Exploits Discovery Corp. — Annual Report 2020

Feb 25, 2021

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CONSOLIDATED FINANCIAL STATEMENTS (AUDITED IN CANADIAN DOLLARS)

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

DATED: FEBRUARY 25, 2021

TABLE OF CONTENTS

Management’s Statement of Responsibility for Financial Reporting. .................................................................... 1 Auditors’ Report to the Unitholders. ......................................................................................................................... 2 Consolidated Statements of Financial Position ......................................................................................................... 6 Consolidated Statements of Comprehensive Income ................................................................................................ 7 Consolidated Statements of Changes in Unitholders’ Equity .................................................................................. 8 Consolidated Statements of Cash Flows .................................................................................................................... 9 Notes to the Consolidated Financial Statements ..................................................................................................... 10

Plaza Retail REIT

Management’s Statement of Responsibility for Financial Reporting

The accompanying consolidated financial statements and information have been prepared by, and are the responsibility of, the management of the Trust. The financial statements have been prepared within accepted limits of materiality and in accordance with the International Financial Reporting Standards appropriate in the circumstances.

Management maintains appropriate systems of internal control. Policies and procedures are designed to provide reasonable assurance that transactions are properly authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for preparation of financial statements.

The board of trustees, with the assistance of its Audit Committee, is responsible for ensuring that management fulfills its oversight responsibility for financial reporting and internal control. The Audit Committee consists entirely of independent trustees. At regular meetings, the Audit Committee reviews audit, internal control and financial reporting matters with management and the external auditors to satisfy itself that each is properly discharging its responsibilities. The financial statements, the independent auditors’ report thereon and the accompanying management’s discussion and analysis have been reviewed by the Audit Committee and have been approved by the Board of Trustees.

KPMG LLP, the independent auditors appointed by the unitholders based on the recommendation of the Board of Trustees, have been engaged to audit the consolidated financial statements and provide an independent professional opinion thereon. The auditors have full and independent access to the Audit Committee to discuss audit and related matters with and without the presence of management and non-independent Trustees.

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______ __________ Michael Zakuta Jim Drake President and CEO Chief Financial Officer February 25, 2021 February 25, 2021

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KPMG LLP

Frederick Square 77 Westmorland Street, Suite 700 Fredericton NB E3B 6Z3 Canada Tel 506‐452‐8000 Fax 506‐450‐0072

INDEPENDENT AUDITORS’ REPORT

To the Unitholders of Plaza Retail REIT

Opinion

We have audited the consolidated financial statements of Plaza Retail REIT (the “Entity”), which comprise:

• the consolidated statements of financial position as at December 31, 2020 and December 31, 2019

• the consolidated statements of comprehensive income (loss) for the years then ended

• the consolidated statements of changes in unitholders’ equity for the years then ended

• the consolidated statements of cash flows for the years then ended

• and notes to the consolidated financial statements, including a summary of significant accounting policies

• (Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2020 and December 31, 2019, and its consolidated results of financial performance, and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “ Auditors’ Responsibilities for the Audit of the Financial Statements ” section of our auditors’ report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2020.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matter described below to be the key audit matter to be communicated in our auditors’ report.

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Evaluation of the Valuation of Income Producing Properties

Description of the matter:

We draw attention to Notes 2(c)(i), 3(b), and 4 to the financial statements. The Entity uses the fair value model to account for income producing properties. The Entity has recorded income producing properties at fair value for an amount of $972,430 thousand as at December 31, 2020. Significant assumptions include future stabilized net operating income and capitalization rates applied to the future stabilized net operating income.

Why the matter is a key audit matter:

We identified the evaluation of the fair value of income producing properties as a key audit matter. This matter represented an area of significant risk of material misstatement given the magnitude of income producing properties and the high degree of estimation uncertainty in determining the fair value of income producing properties. In addition, significant auditor judgement and specialized skills and knowledge were required in performing, and evaluating, the results of our audit procedures due to the sensitivity of the fair value of income producing properties to minor changes in certain significant assumptions.

How the matter was addressed in the audit:

The primary procedures we performed to address this key audit matter included the following:

For a selection of income producing properties, we assessed the Entity’s ability to accurately forecast by comparing the Entity’s future stabilized net operating income used in the prior year’s estimate of the fair value of income producing properties to actual results.

For a selection of income producing properties, we compared the Entity’s future stabilized net operating income to the actual historical net operating income. We assessed the future stabilized net operating income by:

• Taking into account the changes in conditions and events affecting the selected income producing properties

• Considering the adjustments, or lack of adjustments, made by the Entity in arriving at the future stabilized net operating income.

We involved valuations professionals with specialized skills and knowledge, who assisted in evaluating, for the overall portfolio, the appropriateness of the capitalization rate ranges used by the Entity’s internal valuation team and external appraisers. These rates were evaluated by comparing them to published reports of real estate industry commentators.

We evaluated the competence, capabilities and objectivity of the external independent appraisers by:

• Inspecting evidence that the appraisers are in good standing with the Appraisal Institute

• Considering whether the appraisers have appropriate knowledge in relation to the specific type of investment properties

• Reading the reports of the external independent appraisers which refers to their independence

Other Information

Management is responsible for the other information. Other information comprises:

• the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions.

• the information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled “Annual Report”.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

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In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditors’ report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditors’ report.

We have nothing to report in this regard.

The information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled “Annual Report” is expected to be made available to us after the date of this auditors’ report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Financial

Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are/is free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

• Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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Chartered Professional Accountants

The engagement partner on the audit resulting in this auditors’ report is Douglas Reid.

Fredericton, Canada

February 25, 2021

© 2021 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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December 31, December 31, 2020 2019

Plaza Retail REIT

Consolidated Statements of Financial Position

(in thousands of Canadian dollars)

Assets Non-Current Assets Investment properties (Note 4) Investments (Note 5) Tenant loans Deferred income tax asset (Note 16) Total non-current assets Current Assets Investment properties held for sale (Note 4) Cash Receivables (Note 6) Prepaid expenses and deposits (Note 7) Tenant loans Notes and advances receivable (Note 8) Total current assets Total assets Liabilities and Unitholders’ Equity Non-Current Liabilities Debentures payable (Note 9) Mortgage bonds payable (Note 10) Mortgages payable (Note 11) Class B exchangeable LP units (Note 21) Land lease liabilities (Note 13) Deferred income tax liability (Note 16) Total non-current liabilities Current Liabilities Current portion of debentures payable (Note 9) Current portion of mortgage bonds payable (Note 10) Bank indebtedness (Note 12) Current portion of mortgages payable (Note 11) Mortgage payable of investment property held for sale (Note 11) Accounts payable, accrued liabilities, tenant payables and tenant deposits (Note 14) Land lease liabilities (Note 13) Notes payable (Note 15) Total current liabilities Total liabilities Unitholders’ equity Non-controlling interests Total unitholders’ equity Total liabilities and unitholders’ equity	$ 1,061,136 $ 1,086,680 46,939 49,124 402 530 335 364
	1,108,812 1,136,698
	3,128 609 8,274 8,845 8,106 4,285 3,492 5,383 109 110 7,206 6,038
	30,315 25,270
	$ 1,139,127 $1,161,968
	$ 51,631 $ 64,190 6,146 2,950 405,667 414,125 4,300 5,444 65,986 59,219 8,116 7,247
	541,846 553,175
	9,176 - 1,997 5,987 33,451 17,339 104,369 90,228 709 - 18,681 21,647 760 688 1,236 1,456
	170,379 137,345
	712,225 690,520
	422,407 467,142 4,495 4,306
	426,902 471,448
	$ 1,139,127 $1,161,968

Contingencies, commitments, guarantees and indemnities, litigation and provisions – see Note 27 Subsequent events – see Note 30

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______ Doug McGregor, Trustee Barbara Trenholm, Trustee Chair of the Board Chair of the Audit Committee

See accompanying notes which are an integral part of these consolidated financial statements.

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Plaza Retail REIT

Consolidated Statements of Comprehensive Income (Loss)

Plaza Retail REIT Consolidated Statements of Comprehensive Income (Loss)
(in thousands of Canadian dollars)		2020 2019
Revenues (Note 17) Operating expenses (Note 18) Net property operating income Share of profit (loss) of associates Administrative expenses (Note 19) Investment income Other income Income before finance costs, fair value adjustments and income taxes Finance costs (Note 20) Finance costs - net change in fair value of convertible debentures (Note 9) Finance costs - net change in fair value of Class B exchangeable LP units (Note 21) Finance costs - net change in fair value of interest rate swaps (Note 11 and 28) Net change in fair value of right-of-use land lease assets (Note 4) Net change in fair value of investment properties (Note 4) Profit (loss) before income tax Income tax expense - Current - Deferred Profit (loss) and total comprehensive income (loss) for the year Profit (loss) and total comprehensive income (loss) for the year attributable to: - Unitholders - Non-controlling interests		$ 106,898 $ 112,461 (38,148) (39,734)
		68,750 72,727 (1,305) 1,229 (8,777) (9,905) 503 981 2,363 3,800
		61,534 68,832 (29,061) (29,518) 3,429 (4,294) 1,144 (822) (3,386) (392) (693) (663) (46,891) 18,748
		(13,924) 51,891 (115) (288) (898) (266)
		(1,013) (554)
		$ (14,937) $51,337
		$ (14,908) $ 51,407 (29) (70)
		$ (14,937) $51,337

See accompanying notes which are an integral part of these consolidated financial statements.

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Plaza Retail REIT

Consolidated Statements of Changes in Unitholders’ Equity

(in thousands of Canadian dollars)

Trust Units (Note 21) Retained Earnings Balance as at December 31, 2018 $ 278,058 $ 169,123 Profit and total comprehensive income (loss) for the year - 51,407 Transactions with unitholders, recorded directly in equity: - Issuance of units under the RU plan (Note 21) 273 - - Repurchase of units under normal course issuer bid (Note 21) (1,925) (1,108) - Distributions to unitholders (Note 23) - (28,686) - Distributions from non-controllinginterests - - Balance as at December 31, 2019 $ 276,406$ 190,736 Loss and total comprehensive loss for the year - (14,908) Transactions with unitholders, recorded directly in equity: - Issuance of units under the RU plan (note 21) 143 - - Repurchase of units under normal course issuer bid (Note 21) (1,096) (362) - Distributions to unitholders (Note 23) - (28,512) - Contributions to non-controllinginterests - -	Total Attributable to Unitholders Non- Controlling Interests Total Equity
	$ 447,181 $ 4,521 $ 451,702 51,407 (70) 51,337 273 - 273 (3,033) - (3,033) (28,686) - (28,686) - (145) (145)
	$ 467,142 $ 4,306 $ 471,448
	(14,908) (29) (14,937) 143 - 143 (1,458) - (1,458) (28,512) - (28,512) - 218 218 $ 422,407 $ 4,495 **$ 426,902 **
Balance as at December 31, 2020 **$ 275,453$ 146,954 **

See accompanying notes which are an integral part of these consolidated financial statements.

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2020 2019

Plaza Retail REIT

Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)	2020 2019
Cash obtained from (used for): Operating activities Profit (loss) and total comprehensive income (loss) for the year Items not affecting cash: Finance costs (Note 20) Share of loss (profit) of associates Net change in fair value of investment properties Net change in fair value of convertible debentures Net change in fair value of Class B exchangeable LP units Net change in fair value of interest rate swaps (Note 11 and 28) Net change in fair value of right-of-use land lease assets Current and deferred income taxes Issuance of units under the DRIP and RU plan Straight-line rent (Note 17) Interest paid Imputed interest paid on land lease liabilities (Note 20) Income taxes paid Distributions from equity accounted investments (Note 5) Leasing commissions paid Change in non-cash working capital (Note 24) Financing activities Cash distributions paid to unitholders (Note 23) Cash distributions paid to Class B exchangeable LP unitholders (Note 20) Repurchase of units under normal course issuer bid (Note 21) Gross mortgage proceeds Fees incurred for placement of mortgages Loan defeasance expenses and early mortgage discharge fees paid (Note 20) Mortgages repaid Periodic mortgage principal repayments Land lease principal repayments Gross proceeds from mortgage bonds Fees incurred for placement of mortgage bonds Redemption of mortgage bonds and debentures Distribution from equity accounted investments (Note 5) Increase (decrease) in notes payable Investing activities Acquisitions of investment properties and land (Note 4) Investment properties – additions Net proceeds from disposal of investment properties and land (Note 4(e)) Net proceeds from asset previously held for sale (Note 4(e)) Advances to equity accounted investments for developments (Note 5) Contributions to/(distributions from) subsidiaries from/to non-controlling interests Decrease (increase) in deposits for acquisitions and financings (Note 7) Decrease (increase) in notes and advances receivable Issuance of tenant loans Repayment of tenant loans Net increase (decrease) in cash Cash less bank indebtedness, beginning of the year Cash less bank indebtedness, end of the year	$ (14,937) $ 51,337 29,061 29,518 1,305 (1,229) 46,891 (18,748) (3,429) 4,294 (1,144) 822 3,386 392 693 663 1,013 554 143 273 (402) (78) (24,764) (26,134) (2,245) (2,254) (537) (348) 1,739 1,676 (478) (232) (4,573) 2,146
	31,722 42,652
	(28,512) (28,686) (334) (334) (1,458) (3,033) 73,489 139,949 (320) (1,059) (225) (134) (53,394) (92,953) (10,762) (10,795) (693) (663) 3,395 - (34) - (4,195) (6,000) 2,624 3,952 (220) 115
	(20,639) 359
	(8,727) (12,650) (27,665) (26,541) 9,901 16,265 609 - (3,483) (8,910) 218 (145) 2,441 (1,907) (1,168) 10,623 - (40) 108 108
	(27,766) (23,197)
	(16,683) 19,814 (8,494) (28,308)
	$ (25,177) $ (8,494)

See accompanying notes which are an integral part of these consolidated financial statements.

