Realia Properties Inc.

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FORM 51-102F1

MANAGEMENT’S DISCUSSION AND ANALYSIS

For the period ended June 30, 2021

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

SECTION I ...................................................................................................................... 1 FORWARD-LOOKING DISCLAIMER ............................................................................................................. 1 BASIS OF PRESENTATION ............................................................................................................................. 1 OVERVIEW OF THE COMPANY ..................................................................................................................... 2 PROPERTY PORTFOLIO .................................................................................................................................. 3 OUTLOOK ............................................................................................................................................................ 5 INVESTING ACTIVITY ....................................................................................................................................... 5 SECTION II ..................................................................................................................... 5 NON-IFRS INDUSTRY MEASURES ................................................................................................................ 5 KEY PERFORMANCE INDICATORS .............................................................................................................. 6 PROPERTY NET ASSET VALUES (NAV) AT COST COMPARED TO CURRENT MARKET VALUES ................................................................................................................................................................ 7 CAPITAL STRUCTURE, FINANCING ............................................................................................................. 7 SECTION III .......................................................................................................................................................... 8 SELECTED FINANCIAL INFORMATION ....................................................................................................... 8 RESULTS OF OPERATIONS ........................................................................................................................... 8 Summary ........................................................................................................................................................ 8 LIQUIDITY, WORKING CAPITAL .................................................................................................................... 9 SELECTED QUARTERLY INFORMATION - MOST RECENT EIGHT QUARTERS ............................... 9 SECTION IV .................................................................................................................... 9 CRITICAL ACCOUNTING ESTIMATES ......................................................................................................... 9 RISKS AND UNCERTAINTIES ...................................................................................................................... 11 RELATED PARTY TRANSACTIONS ............................................................................................................ 16 CONVERTIBLE DEBENTURES ..................................................................................................................... 19 OUTSTANDING SHARE DATA ...................................................................................................................... 20 AVAILABLE SOURCES OF ADDITIONAL INFORMATION ..................................................................... 21

Identical to Financial Statements

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

SECTION I

This Management’s Discussion and Analysis (“MD&A”) dated August 30, 2021 is in respect of the six months period ended June 30, 2021, and should be read in conjunction with the condensed consolidated interim financial statements for the period ended June 30, 2021, together with the audited consolidated financial statements and appended notes and MD&A for the year ended December 31, 2020.

FORWARD-LOOKING DISCLAIMER

This MD&A contains forward-looking statements with respect to Realia Properties Inc. (the " Company "), including statements that reflect management's expectations regarding the Company's real property assets, the Company's sources of funding, ongoing occupancy levels with respect to the Company's current real estate assets, the local economies in which the Company's real estate assets are located, ongoing capitalization rates and lease rates in such local economies. Wherever possible, words such as "anticipates," "will," "in the process of" and "on track to" or similar words or phrases have been used to identify such forward-looking statements. Such forward-looking statements are not historical facts, but instead reflect management's current beliefs, expectations and estimates based on information currently available to management. Such forward-looking statements include statements with respect to the potential value of the Company's assets, the Company's anticipated sources of funding, the general climate and growth of the local economies in which the Company's real estate assets are located, decreasing capitalization rates and increasing lease rates in such local economies.

Forward-looking statements are subject to significant risks, uncertainties and assumptions. Although management of the Company believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that the expectations represented in such forwardlooking statements will prove to be correct. Some of the factors and risks which could affect future results and could cause results to differ materially from those expressed in the forward-looking statements contained herein include the impact of general economic conditions, industry conditions, interest rate fluctuations, changes in currency exchange rates, tax-related risk factors, governmental regulation, environmental risks competition from other industry participants, and the risk of fluctuation and variation in actual operating results, which variation may be material.

There can be no assurance that forward-looking statements will prove to be accurate, as actual events and future events could differ materially from those anticipated. Accordingly, readers should not place undue reliance on forward-looking statements. The forward looking-statements in this communication are made as of the date indicated above. The Company does not undertake any obligation to update any forwardlooking information or statements except as and to the extent required by applicable Canadian securities laws.

BASIS OF PRESENTATION

Unless otherwise noted, all financial information has been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The financial information included in this MD&A for the six months period ended June 30, 2021 includes material information up to August 30, 2021. This MD&A should be read in conjunction with the Company’s condensed consolidated interim financial statements for the period ended June 30, 2021, together with the audited consolidated financial statements for the year ended December 31, 2020, available on SEDAR at www.sedar.com.

All amounts presented in this MD&A are in Canadian dollars, unless otherwise noted.

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

OVERVIEW OF THE COMPANY

Realia Properties Inc. (formerly “TitanStar Properties Inc.” and "DPVC Inc.") was incorporated under the Canada Business Corporations Act on June 3, 2008 and is a real estate holding company trading on the TSX Venture Exchange (the “Exchange”). The Company issued share capital and commenced operations on June 30, 2008. On September 27, 2010, the Company's shareholders passed a special resolution approving a change in the Company's name from "DPVC Inc." to "TitanStar Properties Inc.". On June 3, 2019, the shareholders approved a name change from “TitanStar Properties Inc.” to “Realia Properties, Inc.”

As at June 30, 2021, the Company held a 100% beneficial interest in 116[th] Street Centre located in Indianapolis, Indiana, a 100% beneficial interest in Metro Gateway Shopping Center located in Phoenix, Arizona, and a 100% membership interest in Martin Downs NSC LLC, a partnership which holds registered title to Martin Downs Town Center located in Palm City, Florida.

The sole business of the Company is the ownership of real property interests, consistent with a wellestablished investment policy. The Company seeks to create a portfolio of stabilized income producing real estate assets in the United States with value to be maximized through the acquisition of well-positioned quality assets where management believes there will be room to improve occupancy and increase lease rates which will each contribute to value creation.

