Minto Apartment Real Estate Investment Trust Annual Report 2022

Plain-text annual report

Niagara West in Toronto, Ontario 2022 Annual Report TSX | MI.UN A growth-oriented real estate investment trust that owns and operates high quality multi-residential rental properties located in primary urban markets in Canada. The REIT’s Objectives • Provide Unitholders with the opportunity to invest in high quality income producing multi-residential rental properties strategically located across urban centres in Canada • Enhance asset value and maximize long-term Unitholder value through value-enhancing capital investments and active asset and property management of the portfolio • Provide Unitholders with predictable and sustainable cash distributions • Expand the asset base across Canadian urban centres through acquisitions, intensification programs and development Summary Information(1) Portfolio Geographic Distribution(5) Suites(2) 2022 2021 8,291 7,538 Average Monthly Rent(3) $1,732 $1,641 2% 8% Occupancy - End of Period(3) 97.6% 95.5% 18% Total Assets $2.7 Billion $2.4 Billion Debt-to-Gross Book Value(3) 40.6% 36.5% Weighted Average Fixed Interest Rate(3) 3.06% 2.82% Weighted Average Variable Interest Rate(3) 6.87% 2.19% 34% Suites Under Development(2,4) 2,302 1,678 2022 38% Ottawa Toronto Montreal Calgary Edmonton $0.490 $0.475 $0.455 $0.440 Ottawa Toronto Montreal Calgary Edmonton $24.00 $24.00 $22.26 $20.56 2019 2020 2021 2022 2019 2020 2021 2022 Annualized distributions per unit(6) NAV per unit(3) (1) All amounts are as at December 31, 2022 and December 31, 2021 respectively. (2) Suite counts are presented at 100% ownership share rather than the REIT's proportionate share. (3) Non-IFRS financial measure. See “Non-IFRS and Other Financial Measures” in the Management’s Discussion and Analysis included in this annual report. (4) Suites under development includes suites available to the REIT through execution of purchase options and suites being directly developed by the REIT. (5) Geographic breakdown is based on the proportionate share of the fair value of the REIT's investment properties as at December 31, 2022. (6) Distribution rates in effect as at December 31. Letter from the Chief Executive Officer Dear Fellow Unitholders, I look forward to writing this letter each year as it provides an opportunity to reflect and take stock of what we have accomplished. However, this year it is a little bittersweet as it will be the last year that I will be writing to you as Chief Executive Officer (“CEO”). As previously announced, Jonathan Li, the REIT’s President and Chief Operating Officer will be succeeding me as the CEO effective April 3, 2023. Going forward, I will be focusing on my role as CEO of the Minto Group and I will continue to serve as a trustee of the REIT and work with Jonathan as a strategic partner in the years ahead. This change is an important part of the REIT’s long-term plans to move to a fully internalized management structure. Based on its scale at the time of the initial public offering (“IPO”), the REIT was established with a hybrid structure that allowed it to benefit from management and administrative support from the Minto Group on advantageous terms. Since its IPO, the REIT has grown substantially and delivered on its mission to generate strong operating performance while building value through an urban portfolio of high-quality, multi-family residential communities in Canada’s largest housing markets. It has acquired interests in ten properties and grown its suite count from 4,279 suites to 8,291 suites. Total assets have grown from $1.1 billion to $2.7 billion at December 31, 2022. I believe, and the Board of Trustees concurred, that it is time for the REIT to have a dedicated CEO. Similarly in 2022, the REIT also announced the appointment of Edward (“Eddie”) Fu as Chief Financial Officer (“CFO”). Eddie, formally Vice President, Finance of the REIT, succeeded Julie Morin as CFO on January 9, 2023. Julie was instrumental in the successful IPO of the REIT and its continued growth since then, and we thank her for her exceptional commitment and dedication to the REIT. Julie is now focusing on her role as CFO of the Minto Group. The Board of Trustees and I have great confidence in Jonathan and Eddie’s leadership and look forward to working closely with them as they take the REIT to the next level of its growth and evolution. The REIT delivered strong economic performance in 2022 despite a backdrop of volatile equity markets, high inflation, and rapidly rising interest rates. Notwithstanding valuation pressures caused by rising interest rates, the REIT maintained its net asset value at $24.00 per unit and on November 8, 2022, announced a 3.2% increase to its annual cash distribution. The REIT has increased its cash distribution in each full year of operation since its IPO and I am proud to say that because of this performance, the REIT was added to the S&P/TSX Dividend Aristocrats Index, effective on February 1, 2023. The REIT made substantial progress on its development pipeline during the year. Through a combination of direct property investments and convertible development loans, the REIT now has a development pipeline of eight projects comprising 2,302 suites. At year end, one of these projects was stabilized, five were under construction and two were in the pre-development stage. Three of these development projects are in the Greater Vancouver/Victoria market which provides the opportunity for the REIT to enter these markets with very high quality properties in excellent locations. The REIT’s suite renovation and repositioning program also continued to deliver strong investment returns. Repositioning enhances the quality and marketability of our suites and lowers future repair and maintenance costs. The REIT currently has repositioning programs at 11 of its 32 properties and repositioned 259 suites in 2022. Strong tenant demand for repositioned suites resulted in annualized rent increases that generated a 9.0% return on invested capital. At the end of the year the REIT had 1,983 suites (24% of its total suite count) remaining to reposition within its active repositioning programs. The REIT acquired two institutional quality properties in highly desirable downtown markets. Niagara West in downtown Toronto was newly constructed and completed in 2020 and has 501 suites with grocery-anchored retail at its base. The International in downtown Calgary has 247 suites and enjoys a rare connection to Calgary’s Plus 15 Skywalk which enables pedestrian mobility throughout the central business district in an 18-kilometre, weather-protected, above-ground walkway. The REIT released its second annual Environmental, Social and Governance Report ("ESG Report") in 2022 including the results from its 2022 