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Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

1. Reporting Entity

Plaza Retail REIT (the “Trust” or “Plaza”) is an unincorporated “open-ended” real estate investment trust established pursuant to its declaration of trust dated as of November 1, 2013 and amended as of March 26, 2020 (the “Declaration of Trust”) and is governed by the laws of the Province of Ontario. The address of the Trust’s head office is 98 Main Street, Fredericton, New Brunswick. The Trust operates a retail real estate ownership and development business in Canada. Management does not distinguish or group its operations by geography or any other basis when measuring its performance or making decisions. Accordingly, the Trust has a single reportable segment for disclosure purposes.

2. Basis of Preparation

(a) Statement of Compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

The consolidated financial statements were authorized for issue by the Board of Trustees of the Trust on February 25, 2021.

(b) Basis of Measurement

The consolidated financial statements have been prepared on a historical cost basis, except for the following items in the consolidated statements of financial position that are measured at fair value:

• Interest rate swaps;

• Unit-based payments;

• Convertible debentures;

• Investment properties;

• Investment properties included in investments; and

• Exchangeable LP units.

These consolidated financial statements are presented in Canadian dollars, which is the Trust’s functional currency.

(c) Use of Estimates and Judgments

The preparation of the Trust’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of certain assets and liabilities at the reporting date and the reported amounts of revenues and expenses during the reporting period. The significant estimates and judgments include the assessment of fair values, the discount rates used in the valuation of the Trust’s assets and liabilities, capitalization rates, the relative credit worthiness of the Trust to its counterparties, the determination of the accounting basis for investments and joint arrangements, the amount of borrowing costs to capitalize to properties under development and the selection of accounting policies.

(i) Investment properties

One significant judgment and key estimate that affects the reported amounts of assets at the date of the consolidated financial statements and the reported amounts of profit or loss during the year, relates to property valuations. Investment properties, which are carried on the consolidated statements of financial position at fair value, are valued either by the Trust’s internal valuation team or by external independent appraisers. The valuations are based on a number of significant assumptions, such as capitalization rates, future stabilized net operating income and capital expenditures. The determination of future stabilized net operating income involves assumptions regarding future rental income and operating expenses. These investment properties are sensitive to fluctuations in capitalization rates.

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Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

3. Summary of Significant Accounting Policies

The Trust’s accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements.

(a) General and Consolidation

The consolidated financial statements comprise the financial statements of the Trust and the entities that it controls. All intragroup balances, transactions, income and expenses resulting from intra-group transactions are eliminated in full.

(i) Subsidiaries

Subsidiaries are entities over which the Trust has control. The Trust has control over an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

When the Trust does not own all of the equity in a subsidiary, the non-controlling equity interest is disclosed in the consolidated statement of financial position as a separate component of total equity.

(ii) Associates and joint ventures

Associates are entities over which the Trust has significant influence over the financial and operating policies of the entities and that are neither subsidiaries nor interests in joint ventures.

A joint venture is a type of joint arrangement whereby the parties that share joint control have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

Investments in associates and joint ventures are accounted for using the equity method and initially recorded at cost and adjusted thereafter to recognize the Trust’s share of the profit or loss and other comprehensive income of the associate or joint venture. The Trust’s share of the associate or joint venture’s profit or loss is recognized in the Trust’s consolidated statements of comprehensive income under share of profit of associates.

(iii) Joint operations

A joint operation is a joint arrangement whereby the parties that have joint control have rights to the assets and obligations for the liabilities relating to the arrangement. The Trust recognizes its proportionate share of assets, liabilities, revenues and expenses of joint operations.

The financial statements of the associates, joint ventures, and joint operations are prepared for the same reporting period as the Trust, using consistent accounting policies.

(b) Investment Properties

Investment properties are held to earn rental income or for capital appreciation, or both, but not for sale in the ordinary course of business. As such, investment properties are measured at fair value, under IAS 40, Investment Property (“IAS 40”) using valuations prepared by either the Trust’s internal valuation team or external independent appraisers. Fair value represents the amount at which the properties could be exchanged between knowledgeable, willing parties in an arm’s length transaction at the date of valuation.

Management undertakes a review of the fair value of its investment properties at each reporting period to assess the continuing validity of the underlying assumptions, such as future stabilized net operating income and capitalization rates. Where increases or decreases are warranted, the Trust adjusts the fair values of its investment properties. Related fair value gains and losses are recorded in profit or loss in the period in which they arise.

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Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

(c) Properties Under Development

Properties under development for future use as investment property are accounted for as investment property under IAS 40. Development properties consist of properties under construction, which are recorded at fair value less costs to complete.

(d) Surplus lands

Surplus lands are included in investment properties and are carried at fair value. The fair value of the surplus lands is based on internal valuations based on recent market transactions.

(e) Assets and Liabilities Held for Sale

Investment properties are classified as held for sale if their carrying amount will be recovered primarily through a sale transaction rather than through continuing use. The asset is classified as such only when management has committed to a plan to sell, when the sale is probable and is expected to qualify for recognition as a completed sale within one year. Investment properties classified as held for sale are recorded at fair value less costs of disposal. Any difference between the existing fair value and the calculated fair value less costs of disposal, at the time the asset is reclassified, is recorded through change in fair value.

Liabilities that are assumed by the buyer on disposition of the non-current asset, are also classified as held for sale. Non-current assets and non-current liabilities held for sale are classified separately from other assets and other liabilities in the consolidated statement of financial position. These amounts are not offset or presented as a single amount.

(f) Capitalization of Costs

The Trust capitalizes investment property acquisition costs incurred at the time of purchase.

For development properties, the Trust capitalizes all direct expenditures incurred in connection with their acquisition, development and construction. These expenditures consist of all direct costs and borrowing costs on both specific and general debt. Borrowing costs are offset by any interest earned by the Trust on borrowed funds prior to utilization. The development period commences when expenditures are being incurred and activities necessary to prepare the asset for its intended use are in progress. Capitalization ceases when substantially all the activities necessary to prepare the asset for its intended use are complete.

(g) Revenue Recognition

The Trust enters as a lessor into lease agreements that fall within the scope of IFRS 16, “Leases” which are classified as operating leases. The Trust's revenues are earned from lease contracts with tenants and include both a lease component and a non-lease component. The Trust recognizes contractual revenue from lease components on a straight-line basis over the lease term, which is included in revenue in the consolidated statements of comprehensive income due to its operating nature. An accrued straight-line rent receivable is recorded from tenants for the difference between the straight-line rent and the rent that is contractually due from the tenant. Contingent rental income is recognized when it arises.

The lease agreements include certain services offered to tenants such as cleaning, utilities, security, landscaping, snow removal, property maintenance costs, as well as other support services. The consideration charged to tenants for these services includes fees charged based on a percentage of the rental income and reimbursement of certain expenses incurred. The Trust has determined that these services constitute a distinct non-lease component (transferred separately from the right to use the underlying asset) and are within the scope of IFRS 15, “Revenue from Contracts with Customers”. These property management services are considered a performance obligation, meeting the criteria for over time recognition and are recognized in the period that recoverable costs are incurred, or services are performed.

Fee Income

Fee income consists mainly of property management fees, leasing fees, project management fees and other miscellaneous fees charged to co-owners. Property management fees are generally based on a percentage of property revenues and are recognized when earned in accordance with the property management or co-ownership agreements. Leasing fees are incurred when the

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Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

Trust is the leasing manager for co-owned properties and are recognized when earned in accordance with the property management or co-ownership agreements.

Lease buyout revenue

Lease buyout revenue represents amounts earned from tenants in connection with the cancellation or the early termination of their remaining lease obligations and is recognized when a lease termination agreement is signed, and collection is reasonably assured.

Government grants

Government grants are recognized in net income during the period when there is reasonable assurance that the grants will be received and that the Trust will comply with the terms of the respective grant. Government grants are presented separately as either income or as a reduction of the related costs for which the grants are intended to compensate.

(h) Income Taxes

The Trust is a mutual fund trust and qualifies as a real estate investment trust for Canadian income tax purposes. Under current tax legislation, a real estate investment trust is entitled to deduct distributions of taxable income such that it is not liable to pay income tax, provided that its taxable income is fully distributed to unitholders. Accordingly, income taxes, comprised of current and deferred taxes, are only recorded for the Trust’s corporate subsidiaries. The Trust intends to continue to qualify as a real estate investment trust and to make distributions not less than the amount necessary to ensure that the Trust will not be liable to pay income taxes. The Trust qualified as a real estate investment trust throughout 2020 and the 2019 comparative year.

(i) Cash

Cash represents cash in bank accounts and short-term deposits with initial maturity dates of less than 90 days. The Trust’s cash balance does not include any instruments related to asset-backed securities or commercial paper programs.

(j) Unit-based Payments

The Trust also issues unit-based awards, comprised of restricted units, to certain officers and employees of the Trust or its affiliates. Under the restricted unit plan, the fair value of the restricted units granted is recognized as compensation expense over the vesting period. Fair value is determined with reference to the market price of the Trust’s units.

The Trust issues unit-based awards, comprised of deferred units, to non-employee trustees. Under the deferred unit plan, the fair value of the deferred units granted is recognized as compensation expense in the period the deferred units are granted and the fair value is updated at the end of each reporting period. Fair value is determined with reference to the market price of the Trust’s units.

Since the Trust’s units are redeemable at the option of the holder and are, therefore, considered puttable instruments in accordance with IAS 32, “Financial instruments: presentation”, any restricted units or deferred units are accounted for as a liability because the participants’ rights to receive a puttable instrument is a cash-settled share-based payment under IFRS 2, “Share-based payments”. The restricted unit or deferred unit liability is adjusted to reflect the change in their fair value at each reporting period with the changes in fair value recognized as compensation expense.

(k) Investments

Investments consist of the Trust’s associates and joint ventures accounted for using the equity method. For investments in entities not accounted for using the equity method, amounts received or receivable in accordance with the income distribution formula of the entity, if not capital or financing receipts, are included in income. For investments in entities accounted for using the equity method, amounts received are accounted for as a reduction of the investments and the proportionate share of the net income or loss from the investments are recorded in profit or loss for the period under share of profit of associates, and as an increase or decrease to the investments.

Page 13 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

Investment properties that are held by equity-accounted entities are measured at fair value, consistent with the Trust’s policy for its consolidated investment properties. The Trust’s pro-rata share of any fair value gain or loss is calculated based on “windingup” the specific entity and distributing the net assets to the partners as dictated by the respective agreements. The Trust’s prorata share of any fair value gain or loss is recorded in profit or loss for the period within share of profit of associates.

(l) Financial Instruments

Financial assets and liabilities are recognized when the Trust becomes a party to the contractual provision of the financial instrument.

Classification and Measurement - Financial assets are classified and measured based on three categories: amortized cost, fair value through other comprehensive income (“FVOCI”), and fair value through profit or loss (“FVTPL”). Financial liabilities are classified and measured on two categories: amortized cost or FVTPL. Derivatives embedded in contracts where the host is a financial asset in the scope of IFRS 9, “Financial Instruments” are not separated, but the hybrid financial instrument as a whole is assessed for classification.

Financial assets are measured at amortized cost if both of the following conditions are met and it is not designated as FVTPL:

‐ the financial asset is held within a business model with the objective of collecting the contractual cash flows; and

‐ the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets are measured at FVOCI if they meet both of the following conditions and are not designated at FVTPL:

‐ the financial asset is held within a business model whose objective is to both hold assets to collect contractual cash flows and to sell assets prior to maturity; and

‐ the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Assets held within another business model or assets that do not have contractual cash flow characteristics that are solely payments of principal and interest are measured at FVTPL.

Financial liabilities are classified and measured subsequently at amortized cost using the effective interest method or at FVTPL.