The focus is on necessity-based neighborhood shopping centers.

In prior reporting periods, the Company made the following investments, either directly or through a subsidiary, in its interests in joint ventures and associates:

100% beneficial interest in a Delaware LLC, Martin Downs NSC LLC

On September 2015, the Company purchased 49% ownership interest in Martin Downs NSC LLC, which holds Martin Downs Town Center (“Martin Downs”), a 36,252 square foot, 88% leased neighborhood retail shopping center located in Palm City, Florida. On August 31, 2018 and October 17, 2018, the Company acquired an additional 9% and 41% ownership interest in the property, respectively. On March 19, 2021, the Company acquired the remaining 1% ownership interest in the property.

100% beneficial interest in a Nevada LLC, TSP Metro Gateway, LLC

TSP Metro Gateway, LLC was formed by the Company and completed its acquisition of a commercial retail property located in Phoenix, Arizona (the “Metro Gateway”) in 2016. Metro Gateway is a 67,793 square foot retail shopping center. It is currently 86% leased.

100% beneficial interest in a Nevada LLC, TSP 116 Street, LLC

TSP 116[th] Street, LLC was formed by the Company and completed its acquisition of a commercial retail property located in Indianapolis, Indiana (the “116[th] Street”) in 2016. 116[th] Street is a 44,854 square foot retail shopping center. It is currently 87% leased.

A detailed description of each property interest owned through subsidiaries or joint ventures of the group follows below.

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

On July 19, 2018, the Company announced that a Notice of Civil Claim has been filed with the Supreme Court of British Columbia by its former directors and certain entities owned by the former directors against the Company and certain of its current shareholders and directors with respect to an alleged breach of the Shareholder Agreement between the former directors of the Company and the Company; and an alleged breach of the Trade-Name License Agreement and the Domain Name License Agreement between the Company and a company owned by one of the former directors of the Company. On September 20, 2019, the Company settled the litigation. The settlement agreement provided, among other things, for a payment by the Company of approximately $1.25 million to repay loans made by the former directors and to settle all claims. The settlement was made without any admission of liability.

PROPERTY PORTFOLIO

Overview

As at June 30, 2021, the Company's real estate portfolio consisted of three properties. The details of each property as at the date of this MD&A are as follows:

Property	Date Acquired	%	Purchase Price (USD)(1)	Lot Size (acres)	Gross Leasable Area (sq ft)	Built/ renovated	Major Tenants	Occupancy
Martin Downs(2) Town Center (Palm City, FL)	September 2015	100%	11.5 million(3)	7.49	36,252	2006	• Panera Bread • BB & T •Edward Jones	88%
Metro Gateway(4) Shopping Center (Phoenix, AZ)	March 2016	100%	9.1 million	6.46	73,146	1978/1986	• Planet Fitness • Laser Quest • Dart Bar •Domino’s Pizza	86%
116thStreet Center(5) (Indianapolis, IN)	August 2016	100%	9.825 million	3.97	44,839	2007/2008	• Fred Astaire Dance • Upland Brewing Co. • Sylvan Learning •Caliente Mexican	87%

Notes:

(1) Subject to customary closing adjustments.

(2) Martin Downs is owned directly by Martin Downs NSC LLC. The Company owns 100% beneficial interest through its subsidiary Realia Properties US.

(3) The Company initially acquired its 49% ownership interest based on the purchase and sales agreement price of $11.5MM. The acquisition of the additional 41% interest from Inovalis City Center Retail Fund was based on the $11.5MM price per the PSA. The acquisition of the 9% was based on an agreed upon value of $1.0MM.

(4) Metro Gateway is owned directly by TSP Metro Gateway LLC, a Nevada LLC. The Company owns a 100% beneficial interest through its subsidiary, Realia Properties US.

(5) 116[th] Street is owned directly by TSP 116[th] Street, LLC, a Nevada LLC. The Company owns a 100% beneficial interest through its subsidiary, Realia Properties US.

Martin Downs Town Center

Martin Downs Town Center is a 36,252 square foot neighborhood retail shopping center located in Palm City, Florida, covering a total site area of 7.6 acres. The center was built in 2006 and as of the date of this MD&A is 88% leased. The center is shadow anchored by a Publix supermarket and has a variety of retail tenants including Panera Bread, BB & T (Trust Company), Edward Jones, Dunkin’ Donuts, Olympic Diner, Hokkaido Hibachi and Sushi, amongst others.

Pursuant to the terms of the acquisition, the sellers received US$2.369 million in exchange for the Company’s acquisition of an initial 49% interest in the joint venture. Consideration and closing costs for the acquisition were paid by issuing common shares of the Company. The property was independently appraised at US$12.5 million and the transaction was concluded based on a property value of US$11.5

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

million. Prior to the acquisition, the center was 90% owned by an affiliate of Inovalis, Inovalis City Center Retail Fund Inc. and 10% owned by Martin Downs GP LLC. The Company acquired its interest from Inovalis City Center Retail Fund Inc.

On August 31, 2018, the Company acquired an additional 9% ownership interest from Martin Downs GP LLC for $1,302,000 (US$1,000,000).

On October 17, 2018, the Company acquired an additional 41% interest from Inovalis City Center Retail Fund Inc. The acquisition was a result of the Company exercising an option from the original 2015 Purchase and Sales agreement. In consideration for the acquisition cost of $3,710,875, the Company issued 38,459,269 common shares as at February 22, 2019.

On March 19, 2021, the Company acquired the remaining 1% ownership interest from Martin Downs GP LLC for $47,141 (US$37,500).

Martin Downs Town Center is managed by NAI Southcoast at market management fees rates. These management fees are operating expenses recoverable from tenants.

