Subversive Acquisition LP — Audit Report / Information 2019

Feb 12, 2020

Subversive Real Estate Acquisition REIT LP

Financial Statements

(Audited)

As at December 31, 2019 and for the period from inception on November 12, 2019 to December 31, 2019 (Expressed in United States dollars)

Deloitte LLP Bay Adelaide East 8 Adelaide Street West Suite 200 Toronto ON M5H 0A9 Canada

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Tel: 416-601-6150 Fax: 416-601-6151 www.deloitte.ca

Independent Auditor’s Report

To the Partners of Subversive Real Estate Acquisition REIT LP.

Opinion

We have audited the financial statements of Subversive Real Estate Acquisition REIT LP (the “REIT LP”) which comprise the balance sheet as at December 31, 2019, and the statements of income, equity and cash flows for the period from November 12, 2019 to December 31, 2019, and notes to the financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the REIT LP as at December 31, 2019, and its financial performance and its cash flows for the period from November 12, 2019 to December 31, 2019 in accordance with International Financial Reporting Standards (“IFRS”).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the REIT LP 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.

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 REIT LP’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 REIT LP or to cease operations, or has no realistic alternative but to do so.

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

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s 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 GAAS 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 these financial statements.

As part of an audit in accordance with Canadian GAAS, 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.

• 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 REIT LP’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 REIT LP’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s 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 auditor’s report. However, future events or conditions may cause the REIT LP 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.

We 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.

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

The engagement partner on the audit resulting in this independent auditor’s report is Mervyn Ramos.

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Chartered Professional Accountants Licensed Public Accountants February 10, 2020

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP

BALANCE SHEET

(expressed in U.S. dollars)

ASSETS Current Cash EQUITY Capital [note 3]	As at December 31, 2019 U.S.$
	25,011
	25,011
	25,011
	25,011

The accompanying notes are an integral part of these financial statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP

STATEMENT OF INCOME

(expressed in U.S. dollars)

REVENUE Revenue EXPENSES Expenses Income before income taxes Provision for income taxes Net income and comprehensive income for the period EARNINGS PER UNIT Basic Diluted The accompanying notes are an integral part of these financial statements	For the period from November 12, 2019 to December 31, 2019 U.S.$ - - - - - - -	For the period from November 12, 2019 to December 31, 2019 U.S.$ - - - - - - -
		-
		- -

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP

STATEMENT OF EQUITY

For the period from November 12, 2019 to December 31, 2019 (expressed in U.S. dollars, except for number of units outstanding amounts)

Limited Partner

CAPITAL Outstanding, beginning of period Issuance of Proportionate Voting Unit [note 3] Issuance of Founders Proportionate Voting Units [note 3] Outstanding, end of period General Partner CAPITAL Outstanding, beginning of period Issuance of general partnership unit Outstanding, end of period	Number of Units U.S.$ - - 1 1 58,820 25,000 58,821 25,001 Number of Units U.S.$ - - 1 10 1 10

The accompanying notes are an integral part of these financial statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP

STATEMENT OF CASH FLOW

(expressed in U.S. dollars)

OPERATING ACTIVITIES Net income for the period Cash provided by operating activities FINANCING ACTIVITIES Issuance of Proportionate Voting Unit [note 3] Issuance of General Partnership Unit Issuance of Founders Proportionate Voting Units [note 3] Cash provided by financing activities Net increase in cash during the period Cash, beginning of period Cash, end of period	For the period from November 12, 2019 to December 31, 2019 U.S.$
	-
	- 1 10 25,000
	25,011
	25,011 - 25,011

The accompanying notes are an integral part of these financial statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP NOTES TO THE FINANCIAL STATEMENTS

As at December 31, 2019 and for the period from November 12, 2019 (the date of formation) to December 31, 2019

1. CORPORATE INFORMATION

Subversive Real Estate Acquisition REIT LP (the “ REIT LP ”, “ we ”, “ our ” or “ us ”) is a newly established limited partnership formed under the laws of the Province of Ontario for the purpose of effecting, directly or indirectly, an acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, equity exchange, asset acquisition, equity purchase, reorganization, or any other similar business combination involving the REIT LP, which we refer to as our “Qualifying Transaction”. Subversive Real Estate Sponsor LLC (“ Subversive Sponsor ”), Inception Altanova Sponsor, LLC and CG Investments Inc. IV are sponsors of the REIT LP (collectively, the “ Sponsors ”). The amended and restated limited partnership agreement (the “ A&R LPA ”) of the REIT LP is filed on SEDAR at www.sedar.com.

