Subversive Acquisition LP — Interim / Quarterly Report 2020

Nov 14, 2020

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP UNAUDITED INTERIM FINANCIAL STATEMENTS

AS AT SEPTEMBER 30, 2020

(Expressed in U.S. Dollars)

Unaudited Interim Financial Statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS As at September 30, 2020 (expressed in U.S. dollars)

NOTICE TO READER

The REIT LP’s independent auditor has not performed a review of these unaudited condensed interim consolidated financial statements.

(signed) “ Richard Acosta ” Richard Acosta Chief Executive Officer

(signed) “ Michael Miller ” Michael Miller Chief Financial Officer

Unaudited Interim Financial Statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP

UNAUDITED BALANCE SHEET

(expressed in U.S. dollars)

Assets Cash Prepaid expenses and other assets Securities held in Escrow Account (Note 5) Total Assets Liabilities and Unitholders' Equity Accrued Expenses Class A Restricted Voting Units subject to redemption (Note 6) Total Liabilities Equity Unit capital, net Deficit Total Unitholders' Equity Total Liabilities and Unitholders' Equity	As at As at September 30, 2020 June 30, 2020 U.S.$ U.S.$ 316,800 1,283,974 1,057,790 117,262 225,999,320 225,887,813 227,373,910 227,289,049 444,144 138,555 219,397,912 213,498,082 219,842,056 213,636,638 24,944,677 24,944,677 (17,412,824) (11,292,265) 7,531,853 13,652,412 227,373,910 227,289,049

The accompanying notes are an integral part of these financial statements.

Unaudited Interim Financial Statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP

UNAUDITED STATEMENT OF INCOME (LOSS)

(expressed in U.S. dollars)

Revenue Interest Total Revenue Expenses Amortization of issue costs on Class A rights (Note 6) General and administrative (Note 12) Interest allocated to Class A Units Total Expenses Net loss Weighted average units outstanding, basic and diluted1 Net loss per unit - basic and diluted	For the 3 month period from For the 9 month period from July 1, 2020 January 1, 2020 to September 30, 2020 September 30, 2020 U.S.$ U.S.$ 111,506 999,319 111,506 999,319 5,788,324 16,333,657 331,143 1,073,878 112,598 1,004,609 6,232,065 18,412,143 (6,120,559) (17,412,824) 582,063 582,063 (10.52) (29.92)

1. Includes Class B Units, Proportionate Voting Units and the General Partnership Unit.

Unaudited Interim Financial Statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP

UNAUDITED STATEMENT OF CASH FLOW

(expressed in U.S. dollars)

Operating Activities Net loss for the period Amortization of issue costs on Class A Units Prepaid Expenses Accrued Expenses Cash used in operating activities Investing Activities Securities held in Escrow Cash used in investing activities Financing Activities Issuance of Class B Units Issuance of Class A Units Transaction Costs allocated to Class A Units Transaction Costs allocated to Class B Units Transaction costs allocated to Rights Cash provided by financing activities Net increase in cash during the period Cash, beginning of period Cash, end of period

For the 3 month period from For the 9 month period from July 1, 2020 January 1, 2020 to September 30, 2020 to September 30, 2020 U.S.$ U.S.$ (6,120,559) (17,412,824) 5,788,324 16,333,657 (940,527) (1,057,790) 305,589 444,144 (967,173) (1,692,813) - (225,000,000) - (225,000,000) - 5,245,000 - 225,000,000 - (2,946,522) - (26,341) - (287,535) - 226,984,602 (967,173) 291,789 1,283,974 25,011 316,800 316,800

The accompanying notes are an integral part of these financial statements.