Metro Gateway Shopping Center

Metro Gateway is a 73,146 square foot community center located in Phoenix, Arizona on approximately 6.4 acres. As of the date of this MD&A is 86% leased. The well-located shopping center is comprised of a complimentary mix of national, regional and local tenants including Planet Fitness and Dart Bar.

The acquisition cost of US$9,100,000 was financed, in part, through a first mortgage deed of US$6,080,000. The remainder of the acquisition cost was funded from proceeds of the convertible debenture private placement of an aggregate principal amount of $4,500,000 of 8% convertible unsecured subordinated debentures.

Metro Gateway is managed by Mutual Property Advisors, at market management fees rates. The management fees are recorded as operating expenses and are recoverable from tenants.

116[th] Street Centre

116[th] Street Centre is a 44,839 square foot retail center located in Indianapolis, Indiana on approximately 3.97 acres. As of the date of this MD&A it is 87% leased. The well-located, stabilized shopping center is comprised of a complimentary mix of long-term leased tenants including Sylvan Learning, Fred Astaire Dance Studio, Caliente Mexican Grill, Meridian Design Group and Upland Brewing Co.

The acquisition cost of US$9,825,000 was financed in part through a first mortgage of US$6,975,750 with the remainder provided by US$2,515,512 of proceeds from the sale of the Company’s interests in Swanway and San Tan joint ventures, and the bridge loans provided 50% by TitanStar Finance Inc., a Company of which the former Chairman is a principal, and 50% by a private company owned by a former director of the Company.

116[th] Street Centre is managed by McCrea Property Group, at market management fees rates. The management fees are recorded as operating expenses and are recoverable from tenants.

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

OUTLOOK

The Company owns interest in three neighborhood shopping centers. The Company anticipates selling a portion of its interest in the assets to repay the outstanding corporate debts as they come due.

INVESTING ACTIVITY

No new investments or letters of intent were entered into during the period ended June 30, 2021.

SECTION II

NON-IFRS INDUSTRY MEASURES

The Company has included certain non-IFRS measures throughout this MD&A. Management believes that in addition to conventional measures prepared in accordance with IFRS, investors in the real estate industry use these non-IFRS financial measures to evaluate the Company’s performance, ability to generate cash flows and financial condition. Accordingly, these non-IFRS financial measures are intended to provide additional information and should not be considered in isolation or as a substitute for performance measures prepared in accordance with IFRS. The non-IFRS financial measures do not have standardized meanings and may not be comparable to measures used by other issuers in the real estate industry or other industries. The non-IFRS financial measures noted in this MD&A are as follows and include definitions:

a) Adjusted Funds From Operations (“AFFO”)

NOI less debt service loan reserves and non-recoverable operating expenses including owner’s expenses.

b) AFFO Company

AFFO less cash cost of corporate debt and G & A expenses.

c) Debt Coverage Ratio

NOI divided by mortgage cost (principal and interest).

d) Debt to Gross Book Value

Principal balance of outstanding mortgage divided by original acquisition cost of properties.

e) Debt to Gross Book Value (Company)

All mortgage and corporate debt divided by original acquisition cost of properties.

f) Interest Coverage Ratio (Company)

NOI divided by all mortgage and corporate debt.

g) Net Asset Value Table (page 9)

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

KEY PERFORMANCE INDICATORS

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REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

PROPERTY NET ASSET VALUES (NAV) AT COST COMPARED TO CURRENT MARKET VALUES

The Net Asset Value Table is intended to illustrate the change in value of properties since they were acquired, net of the face value of mortgages and non-property debt. The property cost is the contracted purchase price without adjustments for transaction costs, depreciation and amortization. These measures are not recognized measures under generally accepted accounting principles (“GAAP”) or IFRS but are intended to provide readers with guidance of the trend in the asset values of the properties and the net asset values after debt since acquisition on a simplified basis.

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Market values are based on management estimates unless appraisal values are referenced.

(1) US$15,500,000 per NAI Southcoast Broker Opinion of Value dated April 1, 2021

(2) US$9,523,000 per CBRE summary valuation dated March 31, 2021.

(3) US$9,864,500 per CBRE In-Place Analysis dated March 24, 2021.

CAPITAL STRUCTURE, FINANCING

The Company’s objectives when managing capital of $37,644,042 (2020 - $40,775,772), which is share capital, contributed surplus, equity component of convertible debentures, accumulated other comprehensive income, deficit, notes payable, mortgages payable, due to related parties, convertible debentures and long-term debt, are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

The Company sets the amount of capital in proportion to risk. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new common shares, or sell assets to reduce debt.

The Company monitors capital from time-to-time using a variety of measures. Monitoring procedures are typically performed as a part of the overall management of the Company's operations. The Company's strategy during the period, which was unchanged from the prior period, was to maintain its ability to secure access to financing at a reasonable cost. The requirements and terms of sources of capital cannot be predicted and change in ways the Company cannot predict. There have been no changes to the Company’s approach to capital management during the period ended June 30, 2021 and year ended December 31, 2020. The Company is not subject to externally imposed capital requirements. As at June 30, 2021, the Company is in compliance with its financial covenant.

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

SECTION III

SELECTED FINANCIAL INFORMATION

A summary of selected financial information for the period ended June 30, 2021 and 2020 is as follows:

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The Company experienced a higher net income and comprehensive net income as of June 30, 2021 than in the comparable six month period of June 30, 2020 due to a tenant’s lease cancellation fee recognized as revenue for the period. The decrease in total assets is mostly due to the strengthening of the Canadian dollars (June 30, 2021 – 1.2398 vs June 30, 2020 – 1.3576). The decrease in working capital deficiency is due to mortgages payable maturing within a year in 2020 and new mortgage payable this period.