The REIT LP was established under the Limited Partnership Act (Ontario) on November 12, 2019. The REIT LP’s head office is located at 135 Grand Street, 2nd Floor, New York, New York 10013 and its registered office is located at 333 Bay Street, Suite 3400, Toronto, Ontario, M5H 2S7, Canada.

The financial statements were authorized for issuance by the Board of Directors of the general partner of the REIT LP on February 12, 2020.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These financial statements of the REIT LP as at December 31, 2019 and for the period from November 12, 2019 (the date of formation) to December 31, 2019 have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The financial statements of the REIT LP have been prepared on a historical cost basis. The REIT LP’s functional and presentation currency is the U.S. dollar.

Cash

Cash is comprised of amounts held in trust.

Use of estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

3. CAPITAL

The REIT LP is authorized to issue an unlimited number of proportionate voting units (“ Proportionate Voting Uni t”) and an unlimited number of restricted voting units (“ Restricted Voting Units ”). The Restricted Voting Units form part of the Class A Restricted Voting Units that were issued to the public as described in Note 4.

On November 12, 2019, the REIT LP issued the general partner interest to Subversive Real Estate Acquisition REIT (GP) Inc.(the “ General Partner ”), the REIT LP’s general partner, in exchange for proceeds of U.S.$10.00. The General Partner is responsible for the management and control of the REIT LP in accordance with the A&R LPA. On November 12, 2019, the REIT LP issued one proportionate voting unit to Subversive Sponsor. On December 31, 2019, the REIT LP issued 58,820 Proportionate Voting Unit of the REIT LP to the Founders (“ Founders’ Proportionate Voting Units ”) at approximately U.S.$0.425 per Proportionate Voting Unit for aggregate proceeds of U.S.$25,000. Our Sponsors and the General Partners’ directors and officers, Michael Auerbach, Leland Hensch, Richard Acosta, Omar Mangalji, Scott Baker, Octavio Boccalandro, Craig Hatkoff, Anne Sullivan, Eric Clarke, Michael Miller, Dylan Marcoot and Dylan Hart, comprise our Founders.

The Proportionate Voting Units form part of the Class B Units. The Proportionate Voting Units, including fractions thereof, may at any time following the closing of the Qualifying Transaction, subject to the FPI Condition (as defined below), at the option of the holder, be converted into Limited Partnership Units at a ratio of 100 Limited Partnership Units per Proportionate Voting Unit with fractional Proportionate Voting Units convertible into Limited Partnership Units at the same ratio. Further, the General Partner’s board of directors may determine at any time following the closing of the Qualifying Transaction that it is no longer advisable to maintain the Proportionate Voting Units as a separate class of units and may cause all of the issued and outstanding Proportionate Voting Units to be converted into Limited Partnership Units at a ratio of 100 Limited Partnership Units per Proportionate Voting Unit with fractional Proportionate Voting Units convertible into Limited Partnership Units at the same ratio and the General Partner’s board of directors shall not be entitled to issue any more Proportionate Voting Units under the A&R LP Agreement thereafter.

The Proportionate Voting Units are not transferrable without approval of the General Partner’s board of directors, except to Permitted Holders, as defined in our initial public offering final prospectus dated December 23, 2019 (the “ Prospectus ”) filed on SEDAR at www.sedar.com and in compliance with U.S. securities laws.

The right of the Proportionate Voting Units to convert into Limited Partnership Units is subject to certain conditions in order to maintain the REIT LP’s status as a “foreign private issuer” under U.S. securities laws. Unless otherwise waived by the board of directors of the General Partner, the right to convert the Proportionate Voting Units is subject to the condition that the aggregate number of Limited Partnership Units and Proportionate Voting Units (calculated as a single class) held of record, directly or indirectly, by residents of the United States (as determined in accordance with Rules 3b-4 and 12g3-2(a) under the Securities Exchange Act of 1934, as amended) may not exceed forty percent (40%) of the aggregate number of Limited Partnership Units and Proportionate Voting Unit issued and outstanding after giving effect to such conversions (calculated as a single class) (the “ FPI Condition ”).

The Class B units consist of 1/100 of a Proportionate Voting Unit and one right of the REIT LP (each, a “ Right ”). The Class B units were subscribed by the Sponsors on closing of the public offering as described in Note 4. Each Right shall entitle the holder, upon the closing of our qualifying transaction, to receive one-eighth (1/8) of a Restricted Voting Unit (which at such time will represent one-eighth (1/8) of a Limited Partnership Unit, subject to adjustment under the terms of the qualifying transaction).

