Subversive Acquisition LP — Management Reports 2020

Feb 12, 2020

Subversive Real Estate Acquisition REIT LP

Management’s Discussion and Analysis

As at December 31, 2019 And for the period from inception on November 12, 2019 to December 31, 2019 (Expressed in U.S. dollars)

Management’s Discussion & Analysis

The following discussion of performance, financial condition and future prospects of Subversive Real Estate Acquisition REIT LP (the “ REIT LP ”, “ we ”, “ our ” or “ us ”) should be read in conjunction with the audited financial statements (“ Audited Financial Statements ”) for the period from inception on November 12, 2019 to December 31, 2019 and the accompanying notes thereto.

This Management’s Discussion and Analysis (“ MD&A ”) has been prepared with an effective date of February 12, 2020. The Audited Financial Statements have been prepared by management in accordance with International Financial Reporting Standards (“ IFRS ”) and with interpretation of the International Financial Reporting Interpretations Committee (“ IFRIC ”). The REIT LP’s financial information is expressed in United States dollars unless otherwise specified. In addition to reviewing this MD&A, readers are encouraged to read our public information filings available on the REIT LP’s profile on the System for Electronic Document Analysis and Retrieval (“ SEDAR ”) at www.sedar.com.

Cautionary Statement Regarding Forward-Looking Statements

This document may contain “forward-looking statements” (as defined under applicable securities laws). These forward-looking statements relate to future events or future performance including with respect to our objectives and priorities for fiscal year 2020 and beyond, and strategies or further actions with respect to the REIT LP, a Qualifying Transaction (as defined below) and the REIT LP’s business operations, financial performance and condition.

Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. In some cases, forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, “target”, “intend”, “could” or the negative of these terms or other comparable terminology. By their very nature, forwardlooking statements involve inherent risks and uncertainties, both general and specific, and many factors could cause actual events or results to differ materially from the results discussed in the forward-looking statements. In evaluating forward-looking statements, readers should specifically consider various factors that may cause actual results to differ materially from any forward-looking statement. These factors include, but are not limited to, market and general economic conditions and the risks and uncertainties discussed in the section entitled “Risk Factors” in our initial public offering prospectus dated December 23, 2019 (the “ Prospectus ”).

The forward-looking statements contained in this MD&A is presented for the purpose of assisting investors in understanding business and strategic priorities and objectives of the REIT LP as at the periods indicated and may not be appropriate for other purposes. Forward-looking statements contained in this MD&A are not guarantees of future performance and, while forward-looking statements are based on certain assumptions that we consider reasonable, actual events and results could differ materially from those expressed or implied by forward-looking statements made by us. Readers are cautioned to consider these and other factors carefully when making decisions with respect to the REIT LP and not place undue reliance on forward looking statements. Circumstances affecting us may change rapidly. Except as may be expressly required by applicable law, the REIT LP does not undertake any obligation to update publicly or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

Nature of Activities

The REIT LP is a newly established limited partnership formed under the Limited Partnerships Act (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 (a “ Qualifying Transaction ”). The REIT LP is a special purpose acquisition corporation (“ SPAC ”) for purposes of the rules of the Neo Exchange Inc. (the “ NEO ”). The REIT LP was established 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 REIT LP intends to focus its search for target real estate businesses and/or assets that are involved in the cannabis industry and/or related sectors; however, it is not limited to the acquisition of cannabis-related real estate businesses and/or assets or to a particular geographic region and may acquire other classes of real estate businesses and/or assets and/or non-real estate businesses or assets for purposes of completing its Qualifying Transaction. The REIT LP is targeting a Qualifying Transaction that will aggregate a portfolio of properties with an estimated aggregate enterprise value of between U.S.$200 million and U.S.$650 million.

Subversive Real Estate Acquisition REIT (GP) Inc. (the “ General Partner ”) is the general partner of the REIT LP. The General Partner was incorporated under the laws of British Columbia on November 5, 2019. The General Partner’s head office is located at 135 Grand Street, 2nd Floor, New York, New York 10013 and its registered office is located at 700 West Georgia Street, Suite 2500, Vancouver, British Columbia V7Y 1B3. The amended & restated limited partnership agreement (the “ A&R LP Agreement ”) of the REIT LP provides for the management and control of the REIT LP by the General Partner. A copy of the A&R LP Agreement can be obtained on SEDAR at www.sedar.com.

The REIT LP’s business activities are carried out in a single business segment.

Significant Events

On November 12, 2019, the REIT LP issued the general partner interest to the General Partner in exchange for proceeds of U.S.$10.00. On November 12, 2019, the REIT LP issued one proportionate voting unit (a “ Proportionate Voting Unit ”) to Subversive Real Estate Sponsor LLC (“ Subversive Sponsor ”) in exchange for proceeds of U.S.$1.00.