The Trust’s financial assets and liabilities have been classified and measured as follows:

Asset / Liability	Classification and Measurement Basis
Tenant loans	Amortized cost
Cash	Amortized cost
Receivables	Amortized cost
Notes and advances receivable	Amortized cost
Debentures payable:
‐ Convertible debentures	FVTPL
‐ Non-convertible debentures	Amortized cost
Mortgage bonds payable	Amortized cost
Mortgages payable	Amortized cost
Class B exchangeable LP units	FVTPL
Bank indebtedness	Amortized cost
Accounts payable, accrued liabilities, tenant payables and tenant deposits	Amortized cost
Notes payable	Amortized cost
Interest rate swaps	FVTPL

Financial assets are not reclassified subsequent to their initial recognition, unless the Trust identifies changes in its business model in managing financial assets and would reassess the classification of financial assets.

Page 14 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

The effective interest method is used for financial instruments measured at amortized cost and allocates interest over the relevant period. The effective interest rate used in the effective interest method, is the rate that discounts estimated future cash flows (including all fees paid or received that form an integral part of the Effective Interest Rate, transaction costs and other premiums or discounts) through the expected life of the instrument, to the gross carrying amount of a financial asset or to the amortized cost of a financial liability.

Any transaction costs associated with financial instruments measured at FVPTL are expensed as incurred.

Impairment - An allowance for expected credit losses (“ECL”) is recognized at each balance sheet date for all financial assets measured at amortized cost or those measured at fair value through other comprehensive income, except for investments in equity instruments. The ECL model requires considerable judgment, including consideration of how changes in economic factors affect ECLs, which will be determined on a probability-weighted basis.

Impairment losses, if incurred, would be recorded in the consolidated statement of comprehensive income with the carrying amount of the financial asset or group of financial assets reduced through the use of impairment allowance accounts. In periods subsequent to the impairment where the impairment loss has decreased, and such decrease can be related objectively to conditions and changes in factors occurring after the impairment was initially recognized, the previously recognized impairment loss would be reversed through the consolidated statement of comprehensive income. The impairment reversal would be limited to the lesser of the decrease in impairment or the extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized, after the reversal.

General Hedging - IFRS 9 includes a general hedge accounting standard which aligns hedge accounting more closely with an entity’s risk management objectives and strategies. The Trust does not currently apply hedge accounting in its financial statements.

(m) Trust Units

The Trust’s units are redeemable at the option of the holder and, therefore, are considered puttable instruments. Puttable instruments are required to be accounted for as financial liabilities, except where certain conditions are met in accordance with IAS 32, “Financial instruments: presentation”, in which case, the puttable instruments may be presented as equity. The Trust’s units meet the conditions of IAS 32 and are, therefore, presented as equity.

(n) Leasing Costs

Payments to tenants under lease contracts are characterized as either tenant improvements, which enhance the value of the property, or lease inducements. When the obligation is determined to be a tenant improvement, the Trust is considered to have acquired an asset. Accordingly, the tenant improvements are capitalized as part of investment property. When the obligation is determined to be a lease inducement, the amount is recognized as an asset which forms a component of investment property and is deferred and amortized over the term of the lease as a reduction of revenue.

(o) Finance Costs

Finance costs are comprised of interest expense on borrowings, fair value changes in financial liabilities, the fair value adjustment on interest rate swap and bond forward derivatives and transaction costs associated with the issuance of financial liabilities measured at fair value though profit or loss (such as convertible debentures). Transaction costs associated with financial liabilities presented at amortized cost are presented with the related debt instrument and amortized into finance costs using the effective interest method over the anticipated life of the related debt.

(p) Accounting Standards Implemented in 2020

On January 1, 2020, the Trust implemented amendments and revisions for hedge accounting in IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement, the Conceptual Framework, the definition of Material in IAS 1 and IAS 8, and the definition of a Business in IFRS 3 Business Combinations. The impacts on implementation are described below.

Page 15 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

(i) Hedge Accounting

On September 26, 2019, the IASB issued amendments for some of its requirements for hedge accounting in IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement, as well as the related Standard on disclosures, IFRS 7 Financial Instruments: Disclosures in relation to Phase 1 of IBOR Reform and its Effects on Financial Reporting project. The amendments address issues affecting financial reporting in the period leading up to IBOR reform, are mandatory and apply to all hedging relationships directly affected by uncertainties related to IBOR reform. The amendments modify some specific hedge accounting requirements to provide relief from potential effects of the uncertainty caused by the IBOR reform in the following areas: the ‘highly probable’ requirement, prospective assessments, retrospective assessments (for IAS 39), and eligibility of risk components. The amendments are effective from January 1, 2020. The amendments did not have an impact on the consolidated financial statements.

(ii) Conceptual Framework

On March 29, 2018 the IASB issued a revised version of its Conceptual Framework for Financial Reporting (the Framework), that underpins IFRS Standards. The IASB also issued Amendments to References to the Conceptual Framework in IFRS Standards to update references in IFRS Standards to previous versions of the Conceptual Framework. Some Standards include references to the 1989 and 2010 versions of the Framework. The IASB has published a separate document which contains consequential amendments to affected Standards so that they refer to the new Framework, with the exception of IFRS 3 Business Combinations which continues to refer to both the 1989 and 2010 Frameworks. Both documents are effective from January 1, 2020. The revisions did not have an impact on the consolidated financial statements.

(iii) Definition of Material (Amendments to IAS 1 and IAS 8)

On October 31, 2018, the IASB refined its definition of material and removed the definition of material omissions or misstatements from IAS 8. The definition of material has been aligned across IFRS Standards and the Framework. The amendments provide a definition and explanatory paragraphs in one place. Pursuant to the amendments, information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The amendments are effective for annual periods beginning on or after January 1, 2020. The amendments did not have an impact on the consolidated financial statements.

(iv) Definition of a Business (Amendments to IFRS 3)

On October 22, 2018, the IASB issued amendments to IFRS 3 Business Combinations that seek to clarify whether a transaction results in an asset or a business acquisition. The amendments include an election to use a concentration test. This is a simplified assessment that results in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. If a preparer chooses not to apply the concentration test, or the test is failed, then the assessment focuses on the existence of a substantive process. The amendments apply to businesses acquired in annual reporting periods beginning on or after January 1, 2020. The amendments did not have an impact on the consolidated financial statements.

(q) Future Changes in Accounting Policies

• (i) COVID-19 Related Rent Concessions (Amendment to IFRS 16)

On May 28, 2020, the IASB issued COVID-19 Related Rent Concessions (Amendment to IFRS 16). The amendments exempt lessees from having to consider individual lease contracts to determine whether rent concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and allows lessees to account for such rent concessions as if they were not lease modifications. It applies to COVID-19 related rent concessions that reduce lease payments due on or before June 30, 2021. The amendments are effective for annual periods beginning on or after June 1, 2020. Early adoption is permitted. The Trust has treated rent concessions as lease modifications.

Page 16 of 41

Plaza Retail REIT

Notes to the Consolidated Financial Statements December 31, 2020

(tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

4. Investment Properties

		December 31, 2020	December 31, 2020	December 31, 2020			December 31, 2019	December 31, 2019	December 31, 2019
				Right-of-				Right-of-
	Income	Properties		use land		Income	Properties	use land
	producing	under		lease		producing	under	lease
	properties	development		assets(2)	Total	properties	development	assets		Total
Balance, beginning of the
year:	$ 991,326	$ 35,447		$ 59,907	$ 1,086,680	$ 935,779	$ 52,861	$ -		$ 988,640
Right-of-use land lease assets
(Note 4 (f))	-		-	-	-	-	-	60,570		60,570
Additions (deductions):
Additions to investment
properties	5,759	20,358		7,532	33,649	5,788	21,872		-	27,660
Acquisitions of investment
properties and land	8,727		-	-	8,727	12,650	-		-	12,650
Disposals(1)	(17,498)		-	-	(17,498)	(20,377)	-		-	(20,377)
Transfers	36,714	(36,714)		-	-	38,377	(38,377)		-	-
Straight line rent receivable
change	257	33		-	290	(25)	86		-	61
Change in investment
properties held for sale
(Note 4(g))	(3,128)		-	-	(3,128)	(609)	-		-	(609)
Change in fair value –
income producing and
under development	(49,727)	2,836		-	(46,891)	19,743	(995)		-	18,748
Change in fair value –
right-of-use land lease
assets	-		-	(693)	(693)	-	-	(663)		(663)
Balance,end of theyear:	$ 972,430	$ 21,960		$ 66,746	$ 1,061,136	$991,326	$35,447	$59,907		$1,086,680

(1) Cash received in the current year from disposals as per the statement of cash flows of $9.9 million is net of mortgages assumed by the purchasers of $7.6 million. Cash received in the prior year from disposals as per the December 31, 2019 statement of cash flows of $16.3 million is net of notes and advances receivable of $4.1 million assumed by the purchasers.

(2) The IFRS 16, Leases standard was effective January 1, 2019 and was applied prospectively.

The majority of the Trust’s income producing properties and properties under development have been pledged as security under various debt agreements.

Fair value disclosure:

Investment properties (including those owned through equity accounted joint ventures) are measured at fair value using either an internal approach or external appraisals.

Income Producing Properties

(i) Internal approach – direct capitalization income approach

Income producing properties are valued using the direct capitalization method. Under this method, fair value is estimated by applying capitalization rates to future stabilized net operating income (property revenue less property operating expenses), with the resulting value reduced by any costs required to achieve stabilization. Stabilized net operating income adjusts net operating income for things like market property management fees, or in the case of development properties, to reflect full intended occupancy (less a normal vacancy allowance). The key assumption is the capitalization rate for each specific property. The Trust utilizes quarterly capitalization rate matrices provided by an external appraiser. The capitalization rate matrices provide a range of rates for various geographic regions and for various types and qualities of properties within each region. The Trust generally utilizes capitalization rates within the range of rates provided. To the extent that the externally provided capitalization rate ranges change from one reporting period to the next or should another rate within the provided ranges be more appropriate than the rate previously used, the fair value of the investment properties would increase or decrease accordingly.

Page 17 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

(ii) External appraisals

Independent appraisals are obtained in the normal course of business as refinancing activities require them. When an independent appraisal is obtained, the internal valuation team assesses all major inputs used by the independent valuators in preparing their reports and holds discussions with them on the reasonableness of their assumptions. Where warranted, adjustments will be made to the internal valuations to reflect the assumptions contained in the external valuations.

Properties Under Development

Properties under development are valued using a combination of the internal approach, as noted above, and external appraisals. The resulting values are reduced by future cash outlays for costs to complete the development and achieve stabilization, including construction, development, lease-up and related costs.

Of the total fair value in the chart above, $96.8 million of investment properties were based on external appraisals obtained during the year (year ending December 31, 2019 - $290 million).

As at December 31, 2020 the Trust has utilized the following range of capitalization rates:

	Number of Properties(1) Weighted average capitalization rates Primary Market Secondary Market
Freestanding or Mini Box Quick Service Restaurant Anchored Open-Air Centre – Class A Anchored Open-Air Centre – Class B Unanchored Open-Air Centre Enclosed Malls – Community	73 6.59% 5.50% - 9.00% 6.00% - 9.50% 83 7.02% 5.75% - 9.75% 6.25% - 11.50% 15 6.85% 6.50% - 9.00% 6.50% - 9.75% 40 7.21% 6.50% - 9.25% 7.00% - 10.75% 33 7.94% 6.25% - 10.00% 6.75% - 11.50% 3 10.00% 8.50% - 10.00% 8.25% - 11.50% 247 7.19%

(1) Excludes certain properties under development and non-consolidated trusts and partnerships.

Freestanding or Mini Box - defined as a freestanding retail, non-restaurant use such as a pharmacy or equivalent national box retailer. May include nominal additional gross leasable area (“GLA”) if the additional GLA is 15% or less than the total GLA or gross revenue.

Quick Service Restaurant – defined as freestanding retail quick-service restaurant.

Anchored Open-Air Centre – Class A - defined as a food or equivalent-anchored retail open-air centre, 20,000-125,000 square feet and where the anchor tenant(s) represents 70% or more of GLA or gross revenue.

Anchored Open-Air Centre – Class B - defined as a food or equivalent-anchored retail open-air centre, 20,000-200,000 square feet and where the anchor tenant(s) represents less than 70% of GLA or gross revenue.

Unanchored Open-Air Centre - defined as an unanchored retail open-air centre less than 75,000 square feet.

Enclosed Malls - Community - defined as an enclosed community mall with food or department/junior department store or equivalent anchors .

At December 31, 2020 a decrease of 0.25% in the capitalization rates used to determine the fair value of investment properties would have resulted in an increase in investment properties of approximately $24.2 million. An increase of 0.25% in the capitalization rates used would have resulted in a decrease in investment properties of approximately $21.7 million.