Global Real Estate Sustainability Benchmark ("GRESB") assessment. The REIT earned a GRESB score of 80, a 3-Star GRESB Rating, and Green Star Designation. This score is a ten-point improvement over 2021 and places the REIT fourth out of 16 in our peer comparison group of North American residential firms. The REIT also earned a public disclosure score of 93, ranking it first out of ten in its Canadian peer set. Looking forward, the macro backdrop for housing remains strong in all the REIT’s markets. In 2022, Canada saw its highest population growth rate in over 50 years, fuelled by high and rising levels of immigration. The REIT focuses on primary urban markets and these are the first choice of new Canadians. This demand drove both occupancy and average monthly rent higher. The REIT finished 2022 with an occupancy level for its unfurnished suites of 97.6% (compared to 95.5% in 2021) and an average monthly rent per occupied unfurnished suite of $1,732 (compared to $1,641 in 2021). The Federal Government has increased its immigration targets for each of the next three years and we expect overall rental demand to remain robust as a result. On behalf of the Board of Trustees and Management, I want to thank you for your trust and confidence. We are excited about the opportunities ahead for 2023. The REIT’s property portfolio is well positioned to capitalize on growing demand for residential rentals and our development pipeline is second to none. I look forward to Jonathan sharing our progress in the year ahead. Michael Waters Chief Executive Officer, Minto Apartment REIT Table of Contents Management's Discussion and Analysis Section I - Overview Business Overview Business Strategy and Objectives Declaration of Trust Basis of Presentation Forward-Looking Statements Use of Estimates Financial and Operating Highlights Outlook Section II - Financial Highlights and Performance Key Performance Indicators Review of Financial Performance Summary of Quarterly Results Summary of Annual Results Section III - Assessment of Financial Position Investment Properties Class B LP Units Class C LP Units Secured Debt Units Distributions Section IV - Liquidity, Capital Resources and Contractual Commitments Liquidity and Capital Resources Cash Flows Reconciliation of Non-IFRS Financial Measures and Ratios Section V - Accounting Estimates and Policies, Controls and Procedures and Risk Analysis Critical Judgments in Applying Accounting Policies Critical Accounting Estimates and Assumptions Risks and Uncertainties Financial Risk Management Related Party Transactions Contingencies and Commitments Future Changes in Accounting Standards Disclosure Controls and Internal Controls Over Financial Reporting Subsequent Events Section VI - Supplemental Information Property Portfolio Average Rent Per Square Foot Non-IFRS and Other Financial Measures Consolidated Financial Statements Independent Auditors' Report Consolidated Balance Sheets Consolidated Statements of Net Income and Comprehensive Income Consolidated Statements of Changes in Unitholders' Equity Consolidated Statements of Cash Flows Notes to the Consolidated Financial Statements Unitholder Information 1 1 1 2 2 2 2 3 3 9 14 14 15 25 26 27 27 29 29 29 30 30 31 31 33 35 38 38 38 39 45 46 49 49 50 50 51 51 52 52 55 55 60 61 62 63 64 94 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Section I - Overview Business Overview Minto Apartment Real Estate Investment Trust (the "REIT") is an unincorporated, open-ended real estate investment trust established pursuant to a Declaration of Trust dated April 24, 2018, which was amended and restated on June 27, 2018 and has been further amended from time to time. The REIT owns, develops and operates a portfolio of income-producing multi- residential rental properties located in Canada. The REIT was established under the laws of the Province of Ontario. The principal and registered office of the REIT is 200-180 Kent Street, Ottawa, Ontario. The REIT's portfolio, referred to herein as the "Total Portfolio", consists of 32 (December 31, 2021 - 30) multi-residential rental properties located in Ontario, Quebec and Alberta. The "Same Property Portfolio" consists of 29 multi-residential properties. The ownership distribution of suites is shown in the table below and unless otherwise noted, all references to suite count, including co-owned properties, are at 100% ownership rather than the REIT's proportionate effective ownership: As at December 31, Wholly-owned 50% co-owned 40% co-owned 28.35% co-owned Total suites Total suites at effective ownership Same Property Portfolio Suites Total Portfolio Suites 2022 5,114 1,413 750 — 7,277 6,121 2021 5,114 1,413 750 — 7,277 6,121 2022 5,627 1,413 750 501 8,291 6,776 2021 5,375 1,413 750 — 7,538 6,382 The REIT is currently developing two income-producing multi-residential projects on excess land available at Richgrove and Leslie York Mills, both in Toronto, that will add 417 suites to the portfolio and is pursuing the development of a third multi- residential project on excess land available at High Park Village in Toronto that would add a further 680 suites to the portfolio if completed. The REIT has also provided convertible development loans for the development of five multi-residential properties, which provide the REIT the option to acquire direct or indirect interests in these properties upon stabilization (the "CDL Options"). Once completed, and subject to the exercise of the CDL Options, 1,205 suites would be added to the portfolio. The aggregate of these growth opportunities would increase the portfolio suite count by approximately 28% by 2029, as depicted below: Suite Growth in the REIT's Portfolio The REIT has a thoughtful and prudent approach to managing its capital by balancing the allocation among available alternatives. These alternatives include its convertible development loan programs, increasing suite count through its current developments, maintenance capital expenditures, distributions, repositioning programs, deleveraging and unit buy-backs. Key criteria impacting our capital allocation decisions include project returns, liquidity, leverage levels, NAV per unit and cash flow growth per unit over time. The REIT is also evaluating dispositions that meet its divestiture criteria as part of its capital management. The potential changes in suite count through future acquisitions or dispositions are not depicted in the chart above. Minto Apartment REIT | 2022 Annual Report 8,2918,4548,6758,9029,91310,593Existing PortfolioGrowth Through Exercise of CDL OptionsGrowth Through DevelopmentQ4 2022202320242025202620291Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Business Strategy and Objectives The REIT's objectives are to: • provide Unitholders an opportunity to invest in high-quality income-producing