Unaudited Interim Financial Statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP

STATEMENT OF EQUITY

For the six and nine month period ended June 30, 2020 and September 30, 2020 (expressed in U.S. dollars, except for number of units outstanding amounts)

General partner

General partnership Unit

General partner	General partnership Unit
CAPITAL Outstanding, beginning of period Outstanding, end of period Limited Partner Outstanding, beginning of period Relinquishment Issuance of Class B Units to Sponsor Value assigned to Class A Rights Transaction Costs assigned to Class B units Transaction Costs assigned to Class A Rights Retained Deficit - June 30, 2020 Balance - June 30, 2020 Retained Deficit - September 30, 2020 Balance - September 30, 2020	Units Amount 1 10 1 10 Units Amount 58,821 25,011 (1,259) - - - - - - - - - - - 57,562 25,011 - - 57,562 25,011 Proportionate Voting Units	Rights Amount - - - - - - 22,500,000 19,988,541 - - - (287,534) - - 22,500,000 19,701,007 - - 22,500,000 19,701,007 Class A Rights	Class BUnits	Deficit - 25,011 - - - 5,245,000 - 19,988,541 - (26,341) - (287,534) - (11,292,265) (11,292,265) (11,292,265) 13,652,412 (6,120,559) (6,120,559) (17,412,824) 7,531,853 Total Unitholders' Equity
			Units Amount
			- - - - 524,500 5,245,000 - - - (26,341) - - - -
			524,500 5,218,659
			- -
			524,500 5,218,659

The accompanying notes are an integral part of these financial statements.

Unaudited Interim Financial Statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS As at September 30, 2020 (expressed in U.S. dollars)

1. CORPORATE INFORMATION

Subversive Real Estate Acquisition REIT LP (the “ REIT LP ”, “ we ”, “ our ” or “ us ”) is a 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 the “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 November 13, 2020.

2. SIGNIFICANT EVENTS

Due to its limited working capital position, the REIT LP’s ability to continue as a going concern is dependent upon the continued support of its Sponsor and/or upon the completion of the Qualifying Transaction or on the approval of an extension of the permitted timeline should the Qualifying Transaction not be completed prior to January 8, 2021. There can be no assurance that we will be successful in completing our Qualifying Transaction.

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 (“ Proportionate Voting Unit ”) to Subversive Sponsor. On December 31, 2019, the REIT LP issued 58,820 Proportionate Voting Units 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.

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 of the REIT LP (each, a “ Right ”). Each Restricted Voting Unit, unless previously redeemed, will be automatically renamed “Limited Partnership Units” following the closing of the Qualifying Transaction (the “ Closing ”). 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. (the " Exchange ") under the symbol SVX.UN on January 8, 2020. The Class A Restricted Voting Units separated into Restricted Voting Units and Rights on February 18, 2020, and trade under the symbols “SVX.U” and “SVX.RT.U”, respectively.

Unaudited Interim Financial Statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS As at September 30, 2020 (expressed in U.S. dollars)

In connection with the Offering, the REIT LP granted the underwriters a 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 to acquire 2,500,000 Class A Restricted Voting Units and the over-allotment closed 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 57,561 Proportionate Voting Units (excluding Proportionate Voting Units underlying the Class B Units).

Concurrent with the 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. Each Class B Unit consists of 1/100 of a Proportionate Voting Unit and one Right. 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 were placed in an escrow account (the “ Escrow Account ”) with Olympia Trust Company (“ Olympia ”), pursuant to an escrow agreement between the REIT LP and Olympia (the “ Escrow Agreement ”) and will be released upon consummation of the Qualifying Transaction in accordance with the terms and conditions of the Escrow Agreement.

On October 7, 2020 we announced that we had entered into binding agreements (the " Agreements ") to acquire real properties in the amount of approximately US$97.4 million and originate or acquire US$85.4 million of first lien mortgages (collectively, the " Initial Portfolio "), to become a leading real estate capital provider for prominent cannabis operators that own or are seeking industrial and retail real estate in high growth cannabis markets in the United States. The acquisition of the Initial Portfolio will constitute the Qualifying Transaction and is the first instance of the popular SPAC vehicle converting into a public REIT.