RESULTS OF OPERATIONS

Summary

A summary of selected financial information for the period ended June 30, 2021 and 2020 is as follows:

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Higher rental income in June 30, 2021 than in comparable six month period in June 30, 2020 due to inclusion of tenant’s lease cancellation fee to rental income in 2021.
Lower operating and leasing expenses, general and administrative expenses and depreciation expenses and higher foreign exchange gain in June 30, 2021 than in comparable period due to the strengthening of Canadian dollar in 2021 (June 30, 2021 – 1.2398 vs June 30, 2020 – 1.3576).
Write off of liabilities from 2014 and 2015 in 2020.
Modification of convertible debentures in March 2021.

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

TOTAL ASSETS

Total assets as at June 30, 2021 included $34,864,937 of investment properties, $1,531,690 of mortgage reserve funds, $982,360 of cash, $394,183 of restricted cash, $589,068 of accounts receivable and $66,405 of prepaid expenses and deposits.

LIQUIDITY, WORKING CAPITAL

As at June 30, 2021, the Company had a working capital deficiency of $3,252,420 (June 30, 2020 – working capital deficiency of $26,070,794).

The net decrease in working capital deficiency from June 30, 2020 to June 30, 2021 is due to mortgages payable maturing within the next twelve months in 2020 and a new mortgage in 2021.

SELECTED QUARTERLY INFORMATION - MOST RECENT EIGHT QUARTERS

A summary of selected quarterly financial information for the most recent eight quarters is as follows:

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In the third quarter ended September 30, 2020, the Company experienced a lower net loss and comprehensive loss than in the comparable period in September 30, 2019 due to the loss on settlement of dispute in 2019 and the strengthening of Canadian dollars in 2020.

In the fourth quarter ended December 31, 2020, the Company experienced a higher net loss and comprehensive loss than in the comparable period in December 31, 2019 due lower rental income and loss on foreign exchange due to the weakening of the Canadian dollars in 2020.

In the first quarter ended March 31, 2021, the Company experienced a higher net income and comprehensive income than in the comparable period in March 31, 202 due to the inclusion of a lease termination fee in 2021.

The results for the quarter ended June 30, 2021 are previously described under Results of Operations.

SECTION IV

CRITICAL ACCOUNTING ESTIMATES

The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that effect the reported amounts in the financial statements. Management bases its judgments, estimates and assumptions on factors it believes to be reasonable in the circumstances, but which may be inherently uncertain and unpredictable. The uncertainty of these judgments, assumptions and estimates could results in actual results that differ from the estimates and outcomes that require a material adjustment to the carrying amount of assets and liabilities in the future.

(a) Judgements:

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

The following are critical accounting judgments that have been made in applying the Company’s accounting policies:

(i) Investment properties:

The Company’s accounting policy relating to investment properties is described in note 3(d) of the Financial Statements. In applying this policy, judgment is applied to determine the significant components of each property, including the useful lives over which the componentized assets are to be amortized.

(ii) Going concern:

The assessment of the Company's ability to continue on a going concern basis, to obtain sufficient funds to cover ongoing operating expenses and to meet its obligations for the coming year involves a large part of judgment based on past experience and other factors, including expectations of future events that are considered reasonable in the circumstances.

(b) Estimates:

The significant areas of estimation include the following:

(i) Fair value of the investment properties:

The fair value of investment properties disclosed in note 5 of the Financial Statements is determined by management.

The determination of the fair value of investment property requires the use of estimates such as future cash flows from assets (i.e., tenant profiles, future revenue streams and overall repair and condition of the property), discount rates applicable to those assets’ cash flows and capitalization rates. These estimates are based on market conditions existing at the reporting date.

(ii) Convertible debentures:

For convertible debentures containing an equity component, the Company assesses the value of the debt component which is calculated at the estimated fair value of the future interest and principal payments due under the terms of the convertible debentures, using an estimated discount rate based on Management’s estimated cost of capital.

For convertible debentures which do not contain an equity component, the Company is required to estimate the fair value of the embedded derivative liability which is calculated based on using a model which considers inputs requiring significant judgement.

NEW ACCOUNTING POLICIES ADOPTED IN THE CURRENT PERIOD

No new accounting policies were adopted for the period ended June 30, 2021.

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

RISKS AND UNCERTAINTIES

General Business Risks

The Company will be subject to general business risks and to risks inherent in the commercial real estate industry, including the ownership of real property. These risks include general economic and market factors, health crisis factors, tenant credit risk, local real estate conditions, competition, changes in government regulation, interest rates, the availability of equity and debt financing, environmental and tax related matters, availability of specialized trades people and reliance on key personnel. Any one of, or a combination of, these factors may adversely affect the financial position of the Company.

Real Property Ownership

All real property investments are subject to elements of risk. Such investments are affected by general economic conditions, local real estate markets, the attractiveness of the properties to residents, supply and demand for space, and competition from other available space and various other factors.

The performance of the economy in the area in which Martin Downs Town Center, Metro Gateway Shopping Center, and 116[th] Street Center (collectively called the “Properties”) are located affects occupancy, market rental rates and expenses. These factors consequently can have an impact on the future share of income/(loss) attributable to the Company from the Properties.

Other factors may further adversely affect the future value of the Properties. These factors include local conditions in the areas in which the Properties are located, such as an oversupply of commercial real estate properties or a reduction in the demand for commercial real estate properties, the attractiveness of the Properties to tenants, competition from other properties and the Company’s ability to provide adequate facilities, maintenance, services and amenities. Operating costs, including real estate taxes, insurance and maintenance costs, and mortgage payments, if any, do not, in general, decline when circumstances cause a reduction in income from a property. The Company could sustain a loss as a result of foreclosure on the Properties if they are mortgaged to secure payment of indebtedness and the Company or its wholly-owned subsidiaries, as applicable, were unable to meet their mortgage payments. In addition, applicable laws, including tax laws, interest rate levels and the availability of financing also affect revenues from properties and real estate values generally.