The Trust reviewed its future NOI, cash flow projections and valuation of investment properties in light of COVID-19 during 2020. Although the fair value of investment properties reflects the Trust’s best estimates as at December 31, 2020, Plaza is continuing to review its future NOI and cash flow projections. Depending on the duration and full impacts of COVID-19, certain aspects of Plaza’s operations could be further affected, including rental and occupancy rates, consumer demand and demand for retail space, capitalization rates, tenants’ ability to pay rent in full or at all, tenant inducements, temporary or long-

Page 18 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020

(tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

term labour or supply chain disruptions and the impact on construction costs and development projects, and the resulting value of Plaza’s properties.

As at December 31, 2019 the Trust utilized the following range of capitalization rates:

	Number of Properties(1) Weighted average capitalization rates Primary Market Secondary Market
Freestanding or Mini Box Quick Service Restaurant Anchored Open-Air Centre – Class A Anchored Open-Air Centre – Class B Unanchored Open-Air Centre Enclosed Malls – Community	73 6.57% 5.50% - 9.00% 6.00% - 9.50% 92 6.64% 5.50% - 9.50% 6.00% - 11.50% 14 7.06% 6.25% - 8.75% 6.25% - 9.50% 36 7.14% 6.00% - 9.00% 6.75% - 10.50% 37 7.76% 5.75% - 9.50% 6.25% - 11.50% 3 7.77% 8.00% - 10.00% 7.75% - 11.50% 255 7.07%

(1) Excludes certain properties under development and non-consolidated trusts and partnerships.

(a) Straight-line Rent

Included in investment properties at December 31, 2020 is $12.2 million (December 31, 2019 - $12.0 million) of straight-line rents receivable arising from the recognition of rental revenue on a straight-line basis over the lease terms in accordance with IFRS 16, Leases . During the year ended December 31, 2020, as a result of the landlord’s write-off of 25% of rent for eligible tenants under the Canada Emergency Commercial Rent Assistance (“CECRA”) program and abatements granted to tenants, straight line rent increased by $773 thousand.

(b) Surplus Land

Included in investment properties at December 31, 2020 is $1.2 million of surplus lands at fair value (December 31, 2019 - $2.3 million).

(c) Borrowing Costs

The total amount of borrowing costs capitalized for the year ended December 31, 2020 is $380 thousand (for the year ended December 31, 2019 - $640 thousand).

(d) Acquisitions of Investment Properties and Land

		Year ending	Year ending
	%	December 31,	December 31,
Properties Acquired	Acquired	2020(1)	2019
Northern Avenue Plaza, Sault Ste. Marie, ON	50%	$ 8,727	$ -
Tri-CityCentre,Cambridge,ON	50%	-	12,650
Total acquisitions		$8,727	$12,650

(1) Including closing costs

Page 19 of 41

Plaza Retail REIT

Notes to the Consolidated Financial Statements December 31, 2020

(tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

(e) Disposals

Properties Disposed % Disposed	Net Proceeds Year Ending December 31, 2020 Net Proceeds Year Ending December 31, 2019
Quick Service Restaurants and non-core Assets – Arnprior, ON, Cambridge, ON, Hamilton, ON, Thunder Bay, ON, Toronto, ON, Windsor, ON, Neufchatel, QC, and Shawinigan, QC. 100% Quispamsis Town Centre, Quispamsis, NB(2) 50% Quick Service Restaurants and Single Tenant Assets - Coldbrook, NS, Halifax, NS, London, ON, Ottawa, ON, Paris, ON, Laval, QC, Longueuil, QC, and Montreal, QC 100% Winnipeg, MB portfolio – five properties 100% Land – Sherbrooke, QC 50% Five single-use properties located in Calgary, AB, New Glasgow, NS, Antigonish, NS and Montreal, QC(1) 50%	$ 5,894 $ - - 2,245 - 6,645 - 6,900 - 475 4,616 -
Total disposals	$ 10,510 $16,265

(1) The Trust sold a 50% co-ownership interest in five properties for net proceeds of $12.3 million, $4.6 million after assumption of long-term financing on the properties.

(2) The Trust sold a 50% co-ownership interest in a property located in Quispamsis, NB for net proceeds of $6.4 million, $2.2 million after assumption of notes and advances and receivables for the purchaser’s 50% interest of the existing line of credit on the property.

(f) Right-of-use land lease assets

Effective January 1, 2019, the Trust implemented the new IFRS 16, Leases standard. This standard required lessees to bring most leases on their statement of financial position. The Trust has investment properties located on land which is leased. A right-of-use asset has been recorded effective January 1, 2019 to recognize these assets. The Trust has 27 long-term land leases (affecting 26 properties). Land leases expire (excluding any non-automatic renewal periods) on dates ranging from 2022 to 2084 with an average life of 34 years, with some of the leases also containing non-automatic renewal options, extending the average life of the leases to 60 years including these non-automatic renewal options.

(g) Investment properties held for sale

The Trust has segregated three investment properties as held for sale of $3.1 million for properties located in Chicoutimi, QC, Longueuil, QC and in Montreal, QC (December 31, 2019 - $609 thousand). The sales are expected to close in the first quarter of 2021.

5. Investments

Investments consist of the following:

	Ownership	Preferred	Residual	December 31,	December 31,
	Position	Return	Return	2020	2019
Equity Accounted Investments
Centennial Plaza Limited Partnership	10%	10%	20%	$ 13,430	$ 12,237
Trois Rivières Limited Partnership	15%	10%	30%	2,705	2,825
VGH Limited Partnership	20%	8%	27%	1,038	1,912
Plazacorp Ontario1 Limited Partnership	25%	8%	25%	2,275	2,179
Plazacorp Ontario2 Limited Partnership	50%	-	-	3,911	3,972
Plazacorp Ontario3 Limited Partnership	50%	-	-	2,301	2,139
Plazacorp Ontario4 Limited Partnership	50%	-	-	2,452	1,613
RBEG Limited Partnership	50%	-	-	2,407	2,387
CPRDL Limited Partnership	50%	-	-	2,321	2,224
Fundy Retail Ltd.	50%	-	-	532	556
Ste. Hyacinthe Limited Partnership	25%	-	-	210	224
144 Denison East Limited Partnership	25%	-	-	490	440
The Shoppes at GalwayLimited Partnership	50%	-	-	12,867	16,416
Total investments				$ 46,939	$49,124

Page 20 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

For equity accounted investments in which the Trust has less than a 20% ownership interest, the Trust has significant influence over these entities as it has the power to participate in the financial and operating policy decisions of the entities but is not able to exercise control or joint control over those policies.

The share of the profits which the equity-accounted investments noted above are entitled to, is distributed first as a preferred return on invested capital with the remaining distributed as a residual return, as outlined above.

For the year ended December 31, 2020 the Trust received $1.7 million of distributions (for the year ended December 31, 2019 - $1.7 million) from equity accounted investments, and an additional $2.6 million in distributions relating to proceeds from financing (for the year ended December 31, 2019 – $3.9 million). For the year ended December 31, 2020 the Trust made $3.5 million in contributions to its equity accounted investments (for the year ended December 31, 2019 - $8.9 million).

Summary financial information for equity accounted investments, not adjusted for the percentage ownership held by the Trust is as follows:

	December 31,	December 31,
Equity Accounted Investments	2020	2019
Cash	$ 5,071	$ 4,714
Current assets	$ 1,416	$ 2,507
Long term assets	$ 315,820	$ 315,243
Current liabilities	$ 3,781	$ 4,273
Long term liabilities	$ 165,075	$ 157,789
Revenues	$ 25,307	$ 22,766
Expenses	$ (15,007)	$ (13,215)
Fair value gain (loss)	$ (10,940)	$ 2,336
Profit	$(640)	$11,887

6. Receivables

Receivables consist of the following:

	December 31,	December 31,
	2020	2019
Tenant accounts receivable, net of allowance	$ 3,793	$ 1,249
Excise tax	900	667
CEWS government receivable	976	-
Holdback receivable	649	949
Other receivables	1,424	1,420
Income tax receivable	364	-
Total receivables	$ 8,106	$4,285

The Trust determines its allowance for doubtful accounts on a tenant-by-tenant basis using an expected credit loss model taking into consideration lease terms, industry conditions and status of the tenants’ accounts, among other factors. Accounts are written off only when all collection efforts have been exhausted. The allowance for doubtful accounts balance at December 31, 2020 is $1.0 million (December 31, 2019 - $358 thousand). This amount is deducted from tenant accounts receivable. The uncertainty caused by COVID-19 may impact the allowance for doubtful accounts in future periods.

The Government of Canada introduced the Canadian Emergency Wage Subsidy (“CEWS”) program in 2020 which provides a subsidy for Canadian employers who have seen a drop in revenue during the COVID-19 pandemic. The Trust qualified and has recorded a CEWS government receivable. $531 thousand of the subsidy was recorded to reduce operating expenses, $291 thousand was recorded to reduce administrative expenses, and $86 thousand was recorded to reduce capitalized salaries. The CEWS receivable was received subsequent to year end.

Page 21 of 41

(tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020

7. Prepaid Expenses and Deposits

Prepaid expenses and deposits consist of the following:

Prepaid expenses and deposits consist of the following:
	December 31, 2020 December 31, 2019
Prepaid expenses Deposits for acquisitions and financings	$ 2,281 $ 2,224 1,211 3,159
Totalprepaid expenses and deposits	$ 3,492 $5,383

8. Notes and Advances Receivable

The notes and advances receivable are owed by co-owners of investment properties as a result of funding requirements on a short-term basis during development of investment properties, and by minority interest shareholders of consolidated entities. The notes and advances are due on demand.

9. Debentures Payable

Debentures payable consist of the following:

Maturity Date Interest Rate		December 31, 2020December 31,2019
Convertible Series E(1) March 31, 2023 5.10% Series VII June 30, 2021 5.50% Total convertible debentures Non-convertible(2) (3) Various (see below) 5.00% Net debentures payable Less: current portion of debentures payable Total debenturespayable – long-termportion		$ 45,667 $ 48,739 5,316 5,673
		50,983 54,412 9,824 9,778
		60,807 64,190 (9,176) -
		$ 51,631 $64,190

(1) Recorded at fair value based on closing market trading prices of the debentures; the fair value change of the total convertible debentures during 2020 was a gain of $3.4 million (for the year ended December 31, 2019 – loss of $4.3 million)

(2) Recorded at amortized cost

(3) Net of unamortized finance charges of $36 thousand (December 31, 2019 - $82 thousand)

Convertible and non-convertible debentures are subordinate and unsecured.

Convertible debenture terms are as follows:

	Series E	Series VII
Conversion price	$5.65	$6.04
Trust’s first redemption date	April 1, 2021	June 30, 2019
Par call date	April 1, 2022	June 30, 2020
Maturity date	March 31, 2023	June 30, 2021
Face value outstanding	$47,250	$5,500
Publiclylisted	yes	no

Non-convertible debenture maturities are as follows:

	Series I	Series II	Total
Face value outstanding	$3,860	$6,000	$9,860
Maturitydate	May2,2021	February28,2022

Page 22 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

10. Mortgage Bonds Payable

Mortgage bonds payable are secured by various properties:

December 31, 2020	December 31,2019
Series X.1 Series X.2 Series XII	Total Total
Various properties, 1stmortgage $ 2,005 $ 3,195 $ - Variousproperties,1stmortgage - - 3,000	$ 5,200 $ 6,000 3,000 3,000
Gross mortgage bonds payable 2,005 3,195 3,000 Less: unamortized finance charges Net mortgage bonds payable Less: current portion of mortgage bonds payable Net mortgage bondspayable – long-termportion	8,200 9,000 (57) (63)
	8,143 8,937 (1,997) (5,987)
	$ 6,146 $2,950
Series X.1 Series X.2 Series XII
Interest Rate 6.00% 6.15% 5.50% Maturity Date March 25, 2021 June 25, 2022 July 15, 2022 Amount $2,005 $3,195 $3,000

The Series X and XII mortgage bonds can be deployed up to 90% of the cost of a property under a first or second charge on that property. If it is a second charge, the total debt, including mortgage bonds, cannot exceed 90%. These mortgage bonds can be reallocated to different properties from time to time as required.

On June 25, 2020, $6.0 million of Series X mortgage bonds matured and $5.2 million of these bonds were extended or issued. Of the $5.2 million, $2.0 million of these bonds were extended to March 25, 2021 at an interest rate of 6.0% and $3.2 million of these bonds were extended to June 25, 2022 at an interest rate of 6.15%.