multi-residential rental properties strategically located across urban centres in Canada; • enhance the value of the REIT's assets and maximize long-term Unitholder value through value-enhancing capital investment programs and active asset and property management of the REIT's properties; • provide Unitholders with predictable and sustainable distributions; and • expand the REIT's asset base across Canadian urban centres through intensification programs, acquisitions and developments. Management believes it can accomplish these objectives given that it operates a high quality portfolio in an attractive asset class with compelling supply and demand characteristics. Furthermore, the REIT has several strategic avenues for growth and benefits from its strategic alliance with Minto Properties Inc. ("MPI"). Declaration of Trust The investment guidelines and operating policies of the REIT are outlined in the REIT’s Amended and Restated Declaration of Trust dated June 27, 2018, as amended from time to time (collectively, the "DOT"). A copy of the DOT is available on SEDAR at www.sedar.com. As of March 8, 2023, the REIT was in compliance with its investment guidelines and operating policies. Basis of Presentation The following Management's Discussion and Analysis of the REIT's results of operations and financial condition should be read in conjunction with the REIT's consolidated financial statements and accompanying notes for the years ended December 31, 2022 and 2021, prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). This Management's Discussion and Analysis also contains certain non-IFRS and other financial measures including funds from operations ("FFO"), FFO per unit, adjusted funds from operations ("AFFO"), AFFO per unit, AFFO Payout Ratio, net operating income ("NOI"), debt-to-Gross Book Value ratio, debt-to-adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") ratio, debt service coverage ratio, net asset value ("NAV"), and NAV per unit, which are measures commonly used by publicly traded entities in the real estate industry. Management believes that these metrics are useful for measuring different aspects of performance and assessing the underlying operating performance on a consistent basis. However, these measures do not have a standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly traded entities. These measures should strictly be considered supplemental in nature and not a substitute for financial information prepared in accordance with IFRS. See "Non-IFRS and Other Financial Measures" under Section VI - "Supplemental Information" for definitions of these measures. The REIT's Board of Trustees approved the content of this Management's Discussion and Analysis on March 8, 2023. Disclosure in this document is current to that date unless otherwise stated. Additional information relating to the REIT can be found on SEDAR at www.sedar.com and also on the REIT's website at www.mintoapartments.com. Forward-Looking Statements This Management's Discussion and Analysis may contain forward-looking statements (within the meaning of applicable Canadian securities laws) relating to the business of the REIT. Forward-looking statements are identified by words such as "believe", "anticipate", "project", "expect", "intend", "plan", "will", "may", "estimate" and other similar expressions. These statements are based on the REIT's expectations, estimates, forecasts and projections. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed under the heading "Risks and Uncertainties". There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this Management's Discussion and Analysis and, except as expressly required by applicable law, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. 2022 Annual Report | Minto Apartment REIT 2Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Use of Estimates The preparation of the consolidated financial statements in conformity with IFRS requires Management to make judgments, estimates and assumptions that affect the application of accounting policies and the amounts reported in the consolidated financial statements and accompanying note disclosures. Although these estimates are based on Management’s knowledge of current events and actions the REIT may undertake in the future, actual results may differ from the estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Financial and Operating Highlights Financial Performance Revenue and NOI growth driven by strengthening rental demand and occupancy increases The REIT's performance in the quarter ended December 31, 2022 ("Q4 2022") rounded out a strong operating year. Over the course of the year, rising interest rates and inflation have increased the cost of living, and further widened the affordability gap between home ownership and renting. Combined with continued population growth, these economic factors have created an increase in rental demand which has raised average rents and occupancy. In Q4 2022, average monthly rent for the Same Property Portfolio increased by 4.6%, supplemented by strong average occupancy growth of 220 bps over the quarter ended December 31, 2021 ("Q4 2021"). The Same Property Portfolio revenue grew by 7.6% as a result of these higher rents and occupancy. Despite this revenue growth being somewhat moderated by inflationary cost pressure on expenses such as wages and natural gas, which increased the REIT's property operating expenses by 8.4%, Same Property Portfolio NOI grew by 7.2% over Q4 2021. Total Portfolio closing occupancy rose sequentially, reaching 97.6% at the end of December 2022 and average monthly rent rose to $1,732. Total Portfolio NOI for Q4 2022 grew by 15.1%, driven by revenue growth of 16.9% from the strong performance of the Same Property Portfolio and the contributions of properties acquired since late 2021: Le Hill-Park in Montreal in early December 2021, and Niagara West in Toronto and The International in Calgary both in Q2 2022. For the year ended December 31, 2022 ("FY 2022"), the REIT experienced improved performance across many of its key performance indicators due to the rebounding of the rental market after a few challenging years dealing with COVID-19 disruptions. Same Property Portfolio and Total Portfolio revenue increased by 8.3% and 16.4%, respectively over the year ended December 31, 2021 ("FY 2021"). This was driven by rising average monthly rent throughout the year and improved average occupancy, which for the Same Property Portfolio was up 320 bps over FY 2021. Strong revenue growth was partially offset by increased operating costs across the portfolio, as the market conditions impacting Q4 2022 expenses have been a factor throughout FY 2022. Despite higher operating costs, the REIT's NOI in FY 2022 increased by 7.5% and 15.1% for the Same Property Portfolio