The REIT LP also announced a private placement (the " Private Placement ") of subscription receipts (the " Subscription Receipts "). On Closing, the Subscription Receipts shall convert into US$40.0 million aggregate principal amount of 6.0% senior secured convertible debentures (the " Debentures ") at a price of (a) US$1,000 per Debenture and 137,500 limited partnership units (the “ Limited Partnership Units ”) of the REIT LP (" Debenture Units "), in respect of US427.5 million Debentures; and (b) US$950 per Debenture, in respect of US$12.5 million Debentures (each, as applicable, the " Offering Price "). The REIT LP has also granted the agents, being Canaccord Genuity Corp. (" Canaccord Genuity ") and Compass Point Research & Trading, LLC (" Compass Point ", and together with Canaccord Genuity, the " Agents ") a non-transferable option to purchase Subscription Receipts convertible into an aggregate of US$25.0 million Debentures and, if applicable, up to an additional 125,000 Debenture Units.

The completion of the Qualifying Transaction is conditional upon, among other things, approval by the Exchange. The Exchange has conditionally approved the continued listing of the Limited Partnership Units of the REIT LP (the " Limited Partnership Units "), including the Limited Partnership Units issuable in connection with the Qualifying Transaction (including, for greater certainty, upon the redemption of certain units (the " Exchangeable Units ") of a subsidiary of the REIT LP that are economically equivalent to the Limited Partnership Units), the Debenture Units and Limited Partnership Units underlying the Debentures, and the Rights, the Debentures and the Contingent Rights. Continued listing of the Limited Partnership Units and the Rights and the listing of the Debentures and the Contingent Rights is subject to the REIT LP fulfilling all of the requirements of the Exchange. It is expected that the Limited Partnership Units, Rights, Debentures and Contingent Rights would trade under the symbols "SVX.U", "SVX.RT.U", "SVX.DB.U" and “SVX.RT.C”, respectively.

Unaudited Interim Financial Statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS

As at September 30, 2020 (expressed in U.S. dollars)

On October 19, 2020 we announced that we had agreed to grant an aggregate of up to 24,116,750 million contingent rights (the “ Contingent Rights ”) to holders of Restricted Voting Units that are not redeemed in connection with the REIT LP’s previously announced Qualifying Transaction and to holders of Restricted Voting Units that are issued in connection therewith, which Contingent Rights will be issued to holders of record on the day following the Closing.

On November 2, 2020 we publicly announced that we changed the deadline for redemption of our Restricted Voting Units from November 2, 2020 to November 9, 2020. To redeem their Restricted Voting Units in connection with the Qualifying Transaction, holders must deposit their Restricted Voting Units for redemption prior to 5:00 p.m. (Toronto time) on November 9, 2020, in accordance with the instructions contained in the notice of redemption (the “ Notice of Redemption ”). The Notice of Redemption was mailed to all holders of Restricted Voting Units on October 8, 2020, and is available on SEDAR at www.sedar.com. Other than the deadline for redemption, the information set out in the Notice of Redemption is unchanged.

On November 9, 2020 we postponed the Closing of our Qualifying Transaction and withdrew the optional redemption event that we had extended to holders of our Restricted Voting Units in connection therewith. Restricted Voting Units already deposited for redemption were returned to the holders thereof in accordance with the terms of our amended and restated limited partnership agreement.

Further information on the Qualifying Transaction is contained in the REIT LP’s long form prospectus dated October 19, 2020, which is available on the REIT LP’s SEDAR profile at www.sedar.com.

3. BASIS OF PREPARATION

Basis of preparation

These unaudited interim financial statements of the REIT LP as at September 30, 2020 and for the period from July 1, 2020 through September 30, 2020 have been prepared by management in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and with interpretation of the International Financial Reporting Interpretations Committee (“IFRIC”). These financial statements meet the requirements of International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”. The REIT LP was established on November 12, 2019 and accordingly no comparatives have been provided for the income statements and cash flows.

Basis of measurement

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

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. Significant assumptions were used in determining the fair value of Rights attached to the Class A Restricted Voting Units at inception.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial instruments

Unaudited Interim Financial Statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS

As at September 30, 2020 (expressed in U.S. dollars)

Financial assets and liabilities are recognized when the REIT LP becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or are assigned, and the REIT LP has transferred substantially all risks and rewards of ownership in respect of the asset. Financial liabilities are derecognized when the related obligation is discharged, cancelled or when it expires.

Management determines the classification of financial instruments at initial recognition with reflection of the business model and cash flow characteristics of the financial instruments. Financial assets are classified at fair value through profit or loss (‘‘FVTPL’’) or at amortized cost. Financial liabilities are classified at amortized cost.