Page 23 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020

(tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

11. Mortgages Payable

Interest Rate Range Weighted Average Effective Interest Rate Maturity Dates	December 31, 2020 December 31, 2019
Secured fixed rate loans: 2.09% - 7.00% 4.26% Up to June 2034 Unsecured interest-only fixed rate loans: 5.00% 5.00% Up to May 2024 Fair value of interest rate swap Revaluation of loans upon acquisitions, net of amortization of $6,329 (December 31, 2019 - $6,164) Less: unamortized finance charges Total net fixed rate loans Variable rate loans: - $20 million development facility Prime plus 0.75% or BA plus 2.25% July 31, 2021 - $15 million development facility Prime plus 0.75% or BA plus 2.25% July 31, 2021 - $6.6 million secured non-revolving construction credit facility Prime plus 1.25% or BA plus 2.75% November 30, 2020 - $1.2 million unsecured interest-only loan Prime plus 1.05% (min. 5.00% rate) January 15, 2024 - $10.08 million secured non-revolving construction credit facility Prime plus 1.00% or BA plus 2.25% April 24, 2021 - $5.6 million interim facility Prime plus 1.00% or BA plus 2.50% August 13, 2022 Less: unamortized finance charges Total net variable rate loans Net mortgages payable Less: mortgages payable for investment properties held for sale Less: mortgagespayable – currentportion	$ 465,441 $ 473,135 10,443 7,443 3,739 354 444 609 (2,236) (2,638)
	477,831 478,903
	10,900 - 6,477 8,924 - 6,560 1,171 1,171 8,855 8,855 5,558 - (47) (60)
	32,914 25,450
	510,745 504,353
	(709) - (104,369) (90,228)
Total mortgagespayable – long-termportion	$ 405,667 $414,125

All mortgages and facilities are secured by charges against specific assets. The unamortized finance charges are made up of fees and costs incurred to obtain the mortgage financing, less accumulated amortization.

To fund development activities the Trust has two revolving development facilities with Canadian chartered banks available upon pledging of specific assets. One is a $20.0 million one-year revolving facility that bears interest at prime plus 0.75% or bankers’ acceptances (“BAs”) plus 2.25%, and the other is a $15.0 million two-year revolving facility that bears interest at prime plus 0.75% or BAs plus 2.25%. At December 31, 2020 there is $17.6 million available on these development facilities (December 31, 2019 - $26.1 million). Funding is secured by first mortgage charges on development properties. The Trust must maintain certain financial ratios to comply with the facilities. These covenants include loan-to-value, debt coverage, interest coverage and occupancy covenants, as well as unitholder equity tests. As of December 31, 2020 the Trust is in compliance with all financial covenants.

During 2019, the Trust entered into four new mortgages that utilize interest rate swaps in order to fix the variable interest rate. The interest rate swaps mature in May, June and August 2029 and are recorded at fair value, with movements in fair value recorded in mortgages payable, and profit (loss).

Page 24 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

12. Bank Indebtedness

The Trust has a $46.0 million (December 31, 2019 - $44.0 million) revolving operating line of credit facility with a Canadian chartered bank at the rate of prime plus 0.75% or BA plus 2.25%. The amount available to be drawn fluctuates depending on the specific assets pledged as security. Based on the assets pledged at December 31, 2020, the available limit was $46.0 million of which $33.5 million (December 31, 2019 – $17.3 million) was drawn and therefore the maximum amount available to be drawn on the facility was $10.0 million (December 31, 2019 – $26.2 million), net of letters of credit outstanding of $503 thousand (December 31, 2019 - $503 thousand). As security, at December 31, 2020, the Trust has provided a $50.0 million demand debenture secured by a first mortgage over forty-two properties.

13. Land Lease Liabilities

Effective January 1, 2019, the Trust implemented the new IFRS 16, Leases standard. This standard required lessees to bring most leases on their statement of financial position. The Trust has investment properties located on land which is leased. A liability has been recorded effective January 1, 2019 to recognize these assets. IFRS 16 has been implemented prospectively and therefore prior year comparatives have not been restated. The Trust has 27 long-term land leases (affecting 26 properties). Land leases expire (excluding any non-automatic renewal periods) on dates ranging from 2022 to 2084 with an average life of 34 years, with some of the leases also containing non-automatic renewal options, extending the average life of the leases to 60 years including these non-automatic renewal options.

14. Accounts Payable, Accrued Liabilities, Tenant Payables and Tenant Deposits

Accounts payable, accrued liabilities, tenant payables and tenant deposits consist of the following:

	December 31,	December 31,
	2020	2019
Accounts payable and accrued liabilities	$ 7,010	$ 9,749
Tenant CAM and tax accrual	1,614	1,286
Distributions payable	2,403	2,412
Excise tax payable	1,003	1,328
Accrued interest payable	2,282	2,374
Deferred tenant revenue and deposits	3,873	4,125
Other	496	373
Total accountspayable,accrued liabilities,tenantpayables and tenant deposits	$ 18,681	$21,647

15. Notes Payable

Notes payable consist of the following:

	Interest	December 31,	December 31,
	Rate	2020	2019
Non-interest bearing notes:
Entities owned (directly and indirectly), controlled or significantly
influenced by Michael Zakuta, President, CEO and Trustee of the Trust(1)	n/a	$ 261	$ 261
Unrelatedparties and non-controllinginterests	n/a	975	1,195
Total notespayable		$ 1,236	$1,456

(1) The notes are repayable on sale or refinancing of the related asset

Page 25 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

16. Income Taxes

The Trust qualifies as a real estate investment trust (“REIT”) for Canadian income tax purposes. The Trust expects to distribute all of its taxable income to unitholders and is entitled to deduct such distributions for income tax purposes. Accordingly, no provision for Canadian current income tax payable is required, except for amounts in its incorporated Canadian subsidiaries.

Where an entity does not qualify as a REIT for Canadian income tax purposes, certain distributions will not be deductible by that entity in computing its income for Canadian tax purposes. As a result, the entity will be subject to tax at a rate substantially equivalent to the general corporate income tax rate on distributed taxable income. Distributions paid in excess of taxable income will continue to be treated as a return of capital to unitholders. Undistributed taxable income is subject to the top marginal personal tax rate. The Trust consolidates certain wholly-owned incorporated entities that remain subject to tax. The current year tax disclosures and expense relate only to these entities.

The components of deferred taxes on the consolidated statements of financial position are as follows:

		December 31, 2020 December 31, 2019
	Deferred income tax assets Tax loss carry-forwards of subsidiaries Deferred income tax liabilities Incomeproducing properties	$ 335 $364
		8,116 7,247
	Net deferred income tax liability	$7,781 $6,883

Distributions are declared monthly at the discretion of the Board of Trustees of the Trust, provided that the Board of Trustees intend to make distributions sufficient to reduce or eliminate the Trust’s liability for income tax under Part I of the Income Tax Act (Canada) .

	2020	2019
Cash distributions declared	$ 28,512	$ 28,686
Required cash distributions to ensure no Part I tax	9,026	14,616
Total excess over Part I tax	$ 19,486	$14,070

Page 26 of 41

Plaza Retail REIT

Notes to the Consolidated Financial Statements December 31, 2020

(tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

17. Revenues

	2020	2019
Contractual revenue	$ 73,604	$ 73,910
Straight-line rent	402	78
Property tax and insurance recoveries	20,804	20,513
Cost recovery revenue	11,188	11,726
Lease buyout revenue	722	5,963
Other revenue	178	271
Totalpropertyrevenues	$ 106,898	$112,461

The Government of Canada introduced the Canadian Emergency Commercial Rent Assistance (“CECRA”) program in May 2020 which provides relief for eligible small businesses experiencing financial hardship due to COVID-19. Under the CECRA program, the Trust must abate 75% of gross rents due for April to September for CECRA eligible tenants. In exchange of the abatements granted, the Trust is eligible for forgivable interest free loans from the Government of Canada amounting to 50% of gross rents abated during the eligible timeframe, for a net abatement of 25%. The Trust believes it has met all the criteria under the CECRA program for the loans to be forgiven. During the year ended December 31, 2020 the Trust has received $1.6 million in government assistance through the CECRA program from the federal government and $155 thousand from the Quebec provincial government.

18. Operating Expenses

	2020	2019
Property taxes and insurance	$ 22,767	$ 22,338
Recoverable expenses	12,835	15,054
Non-recoverable expenses(1)	2,546	2,342
Total operatingexpenses	$ 38,148	$39,734

(1) Non-recoverable expenses include bad debt expense of $1.0 million for the year ended December 31, 2020 (for year ended December 31, 2019 - $416 thousand).

The Government of Canada introduced the Canadian Emergency Wage Subsidy (“CEWS”) program in 2020 which provides a subsidy for Canadian employers who have seen a drop in revenue during the COVID-19 pandemic. The Trust qualified for the subsidy which has resulted in a reduction of operating expenses by $531 thousand for the year ended December 31, 2020.

19. Administrative Expenses

	2020	2019
Salaries and benefits	$ 5,936	$ 7,030
Professional services	1,039	1,272
Office expenses	**1,802 **	1,603
Total administrative expenses	$ 8,777	$9,905

Total employee salaries and benefits recorded by the Trust during the year were $11.4 million, of which $4.1 million is included in operating expenses, $5.9 million is included in administrative expenses and $1.4 million has been capitalized to investment properties (for the year ended December 31, 2019 – $13.4 million, of which $4.9 million is in operating expenses, $7.0 million is in administrative expenses and $1.5 million is in investment properties).

The Government of Canada introduced the Canadian Emergency Wage Subsidy (“CEWS”) program in 2020 which provides a subsidy for Canadian employers who have seen a drop in revenue during the COVID-19 pandemic. The Trust qualified for the subsidy which has resulted in a reduction of administrative expenses by $291 thousand for the year ended December 31, 2020.

Page 27 of 41

Plaza Retail REIT

Notes to the Consolidated Financial Statements December 31, 2020

(tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

20. Finance Costs

	2020	2019
Mortgage interest	$ 20,997	$ 21,461
Debenture interest	3,205	3,204
Mortgage bond interest	448	646
Distributions paid to Class B exchangeable LP unitholders	334	334
Operating line of credit interest	1,081	1,235
Interest and bank charges	340	274
Amortization of finance charges	731	758
Loan defeasance and early mortgage discharge fees	225	134
Imputed interest on land lease liabilities	2,245	2,254
Mark to market amortization	(165)	(142)
Capitalization of interest	(380)	(640)
Total finance costs	$ 29,061	$29,518

21. Unitholders’ Equity

(a) Authorized

The Declaration of Trust authorizes the issuance of an unlimited number of units and special voting units. Special voting units are only issued in tandem with the issuance of securities exchangeable into units.

Each special voting unit shall have no economic entitlement nor beneficial interest in the Trust including in the distributions or assets of the Trust, but shall entitle the holder of record thereof to a number of votes at any meeting of the unitholders equal to the number of units that may be obtained upon the exchange of the exchangeable security to which such special voting unit is attached. Special voting units may only be issued in connection with or in relation to, securities exchangeable into units, for the purpose of providing voting rights with respect to the Trust to the holders of such securities. The creation or issuance of special voting units is subject to the prior written consent of the Toronto Stock Exchange (“TSX”).

In addition, preferred units may from time to time be created and issued in one or more classes (each of which may be made up of unlimited series) without requiring voting unitholder approval. Before the issuance of preferred units of a series, the Board will execute an amendment to the Declaration of Trust containing a description of such series, including the designations, rights, privileges, restrictions and conditions determined by the Board, and the class of preferred units of which such series is a part. The issuance of preferred units is also subject to the prior written consent of the TSX.

(b) Issued and Outstanding

(i) Class B Exchangeable LP Units

The Class B exchangeable units are economically equivalent to units of the Trust and are exchangeable at any time into units of the Trust on a one-for-one basis. These units are puttable instruments where the Trust has a contractual obligation to issue Trust units to the exchangeable unitholders upon redemption. Holders of the exchangeable LP units are entitled to receive distributions per LP unit equal to distributions per unit provided to the unitholders of the Trust.

	December 31, 2020	December 31, 2020		December 31,2019
	Units (000s)	Amount		Units(000s)	Amount
Exchangeable LP units outstanding, beginning of the year	1,191	$	5,444	1,191	$ 4,622
Fair value adjustment for theyear	-		(1,144)	-	822
Exchangeable LP units outstanding,end of theyear	**1,191 **	$	4,300	1,191	$5,444

Page 28 of 41

Plaza Retail REIT

Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

(ii) Special Voting Units

At December 31, 2020, there were 1,191,000 (December 31, 2019 - 1,191,000) special voting units outstanding, issued in connection with 1,191,000 (December 31, 2019 - 1,191,000) Class B exchangeable LP units of a subsidiary of the Trust (see above).