and Total Portfolio, respectively. FFO and AFFO growth constrained by rising interest rates The REIT's strong operating performance for FY 2022, driven by improved occupancy and average monthly rents, contributed to significant FFO and AFFO growth of 11.6% and 12.3%, respectively over FY 2021. In Q4 2022, Total Portfolio NOI growth was offset by higher floating interest rate costs which unfavourably impacted the REIT's FFO and AFFO results. The REIT's FFO and AFFO decreased by 2.9% and 4.3%, respectively, compared to Q4 2021, largely due to the increased interest rates on variable rate mortgages and the credit facility. The REIT is actively in the process of refinancing its variable rate mortgages to fixed rate instruments, and if the interest rates on refinancings are favourable compared to existing interest rates, it will significantly reduce the REIT's borrowing costs and variable interest rate exposure. FFO and AFFO decreases would have been 5.2% and 6.9%, respectively, excluding the impact of a one-time insurance recovery of approximately $304 received in Q4 2022. Minto Apartment REIT | 2022 Annual Report 3Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Increased Interest Costs1 Impact FFO and AFFO per unit December 31, 2021 December 31, 2022 2.79% 3.97% Weighted average interest rate - Total Debt2 Execution of organic growth strategy The REIT continued to deliver on its strategy to create organic growth by realizing on the gain-to-lease potential in the portfolio and by executing on its suite repositioning programs. For Q4 2022 and FY 2022, the REIT was able to realize significant gains of 16.6% and 13.9%, respectively, on the 423 and 2,065 new leases it signed during each period. These gains represent annualized revenue growth of approximately $1,205 for Q4 2022 and $4,618 for FY 2022. In addition, the strong market conditions have fuelled the estimated gain-to-lease potential of the portfolio which increased to 13.6% at December 31, 2022, up from 12.1% in Q3 2022 and significantly stronger than 6.8% in Q4 2021. The REIT successfully repositioned 41 suites in Q4 2022, generating an average annual unlevered return of 11.3%. NAV per Unit decrease due to expansion of capitalization rates and capital expenditure reserves NAV per unit as at December 31, 2022 decreased to $24.00 from $24.12 as at September 30, 2022, driven by a fair value loss on investment properties of $12,209 due to the slight expansion of capitalization rates and increases in the capital expenditure reserve for upcoming projects and sustainability initiatives at certain properties, partially offset by strong growth in forecast NOI for the portfolio. Distribution Increase On November 8, 2022, the Board of Trustees approved a 3.2% increase to the REIT's annual distribution from $0.4750 per Unit to $0.4900 per Unit. The monthly distribution increased to $0.04083 per Unit, up from $0.03958 per Unit, and was effective for the REIT's November 2022 cash distribution paid on December 15, 2022. The distribution increase is the fifth consecutive annual increase since the REIT's initial public offering, and reflects Management's confidence in its business model, execution of its long-term strategy and the overall outlook for the REIT. The REIT expects to continue maintaining a low AFFO payout ratio, fuelling the growth strategy by allowing the reinvestment of capital. Announcing REIT Leadership Succession On January 16, 2023, the REIT announced another major step in its long-term internalization process. Effective April 3, 2023, Jonathan Li, who currently serves as the REIT's President and Chief Operating Officer, will assume the role of President and Chief Executive Officer ("CEO") replacing Michael Waters, who is stepping down as CEO but who will continue to serve as a Trustee of the REIT. Following Mr. Li's appointment, both the CEO and Chief Financial Officer ("CFO") functions will be fully internalized. Mr. Li will join Edward Fu, the REIT's recently appointed CFO, as a full-time C-suite executive of the REIT and will direct the REIT's overall strategy, operations development, capital allocation, asset management and balance sheet management. Management believes as of April 3, 2023, the REIT will have a management structure similar to the large sponsored retail and grocery real estate investment trusts at the time of their IPOs. 1 Interest costs is comprised of interest expenses, other financing charges and distributions on Class C LP Units. 2 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures" 2022 Annual Report Minto Apartment REIT | $6,133$7,912$24,874$27,615$2,150$5,033Same Property Portfolio interest costs¹Acquired propertiesSame Property Portfolio interest costs¹ $0.027 per unit higher in Q4 2022Same Property Portfolio interest costs¹ $0.042 per unit higher in FY 2022Q4 2021Q4 2022FY 2021FY 2022$—$15,000$30,0004Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) The REIT Joins the S&P/TSX Canadian Dividend Aristocrats Index On January 24, 2023, it was announced that the REIT would be added to the S&P/TSX Canadian Dividends Aristocrats Index, effective February 1, 2023. The REIT, whose Units trade on the Toronto Stock Exchange under the symbol "MI.UN", was added to the index as result of its record of consistent distribution increases. Organic Growth — Gain-to-Lease1 The REIT realized on organic growth for Q4 2022 through effective leasing activities and revenue management strategies aided by a strong rental market. As new tenants take occupancy, the REIT is able to move rental rates from older in-place rents to current market rates. During the period, new leases resulted in annualized revenue growth of approximately $1,205. A summary of leasing activities and the gains to be realized from new leases signed for Q4 2022 is set out in the table below: Geographic Node Toronto Ottawa Alberta Montreal New Leases Signed2 103 148 96 76 Total/Average 423 Expiring AMR New AMR $2,476 1,648 1,361 1,645 $1,699 $2,896 1,920 1,615 1,855 $1,981 Realized Gain-to-Lease 17.0% 16.5% 18.7% 12.8% Annualized Gain- to-Lease1,3 $256 563 260 126 16.6% $1,205 The REIT realized gain-to-lease in all of its markets, with an average gain-to-lease of 16.6% on the 423 new leases it signed in Q4 2022. The Canadian rental market continued its strong performance, spurred by increased immigration, a large affordability gap with home ownership due to sharp increases in home purchase mortgage rates, increasing general acceptance of renting versus owning, the return to in-person learning and, for the REIT, a sharp return to downtown living. This has led to an escalation in demand for rentals, resulting in higher rental rates in addition to greatly reducing the need for discounts and promotions. Total Portfolio Annualized Turnover Rate1 Management expects turnover to slow in the coming quarters due to typically slower leasing through the winter months. Separately, the trend of high average monthly rents and high occupancy is expected to increase the average length of stay for tenants resulting in lower-than-average turnover. For more details on revenue growth, see Section II - "Financial Highlights and Performance - Review of Financial Performance - Revenue from Investment Properties". Realized Gain-to-Lease and Average Monthly Rent1 1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures" 2 New leases signed includes 100% of new leases from co-ownerships and excludes new leases of furnished suites. 