Financial instruments classified as FVTPL are carried at fair value in the statement of financial position and any gains or losses are recorded in net income in the period in which they arise. There were no items classified as FVTPL. Financial instruments classified at amortized cost include securities held in escrow. The Class A Restricted Voting Units subject to redemption have been classified as liabilities for accounting purposes and are recorded at amortized cost.

Impairment of financial asset at amortized cost

At each financial statement reporting date, the REIT LP assesses whether there is objective evidence that a recorded financial asset is impaired. Impairment exists if one or more events have occurred after the initial recognition of the asset and those events have objectively given rise to an expected negative impact on the estimated future cash flows of the financial asset that can be reliably estimated. The REIT LP recognizes impairment if the expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of this difference is recognized as the impaired amount and is recorded as profit or loss. An impairment of a financial asset carried at amortized cost is reversed in subsequent periods if the amount of the loss decreased and the decrease can be related objectively to an event occurring after the impairment was recognized.

Income tax

Pursuant to the Limited Partnership Agreement, all of the investment income, expense and realized capital gains and losses of the Partnership are allocated to the limited partners and the General Partner. These financial statements do not provide for income taxes as the limited partners and the General Partner are taxed individually on their share of the Partnership’s income.

Per unit information

Basic income or loss per Class B Unit is calculated by dividing the net income or loss by the weighted average number of Class B Units, Proportionate Voting Units and General Partnership Unit outstanding during the period. The calculation excludes the effect of Class A Restricted Voting Units, as the Class A Restricted Voting Units have been classified in these financial statements as financial liabilities.

5. RESTRICTED CASH HELD IN ESCROW

Unaudited Interim Financial Statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS

As at September 30, 2020 (expressed in U.S. dollars)

The following cash balances were held in escrow at a Canadian trust company as at September 30, 2020:

	AS AT AS AT SEPTEMBER 30, 2020 DECEMBER 31, 2019
Bank of Montreal GIC - USD due 15-Jun-2021 BNS Corp USD Investment Savings Account NB GIC - USD due 15-Jun-2021 NBC NBI Altamir CP Account RBC Bank BDN - USD due 01-Oct-2020 REN USD High Interest Savings Account Cash (in Escrow)	25,030,781 $ - $ 77,958,715 $ - $ 19,502,858 $ - $ 9,978,590 $ - $ 78,509,902 $ - $ 15,016,053 $ - $ 2,421 $ - $
	225,999,320 $ - $

These balances are valued at amortized cost which approximates fair value due to the short-term nature of the items.

6. CLASS A RESTRICTED VOTING UNITS SUBJECT TO REDEMPTION

Authorization

The REIT LP is authorized to issue an unlimited number of Class A Restricted Voting Units. The holders of Class A Restricted Voting Units have no pre-emptive rights or other subscription rights and there are no sinking fund provisions applicable to these units.

Voting Rights

The holders of the Class A Restricted Voting Units are entitled to vote on and receive notice of meetings on all matters requiring unitholder approval (including any proposed extension to the permitted timeline and approval of the Qualifying Transaction if otherwise required under applicable law) other than the election and/or removal of directors of the General Partner and auditors of the REIT LP prior to Closing. Prior to the Qualifying Transaction, holders of the Class A Restricted Voting Units are not entitled to vote at (or receive notice of or meeting materials in connection with) meetings held only to consider the election and/or removal of directors and auditors.

Redemption Rights

Only holders of Class A Restricted Voting Units are entitled to have their units redeemed and receive the escrow proceeds (net of applicable taxes and other permitted deductions) in the event the Qualifying Transaction does not occur within the permitted timeline, in the event of the Qualifying Transaction, and in the event of an extension to the permitted timeline. The Rights which were issued with the Class A Restricted Voting units have no redemption rights.