4. SUBSEQUENT EVENTS

On January 8, 2020, the REIT LP closed its initial public offering (the “ Offering ”) of 20,000,000 Class A Restricted Voting units (the “ Class A Restricted Voting Units ”) at U.S.$10.00 per Class A Restricted Voting Unit, for gross proceeds of U.S.$200,000,000. Each Class A Restricted Voting Unit consists of one restricted voting unit of the REIT LP (each, a “ Restricted Voting Unit ”) and one Right. Each Restricted Voting Unit, unless previously redeemed, will be automatically renamed “Limited Partnership Units” following the closing of a Qualifying Transaction. Each Right represents the entitlement to automatically receive, for no additional consideration, one-eighth (1/8) of one Restricted Voting Unit (which at such time will represent one-eighth (1/8) of a Limited Partnership Unit, subject to adjustment under the terms of the Qualifying Transaction). The REIT LP’s Class A Restricted Voting Units commenced trading

on the Neo Exchange Inc. (“ Exchange ”) under the symbol SVX.UN on January 8, 2020. The Class A Restricted Voting Units will separate into Restricted Voting Units and Rights on February 18, 2020, being 40 days following the closing of the Offering, and will trade under the symbols “SVX.U” and “SVX.RT.U”, respectively.

In connection with the Offering, the REIT LP granted the underwriters a 30-day non-transferable option to purchase up to an additional 3,000,000 Class A Restricted Voting Units, at a price of U.S.$10.00 per Class A Restricted Voting Unit, to cover over-allotments, if any, and for market stabilization purposes. The underwriters partially exercised the over-allotment option and acquired 2,500,000 Class A Restricted Voting Units on January 23, 2020. Due to the partial exercise of the over-allotment option, an aggregate of 1,259 Proportionate Voting Units were relinquished without compensation by the Sponsors on January 23, 2020. As a result, following the exercise of the over-allotment option and relinquishment of the 1,259 Proportionate Voting Units, the Founders own an aggregate of 57,562 Proportionate Voting Units (excluding Proportionate Voting Units underlying the Class B Units).

Concurrent with closing of the Offering, the Sponsors purchased an aggregate of 512,000 class B units (“ Class B Units ”) at an offering price of U.S.$10.00 per Class B Unit, for gross proceeds of U.S.$5,120,000. In connection with the partial exercise of the over-allotment, the Sponsors purchased an aggregate of 12,500 additional Class B Units, for additional gross proceeds of U.S.$125,000.

The proceeds of U.S.$225,000,000 from the Offering and over-allotment are held by Olympia Trust Company, as escrow agent, in an escrow account at a Canadian chartered bank (the “ Escrow Account ”) or subsidiary thereof, in accordance with the escrow agreement. Subject to applicable law and payment of certain taxes, permitted redemptions and certain expenses, as further described herein, none of the funds held in the Escrow Account will be released to the REIT LP prior to the closing of a Qualifying Transaction. The escrowed funds will be held to enable the REIT LP to (i) satisfy redemptions made by holders of Restricted Voting Units (including in the event of a Qualifying Transaction or an extension to the Permitted Timeline (as defined in the Prospectus) or up to 15 months with unitholders approval from the holders of Restricted Voting Units and the General Partner’s board of directors, or in the event a Qualifying Transaction does not occur within the Permitted Timeline), (ii) fund a Qualifying Transaction with the net proceeds following payment of any such redemptions and deferred underwriting commissions, and/or (iii) pay taxes on amounts earned on the escrowed funds and certain permitted expenses. Such escrowed funds and all amounts earned, subject to such obligations and applicable law, will be assets of the REIT LP.

If we are unable to consummate a Qualifying Transaction within the Permitted Timeline of 12 months from the closing date of the Offering (the “ Closing Date ”) (or 15 months from the Closing Date if we have executed a definitive agreement for a Qualifying Transaction within 12 months from the Closing Date but have not completed the qualifying transaction within such 12-month period), we will be required to redeem each of the outstanding Restricted Voting Units, for an amount per unit, payable in cash, equal to the pro-rata portion (per Restricted Voting Unit) of: (A) the escrowed funds available in the escrow account, including any interest and other amounts earned thereon, less (B) an amount equal to the total of (i) any applicable taxes payable by the REIT LP on such interest and other amounts earned in the escrow account, and (ii) up to a maximum of U.S.$50,000 of interest and other amounts earned from the proceeds in the escrow account to pay actual and expected winding-up expenses and certain other related costs (as described in the Prospectus), each as reasonably determined by the General Partner. In such event, the Rights will expire and be worthless. The underwriters of the Offering will have no right to the deferred underwriting commission held in the escrow account in such circumstances.