(iii) Units

	December 31, 2020	December 31, 2020	December 31,2019	December 31,2019
	Trust Units		Trust Units
	(000s)	Amount	(000s)	Amount
Units outstanding, beginning of the year	102,171	$ 276,406	102,824	$ 278,058
Issuance of units:
RU plan	41	143	59	273
Repurchase and cancellation of units under normal course issuer bid	(405)	(1,096)	(712)	(1,925)
Units outstanding,end of theyear	101,807	$ 275,453	102,171	$276,406

Unitholders have the right to redeem their units at the lesser of (i) 90% of the Market Price of the unit (Market Price is defined for this purpose in the Declaration of Trust as the weighted average trading price of the previous 10 trading days) and (ii) the most recent Closing Market Price (Closing Market Price is defined for this purpose in the Declaration of Trust as the weighted average trading price on the specified date) at the time of the redemption. The redemption price will be satisfied by cash, up to a limit of $50 thousand for all redemptions in a calendar month, or a note payable. For the year ended December 31, 2020 no unitholder had redeemed units.

The Trust has a Distribution Reinvestment Plan (“DRIP”), which was suspended until further notice commencing with the payment of the October 2018 distribution, and unitholders enrolled in the DRIP began receiving distribution payments in cash. Prior to its suspension, the DRIP enabled Canadian resident unitholders to acquire additional units of the Trust through the reinvestment of distributions on their units. Units issued in connection with the DRIP were issued directly from the treasury of the Trust at a price based on the weighted average daily closing price of the units on the TSX for the 5 trading days immediately preceding the relevant distribution date. Participants also received “bonus units” in an amount equal to 3% of the distribution amount reinvested. If the Trust elects to reinstate the DRIP in the future, unitholders that were enrolled in the DRIP at the time of its suspension and remain enrolled at the time of reinstatement, will automatically resume participation in the DRIP.

On September 24, 2020, the Trust announced that it had received approval from the TSX for the renewal of its normal course issuer bid (“NCIB”) for a further year. Plaza’s prior NCIB expired on September 27, 2020; the period of the renewed NCIB commenced on September 28, 2020 and will conclude on the earlier of the date on which purchases under the bid have been completed and September 27, 2021. Under the terms of the renewed NCIB, the Trust can purchase up to 6,472,223 of its issued and outstanding units through the facilities of the TSX and any alternative trading system in Canada. Subject to certain prescribed exemptions and any block purchase made in accordance with the rules of the TSX, daily purchases made by the Trust may not exceed 44,809 units, representing 25% of the average daily trading volume of the units on the TSX for the sixmonth period ended August 31, 2020 (being 179,239 units). All units that are purchased under the renewed NCIB will be cancelled (on a monthly basis, on or before the record date for each monthly distribution). Unitholders may obtain a copy of the NCIB renewal notice, without charge, by contacting the Trust.

Plaza also entered into a new automatic securities purchase plan agreement (the “Plan”) with its designated broker in order to facilitate purchases of units under the renewed NCIB. The Plan, which was pre-cleared by the TSX, allows for purchases of units by Plaza at times when it would ordinarily not be permitted to make purchases due to regulatory restrictions or selfimposed blackout periods. The Plan will terminate on September 27, 2021.

For the year ended December 31, 2020, 395,797 units have been repurchased for cancellation under Plaza’s prior and renewed NCIB at a weighted average price of $3.5613. With this, to December 31, 2020, Plaza has purchased a total of 1,117,486 units for cancellation since the commencement of the original NCIB on September 28, 2018 at a weighted average price of $4.0113.

Page 29 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

22. Restricted Unit Plan and Deferred Unit Plan

The Trust has a Restricted Unit Plan (“RU Plan”) to enable the Trust to reward senior management and employees for their sustained contributions and to assist in attracting, retaining and motivating senior management and employees of the Trust. Restricted Units (“RUs”) may be granted from time to time on a discretionary basis by the Administrator (the Governance and Compensation Committee of the Board of Trustees). Each RU notionally represents a unit in the Trust. Each RU credited to a participant shall receive a distribution of additional RUs equal to the amount of distributions paid per unit by the Trust on its units (“Distribution RUs”). The number of Distribution RUs to be issued for each distribution payment will be equal to the aggregate amount of such distribution payable to a participant on his or her RUs divided by the volume weighted average closing price of units for the five trading days immediately preceding such applicable day. The Distribution RUs are granted immediately following any distribution payment date, vest at the same time as and are redeemed on the same basis as the underlying RUs. The RUs vest as follows: one-third of a given award on the first anniversary of the grant date, one-third on the second anniversary of the grant date and the balance on the third anniversary of the grant date. Upon vesting, the RUs are exchanged for units, net of any applicable withholding taxes. At December 31, 2020, the maximum number of units that may be issued under the RU Plan upon the redemption of RUs and Distribution RUs is 5,629,270. A total of 488,813 RUs have been granted under the RU Plan since inception. For the year ended December 31, 2020, compensation expense of $200 thousand (for the year ended December 31, 2019 - $482 thousand) has been recognized in respect of the RUs.

	December 31, 2020	December 31,2019
Restricted units outstanding, beginning of the year	84,959	195,120
Vested	(56,202)	(106,129)
Forfeited	(5,618)	(4,032)
Restricted units outstanding,end of theyear	23,139	84,959

In 2015, the Trust implemented a Deferred Unit Plan (“DU Plan”) for non-employee trustees. Participants may be awarded deferred units (“DUs”) from time to time on a discretionary basis by the Governance and Compensation Committee. Each DU is economically equivalent to one unit, however, under no circumstances shall DUs be considered units nor entitle a participant to any rights as a unitholder, including, without limitation, voting rights or rights on liquidation. On June 18, 2020, Participants resolved to receive 100% of their trustee fees in the form of DUs. Trustee fees include annual Board retainers, meeting fees and additional compensation paid by the Trust to a trustee in a calendar year for service on the Board or for chairing a committee of the Board. Each DU shall receive a distribution of additional DUs equal to the amount of distributions paid per unit by the Trust on its units. DUs vest immediately upon grant or issuance. The DUs shall be redeemable by the participant on or after the date on which the participant ceases to be a trustee. The DUs may be redeemed in whole or in part for units of the Trust issued from treasury or cash, as elected by the participant, net of any applicable withholding taxes. At December 31, 2020, the maximum number of units that may be issued under the DU Plan upon the redemption of DUs is 542,868. At December 31, 2020, a total of 215,202 DUs have been granted or issued under the DU Plan and a total of 8,069 DUs have been redeemed for cash under the DU Plan since inception, and for the year ended December 31, 2020 compensation expense of $125 thousand was recorded (for the year ended December 31, 2019 - $234 thousand).

	December 31, 2020	December 31,2019
Deferred units outstanding, beginning of the year	136,359	100,427
Granted	11,461	9,456
Redeemed	(8,069)	-
Trustee fees taken as deferred units	55,012	18,899
Distributionspaid on deferred units taken as additional deferred units	12,369	7,577
Deferred units outstanding,end of theyear	207,132	136,359

23. Distributions

Distributions are declared monthly at the discretion of the Board.

		2020		2019
Cash distributionspaid to unitholders	**$ **	28,512	$	28,686

Page 30 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020

(tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

24. Additional Cash Flow Information

(a) Changes in Non-Cash Working Capital

		2020		2019
Receivables	$	(3,456)	$	(887)
Prepaid expenses and deposits		(551)		(86)
Change in construction accruals removed from investing activities		(2,533)		(991)
Accountspayable,accrued liabilities,tenantpayables and tenant deposits		1,967		4,110
Total cash from change in non-cash workingcapital	**$ **	(4,573)	$	2,146

(b) Changes in Liabilities Arising from Financing Activities

(b) Changes in Liabilities Arising from Financing Activities
	December 31, 2020 December 31, 2019
Current and long-term debt(1) (2)– beginning of the year Redemption/repayment of mortgage bonds and debentures Periodic mortgage principal repayments Mortgage interest deferral program Land lease addition Land lease principal repayments Mortgages repaid Mortgages assumed by purchasers on sale of investment properties Gross mortgage proceeds Gross mortgage bond proceeds Fees incurred for placement of debt Increases (decreases) in notes payable Non-cash changes in current and long-term debt: Net change in fair value of Class B exchangeable LP units Net change in fair value of interest rate swaps Net change in fair value of convertible debentures Amortization of finance charges Mark to market amortization	$ 644,287 $ 609,569 (4,195) (6,000) (10,762) (10,795) 997 - 7,532 - (693) (663) (53,394) (92,953) (7,484) - 73,489 139,949 3,395 - (354) (1,059) (220) 115 (1,144) 822 3,386 392 (3,429) 4,294 731 758 (165) (142)
Current and long-term debt(1)– end of theyear	$ 651,977 $644,287

(1) Debt defined for this purpose as mortgage bonds, debentures, mortgages payable, notes payable, Class B exchangeable LP units and land lease liabilities.

(2) Opening debt on January 1, 2019 includes the land lease liabilities of $60.6 million booked under new accounting pronouncements on a prospective basis (see Note 13).

Page 31 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

25. Related Party Transactions

The following are the related party transactions of the Trust. All related party transactions have been recorded at the exchange amount.

(a) Bonds and Debentures

The trustees own directly or indirectly the following unsecured debentures of the Trust (stated at face value):

	December 31, 2020	December 31,2019
Earl Brewer (trustee)	$ 325	$ 325
Stephen Johnson (trustee)	200	200
DougMcGregor(Chairman and trustee)	400	-
Total	$ 925	$525

No other trustee or key management personnel own mortgage bonds or debentures of the Trust at December 31, 2020 (December 31, 2019 - nil).

(b) Notes Payable to Related Parties

The following non-interest bearing notes existed at the time of acquisition of properties in September 2000. The notes are repayable on sale or refinancing of the related asset.

	December 31, 2020	December 31,2019
Entities owned (directly or indirectly), controlled or significantly
influenced byMichael Zakuta.	**$ 261 **	$261

(c) Other Transactions with Related Parties

• (i) TC Land LP, an entity controlled by Michael Zakuta and Earl Brewer, leases nine parcels of land to the Trust at market rates, with a total annual rent of $1.2 million. The land leases expire at various times from October 2043 to November 2047, subject to options to renew. All of these land leases have options to purchase, of which one is at a fixed price and the others are at fair market value.

• (ii) Earl Brewer and Michael Zakuta, directly or indirectly, hold interests in common with the Trust’s 25% interest in the Gateway Mall, Sussex, NB. A subsidiary of the Trust manages the mall. At December 31, 2020 there is a $6 thousand accounts receivable balance owing to the Trust for property management, leasing and development fees (December 31, 2019 - $28 thousand). For the twelve months ended December 31, 2020, property management, development, financing and leasing fees of $70 thousand were earned by a subsidiary of the Trust from this property (for the twelve months ended December 31, 2019 - $158 thousand).

• (iii) The Montreal office of Plaza Group Management Limited (a wholly-owned subsidiary of the Trust) shares office space with a company indirectly owned by Michael Zakuta in an office building owned by that related party. The Trust pays no rent for the space.

• (iv) Earl Brewer and Michael Zakuta, directly or indirectly, hold interests in common with the Trust’s 20% interest in Mountainview Plaza, Midland, ON and Park Street Plaza, Kenora, ON. A subsidiary of the Trust manages the malls. At December 31, 2020 there is $7.2 million owed by the properties to the Trust which is recorded in notes and advances receivable (December 31, 2019 - $5.9 million). As well, there is a $49 thousand accounts receivable balance owing to the Trust for property management, leasing and development fees (December 31, 2019 - $13 thousand). For the twelve months ended December 31, 2020, property management, leasing, development and financing fees of $289 thousand were earned by a subsidiary of the Trust from these properties (for the twelve months ended December 31, 2019 - $181 thousand).

• (v) Earl Brewer and Michael Zakuta, directly or indirectly, hold interests in common with the Trust’s 50% interest in two single-use properties located in Amherstview and Port Perry, ON. A subsidiary of the Trust manages the properties. For

Page 32 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

the twelve months ended December 31, 2020, property management fees of $5 thousand were earned by a subsidiary of the Trust from these properties (for the twelve months ended December 31, 2019 - $5 thousand).

• (vi) Earl Brewer, Barbara Trenholm and Michael Zakuta, directly or indirectly, hold interests in common with the Trust’s 25% interest in KGH Plaza, Miramichi, NB, a single-use property located at 681 Mountain Road, Moncton, NB, a single-use property located at 201 Main Street, Sussex, NB and Robie Street Truro Plaza, Truro, NS. A subsidiary of the Trust manages the properties. At December 31, 2020 there is a $5 thousand accounts receivable balance owing to the Trust for property management, development and leasing fees (December 31, 2019 - $9 thousand). For the twelve months ended December 31, 2020, property management, leasing and development fees of $75 thousand were earned by a subsidiary of the Trust from these properties (for the twelve months ended December 31, 2019 - $144 thousand).

• (vii) Earl Brewer and Michael Zakuta, directly or indirectly, hold interests in common with the Trust’s 50% interest in Scott Street Plaza, St. Catharines, ON, and five single-use properties located at St. Joseph’s Boulevard, Orleans, ON, Dufferin and Wilson, Perth, ON, Ontario Street Port Hope, Port Hope, ON, Civic Centre Road, Petawawa, ON and 615 King Street, Gananoque, ON. A subsidiary of the Trust manages the properties. For the twelve months ended December 31, 2020, property management fees of $36 thousand were earned by a subsidiary of the Trust from these properties (for the twelve months ended December 31, 2019 - $32 thousand).