Asset and Development Strategy

It is intended that the Company’s business strategy will involve expansion through acquisitions that are in addition to the Properties. These activities require the Company to identify acquisition candidates or investment opportunities that meet its criteria and are compatible with its growth strategy. The Company may not be successful in identifying commercial real estate properties that meet its acquisition criteria or in completing acquisitions or investments on satisfactory terms. Failure to identify or complete acquisitions will slow the Company’s growth. The Company could also face significant competition for acquisitions opportunities. Some of the Company’s competitors have greater financial resources than the Company and, accordingly, have a greater ability to borrow funds to acquire and develop properties. These competitors may also be willing and/or able to accept more risk than the Company can prudently manage, including risks with respect to the geographic concentration of investments and the payment of higher prices. This competition for investments may reduce the number of suitable investment opportunities available to the Company and may increase acquisition costs in certain areas where the Company’s facilities are located or in areas targeted for growth and, as a result, may adversely affect the Company’s operating results.

Even if the Company were successful in identifying suitable acquisitions projects, newly acquired properties may fail to perform as expected and management of the Company may underestimate the costs associated

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

with the integration of the acquired properties. In addition, any expansions the Company undertakes in the future are subject to a number of risks, including, but not limited to, construction delays or cost overruns that may increase project costs, financing risks, the failure to meet anticipated occupancy or rent levels, failure to receive required zoning, land use and other governmental permits and authorizations and changes in applicable zoning and land use laws. If any of these problems occur, expansion costs for a project will increase, and there may be significant costs incurred for projects that are not completed. In deciding whether to acquire or expand a particular property, the Company will make certain assumptions regarding the expected future performance of that property.

It is intended that the Company will invest in new developments which carry a certain risk that projected financial returns may not be achieved and that cost overruns, or start-up losses may require further equity injections. The Company manages this risk through detailed evaluation of each development separately and ensuring certain criteria have been met, including an extensive supply and demand analysis and establishing capital participants.

Joint Venture and Associate Investments

The Company no longer has any interests in joint venture and associate investments as at June 30, 2021. The Company may however enter into arrangements with respect to other properties in the future. In any such arrangement, the Company may not be in a position to exercise sole decision-making authority regarding the properties owned through these arrangements. Investments may, under certain circumstances, involve risks not present when a third party is not involved, including the possibility that 2investment partners might become bankrupt or fail to fund their share of required capital contributions. Investment partners may have business interests or goals that are inconsistent with the Company’s business interests or goals and may be in a position to take actions contrary to the Company’s policies or objectives. Such investments also have the potential risk of impasse on strategic decisions, such as a sale, because neither the Company nor the investment partner would have full control over the arrangement. Any disputes that may arise between the Company and its investment partners could result in litigation or arbitration that could increase the Company’s expenses and distract its officers and/or directors from focusing their time and effort on the Company’s business. In addition, the Company might in certain circumstances be liable for the actions of its investment partners.

Investment Concentration

The Company will be susceptible to adverse markets in Palm City, Florida, Phoenix, Arizona, and Indianapolis, Indiana, the markets in which it is operating, such as changing demographics and other factors. Presently, the Company’s depreciated book value interests in Martin Downs Town Center in Palm City, Florida account for 42% of the Company’s real property assets, the Company’s interest in Metro Gateway in Phoenix, Arizona account for 27% of the Company’s real property assets and the Company’s interest in 116[th] Street in Indianapolis, Indiana accounts for 31% of the Company’s real property assets. As a result of this concentration of assets, the Company will be particularly susceptible to adverse market conditions in these regions. Any adverse economic or real estate markets in the areas in which the Properties are located, or in the future in any of the other markets in which the Company operates, or any decrease in demand for commercial real estate resulting from the local economy or demographics could adversely affect the rental revenues . This effect could impair the ability of the assets to service their debt obligations and generate stable positive cash flow from operations to generate a return for the Company.

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

Illiquidity

Real property investments tend to be relatively illiquid, with the degree of liquidity generally fluctuating in relation to demand for and the perceived desirability of such investments.

Uninsured Losses

Martin Downs Town Center, Metro Gateway Shopping Center and 116[th] Street Center will carry comprehensive general liability, fire, flood, extended coverage and rental loss insurance with policy specifications, limits and deductibles customarily carried for properties similar to the Properties. There are, however, certain types of risks, generally of a catastrophic nature, such as wars or environmental contamination, which are either uninsurable or not insurable on an economically viable basis. Should an uninsured or under-insured loss occur, the Company could lose its investment in, and anticipated profits and cash flows from the Properties.

Environmental Risk

As an indirect owner of real property in the United States, the Company is subject to various federal, state and municipal laws relating to environmental matters. Such laws provide that the Company could be liable for the costs of removal of certain hazardous substances and repair of certain hazardous locations. The failure to remove or remediate such substances or locations, if any, could adversely affect the Company’s ability to sell such real estate or to borrow using such real estate as collateral and could potentially also result in claims against the Company.

Management is not aware of any material non-compliance with environmental laws with respect to the Properties. The Company is also not aware of any pending or threatened investigations or actions by environmental regulatory authorities in connection with the Properties. However, the Company cannot guarantee that any material environmental conditions do not or will not otherwise exist with respect to the Properties.

Public Market Risk

It is not possible to predict the price at which the Shares will trade and there can be no assurance that an active trading market for the Shares will be sustained. The Shares will not necessarily trade at values determined solely by reference to the value of the underlying business of the Company or its assets. Accordingly, the Shares may trade at a premium or a discount to the value implied by the value of the Company’s assets. The market price for the Shares may be affected by changes in general market conditions, fluctuations in the markets for equity securities and numerous other factors beyond the control of the Company.