Such Permitted Timeline, however, could be extended to up to 36 months with unitholder approval, by ordinary resolution of holders of Restricted Voting Units, with approval by the board of directors of the General Partner. If such approvals are obtained, holders of Restricted Voting Units, irrespective of whether such holders voted for or against, or did not vote on, the extension of the Permitted Timeline, would be permitted to deposit all or a portion of their units for redemption prior to the second business day before the meeting of the holders of Restricted Voting Units in respect of the extension. Upon the requisite approval of the extension of the Permitted Timeline, and subject to applicable law, we will be required to redeem such Restricted Voting Units so deposited at an amount per unit, payable in cash, equal to the pro-rata portion (per Restricted Voting Unit) of: (A) the escrowed funds available in the escrow account at the time of the meeting in respect of the extension, including any interest and other amounts earned thereon, less (B) an amount equal to the total of (i) any applicable taxes payable by the REIT LP on such interest and other

amounts earned in the escrow account; and (ii) actual and expected expenses directly related to the redemption, each as reasonably determined by the General Partner. For greater certainty, such amount will not be reduced by the deferred underwriting commission per Restricted Voting Unit held in the escrow account.

Consummation of the Qualifying Transaction will require approval by a majority of the General Partner’s directors unrelated to the Qualifying Transaction. In connection with seeking to complete a Qualifying Transaction, we will provide holders of our Restricted Voting Units with the opportunity to redeem all or a portion of their Restricted Voting Units, provided that they deposit their units for redemption prior to the deadline specified by the REIT LP, following public disclosure of the details of the Qualifying Transaction and prior to the closing of the Qualifying Transaction, of which prior notice had been provided to the holders of the Restricted Voting Units by any means permitted by the Exchange, not less than 21 days nor more than 60 days in advance of such deadline, in each case, with effect, subject to applicable law, immediately prior to the closing of our Qualifying Transaction, for an amount per unit, payable in cash, equal to the pro-rata portion (per Restricted Voting Unit) of: (A) the escrowed funds available in the escrow account at the time immediately prior to the redemption deposit deadline, including interest and other amounts earned thereon; less (B) an amount equal to the total of (i) any applicable taxes payable by the REIT LP on such interest and other amounts earned in the escrow account, and (ii) actual and expected expenses directly related to the redemption, each as reasonably determined by the General Partner, subject to the limitations described in the Prospectus.

For greater certainty, such amount will not be reduced by the deferred underwriting commission per Restricted Voting Unit held in escrow. If approval of the Qualifying Transaction by unitholders is otherwise required under applicable law, holders of Restricted Voting Units shall have the option to redeem their Restricted Voting Units irrespective of whether they vote for or against, or do not vote on, the Qualifying Transaction at any meeting of the REIT LP’s unitholders to be held, if required under applicable law, to vote on our Qualifying Transaction (a “ Qualifying Transaction Meeting ”), as further described in the Prospectus under “Qualifying Transaction – Redemption Rights” and “Description of Securities – Restricted Voting Units and Proportionate Voting Units”. Holders of Restricted Voting Units will be given not less than 21 days’ notice of the Qualifying Transaction Meeting (if such meeting is required under applicable law) and of the corresponding redemption deposit deadline if such Qualifying Transaction Meeting is required. Participants through CDS Clearing and Depositary Services Inc. (“ CDS ”) may have earlier deadlines for accepting deposits of Restricted Voting Units for redemption. If a CDS participant’s deadline is not met by a holder of Restricted Voting Units, such holder’s Restricted Voting Units may not be eligible for redemption.

Our Founders will not be entitled to redeem the Founders’ Proportionate Voting Units (as defined in the Prospectus) or Class B Units (including their underlying securities) in connection with a Qualifying Transaction or an extension to the Permitted Timeline or entitled to access the escrow account should a Qualifying Transaction not occur within the Permitted Timeline, as further described in the Prospectus. Our Founders (including our Sponsors) will, however, participate in any liquidation distribution with respect to any Restricted Voting Units they acquired in connection with the Offering through possible purchases on the secondary market.

Outstanding Units

As of the date of this report, the REIT LP had 22,500,000 Class A Restricted Voting Units, 524,500 Class B Units and 57,562 Proportionate Voting Units issued and outstanding. In addition, the REIT LP had an aggregate of 23,027,000 Rights issued and outstanding.