Classification

The REIT LP has classified its Class A Restricted Voting Units as financial liabilities within the unaudited balance sheet. The REIT LP recorded a discount to the $225,000,000 of gross proceeds from the Offering in the amount of $19,988,541, representing the fair value of the Rights, and $2,946,522, representing the transaction costs associated with the Class A Restricted Voting Units. The fair value of the Rights was arrived at by dividing the $225,000,000 of Class A Restricted Voting Unit gross proceeds by the fully diluted unit value of the REIT LP and dividing the quotient by eight. The difference between the estimated fair value of the Rights and the Class A Restricted Voting Unit value at the time of the Offering is allocated to the Class A Restricted Voting Unit liability within the unaudited balance sheet. The aggregate discount of $22,935,063 is being amortized over 12 months using the effective interest rate method. For the period from July 1, 2020 through September 30, 2020, the Company recorded $5,788,324 of amortization of the issue costs in

Unaudited Interim Financial Statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS

As at September 30, 2020 (expressed in U.S. dollars)

connection with the Rights. Interest earned on the escrow funds of $111,506 has been credited to the Class A Restricted Voting Units.

7. UNITHOLDERS’ EQUITY

The REIT LP is authorized to issue an unlimited number of Class B Units. The holders of Class B Units have no pre-emptive rights or other subscription rights and there are no sinking fund provisions applicable to these units.

Voting Rights

The holders of the Class B Units are entitled to vote at all meetings of unitholders and on all matters requiring a unitholder vote, with the exception of an extension of the permitted timeline, which will only be voted upon by holders of Class A Restricted Voting Units.

Redemption Rights

Holders of Class B Units, being the Founders, do not have access to, and cannot benefit from, any proceeds held in the escrow account, and as such, do not have any redemption rights with respect to their Class B Units. The Founders (including the Sponsor) will, however, be entitled to such redemption rights using proceeds from the escrow account with respect to any Class A Restricted Voting Units they may acquire pursuant to or following the Offering.

8. TRANSACTION COSTS

Transaction costs are directly related to the Offering and consist mainly of legal, accounting, printing, filing and underwriting costs. Transaction costs incurred from November 12, 2019 (date of formation) through September 30, 2020 were allocated between Unitholders’ Equity and units subject to redemption on the following basis:

	Class A Restricted Voting Units Class A Rights Class B Units Total
Professional fees (legal, accounting, etc.)	$ 847,411 $ 82,622 $ 21,784 $ 951,817
Underwriters’ commission	$ 1,765,836 $ 172,168 - $1,938,005
Listing	$ 155,996 $ 15,460 - $ 171,455
**Other **	$177,279 $17,285 $4,557 $199,121
Total	$2,946,522 $287,535 $26,341 $3,260,398

The Underwriters are entitled to an underwriting commission equal up to $12,375,000 or 5.5% of the gross proceeds of the Class A Restricted Voting Units issued under the Offering. The REIT LP paid $1,938,005 to the Underwriters at the closing of the Offering, of which $1,413,750 was used to settle CG Investment Inc. IV’s Class B Unit sponsor share purchase obligation. The balance of the underwriting commission of $10,436,995, or 4.6% of the gross proceeds (the “Deferred Amount”) of the Class A Restricted Voting Units, has been deferred and will only be paid upon successful completion of the Qualifying Transaction as follows: (A) as to 3.6% of the gross proceeds to the Underwriters; and (B) as to 1.0% of the gross proceeds, released only at the General Partner’s sole discretion, in whole or in part, as it sees fit, for payment to parties of the General Partner’s choosing and may be paid to the Underwriters. If the Qualifying Transaction is not consummated within the permitted timeline, no Deferred Amount shall be payable. Due to its association with an uncertain future Qualifying Transaction, the contingent liability of deferred underwriting commission balance has not been recorded in the Interim Financial Statements. Transaction costs were prorated between Class A Restricted Voting Units, Class A Rights and Class B Units by the amount of proceeds received.

Unaudited Interim Financial Statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS As at September 30, 2020 (expressed in U.S. dollars)

9. FINANCIAL INSTRUMENTS

All financial instruments for which fair value is recognized or disclosed are categorized within a fair value hierarchy, described as follows:

Level 1 − Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities

Level 2 − Valuation techniques based on inputs that are quoted prices of similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a valuation model that are observable for that instrument; and inputs that are derived from or corroborated by observable market data by correlation or other means

Level 3 − valuation techniques with significant unobservable market inputs.