Debt Financing

The Company and its owned subsidiaries have incurred and may incur indebtedness in the future in connection with the acquisition or expansion of facilities and its business. The wholly owned subsidiaries may incur unsecured debt or mortgage debt by obtaining loans secured by some or all of their real estate properties or assets. The Company’s wholly owned subsidiaries’ debt may harm the Company’s business and operating results by:

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

requiring the wholly owned subsidiaries to use a substantial portion of their cash flow from operations to pay principal and interest, which will reduce the amount of cash available for generating a return to the Company, and thus, other purposes;
limiting the Company’s ability to borrow more money for operating or capital needs or to finance acquisitions in the future; and
making the Company more vulnerable to economic and industry downturns and reducing its flexibility in responding to changing business and economic conditions.

In addition to the risks discussed above and those normally associated with debt financing, including the risk that the Company’s and its wholly owned subsidiaries’ cash flow will be insufficient to meet required payments of principal and interest, the Company will also be subject to the risk that the wholly owned subsidiaries will not be able to refinance potential future indebtedness on their properties and that the terms of any refinancing they could obtain would not be as favourable as the terms of their existing indebtedness. In addition, the financing arrangements of the Company may contain covenants that will restrict its ability to operate its business in certain ways. If the Company fails to comply with the restrictions in its financing arrangements, its lenders may be able to accelerate related debt as well as any other debt to which a crossdefault or cross-acceleration provision applies. A default could also allow creditors to foreclose, sell or realize on the property securing such debt or exercise other remedies against the Company. Credit facilities also typically require repayment of funds or cash flow sweeps when certain coverage ratios are not met. In connection with its financing arrangements, the Company expects that it will grant security interests over substantially all of its assets. If the Company is not able to meet its debt service obligations, it risks the loss of some or all of its assets to foreclosure or sale.

Interest Fluctuations and Financing Risk

The Company may finance future acquisitions in part with debt borrowings, which could bear interest at fixed or variable rates. The interest expense on any variable rate indebtedness of the Company will increase when interest rates increase. Interest rates are currently low relative to historical levels and may increase significantly in the future. A significant increase in interest expense could adversely affect the Company’s results of operations.

Failure to Obtain Additional Financing

The Company may require additional financing in order to grow and expand its operations. It is possible that such financing will not be available or, if it is available, will not be available on favorable terms. Future financing may take many forms, including debt or equity financing, which could alter the debt-to-equity ratio of the Company or which could be dilutive to Shareholders.

Dilution

The number of Shares that the Company is authorized to issue is unlimited. The directors of the Company will have the discretion to issue additional Shares in order to raise additional capital or in connection with future acquisitions, which may have a dilutive effect on Shareholders.

Potential Volatility of Share Price

It is not possible to predict the price at which the Shares will trade and there can be no assurance that an active trading market for the Shares will be sustained. The market price of the Shares may be volatile and could be subject to wide fluctuations due to a number of factors, including but not limited to: (i) actual or anticipated fluctuations in the Company’s results of operations; (ii) changes in estimates of the Company’s future results of operations by management or securities analysts; and (iii) general industry changes. In

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

addition, the financial markets have in the past experienced significant price and value fluctuations that have particularly affected the market prices of equity securities of many venture and real estate issuers and that sometimes have been unrelated to the operating performance of these companies. Broad market fluctuations, as well as economic conditions generally and in the real estate industry specifically, may adversely affect the market price of the Shares.

Limited Prior Public Market

The Shares have a limited record of trading publicly on the Exchange. The Company cannot predict at what price the Shares will trade and there can be no assurance that an active trading market will be maintained. A publicly traded real estate company will not necessarily trade at values determined solely by reference to the underlying value of its real estate assets. Accordingly, the Shares may trade at a premium or a discount to values implied by valuations.

Proposed Acquisitions

There can be no assurance that the Company will complete further acquisitions of real property interests. Acquisitions of properties by the Company are subject to normal commercial risks and satisfaction of closing conditions that may include, among other things, lender approval, receipt of estoppel certificates and obtaining title insurance. Such acquisitions may not be completed or, if completed, may not be on the terms that are exactly the same as initially negotiated. In the event that the Company does not complete an acquisition, it may have an adverse effect on the operations and results of the Company in the future. There can also be no assurance that the Company will be able to identify and acquire additional real property interests on competitive terms or at all.

Potential Conflicts of Interest

Situations may arise where the interests of directors and officers may conflict with the interests of the Company. Conflicts, if any, will be subject to the procedures and remedies provided by the Canadian Business Corporations Act .

Foreign Currency

The results of operations of the Company are reported in Canadian dollars. The Company’s operations are anticipated to be conducted almost exclusively in the United States. Any fluctuations in the value of the US dollar relative to the Canadian dollar may result in variations in the share of income/(loss) from wholly owned subsidiaries and joint ventures and associates and the net income of the Company. The Company does not plan on undertaking any hedging in order to mitigate its foreign currency risks.

As at June 30, 2021, the Canadian dollar equivalent of monetary assets and liabilities held by the Company that are denominated in U.S. dollars are as follows:

		June 30,	December 31,	December 31,
		2021		2020
Cash	$	362,656	$	24,415
Notes payable		1,239,800		1,272,500
Accounts payable		97,051		56,866
Total		$1,699,508		$1,353,781

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

If the Canadian dollar had strengthened or weakened 5% against the U.S. dollar with all other variables held constant, the Company would have additional income or loss from foreign exchange included in net income and equity for the period ended June 30, 2021 of approximately $48,718 (2020 – $70,880).

Foreign Political Risk

The Properties are located in the United States and, as such, a substantial portion of the Company’s business will be exposed to various degrees of political, economic and other risks and uncertainties. The Company’s operations and investments may be affected by local political and economic developments, including expropriation, nationalization, invalidation of governmental orders, permits or agreements pertaining to property rights, political unrest, labour disputes, limitations on repatriation of earnings, limitations on foreign ownership, inability to obtain or delays in obtaining necessary permits, opposition to property development from local, environmental or other non-governmental organizations, government participation, royalties, duties, rates of exchange, high rates of inflation, price controls, exchange controls, currency fluctuations, taxation and changes in laws, regulations or policies as well as by laws and policies of Canada affecting foreign trade, investment and taxation.