• (viii) Earl Brewer, Denis Losier and Michael Zakuta, directly or indirectly, hold interests in common with the Trust’s 50% interest in the following eight properties: Boulevard Hebert Plaza and Victoria Street Plaza in Edmundston, NB; Grand Falls Shopping Center and Madawaska Road Plaza in Grand Falls, NB; Connell Road Plaza, Woodstock, NB; Welton Street Plaza, Sydney, NS; and Pleasant Street Plaza and Starrs Road Plaza in Yarmouth, NS. A subsidiary of the Trust manages the properties. At December 31, 2020 there is a $16 thousand accounts receivable balance owing to the Trust for property management fees (December 31, 2019 - $16 thousand). For the twelve months ended December 31, 2020, property management, leasing and development fees of $160 thousand were earned by a subsidiary of the Trust from these properties (for the twelve months ended December 31, 2019 – $239 thousand).

• (ix) Barbara Trenholm and Michael Zakuta, directly or indirectly, hold interests in common with the Trust’s 50% interest in the following five properties: 5628 4[th] Street NW, Calgary, AB, 303 Main St., Antigonish, NS, 912 East River Rd, New Glasgow, NS, 1 Mont-Royal Ave E, and 8222 Maurice-Duplessis Blvd., Montreal, QC. A subsidiary of the Trust manages the properties. At December 31, 2020 there is a $2 thousand accounts receivable balance owing to the Trust for property management fees. From August 28, 2020 to December 31, 2020, property management fees of $11 thousand were earned by a subsidiary of the Trust from these properties.

(d) Remuneration of Key Management Personnel

Key management personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of the entity, directly or indirectly, including any trustee of the entity. The remuneration of trustees and other key management personnel of the Trust during the years ended December 31, 2020 and 2019 was as follows:

	2020	2019
Salaries and benefits	$ 1,995	$ 2,494
Share-basedpayments – includingDUs and RUs	193	301
Total keymanagementpersonnel compensation	$ 2,188	$2,795

During the prior year ended December 31, 2019 a retiring allowance of $678 thousand was recorded.

Page 33 of 41

(tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020

(e) Significant Subsidiaries

		Ownership Interest
	December 31, 2020	December	31,2019
Plaza Master Limited Partnership	100%		100%
LeMarchant Property Holdings Inc.	100%		100%
Plaza Retail Limited Partnership #1	100%		100%
Bedford Commons 2 Property Holdings Inc.	100%		100%
Plaza Group Management Limited	100%		100%
Stavanger Torbay Limited Partnership	90%		90%
Spring Park Plaza Inc.	100%		100%
Granville Street Properties Limited Partnership	90%		90%
Wildan Properties Limited Partnership	90%		90%
Exhibition Plaza Inc.	90%		90%
Scott’s Real Estate Limited Partnership	100%		100%
Scott’s Acquisition Inc.	100%		100%
Riverside Emerald (Timmins) Limited Partnership	80%		80%
Plaza Tacoma Limited Partnership	100%		100%
Plazacorp Shediac Limited Partnership	100%		100%
Northwest Plaza Commercial Trust	100%		100%

26. Interests in Joint Operations

As described in Note 3(a), the consolidated financial statements include the Trust’s proportionate interest in its activities characterized as joint operations with other parties. The following amounts represent the total proportionate amounts consolidated for these joint operations:

	December 31, 2020	December 31,2019
Cash	$ 6,016	$ 6,214
Current assets	$ 3,181	$ 2,195
Long term assets	$ 266,621	$ 254,736
Current liabilities	$ 29,672	$ 21,526
Long term liabilities	$ 143,421	$ 138,023
Revenues	$ 30,444	$ 28,426
Expenses	$ (18,302)	$ (17,817)
Fair valuegain(loss)	$(12,444)	$13,064

Page 34 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020

(tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

The chart below details the Trust’s ownership interest of direct and indirect investments and co-ownerships in real estate assets.

		Ownership Interest
		December 31, 2020 December 31, 2019
	Accounting Method– Proportionate Consolidation 5628 – 4thSt NW, Calgary, AB Les Galeries Montmagny and Plaza Tache, QC Bureau en Gross, QC Plaza SP Magog, QC Carrefour des Seigneurs, QC Galeries des Cantons, QC Plaza BDP Deux Montagnes, QC Plaza Jean XXIII, QC Plaza BBRF, QC Plaza TS Magog, QC Plaza De L’Ouest, QC Plaza HDB, QC SBT Chicoutimi, QC 4999 Queen Mary Road, QC 600 JP Perrault, QC 1 Mont-Royal Ave East, Montreal, QC 8222 Maurice-Duplessis Blvd, Montreal, QC 201 Chain Lake Drive Plaza, NS 209 Chain Lake Drive Plaza, NS Tacoma Centre, NS Tacoma Shoppers, NS Robie Street Truro Plaza, NS 210 Wyse Road, NS Pleasant Street Plaza, NS Starrs Road Plaza, NS Welton Street Plaza, NS East River Plaza, New Glasgow, NS 303 Main St, Antigonish, NS Scott Street Plaza, ON St. Josephs Boulevard, ON Civic Centre Road, ON Ontario Street Port Hope, ON Dufferin and Wilson, ON 615 King Street, ON Park Street Plaza, ON Mountainview Plaza, ON Eastcourt, ON Timiskaming, ON 6685 Century Ave, ON 1000 Islands Plaza (Brockville), ON Tri-City Centre, ON Northern Avenue Plaza, Sault Ste. Marie, ON KGH Plaza, NB 681 Mountain Road, NB 201 Main Street - Sussex, NB Boulevard Hebert Plaza, NB Victoria Street Plaza, NB Connell Road Plaza, NB Madawaska Road Plaza, NB Grand Falls Shopping Centre, NB Northwest Centre, NB Shediac West Plaza, NB Quispamsis Town Centre, NB The Village ShoppingCentre,NL	50% - 50% 50% 50% 50% 50% 50% 25% 25% 50% 50% 37.5% 37.5% 50% 50% 50% 50% 50% 50% 50% 50% 33% 33% 50% 50% 25% 25% 50% 50% 50% - 50% - 50% 50% 50% 50% 50% 50% 50% 50% 25% 25% 50% 50% 50% 50% 50% 50% 50% 50% 50% - 50% - 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 20% 20% 20% 20% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% - 25% 25% 25% 25% 25% 25% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50%

Page 35 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

27. Contingencies, Commitments, Guarantees and Indemnities, Litigation and Provisions

(a) Contingencies

The $20.0 million development line of credit has $1.5 million available for use in the form of letters-of-credit. At December 31, 2020, there were no letters-of-credit issued and outstanding (December 31, 2019 – nil).

The $15.0 million development line of credit has $500 thousand available for use in the form of letters-of-credit. At December 31, 2020, there were no letters-of-credit issued and outstanding (December 31, 2019 – nil).

The $46.0 million operating line of credit has $2.0 million available for use in the form of letters-of-credit. At December 31, 2020, letters-of-credit in the amount of $503 thousand were issued and outstanding (December 31, 2019 - $503 thousand).

(b) Commitments

The Trust’s estimated commitments at December 31, 2020 in respect of certain projects under development and other long-term obligations are as follows:

	Year 1	Year 2	Year 3	Year 4	Year 5	After 5	Face Value
	2021	2022	2023	2024	2025	Years	Total
Mortgages – periodic payments	$ 11,046	$ 10,411	$ 8,978	$ 8,613	$ 7,590	$ 26,589	$ 73,227
Mortgages – due at maturity	65,892	38,456	26,498	32,501	42,527	186,340	392,214
Development lines of credit	17,377	-	-	-	-	-	17,377
Construction loans	8,855	5,558	-	-	-	-	14,413
Unsecured interest-only loans	1,200	-	5,643	2,971	1,800	-	11,614
Bank indebtedness	33,451	-	-	-	-	-	33,451
Mortgage bonds payable	2,005	6,195	-	-	-	-	8,200
Debentures(1)	9,360	6,000	47,250	-	-	-	62,610
Land leases(2)	3,252	3,240	3,206	3,243	3,283	121,741	137,965
Development activities	11,236	-	-	-	-	-	11,236
Total contractual obligations	$ 163,674	$ 69,860	$ 91,575	$ 47,328	$ 55,200	$ 334,670	$ 762,307

(1) Stated at face value.

(2) Land leases expire on dates ranging from 2022 to 2084 (including automatic renewal periods) with non-automatic renewal options ranging from 5 to 60 years.

(c) Guarantees and Indemnities

The Trust continues to guarantee certain debt assumed by purchasers in connection with past dispositions of properties. These guarantees will remain until the debt is modified, refinanced or extinguished. These commitments are subject to indemnity agreements. At December 31, 2020 a $4.7 million commitment (December 31, 2019 - $4.8 million) relating to the mortgages on three assets in which the Trust sold a 75% interest in January 2009 is subject to such guarantees by the Trust. These mortgages have a weighted average remaining term of 2.1 years (December 31, 2019 - 3.1 years). As well, at December 31, 2020 a $5.6 million commitment (December 31, 2019 – $6.8 million) relating to the mortgages on five assets (December 31, 2019 – six assets) in which the Trust sold a 50% interest in November 2017 is subject to such guarantees by the Trust. These mortgages have a weighted average remaining term of 5.5 years (December 31, 2019 – 5.6 years). The Trust also has contingent liabilities as original borrower on three mortgages partially assumed by the purchasers of the underlying properties, where a 50% interest in each was sold in August 2020. These commitments are subject to indemnity agreements. These sales did not relieve the Trust’s obligations as original borrower in respect of these mortgages. The debt subject to such guarantees at December 31, 2020 totals $7.5 million with a weighted average remaining term of 7.0 years.

The Trust guarantees a $3.9 million commitment relating to the mortgage of an asset sold in 2018, with a weighted average remaining term of 3.6 years at December 31, 2020.

The Trust is contingently liable for certain obligations of its co-venturers, under guarantees in excess of its ownership percentages for six strip plazas and four free-standing properties. The excess guarantees amount to $14.4 million. Cross indemnities are in place for certain of these properties from co-venturers.

Page 36 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

(d) Litigation

The Trust is involved in litigation and claims in relation to the investment properties that arise from time to time in the normal course of business. Any liability that may arise from current or pending litigation would not have a significant adverse effect on these financial statements.

(e) Provisions

A provision is recognized if, as a result of a past event, the Trust has a present legal or constructive obligation that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. The Trust has no provisions recorded at December 31, 2020 (December 31, 2019 – nil).

28. Financial Instruments and Risk Management

In the normal course of its business, the Trust is exposed to a number of risks that can affect its operating performance. The Trust’s Board of Trustees monitors the Trust’s risk management practices through periodic reviews. These risks and the actions taken to manage them are as follows:

(a) Interest Rate Risk

The Trust adopts a policy of holding floating rate debt generally only for properties under development and for those properties pledged to support the operating line of credit. All other debt is converted to fixed rate debt, when market conditions are favorable, as soon as practical after an asset attains income producing status.

A change in interest rates on Plaza’s fixed rate instruments at the reporting date would not affect profit or loss. The Trust minimizes its exposure to fixed rate interest risk on its debt by staggering the maturities in order to avoid excessive amounts of debt maturing in any one year. If market conditions warrant, the Trust may attempt to renegotiate its existing debt to take advantage of lower interest rates. The Trust minimizes its exposure to short term interest rate risk by obtaining longer term financing as much as possible (generally 10 years or longer). The Trust matches as closely as possible the debt term on a particular asset with its average lease term so that any interest rate increases could be offset by increases in rental rates.

The Trust entered into four interest rate swap contracts during 2019 with Canadian chartered banks, in order to convert the mortgages from variable rates to fixed rates. The swaps mature between May and August 2029. The fair value of these contracts results in a liability of $3.7 million at December 31, 2020 (December 31, 2019 - $354 thousand). There is a risk that interest rates will fluctuate during the terms of the mortgages. The Trust intends to hold the mortgages to maturity and therefore would not realize the fair value fluctuations. The fair value is calculated as the present value of the estimated future cash flows based on observable yield curves.

The Trust had entered into interest rate swap contracts with a Canadian chartered bank in connection with mortgages obtained in 2010, in order to convert the mortgages from variable rates to fixed rates. The swaps mature on July 26, 2025. As the swaps relate to debt of an equity-accounted investee, the interest rate swap contracts have been recorded at fair value in investments with changes in fair value reflected in share of profit of associates. The fair value of these contracts results in a liability, for the Trust’s share, of $166 thousand at December 31, 2020 (December 31, 2019 – $65 thousand recovery). There is a risk that interest rates will fluctuate during the term of the mortgages. The Trust intends to hold the mortgages to maturity and therefore would not realize the fair value fluctuations. The fair value is calculated as the present value of the estimated future cash flows based on observable yield curves.

