Distribution declaration mechanics

In the established Canada vehicle, the general partner declares distributions at its discretion, subject to the partnership having sufficient available cash, to preserving the working-capital reserve, and to compliance with the interest coverage ratio (ICR) covenant that governs the vehicle's borrowing. When distributions are declared, they are allocated to all outstanding units of the relevant asset in equal proportion — no unit carries a preferential distribution right over another. The planned United States vehicle is intended to apply an equivalent discretion, covenant, and proportional-calculation framework once established.

These mechanics apply to the Canada and United States Direct-Hold Solutions, which are structured as limited partnerships. The Spain SOCIMI and Mexico FIBRA are governed by their own jurisdictions' distribution regimes, not by a partnership agreement, and are not covered by the mechanics described here.

Key takeaways

• A distribution is declared at the general partner's discretion, subject to available cash, preservation of the working-capital reserve, and compliance with the vehicle's aggregate interest coverage ratio covenant — not a per-asset formula, and not a mechanism that supplements one property's distribution with another's income.
• Distributions are proportional to outstanding unit counts; an investor holding five percent of a direct-hold LP's units receives five percent of any distribution declared from that LP — no priority class, no catch-up mechanism, no preferred return.
• Declared distributions are income allocations of the limited partnership; the tax treatment of any distribution depends on each partner's own circumstances and is a matter for qualified tax counsel.
• At least 90% of a fiscal year's Distributable Income is paid to limited partners within 90 days of fiscal year-end; the remaining 10% is retained for partnership purposes during the Initial Period, then applied to redeem First Secured Mortgage Debentures.

Interest coverage ratio and distributions

The interest coverage ratio is a covenant on new borrowing, not a distribution formula. It is calculated at the vehicle level — aggregate pre-tax earnings against aggregate interest, fee, and cost payments to lenders across every property the vehicle holds, not any single property in isolation — and it sets a 1.20× floor below which the vehicle may not issue further First Secured Mortgage Debentures, absent a Special Resolution of unit holders. See Debt service and financing structure for the full borrowing-covenant mechanics.

Distribution declarations are a separate, discretionary decision. The general partner's discretion over the amount and timing of distributions is subject to the partnership having sufficient available cash, to preserving the working-capital reserve, and to the ICR covenant — the covenant is one input among several, not a hard gate that halts a single property's distributions on its own while the vehicle's other properties continue paying.

Proportional allocation

When the general partner declares a distribution, the aggregate amount to be distributed is divided by the total outstanding unit count to produce a per-unit distribution amount. Each unit holder receives the per-unit distribution amount multiplied by their unit count. An investor holding 250 units in a 10,000-unit register receives 2.5% of the aggregate declared distribution.

There is no preferred class of units, no minimum preferred return that must be satisfied before ordinary units participate, and no accumulated preferred distribution that must be paid up before a regular distribution is declared. The distribution waterfall contains a single level: all outstanding units of the same asset receive the same per-unit amount.

Minimum distribution and retention

In the established Canada vehicle, where a distribution is declared, the partnership pays at least 90% of the fiscal year's Distributable Income to limited partners within 90 days of the fiscal year-end. Until cumulative distributions equal 100% of the gross proceeds limited partners paid for their units (the Initial Period), the remaining 10% is retained for partnership purposes. After the Initial Period, that 10% is applied to redeem First Secured Mortgage Debentures until fully redeemed, after which it reverts to partnership purposes.

Tax treatment

The limited partnership does not pay income tax at the entity level; income and deductible expenses pass through to the partners in proportion to their unit holdings. The tax treatment of any distribution depends on each partner's own circumstances and is a matter for qualified tax counsel.

See also

• Limited partnership structure — the LP form through which distributions flow to limited partners
• Asset vehicle isolation — why distributions from one LP asset cannot be supplemented by assets held in another LP
• Debt service and financing structure — the interest coverage ratio covenant and how it governs new borrowing
• Narrow bank financial model — the financial model underlying the borrowing covenant