows for a single-class vote unless a transaction materially affects one class of units differently than another. The fund’s independent Board of Trustees, after receiving a fairness opinion from Blair Franklin Capital Partners Inc., determined that this was not the case. They argued that because the economic entitlements of each class were pre-determined by formulas set during the fund's initial public offering, the consolidation would not alter those rights.

By granting the relief, the OSC has signaled its agreement with this assessment. This pragmatic decision prioritizes efficiency, acknowledging that a class-by-class vote could give a small group of unitholders disproportionate power to block a transaction deemed beneficial for the whole. “While efficient, such exemptions test the balance between corporate agility and the granular protections MI 61-101 was designed to provide,” noted one corporate governance analyst. “The regulator is essentially trusting the board's determination that all unitholders face the same financial outcome, rendering separate votes redundant.”

The Unitholder's Choice: A Unified Voice

For investors in the Starlight fund, this regulatory decision fundamentally changes the dynamic of the upcoming vote. Instead of siloed decisions within each unit class, all unitholders will vote together as a single bloc. The fate of the nearly $640 million consolidation now rests on a simple majority of all votes cast. The deadline for registered unitholders is 10:00 a.m. on December 10, 2025, with a virtual meeting scheduled for December 12.

In this context, the role of the fund's independent oversight becomes paramount. The Board of Trustees, chaired by Denim Smith and including members Lawrence Wilder and Tracy Sherren, was presented as the primary safeguard for unitholder interests. Their unanimous recommendation, backed by the fairness opinion, is the central pillar supporting the transaction's legitimacy in the absence of a fragmented vote. Investors are being asked to place their trust in the board's due diligence and its conclusion that the combined entity will create more value than the sum of its parts.

This structure effectively pools the collective will of the investors, preventing potential hold-ups but also diluting the influence of any single minority group that might perceive a unique disadvantage. The outcome will therefore be a powerful referendum on investor confidence in both the strategic merits of the consolidation and the governance framework that brought it to a vote.

Navigating the Crosswinds of BC's Rental Market

The timing of Starlight's consolidation is particularly telling when viewed against the backdrop of British Columbia’s evolving multi-family market. The region remains a magnet for inter-provincial and international migration, fueling robust underlying demand for rental housing. However, the market is facing significant crosswinds heading into 2026.

A surge in multi-family housing starts, spurred by government incentives, is bringing a wave of new supply online. While this is welcome news for renters, it is creating downward pressure on rent growth, particularly in the higher-end segment where vacancy rates have been ticking up. Some analysts predict a national peak in vacancy rates in 2025-2026, and while demand in BC is expected to remain strong, the era of unchecked rent acceleration may be pausing.

In this environment, scale becomes a critical defensive and offensive tool. A larger, consolidated portfolio allows an operator like Starlight to spread risk across different sub-markets and property vintages. The operational efficiencies gained from consolidation are not just a line item on a pro-forma statement; they are a direct means of protecting margins in a market where revenue growth may become less certain. By merging now, Starlight is building a more resilient vehicle capable of navigating market volatility while retaining the financial firepower to capitalize on acquisition opportunities that may arise if smaller competitors struggle. This strategic consolidation is as much about preparing for future challenges as it is about seizing current opportunities for growth.