As part of a property acquisition in 2015, the Trust assumed a variable rate mortgage that had an interest rate swap in place (thereby fixing the variable interest rate). In May 2019, the mortgage was discharged and the interest rate swap was settled at a cost of $176 thousand.

The Trust entered into an interest rate swap with a Canadian chartered bank in connection with a mortgage obtained during 2019 for a property held in an equity-accounted investee. The interest rate swap contract has been recorded at fair value in investments with changes in fair value reflected in share of profit of associates. The fair value of this contract results in a liability, for the Trust’s share of $125 thousand at December 31, 2020 (December 31, 2019 - $27 thousand recovery). There is a risk that interest rates will fluctuate during the term of the mortgages. The Trust intends to hold the mortgages to maturity

Page 37 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

and therefore would not realize the fair value fluctuations. The fair value is calculated as the present value of the estimated future cash flows based on observable yield curves.

Trade receivables and payables (other than tenant deposits) are interest free and have settlement dates within one year.

An increase of 100 basis points in interest rates at December 31, 2020 if applied to all outstanding floating rate instruments would increase interest expense and decrease pre-tax profit by $664 thousand (for the year ended December 31, 2019 – $429 thousand).

(b) Lease Rollover and Occupancy Risk

The Trust is exposed to the risk of not being able to replace tenants as leases expire or in re-leasing space vacated by tenants. The hypothetical impact to net property operating income of a change in occupancy of 1% would be approximately $600 thousand to $1.0 million per annum. The Trust’s principal management of occupancy risk involves the skewing of tenancies towards national tenants, the signing of longer term leases and significant pre-leasing of development space. As well, the Trust attempts to stagger the lease expiry profile so that the Trust is not faced with a disproportionate amount of square footage of leases expiring in any one year. The Trust further mitigates this risk by maintaining a diversified portfolio mix by geographic location and maintaining a well-staffed and highly skilled leasing department to deal with all leasing issues.

(c) Credit Risk

Credit risk arises from the possibility that tenants may experience financial difficulty and will be unable to fulfill their lease commitments. The Trust mitigates the risk of credit loss by ensuring that its tenant mix is diversified and heavily weighted to national tenants. National and regional tenants comprise 94.0% of the in-place tenant base rent (December 31, 2019 – 94.6%). As well, the Trust maintains a portfolio that is diversified geographically so that exposure to local business is lessened and the Trust limits loans granted under lease arrangements to credit-worthy mainly national tenants.

The Trust generally provides financial guarantees and advances only to wholly-owned subsidiaries, non-consolidated investments and joint arrangement partners during the development periods, subject to reciprocal indemnities, by utilizing established development lines of credit. Repayment of the advances occurs upon placing permanent financing on the related property or through cash flows generated by the related property upon completion of the development. Where lenders of first mortgages on joint arrangement properties require financial guarantees from the Trust, reciprocal indemnities are generally obtained from the Trust’s joint arrangement partners. See Note 27(c) for details of guarantees.

The Trust limits cash transactions to high quality financial institutions to minimize its credit risk from cash and cash equivalents.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Carrying Amount	December 31, 2020	December 31,2019
Tenant loans, receivables, and notes and advances receivable	$ 15,823	$ 10,963
Cash	**8,274 **	8,845
**Total **	$ 24,097	$19,808

The Trust’s most significant customer, a national retailer, accounts for $106 thousand of tenant loans at December 31, 2020 (December 31, 2019- $131 thousand).

Shoppers Drug Mart/Loblaw represents 24.7% of monthly base rents in place at December 31, 2020, while Dollarama represents 5.4% of monthly base rents in place. The top 10 tenants collectively represent approximately 54.0% of monthly base rents in place.

Deposits refundable to tenants may be withheld by the Trust in part or in whole if receivables due from the tenant are not settled or in case of other breaches of contract.

Page 38 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

(d) Liquidity and Debt Market Risk

COVID-19 has impacted liquidity during 2020, and is anticipated to impact liquidity going forward, as rent collections from tenants have been impacted.

Prudent liquidity risk management implies maintaining sufficient cash and an adequate amount of committed credit facilities to run the business and pay obligations as they come due. The Trust manages its cash resources and committed credit facilities based on financial forecasts and anticipated cash flows. In terms of debt, there is always the risk that lenders may tighten their lending standards, which could make it challenging for the Trust to obtain financing on favourable terms or any terms at all. If this were to occur, it could adversely impact the Trust. The Trust staggers the maturities of its long-term debt to avoid excessive amounts of debt maturing in any one year. As well, the Trust obtains longer term financing as much as possible (generally 10 years or longer) in order to help mitigate debt market risk. Several mortgages and the development and operating lines contain material adverse change clauses which entitle the lenders to demand partial or full loan repayment when there are material adverse changes in the Trust’s financial position. The Trust has determined that circumstances that could trigger action by a lender under these clauses are unlikely.

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

								More
	Carrying	Contractual						than
	amount	cash flows	Year 1	Year 2	Year 3	Year 4	Year 5	5 years
Current liabilities(1)	$ 18,681	$ 18,681	$ 18,681	$ -	$ -	$ -	$ -	$ -
Debentures payable	$ 60,807	$ 68,598	$ 12,285	$ 8,460	$ 47,853	$ -	$ -	$ -
Notes payable	$ 1,236	$ 1,236	$ 1,236	$ -	$ -	$ -	$ -	$ -
Bank indebtedness	$ 33,451	$ 33,451	$ 33,451	$ -	$ -	$ -	$ -	$ -
Mortgage bonds payable	$ 8,143	$ 8,793	$ 2,397	$ 6,396	$ -	$ -	$ -	$ -
Mortgagespayable	$510,745	$607,521	$121,661	$69,913	$54,739	$55,912	$66,271	$239,025

(1) Balance includes accounts payable, accrued liabilities, tenant payables and tenant deposits.

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

(e) Fair Value

Generally, trading values for the Trust’s financial instruments are not available. In determining estimates of the fair values of the financial instruments, the Trust must make assumptions regarding current market rates, considering the term of the instrument and its risk. Current market rates are generally selected from a range of potentially acceptable rates and accordingly, other effective rates and fair values are possible. The rates used in determining the fair value of fixed rate mortgages are corresponding term Government of Canada bonds plus credit spreads of 1.85% to 3.00% (December 31, 2019 – 1.60% to 2.35%). The rate used to determine the fair value of mortgage bonds was 5.50% (December 31, 2019 – 5.0%). The rate used to determine the fair value of non-convertible debentures was 5.75% (December 31, 2019 – 5.50%). The majority of the Trust’s convertible debentures are publicly traded. The fair value of the Class B exchangeable LP units is based on the trading price for the Trust’s units.

Page 39 of 41

(tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020

The following chart shows the estimated fair value of the Trust’s financial instruments.

	Book Value	Fair Value	Book Value	Fair Value
	December 31,	December 31,	December 31,	December 31,
	2020	2020	2019	2019
Cash	$ 8,274	$ 8,274	$ 8,845	$ 8,845
Receivables	8,106	8,106	4,285	4,285
Notes and advances receivable	7,206	7,206	6,038	6,038
Tenantloans	511	511	640	640
Total Financial Assets	$ 24,097	$ 24,097	$19,808	$19,808
Bank indebtedness	$ 33,451	$ 33,451	$ 17,339	$ 17,339
Accounts payable, accrued liabilities, tenant payables and
tenant deposits	18,681	18,681	21,647	21,647
Total net fixed rate mortgage loans	477,831	498,141	478,903	488,862
Total net variable rate mortgage loans or credit facilities	32,914	32,914	25,450	25,450
Convertible debentures	50,983	50,983	54,412	54,412
Non-convertible debentures	9,824	9,763	9,778	9,688
Mortgage bonds payable	8,143	8,176	8,937	8,975
Class B exchangeable LP units	4,300	4,300	5,444	5,444
Notes payable	1,236	1,236	1,456	1,456
Total Financial Liabilities	$ 637,363	$ 657,645	$623,366	$633,273

The fair value of the Trust’s financial assets and liabilities that represent net working capital, including cash, receivables, notes and advances receivable, income taxes receivable, bank indebtedness, accounts payable, accrued liabilities, tenant payables and tenant deposits and notes payable approximate their recorded values due to their short-term nature.

In accordance with IFRS, the Trust is required to classify its financial instruments carried at fair value in the financial statements using a fair value hierarchy that exhibits the significance of the inputs used in making the measurements.

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

Level 3 - Inputs for the asset or liability that are not based on observable market data.

The following table provides information on financial assets and liabilities measured at fair value.

		December 31,	2020			December 31,2019
	Level 1	Level 2		Level 3	Level 1	Level 2	Level 3
Investment properties	$ -	$ -	$ 994,390		$ -	$ -	$ 1,026,773
Right-of-use land lease assets	-	-		66,746	-	-	59,907
Investmentproperties held for sale	3,128	-		-	609	-	-
	$ 3,128	$-	$ 1,061,136		$609	$-	$1,086,680
Class B exchangeable LP units	$ 4,300	$ -	$	-	$ 5,444	$ -	$ -
Series E convertible debentures	45,667	-		-	48,739	-	-
Series VII convertible debentures	-	5,316		-	-	5,673	-
Land lease liabilities	-	-		66,746	-	-	59,907
	$ 49,967	$5,316	$	66,746	$54,183	$5,673	$59,907

The fair value of investment properties is based on a combination of external appraisals and internal valuations based on a capitalization matrix provided by independent appraisers (see Note 4 for a more detailed description of the Trust’s valuation approach). The significant unobservable inputs include normalized net operating income, which is supported by the terms of existing leases in place and current market rents to renew or lease up vacant or expiring space, adjusted for estimated or normalized vacancy rates based on market conditions and factoring in expected maintenance costs.

Page 40 of 41

Plaza Retail REIT Notes to the Consolidated Financial Statements December 31, 2020 (tabular amounts in thousands of Canadian dollars, except per unit amounts and as otherwise indicated)

29. Capital Management

The primary objective of the Trust’s capital management is to ensure that it maintains adequate capital resources in order to support its business and maximize unitholder value. The Trust manages its capital structure with the primary goal of minimizing risk and ensuring the stability of cash flow from properties. Other goals include maintaining debt service and interest coverage ratios in compliance with bank and debenture covenants. The Trust has defined its capital to include bank indebtedness, mortgages payable, debentures payable, mortgage bonds payable, notes payable and unitholders’ equity.

Bank operating and development lines require maintenance of at least $150 million of unitholders’ equity; maximum leverage of 70% including convertible debentures and 65% excluding convertible debentures; maintenance of debt coverage ratios in excess of 1.5 times with the debt coverage ratios calculated exclusive of interest charged on subordinate debt and convertible debentures. The bank operating line also requires on pledged assets: 90% occupancy; 65% loan to value; and interest coverage constraints of 1.60. In addition, under a development line, the Trust must maintain a ratio of mortgages plus bank indebtedness to the book value of its gross assets less fair value adjustments of not more than 70%. The Trust has a $10.08 million construction credit facility which requires maintenance of at least $200 million of unitholders’ equity, maximum leverage of 65% and debt coverage ratios in excess of 1.3 times. The Trust is in compliance with all financial debt covenants at December 31, 2020.

There were no changes to the Trust’s approach to capital management for the year ended December 31, 2020.

The calculation of the total capital is summarized as follows:

	December 31,	December 31,
	2020	2019
Total net fixed rate mortgage loans	$ 477,831	$ 478,903
Total net variable rate mortgage loans or credit facilities	32,914	25,450
Mortgage bonds payable	8,143	8,937
Debentures payable	60,807	64,190
Land lease liabilities	66,746	59,907
Bank indebtedness	33,451	17,339
Class B exchangeable units	4,300	5,444
Notes payable	1,236	1,456
	685,428	661,626
Unitholders’equity	426,902	471,448
Total	$ 1,112,330	$1,133,074

30. Subsequent Events

Financings

In February 2021, the Trust obtained long-term financing for a property located in Bedford, NS in the amount of $9.75 million with a term of 5 years and an interest rate of 2.381%.

Unitholders’ Equity

Between January 1[st] and February 24[th] , 2021, an additional 4,650 units have been repurchased under the normal course issuer bid at an average unit price of $3.6459.

Distributions and Distribution Reinvestment Plan

The Trust paid a cash distribution of $0.02333 per unit for a total of $2.4 million on January 15, 2021.

The Trust paid a cash distribution of $0.02333 per unit for a total of $2.4 million on February 16, 2021.

Liquidity

The full CEWS government receivable as at December 31, 2020 has been collected.

As at February 24[th] , 2021, Plaza has collected 97.0% of January’s gross rent.

Page 41 of 41