3 For co-owned properties, reflects the REIT's co-ownership interest only. Minto Apartment REIT | 2022 Annual Report 24.1%20.0%25.5%27.8%21.5%Q4 2021Q1 2022Q2 2022Q3 2022Q4 202210.0%20.0%30.0%40.0%7.6%5.9%4.4%7.2%10.8%12.1%14.5%16.6%$1,630$1,640$1,651$1,641$1,655$1,690$1,714$1,732Realized Gain-to-Lease (%)Average Monthly Rent ($)Q1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022$1,050$1,200$1,350$1,500$1,650$1,800—%2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%18.0%5Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) The REIT continues to achieve growth in average monthly rent. Total Portfolio average monthly rent of $1,732 for Q4 2022 is the highest achieved since the REIT's inception and an increase of 5.5% over Q4 2021. Same Property Portfolio average monthly rent has sequentially increased in each quarter in 2022, reaching $1,738 in Q4 2022, which is an increase of 4.6% over Q4 2021. For FY 2022, the REIT realized an average gain-to-lease of 13.9% on the 2,065 new leases it signed and realized gains in all markets. The following table summarizes the leasing activities and the gains to be realized from new leases signed in FY 2022: Geographic Node Toronto Ottawa Alberta Montreal New Leases Signed1 572 808 375 310 Total/Average 2,065 Expiring AMR New AMR $2,118 1,609 1,340 1,716 $1,652 $2,424 1,837 1,508 1,948 $1,881 Realized Gain-to-Lease 14.5% 14.2% 12.5% 13.5% Annualized Gain- to-Lease2,3 $1,094 2,208 754 562 13.9% $4,618 The annualized gains realized from new leases signed in the last four quarters are as follows: Fiscal Quarter Q1 2022 Q2 2022 Q3 2022 Q4 2022 New Leases Signed1 401 667 574 423 Total/Average 2,065 Expiring AMR New AMR $1,620 1,645 1,675 1,699 $1,652 $1,794 1,844 1,918 1,981 $1,881 Realized Gain-to-Lease 10.8% 12.1% 14.5% 16.6% Annualized Gain- to-Lease2,3 $726 1,285 1,402 1,205 13.9% $4,618 The percentage growth in realized gain-to-lease has increased sequentially for each quarter of 2022. Management believes this is an indicator of a return to urban living, demand from immigration-driven population growth and students, as well as the effects of rising interest rates further increasing the cost of home ownership, all of which are driving rental demand and higher rental rates. Management continually reviews market conditions and updates its estimates of market rent for the properties in its portfolio. Factoring in the new estimates of market rent, the estimated gain-to-lease potential on existing tenancies for the REIT's portfolio as at December 31, 2022 is as follows: Geographic Node Total Suites4 Average Monthly In- Place Rent per Suite Toronto Ottawa Alberta Montreal Total/Average 2,351 2,950 901 1,700 7,902 $2,061 1,621 1,436 1,856 $1,732 Management's Estimate of Monthly Market Rent per Suite $2,346 1,876 1,567 2,063 Percentage Gain-to-Lease Potential2,3 13.8% 15.8% 9.1% 11.1% Annualized Estimated Gain-to- Lease Potential2,3 $4,643 9,056 1,413 3,027 $1,968 13.6% $18,139 Management currently estimates that the portfolio has annualized gain-to-lease potential of approximately $18,139, compared to $15,993 at September 30, 2022, and $7,913 at December 31, 2021. As market rents continue to increase, embedded gain-to- lease potential will also increase. The REIT continues to realize on gain-to-lease opportunities as suites turnover and expects to continue doing so going forward. The REIT's ability to realize the gain-to-lease potential is dependent on suite turnover and overall market conditions. Management expects that portfolio turnover will begin to moderate slightly given the anticipated continued strength of the rental market. Notwithstanding a potential slow down in turnover, Management expects that the REIT will be able to realize a significant portion of the gain-to-lease potential over a period of three to five years. 1 New leases signed includes 100% of new leases from co-ownerships and excludes new leases of furnished suites. 2 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures" 3 For co-owned properties, reflects the REIT's co-ownership interest only. 4 Excludes 188 furnished suites, 155 vacant suites and 46 suites offline for repositioning. 2022 Annual Report | Minto Apartment REIT 6Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Management also monitors market conditions for condominium suites being offered as rentals and considers this information when setting its estimate of monthly market rent. The REIT's suites continue to compare favourably to condominiums on a size and rental rate basis. For example, the average size and rental rate of the REIT's occupied Toronto suites are 776 square feet and $2.66 per square foot respectively, compared to 722 square feet and $3.81 per square foot for the average condo rental.1 Value Creation Repositionings In order to take advantage of market demand for repositioned properties, the REIT’s asset management strategy targets improvements to suites, common areas and amenities. As part of an asset management plan for each building, Management will renovate test suites in order to gauge market demand for different improvements or combinations of improvements. Test suites also assist Management in mitigating capital risk by confirming and refining cost estimates, value engineering and uncovering potential construction and design issues prior to a broader roll-out of the program. Once an optimal combination of suite improvements is determined, a repositioning plan is executed for all of the suites in the building as suites turn over. The rate at which Management can complete the repositioning plan depends on the rate of turnover of unrenovated suites which is solely based on residents voluntarily choosing to vacate their suite for alternative housing arrangements. The REIT does not engage in renovation-related evictions. A summary of the repositioning activities for Q4 2022 and FY 2022 is set out below. Property Toronto Minto Yorkville Leslie York Mills High Park Village Roehampton Martin Grove Ottawa Carlisle Castle Hill Montreal Rockhill Le 4300 Haddon Hall Le Hill-Park Total Suites Repositioned and Leased Ownership Interest Three months ended December 31, 2022 