Inability to Resell Shares

There can be no assurance that an active and liquid market for the Shares will be developed and, if developed, will be maintained; and a holder of Shares may find it difficult to resell those Shares.

RELATED PARTY TRANSACTIONS

All of the related party disclosure below is identical to that contained in the financial statements.

Notes Payable

	June 30,	December 31,
	2021	2020
Martin Downs GP, LLC	$ 1,239,800	$ 1,272,500
Total notespayable	$ 1,239,800	$ 1,272,500

On August 31, 2018, concurring with the refinancing of the mortgage loan related to Martin Downs Town Center, the Company acquired an additional 9% interest in Martin Downs NSC, LLC from the Martin Downs GP, LLC, a private entity in which one of the officers is a partner for an amount of $1,304,750 ($1,000,000 USD).

Correspondingly, the US$1,000,000 note payable to Martin Downs GP, LLC to finance the 9% ownership interest acquisition bears interest at a rate of 10% and secured by interest in Martin Downs NSC, LLC. The note matured on August 30, 2019 and was extended to February 2020 in exchange for an extension fee of $21,053 (US$15,000), extended to August 31, 2020 in exchange for an extension fee of $20,124 (US$15,000) and further extended to February 28, 2021 in exchange for an extension fee of $39,957 (US$30,000). On February 28, 2021, the note was extended to February 28, 2026 and the interest rate was reduced to 8.0%. There was no extension fee. The Company may, from time to time, repay all or any part of the note without penalty.

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

Other Related Party Balances and Transactions

Other related party transactions and balances, not already disclosed in the consolidated financial statements include:

	June 30,	December 31,
	2021	2020
Due to Hoche Private Equity Investors SARL (b) (c) (e)	$ 552,527	$ 564,463
Due to Inovalis S.A. (f) (g) (h)	2,015,386	1,988,968
Due to Inovalis USA LLC (d)	129,147	132,553
Due to RLP Hospitality East Winds Inc. (i)	394,183	-
	$ 3,091,243	$ 2,685,984

Included in accounts payable and accrued liabilities is $6,682 of accrued interest charges (December 31, 2020 - $12,540) owing to private companies related through common directors.

(a) Key management personnel compensation

		Six months	ended	June 30,
		2021		2020
CFO:
Consulting fees	$	37,558	$	40,701
Corporate Secretary:
Consulting fees		19,998		23,763
	$	57,556	$	64,464

Key management personnel include the members of the Board of Directors and executive officers of the Company.

(b) Loan facility:

On April 4, 2018, the Company obtained a loan facility for up to $100,000. Under the terms of the loan facility, the Company may draw from time to time from April 4, 2018 to December 31, 2018, for the purpose of funding working capital requirements. Interest on any outstanding drawdowns will accrue at a fixed rate of 10% per annum, and is payable monthly. Outstanding indebtedness is payable on demand, subject to the terms and conditions of the loan facility, but will be subordinated by the Company’s senior indebtedness to secured lenders. The loan facility is provided by a private company of which the Chief Executive Officer and Chairman of the Board of the Company is a principal. In consideration of providing the loan facility, the loan facility provider will receive $3,000. The Company is currently pursuing negotiation for the extension of the maturity of the loan facility.

The Company drew $100,000 in 2018 under this loan facility. The loan remains outstanding at June 30, 2021.

(c) Down payment:

On July 6, 2018, a private company of which the Chief Executive Officer and Chairman of the Board of the Company provided a $52,336 ($40,000USD) down payment for the refinance of the Martin Downs mortgage. The down payment is repayable upon demand.

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

(d) Asset Management and Disposition Fees – Martin Downs:

On July 22, 2013, Martin Downs NSC, LLC entered into a management agreement with Inovalis USA LLC, pursuant to which Inovalis USA LLC provided management services to Martin Downs NSC, LLC, with respect to investment properties it holds. As payment for its service, Inovalis USA LLC was entitled, until October 31, 2018, to 1% of gross revenues collected, as asset management fees. Inovalis USA LLC was also entitled to a 1% disposition fee associated with the sale of its ownership interest in Martin Downs to the Company. On September 30, 2019, the Company formally terminated the management agreement with Inovalis USA LLC and the associated fees became due (management fee - $84,700 (US$63,975) and disposition fee – $53,213 (US$40,192). The amounts are still outstanding at June 30, 2021.

(e) Interest Reserve:

On April 29, 2020, a private company of which the Chairman of the Board of the Company is a principal provided a US$325,000 (CAD $439,429) payment for an up-front 6-month interest reserve associated with the extension of the Martin Downs mortgage. The note payable bears interest at a fixed rate of 7.5% per annum and ending until all indebtedness owing is repaid. The note is repayable upon demand. The Company may, from time to time, repay all or any part of the note payable without penalty.

(f) Working Capital:

On September 27, 2020, Inovalis S.A., a private company of which one of the Director’s is a principal, provided a $400,000 loan to fund ongoing working capital requirements of the Company. The note payable bears interest at a fixed rate of 7.5% per annum and matures on September 27, 2021. The Company may, from time to time, repay all or any part of the note payable without penalty.

(g) Working Capital:

On December 31, 2020, Inovalis S.A. provided a $1,589,000 loan to fund ongoing working capital requirements of the Company. The note payable bears interest at a fixed rate of 7.5% per annum and matures on December 31, 2021. The Company may, from time to time, repay all or any part of the note payable without penalty.

