Mr. Evan Kirsh reports

STARLIGHT U.S. RESIDENTIAL FUND ANNOUNCES PROPOSED REORGANIZATION TRANSACTION

Starlight U.S. Residential Fund has entered into a reorganization agreement with Starlight Group Property Holdings Inc., an affiliate of the fund's asset manager, to implement a reorganization transaction. The reorganization is expected to close before the end of 2025, subject to the satisfaction or waiver of certain closing conditions, including approval of the holders of units of the fund of the reorganization, as described below, the receipt of certain fund lender consents, acceptance of the reorganization from the TSX Venture Exchange, approval for listing of the Class A limited partnership units and, if applicable, Class U limited partnership units, as described below, and certain other customary closing conditions.

Pursuant to the reorganization, among other steps: (i) unitholders will receive limited partnership units of Starlight U.S. Residential Fund (Multi-Family) Investment LP, whose limited partnership agreement will be amended and restated to reflect the terms of the existing declaration of trust of the fund to the extent possible, subject to necessary modification and certain other differences described in the agreement; (ii) provided the foreclosure of the fund's Emerson at Buda property has not been completed, Buda Mezz LLC, the indirect owner of Emerson at Buda, will be distributed to Starlight Group, subject to the consent and other rights of the lender; (iii) the carried interest entitlements of Starlight Group and the president of the fund in the fund structure will be cancelled; (iv) the legacy entities from the fund's former single-family residential holding structure which currently does not own any assets and does not generate any revenue will be distributed to Starlight Group; and (v) the fund will be dissolved and terminated. In addition, the term of SURF LP will expire on November, 2029, being three years from the current expiry of the fund in November, 2026.

Emerson at Buda is currently valued by the fund at less than the associated loans. As disclosed previously, Emerson at Buda was unable to satisfy the loan extension conditions in respect of its outstanding loans and, accordingly, is in default in respect of the obligation to repay the associated loans at maturity. As noted above, foreclosure proceedings have been commenced in respect of Emerson at Buda.

All unitholders will receive either Class A limited partnership units of SURF LP denominated in Canadian dollars or, if the U.S.-dollar class vote (as defined below) fails to achieve the requisite majority, holders of trust units of the fund denominated in U.S. dollars will receive Class U limited partnership units of SURF LP denominated in U.S. dollars. Unitholders will receive Class A or Class U limited partnership units based on the existing entitlements and exchange ratios applicable to each unitholder's current class of units.

The purposes of the reorganization are, among other things, to simplify the fund's capital structure, including by reducing the number of classes of units from nine to one (or, depending on the result of the U.S.-dollar class vote, two), increasing liquidity for investors by having all of the resulting units listed on a stock exchange, eliminating compliance associated with the fund being a trust and with the maintenance of the legacy entities within the former single-family residential holding structure, and eliminating potential for Starlight Group and the president of the fund to receive any carried interest.

It is a condition of closing of the reorganization that the Class A and, if applicable, Class U limited partnership units of SURF LP be listed and posted for trading on the TSX Venture Exchange. Listing is subject to the approval of the TSX Venture Exchange in accordance with its applicable listing requirements.

Required approvals and voting support

The fund will be holding a special meeting of unitholders to seek, among other things, approval of the reorganization. The fund will deliver a management information circular and certain related documents to unitholders in connection with the meeting, copies of which will be filed on SEDAR+. It is anticipated that the meeting will take place in late November or early December, 2025.

Unitholders must approve the reorganization by at least: (i) 66-2/3rds per cent of the votes cast by unitholders present or represented by proxy, voting as a single class, at the meeting; and (ii) subject to receipt of exemptive relief from the Canadian Securities Administrators, a majority of the votes attached to the units held by unitholders present or represented by proxy, voting as a single class, at the meeting, excluding for this purpose votes cast by unitholders that are required to be excluded pursuant to Multilateral Instrument 61-101 (Protection of Minority Security Holders in Special Transactions), provided that, if such exemptive relief is not obtained, the unitholders will vote on a class-by-class basis in respect of (ii). Votes cast by Daniel Drimmer, the senior officers of the fund, the holder of Class I units of the fund, and the senior officers and directors of Starlight Group will be excluded for purposes of the majority of the minority vote described above. In addition, as noted above, holders of U.S.-dollar-denominated units of the fund will have a separate vote, as a class, on whether to receive Class A or Class U limited partnership units of SURF LP.

