Lanesborough Real Estate Investment Trust V.LRT.UN

RE: RE: RE: Bought my Units back Today

[claupier]

I received this from GINO

I ask some question to him

Yes, you will receive a T3 form which will show a capital gain of $1.09 per unit and 50% of that will be taxable.

The transaction was approved by the TSX and is in complete compliance with their requirements. There is no point in physically issuing a bunch of new units and then doing the consolidation. It would involve a bunch of costly paperwork to accomplish nothing.

The press release was issued on Dec 20 and was quite clear that the distribution was NOT paid in cash and that there would NOT be any new units after the transaction. You bought your units on Dec 23 perhaps on the assumption that there was some benefit to the $1.09 distribution. Since there was no cash payment or additional units, we believe that it should have been fairly obvious that there was no benefit to be gained. However, you are now in the unfortunate situation of having to report some capital gains on your 2009 tax return.

Gino

As I noted, the unit distribution and subsequent consolidation all occured on December 31, 2009.

The purpose of the distribution was to flow $1.09 per unit of capital gain to the unitholders. Lanesborough earned approximately $19  million of capital gains from the properties that were sold in 2009. Lanesborough cannot be taxable and therefore needs to payout the capital gains to the unitholders to avoid paying taxes at the REIT level. Since Lanesborough is not currently in a position to pay the distribution in cash the only other way this was possible was by doing it with additional units and subsequent consolidation of the units. Each outstanding unit wasl be allocated $1.09 of capital gain (50% of which is a taxable capital gain). It was simply a method of allocating the capital gain income out of Lanesborough so that Lanesborough does not end up being in a taxable situation and having to pay several millions of dollars in taxes.

The end result is that there are exactly the same number of units outstanding after the issnance and consolidation of the unit distribution as there were prior to the distribution. Therefore, there should really not be any change in the market trading values resulting from the distribution. Please note that if the units were not consolidated there would have been in excess of 40 Million units outstanding compared to the 17.9 Million currently outstanding. That would have resulted in a dilution in the market value of the units and the units would be trading at much lower values than they currently are trading today.

Hopefully, that answers your questions.