(h) Working Capital:

On March 8, 2021, Inovalis S.A. provided a $26,417 loan to fund ongoing working capital requirements of the Company. The note payable bears interest at a fixed rate of 7.5% per annum and matures on December 31, 2021. The Company may, from time to time, repay all or any part of the note payable without penalty.

(i) Nominee:

On May 7, 2021. Realia Hospitality Inc., a wholly owned subsidiary of Realia Properties Inc., entered into a Nominee Ownership and Agency Agreement with Inovalis S.A. and Mirabeau Overseas Inc. to act on their behalf in the acquisition of a Canadian partnership owning a hotel resort in St. Lucia. As part of the Nominee Agreement, Realia Hospitality Inc. will also be providing asset management services in consideration for a quarterly fee.

Management of the Company does not receive any other fee than that described above. The Company's Chairman and CFO are entitled to receive incentive stock options under the Company's incentive stock option plan. The other directors of the Company also do not receive any cash fee and are entitled only to participate in the Company's incentive stock option plan. As such, the management and the directors of

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

the Company will generally benefit only as shareholders and incentive stock option holders of the Company, benefitting only as other shareholders will benefit.

CONVERTIBLE DEBENTURES

	June 30,	December 31	December 31
	2021		2020
Liability, beginning of period	$ 4,542,000	$	4,428,983
Repayment	(1,589,700)		-
Accretion	475		113,017
Impact of convertible debenture modification	(5,008)		-
Liability, end of period	2,947,767		4,542,000
Transaction costs, beginning of period	-		(53,533)
Amortization of transaction costs	7,994		53,533
Debt modification transaction costs	(75,945)		-
Transaction costs, end of period	(67,951)		-
Convertible debentures	$ 2,879,816	$	4,542,000

The Company entered into a trust indenture on July 31, 2013 with BNY Trust Company of Canada under which the Company could issue convertible debentures to a maximum principal amount of $11,500,000.

The convertible debentures are redeemable, unsecured, subordinated to senior indebtedness and were set to mature on September 30, 2018.

On September 28, 2018, the Debenture holders approved an Extraordinary Resolution authorizing (i) the maturity extension of the Debentures from September 30, 2018 to September 30, 2020; (ii) a reduction in the conversion price at which the Debenture may be converted into common shares of the Corporation from $0.08125 to $0.06 per common share; and (iii) an increase of the interest rate payable on the Debentures from 8.5% per annum to 9.5% per annum, which took effect as of October 1, 2018.

In June 2020, the Company began negotiations with the Debentureholders on a modification and extension. On September 30, 2020, the convertible debentures matured and negotiations with the Debentureholders remained ongoing.

On February 19, 2021, the Company entered into a second amendment to the Convertible Debentures. The debenture was amended as follows:

Extended through September 30, 2025;
Repayment of $1,589,700 of outstanding principal balance;
Decreasing the interest rate payable on the Debentures from 9.5% per annum to 4.75% per annum, retroactive to October 1, 2020;
Allowing the Corporation to repay 50% of the principal amount outstanding at maturity in cash, and the remaining 50% of the principal amount outstanding at maturity by way of common shares at a price of $0.10 per share.

For the period ended June 30, 2021, the Company incurred $70,117 (2020 - $215,745) of interest on the convertible debentures, which is included in finance costs (note 13).

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

As a condition of the convertible debentures, the Company is required to maintain a debt service coverage ratio. At the end of June 30, 2021 and as of year end 2020, the Company was in compliance with the covenant.

OUTSTANDING SHARE DATA

As at June 30, 2021 and the date of this MD&A, the following is a description of the outstanding equity securities and convertible securities previously issued by the Company:

	As at June 30, 2021	As at the date of this MD&A
Voting or equity securities authorized	Unlimited	Unlimited
Securities convertible or exercisable into voting or equity securities – share options	Share options to acquire up to 5,104,422 outstanding common shares	Share options to acquire up to 5,104,422 outstanding common shares
Voting or equity securities issued and outstanding	255,221,137 common shares	255,221,137 common shares
Securities convertible or exercisable into voting or equity securities–directors and officers share options	360,000	360,000
Total voting or equity securities issuable on conversion or exchange of outstanding securities	360,000	360,000

ADDITIONAL DISCLOSURES FOR VENTURE ISSUERS WITH SIGNIFICANT EQUITY INVESTEES CONTINGENCIES

None reported.

COVID-19

Subsequent to year-end, an outbreak of a new strain of coronavirus (COVID-19) resulted in a major global health crisis which continues to have impacts on the global economy and the financial markets at the date of completion of the financial statements. These events have caused significant changes to the in place cash flows in the beginning of the year. As the Company owns retail strip centers, several of the tenants had been deemed non-essential and had been required to close. Tenants reopened in June 2020.

As of August 30, 2021, 116[th] Street Centre, located in Carmel, IN, reported that there are currently no COVID restrictions in place that impact the tenants. The mortgage payable remained current during COVID.

As of August 30, 2021, Metro Gateway, located in Phoenix, Arizona, reported that there are currently no restrictions in place that impact the tenants. Due to previous COVID related tenant closures, the Company entered into negotiations with the mortgage loan’s special servicer regarding a mortgage payment plan. However, prior to an agreement being reached, the tenants were permitted to reopen and the loan was brough current.

As of August 30, 2021, Martin Downs Town Center, located in Palm City, FL, reported that there are no COVID restrictions in place that impact the tenants. The notes payable and mortgage payable remained current during COVID.

REALIA PROPERTIES INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2021

SUBSEQUENT EVENTS

None.

AVAILABLE SOURCES OF ADDITIONAL INFORMATION

Additional information relating to the Company, including the Company’s most recent annual information form, is available on SEDAR at www.sedar.com and on the Company’s website at www.RealiaProperties.com.

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Realia Properties Inc. — Management Reports 2021

46382_rns_2021-08-30_067ae9d7-600f-4523-bb53-0ce1a0303426.pdf