Year ended December 31, 2022 Remaining Suites to Reposition Total Suites in the Program Proportion Complete 100% 50% 40% 100% 100% 100% 100% 50% 100% 100% 100% 2 6 7 2 1 4 1 3 3 8 4 4 47 28 42 4 19 11 51 15 26 12 31 198 264 50 22 75 68 755 216 136 168 99 409 407 148 32 191 176 934 261 191 261 41 259 1,983 3,109 69% 52% 35% 66% 31% 61% 61% 19% 17% 29% 36% 36% Renovated suites at Le-Hill Park in Montreal 1 Source: Urbanation Q4 2022 UrbanRental Greater Toronto Area Rental Market Report Minto Apartment REIT | 2022 Annual Report 7Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) The following table summarizes costs and average annualized returns from repositioning activities for the past four quarters: Fiscal Quarter Suites Renovated Q1 2022 Q2 2022 Q3 2022 Q4 2022 Total/Average 60 83 75 41 259 Average Cost per Suite $53,380 51,573 54,628 60,863 $54,347 Average Annual Rental Increase per Suite $4,468 4,434 5,150 6,050 $4,905 Average Unlevered Return1 8.4% 8.6% 9.4% 11.3% 9.0% Management targets an average unlevered return on investment in the range of 8% to 15% on suites renovated and leased. The REIT's repositioning program represents an attractive capital investment opportunity, generating NAV growth with only modest, near-term earnings dilution. Repositioning programs are flexible, with relatively small, discrete capital commitments and short project durations that are easily accelerated or slowed as market conditions dictate. The REIT's high volume of repositioning programs generates a number of efficiencies through volume purchasing, repeatable design concepts and material selection, strong relationships with trade partners, and transferable lessons learned from other projects. Due to the continued strength in the rental market combined with decreasing vacancy and turnover, Management expects its repositioning program to slow in 2023 relative to 2022. Expansion of the REIT Portfolio from Relationship with The Minto Group One of the benefits of the REIT's strategic relationship with The Minto Group is the opportunity to access its property pipeline. During Q2 2022, the REIT acquired interests in two properties partially owned by a subsidiary of MPI. On April 22, 2022, the REIT acquired a 28.35% managing interest in 39 Niagara Street, 29 and 33 Bathurst Street and 31 Bathurst Street ("Niagara West"). On May 6, 2022, the REIT acquired a 100% interest in 220 4th Avenue SW, Calgary, Alberta ("The International"). Both properties are located in their respective downtown cores, are newly built or recently fully renovated, and decrease the average age of the portfolio. Niagara West is a newly constructed property (completed in 2020), comprising 501 suites and approximately 52,600 square feet of grocery-anchored at-grade retail at the intersection of Bathurst Street and Front Street West in downtown Toronto. The acquisition cost of $112,667 was satisfied by a cash payment of $4,990, the assumption of working capital liabilities of $545 and an existing $46,158 mortgage and the issuance of 2,985,956 Class B LP Units to the vendor with a fair value of $60,974. The International comprises 252 suites and 2,700 square feet of commercial space in downtown Calgary. It is directly connected to Calgary's Plus 15 network, one of the world's most extensive pedestrian skywalk systems, connecting residents to office, retail, restaurants and entertainment. The acquisition cost of $86,614 was satisfied by a cash payment of $23,771, and the assumption of an existing mortgage of $62,220 and working capital liabilities of $623. Environmental, Social and Governance Initiatives The REIT continues to implement measures to improve environmental, social, and governance ("ESG") performance under the three strategic pillars of environmental impact, community impact, and business resilience. Highlights from Q4 2022 are provided below. Environmental Impact • Implementation of capital projects to reduce portfolio energy and water use continued with the completion of additional boiler replacements, building automation system improvements, installation of shower heads with thermostatic shut-off valves to eliminate water warm-up waste, and the application of aerosolized duct sealing to reduce energy loss and maximize heating, ventilation, and air conditioning system efficiency. • Real-time water monitoring device installation is in progress at Kaleidoscope and The Quarters in Calgary. All other installations at properties higher than two-storeys and more than 20 suites are complete. • Real-time energy and natural gas consumption monitoring is in place at Roehampton in Toronto through the installed Artificial Intelligence system. • A standalone real-time energy and natural gas consumption monitoring technology has been selected and a pilot project to evaluate the technology is planned for 2023. 1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures" 2022 Annual Report | Minto Apartment REIT 8Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) • Technical feasibility studies for solar photovoltaic systems, which convert sunlight into electricity, were completed for Huron, Seneca, and Aventura in Ottawa, and High Park Village in Toronto and additional assessments are in progress. • The Richgrove development project in Toronto achieved an average construction waste diversion rate of 78.6% from January to October 2022, slightly below the 80% target. A construction waste workshop will be conducted in 2023 to support and optimize diversion for the project. Community Impact and Business Resilience • Roll-out of mandatory Diversity and Inclusion training for all employees started in December 2022, with additional courses scheduled to launch in Q1 2023. • New Business Continuity Plans have been developed for most critical services and assets, with the remainder to be completed by the end of January 2023. • A “lessons learned” exercise was completed to strengthen the REIT's Pandemic Plan. • Strengthening the cybersecurity program continued including: ◦ Continually enhancing cyber security processes, ◦ Expanding multi-factor authentication, ◦ Completion of a fall 2022 cyber security training campaign, ◦ Deployment of the Microsoft 365 platform with enhanced security tools, and ◦ Penetration and vulnerability testing for the REIT's network and applications. Governance Framework The Board of Trustees receives quarterly updates on ESG and an ESG Steering Committee with senior executive representation continues to meet quarterly. REIT employee incentive pay continues to be linked, in part, to ESG performance targets, with half of the annual incentive targets being ESG-related. ESG-related needs and considerations are incorporated into capital and operating budgets and ESG expectations are included in the business plan. Reporting and Disclosure The