The cash and cash balance held in escrow are measured using level 1 inputs.

10. FINANCIAL RISK MANAGEMENT

Market risk

Market risk is the risk that a material loss arises from fluctuations in a financial instrument’s fair value. For purposes of this disclosure, the REIT LP segregates market risk into two categories: fair value risk and interest rate risk.

Fair value risk

Fair value risk is the potential for loss from an adverse movement in market prices. The REIT LP has minimal fair value risk as the only financial instruments carried at fair value are cash and cash and securities held in escrow.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in interest rates. The REIT LP’s exposure to interest rate risk is nominal.

11. CAPITAL MANAGEMENT

The REIT LP defines the capital that it manages as its Class A Restricted Voting Units and its Unitholders’ Equity.

	AS AT AS AT SEPTEMBER 30, 2020 DECEMBER 31, 2019 219,397,912 $ - $ 7,531,853 25,011 226,929,765 $ 25,011 $
Class A Restricted Voting Units Unitholders' Equity

The REIT LP’s primary objective in managing capital is to ensure capital preservation in order to benefit from acquisition opportunities as they arise. To the extent that the REIT LP requires additional funding for general ongoing expenses or in connection with the Qualifying Transaction, the REIT LP may seek funding by way of unsecured loans from the Sponsor and/or its affiliates, which loans would bear interest at no more

Unaudited Interim Financial Statements

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS As at September 30, 2020 (expressed in U.S. dollars)

than the U.S. dollar prime rate plus 1.0%. The lender under the loans would not have recourse against the funds held in the escrow account, and thus the loans will not reduce the value thereof. Such loans will collectively be subject to a maximum aggregate principal amount equal to 10% of the escrowed funds and may only be repayable in cash no earlier than the Closing. Such loans may only be convertible into units and/or Rights in connection with the Closing. The REIT LP may also seek to raise additional funds through a rights offering in respect of units available to our unitholders, in accordance with the requirements of applicable securities legislation and the Exchange’s rules, and subject to the consent of the Underwriters, subject to the conditions outlined further in the Prospectus.

12. GENERAL AND ADMINISTRATIVE EXPENSES

The REIT LP had the following general and administrative expenses for the period from July 1, 2020 through September 30, 2020:

through September 30, 2020:
Fees connected to qualifying transaction	$ 296,576
Regulatory	3,398
Administrative	31,169
Total	$331,143

13. RELATED PARTY TRANSACTIONS

On March 12, 2020 the REIT LP formally engaged Atlas Management, LLC (“Atlas”) as an independent contractor for the provision of consulting services (the “Services”). Such Services include assistance with the identification and evaluation of real estate assets as potential acquisition targets for the Qualifying Transaction; and the negotiation, execution and closing of such acquisitions, together with such ancillary services as may reasonably be requested from time to time by the REIT LP. Atlas has agreed to make its “Management Team” available to perform the Services. Its Management Team includes Richard Acosta, Michael Miller, Eric Clarke, Dylan Marcoot and Dylan Hart, all of whom are Founders of the REIT LP. The term of the REIT LP’s engagement with Atlas will continue until the REIT LP successfully closes the Qualifying Transaction, or if no such transaction takes place on or prior to such time, at the end of any period (including any extensions) permitted for the REIT LP to complete the Qualifying Transaction. During the term, the REIT LP shall pay a consulting fee of $62,500 per month (inclusive of applicable taxes) to Atlas.

The REIT LP has executed an administrative services agreement with Subversive Sponsor, which will make available to the REIT LP administrative support and certain related services as may be required by the REIT LP, including the utilization of office space and utilities. Pursuant to the agreement, in exchange for the administrative services the REIT LP shall pay to Subversive Sponsor a payment of $10,000 per month. For the period from July 1, 2020 to September 30, 2020, the REIT LP did not make any payments to Subversive Sponsor. The REIT LP did accrue for the obligation, recording $30,000 of administrative fees, which such amount is included in General & Administrative expenses in the REIT LP’s statement of income and in Accrued Expenses in the REIT LP’s balance sheet.