On December 31, 2019, Subversive Sponsor, a limited liability company incorporated under the laws of Delaware, Inception Altanova Sponsor, LLC, a limited liability company incorporated under the laws of Delaware (“ Inception Sponsor ”), CG Investments Inc. IV, a corporation incorporated under the laws of the province of Ontario (“ CG IV ” and together with Subversive Sponsor and Inception Sponsor, the “ Sponsors ”) and the General Partner’s 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 (collectively with the Sponsors, the “ Founders ”) purchased an aggregate of 58,820 Proportionate Voting Units of the REIT LP at approximately U.S.$0.425 per Proportionate Voting Unit, for total proceeds of U.S.$25,000.

Selected Annual Financial Information

The following table summarizes the relevant financial data for our business and should be read with the Audited Financial Statements. Only the following balance sheet information is presented, as the REIT LP has not had any significant operations to date. There is no comparative period available as the REIT LP was established on November 12, 2019.

Cash	$25,011
Capital	$25,011

Results of Operations

The REIT LP had no operations for the period November 12, 2019 to December 31, 2019.

The REIT LP has not conducted commercial operations from its formation on November 12, 2019 to December 31, 2019, except the receipt of the proceeds and the issuance of the securities noted above. Accordingly no statement of operations has been presented.

Liquidity and Capital Resources

On November 12, 2019, the REIT LP issued a general partner interest to the General Partner in exchange for proceeds of U.S.$10.00. 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 Units of the REIT LP to the Founders at approximately U.S.$0.425 per Proportionate Voting Unit for aggregate proceeds of U.S.$25,000.

As at December 31, 2019, we had cash of U.S.$25,011 which is available to fund our working capital requirements, including any further transaction costs that may be incurred. We expect to generate negative cash flow from operating activities in the future until our Qualifying Transaction is completed and we commence revenue generation. Management seeks to ensure that our operational and administrative costs are minimal prior to the completion of a Qualifying Transaction, with a view to preserving the REIT LP’s working capital.

As the Offering (as defined below) has been closed, the REIT LP is confident that it will be able to finance its operations primarily through the issuance of class A restricted voting units and class B units. Please see “Subsequent Events” below.

To the extent that the REIT LP may require funding for general ongoing expenses or in connection with sourcing a proposed Qualifying Transaction that is over and above the funds raised prior to and concurrently with the Offering, the REIT LP may obtain such funding by way of unsecured loans from the Sponsors and/or their affiliates, which loans would, bear interest at no more than the prime rate plus 1%. The Sponsors would not have recourse under such loans against the Escrow Account (as defined below), and thus the loans would not reduce the value of such Escrow Account.

Otherwise, and subject to any relief granted by the NEO, the REIT LP may seek to raise additional funds through a rights offering in respect of units available to its unitholders, in accordance with the requirements of applicable securities legislation, and subject to placing the required funds raised in the Escrow Account in accordance with applicable NEO rules.

Proposed Transactions

Although the REIT LP has commenced the process of identifying potential acquisitions with a view of completing a Qualifying Transaction, the REIT LP has not entered into a definitive agreement with respect thereto.

Significant Accounting Policies and Critical Accounting Estimates

For further information about the accounting policies used by the REIT LP, please refer to the Audited Financial Statements and notes thereto for the period ended December 31, 2019, which have been prepared in accordance with IFRS and with interpretation of the IFRIC.

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

Financial Instruments

Fair value of financial instruments

The REIT LP held cash in trust of $25,011 and the carrying amounts of this balance approximate the fair values due to the short-term nature of the instruments.

Off-Balance Sheet Transactions

The REIT LP has no off-balance sheet arrangements.

Related Party Transactions

There were no related party transactions during the period as the REIT LP was recently established.

Future Accounting Changes

There are no future accounting changes that are expected to impact the financial statements of the REIT LP.

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 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 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 commented trading on the NEO 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, 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 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” in the Prospectus. 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 MD&A, 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.

Controls and Procedures

The Chief Executive Officer and the Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting as defined in National Instrument 52109 – Certification of Disclosure in Issuers’ Annual and Interim Filings. As the REIT LP became a reporting issuer on December 23, 2019, the REIT LP has elected to file the alternative form of Chief Executive Officer and Chief Financial Officer interim certificates under Form 52-109F1 IPO/RTO. This filing option is available to the REIT LP under NI 52-109 as this period is the REIT LP’s first financial period ended since it became a reporting issuer.

Managing Risk

Except as otherwise disclosed in this MD&A and in the Audited Financial Statements, there have been no significant changes to the nature and scope of the risks faced by the REIT LP as described in the Prospectus, which is available on the REIT LP’s profile on SEDAR at www.sedar.com. Such business risks should be considered by interested parties when evaluating the REIT LP’s performance and its outlook.