REIT participated in the 2022 Global Real Estate Sustainability Benchmark ("GRESB") assessment, earning a score of 80, a 3- Star GRESB Rating, and Green Star Designation. This score is a ten-point improvement over 2021 and places the REIT fourth out of 16 in our peer comparison group of North American, residential, listed constituents. The REIT was included in the GRESB Public Disclosure evaluation for the first time in 2022. The REIT received a score of 93 out of 100, which placed first out of ten in our Canadian peer group and earned the GRESB Public Disclosure Level A rating. The REIT’s 2021 ESG Report was released October 24, 2022. The report was prepared in accordance with the Global Reporting Initiative (GRI) Standards: Core option and the Sustainability Accounting Standards Board (SASB) Real Estate Sustainability Accounting Standard. Outlook Looking ahead, there are strong fundamental tailwinds supporting Management's positive outlook for revenue growth. The primary tailwinds include the growing affordability gap of home ownership due to high interest rates, insufficient supply of new housing and strong population growth driven by immigration. In addition, Management believes there are other tailwinds that support revenue growth, including the return of in-person post-secondary learning, an increase of international students coming to Canada, the increasing general acceptance of renting versus owning a home for all age groups1, a continuing return to downtown living2, and a federal mandate for government employees to return to the office at least three days per week that will mostly impact the REIT's Ottawa portfolio. Management believes these fundamentals will persist and support revenue growth for the foreseeable future. 1 Ontario’s Need for 1.5 million more homes, Smart Prosperity Institute at the University of Ottawa, August 2022. 2 The Institute of Governmental Studies, UC Berkeley, Q2 2022, study of 62 North American cities. Minto Apartment REIT | 2022 Annual Report 9Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Supported by these tailwinds, Management will continue to maximize organic growth including realizing on the embedded rent in the REIT's high quality urban portfolio, value creation from the repositioning program and driving occupancy in all markets, with particular focus on the REIT's Montreal portfolio which continues to steadily improve. Given the continued anticipated strength in the rental market, Management believes that suite turnover will moderate slightly going forward as existing tenants are more likely to stay in place since affordable housing alternatives will be less available. However, the REIT has exposure to non-rent controlled markets like Calgary, as well as certain properties in Ontario that were built after November 2018. Management estimates that 17.5% of its portfolio is unregulated, and the REIT has an additional 997 suites under development and, if exercised, up to an additional 390 suites through CDL Options that will not be subject to rent control. In 2022, the REIT repositioned 254 suites under the strategic repositioning program. Due to the anticipated lower turnover as well as carrying lower overall vacancy, Management anticipates completing fewer repositionings under the program in 2023 than in 2022 and currently forecasts to reposition 80 to 120 suites in 2023. Management is keenly focused on delivering FFO per unit and AFFO per unit by managing operating expenses, employing strategies to reduce interest costs and by making prudent capital allocation decisions, while at the same time, balancing long- term value creation and growth objectives. Management believes that revenue growth will outpace overall operating expense growth in 2023, generating solid NOI growth. Management will adapt quickly to any changes in labour market dynamics and is evaluating efficiencies resulting from the recent implementation of a new enterprise resource planning ("ERP") system as well as potential efficiencies from carrying low overall vacancy. Natural gas unit costs saw major spikes in 2022 due to the war in Ukraine, however unit prices have dropped significantly in early 2023. Currently, 95% of managed suites in the Total Portfolio are either submetered or directly metered for electricity and approximately 86% of tenants pay the cost of electricity consumed in their suites. Management continues to evaluate opportunities for operational efficiencies and cost reductions, which include property technology, managing service contracts and supplier relationships, and labour efficiencies. Property technology is a burgeoning opportunity to run properties more efficiently and conserve on utilities consumption and cost. With high utility costs, the value proposition on some of the technology has become more attractive and has resulted in some being adopted, while others remain under consideration for feasibility. Should cost inflation persist, Management believes the REIT is well positioned since historically, the multi-family sector has performed well during times of high inflation relative to other real estate subsectors given the short term nature of residential leases. In 2022, high interest rates had a significant negative impact on corporate earnings, particularly for those entities who had meaningful variable rate debt exposure. The REIT's FFO and AFFO per unit in Q4 2022 were materially impacted by high interest rates as it temporarily carried a large amount outstanding on the revolving credit facility and the existing variable rate mortgages on Niagara West and The International, both of which are variable rate debt instruments. Management is actively working to refinance $108,378 of 7.45% variable rate debt with CMHC-insured fixed rate mortgages, secured by Niagara West and The International. Management is also evaluating strategies to manage the amount outstanding on the revolving credit facility, which had a weighted average interest rate of 6.47% at December 31, 2022, including early refinancings and deleveraging using other sources of liquidity. Looking ahead, Management will continue to stagger its debt ladder and maturity profile and believes there is upside to FFO and AFFO per unit if interest rates come down from current elevated levels. Efficient capital allocation continues to be a key area of focus for the REIT. Management will evaluate capital allocation decisions strategically, with consideration for leverage, liquidity, cash flow growth per unit and value creation, among other including developments and convertible things. Management anticipates funding near-term growth opportunities, development loan programs including any related acquisitions, with internal sources including operating cash flow, credit facility draws and capital recycling by disposing