MI 61-101 requires approval of the reorganization to be received from a majority of the votes attached to the units voted by disinterested unitholders voting separately on a class-by-class basis at the meeting. However, the fund has applied to the CSA for exemptive relief from the requirement that the fund obtain approval separately for each class of units on the basis that, among other reasons: (i) the fund's amended and restated declaration of trust provides that unitholders vote as a single class unless the nature of the business to be transacted at the meeting affects holders of one class of units in a manner materially different from its effect on holders of another class of units, and the fund's manager and the fund have determined that, in light of the separate vote for U.S.-dollar-denominated units of the fund, the reorganization does not affect holders of one class of units in a manner materially different from its effect on holders of another class of units; (ii) since the relative economic entitlements as between classes within the fund are to be determined in accordance with the formulas established in the amended and restated declaration of trust of the fund that were set at the time of the fund's initial public offering when investors selected their preferred class and purchased their units, the economic impact of the reorganization will be determined pursuant to such formulas and, other than the potential for holders of U.S.-dollar-denominated units to receive Class A limited partnership units (which will be subject to the U.S.-dollar class vote), the reorganization will not alter such entitlements or otherwise provide for the payment of cash or assets to unitholders in a manner that differs from the pre-established entitlements in the amended and restated declaration of trust; (iii) negotiation of the reorganization was overseen by a special committee of independent trustees of the board of trustees of the fund; (iv) both the special committee and the board have received the fairness opinion (as defined herein); (v) the board believes that providing a class vote would provide disproportionate power to a potentially small number of unitholders; and (vi) to the best of the knowledge of the manager of the fund and the fund, there is no reason to believe that the unitholders of any particular class would not approve the reorganization. There can be no assurance that the requested relief will be granted by the CSA.

Board process and recommendation

The board constituted the special committee to oversee negotiation of the reorganization for the fund.

In connection with such process, Evans & Evans Inc. has provided an opinion to the special committee and the board to the effect that, as of the date of such opinion and based upon and subject to the limitations, qualifications, assumptions and other matters set out therein, the reorganization is fair, from a financial point of view, to the unitholders (other than interested unitholders). Based on the fairness opinion, certain reasons set out above and as will be described more fulsomely in the management information circular and other considerations, the special committee concluded that the reorganization is in the best interests of the fund and, accordingly, unanimously recommended that the board approve the reorganization and related matters.

Based on the fairness opinion, the reasons set out above and other considerations, the board unanimously concluded (with Mr. Drimmer declaring his interest and recusing himself from consideration and voting) that the reorganization is in the best interests of the fund and, accordingly, unanimously approved the reorganization and related matters and unanimously recommends that unitholders vote in favour of the reorganization and related matters.

Transaction advisers

Evans & Evans has provided a fairness opinion to the special committee and the board in connection with the reorganization. Blake, Cassels & Graydon LLP is counsel to the fund, and Wildeboer Dellelce LLP is counsel to the special committee.

About Starlight U.S. Residential Fund

The fund is a trust formed under the laws of Ontario for the primary purpose of indirectly acquiring, owning and operating a portfolio of income-producing multifamily and single-family residential rental properties in the U.S. residential real estate market located primarily in Arizona, California, Colorado, Florida, Georgia, Idaho, Nevada, North Carolina, Oregon, South Carolina, Tennessee, Texas, Utah and Washington. The fund currently has interests in and operates a portfolio comprising interests in 1,333 Class A stabilized, income-producing multifamily residential suites located in Tampa, Fla., Austin, Tex., Phoenix, Ariz., and Raleigh, N.C.

We seek Safe Harbor.