of certain non-core assets. At this time, Management does not anticipate increasing leverage materially, nor anticipate raising equity at a large discount to NAV. Management will also consider unit buybacks, reduction of variable rate debt and continued investment in properties with any excess capital. Canada is facing the worst housing and affordability crisis in a generation. CMHC identified in a report that Canada needs over 22 million new housing units by 2030 to help achieve housing affordability. If the current rates of new construction continue, CMHC projects that the housing stock will increase by 19 million units by 2030. Therefore, to restore affordability, CMHC estimates that an additional 3.5 million housing units are required. Management believes that REITs and the private sector can be part of the solution and in 2022, the five publicly-traded real estate investment trusts came together to form a group called Canadian Rental Housing Providers for Affordable Housing (www.foraffordable.ca). The coalition is committed to being a part of the solution and will continue to work collaboratively with all levels of government and civil society to build new housing supply, create new jobs and help alleviate the housing supply and affordability pressures facing our country. In summary, Management is confident that the industry fundamentals will support strong revenue growth in 2023. In addition, it believes that the in-place strategies to contain controllable operating expenses will deliver solid NOI growth. In addition, FFO and AFFO per unit will benefit from any future reduction of interest rates from current levels. 2022 Annual Report | Minto Apartment REIT 10Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Organic Growth Opportunities The REIT expects to realize on the gap between market rent and average sitting rent on new leases as suites turnover and rent is adjusted to current market rates. The average gain-to-lease potential for the portfolio is 13.6% (as set out in the detailed embedded gain-to-lease potential table in the previous section). The REIT aims to further enhance occupancy, which as of December 31, 2022 was 97.6%, which provides another viable source of organic revenue growth. Value Creation from Repositioning Existing Assets The REIT has been able to drive higher revenue by investing in in-suite and common area improvements. Management continuously evaluates the existing properties and the need for repositioning. The REIT has an extensive repositioning program with nearly 2,000 suites eligible for repositioning. The REIT's ability to execute its repositioning program is highly dependent on turnover of unrenovated suites and market conditions at the time suite renovations are completed. Management is anticipating a slight moderation in turnover in 2023 due to overall rental market strength. Subject to unrenovated suites becoming available, the REIT expects to reposition approximately 80 to 120 suites in 2023. Development of Purpose-Built Rental Properties and Intensification on Existing Sites Management evaluates and prioritizes potential development projects that can generate NAV and long-term earnings growth for its Unitholders. Development and construction entails some risk, however Management believes the REIT can effectively mitigate this risk through its strategic alliance with MPI and its affiliates by capitalizing on their extensive experience and track record of successful developments and construction projects. The REIT is in the process of developing additional rental suites on available excess land at the following properties: Location and Property Name Toronto, ON Richgrove Leslie York Mills High Park Village Ownership Estimated Suites Estimated Project Costs1 Construction Start Date Estimated Stabilization Anticipated Yield 100% 50% 40% 225 192 680 $ 117,000 185,000 520,000 Q4 2024 (est.) Q4 2021 Q4 2021 Q2 2026 Q2 2026 Q3 2029 4.25% - 4.75% 3.75% - 4.25% 4.25% - 4.75% The existing Richgrove community comprises two mid-rise residential apartment buildings with a total of 258 suites and a high- rise residential apartment building with 237 suites. The intensification involves the addition of a new tower with 225 suites, including 100 affordable housing suites, and 213 parking stalls. The REIT has negotiated an agreement with the City of Toronto under which the City has already exempted or waived development charges and other fees amounting to $3,794, has committed to advance funding of $4,500, of which $1,350 has been received, and has agreed to provide exemption from property tax and municipal and school taxes for a period of 25 years after first occupancy. On November 30, 2021, a construction financing agreement was executed with CMHC for a maximum financing of $93,745. On March 1, 2022, the initial draw was made on the construction financing which has a fixed interest rate of 2.39% for a 10-year term. Phase 1 below-grade construction for the parking garage was completed and Phase 2 below-grade excavation for the tower began in January 2023. Leslie York Mills comprises three existing 18-storey towers with a total of 409 suites. The intensification entails the development of 192 new rental terrace homes in four blocks, creating an indoor pool, gym and recreational area and replacing the existing parking structure with a new two-level underground parking garage. Enabling site servicing and construction of temporary parking structures is underway. Underground garage construction is set to commence in late Q1 2023. High Park Village consists of three buildings comprising 750 rental suites. The REIT is finalizing planning approvals with the City of Toronto to develop two new towers comprising an estimated 680 suites and 335 underground parking stalls. Rezoning was completed in Q3 2022, however the development remains subject to municipal as well as investment partner approval through the Site Plan Approval process. The garage rehabilitation that was required to enable construction was completed in December 2022. Current economic conditions including high inflation, rising interest rates and municipal development policy changes have created additional volatility in construction cost estimates. While these risks are largely offset by strong market conditions, Management’s strategy for mitigating these risks include significant budget contingency, managing key vendor relationships, exploration of value-engineering opportunities through each stage of the project, coupled with extensive use of sensitivity analysis for construction costs, interests rates, capitalization rates and project duration to ensure project returns remain viable under various changing economic conditions. 1 Estimated project costs are presented at 100% rather than the REIT's proportionate share. Minto Apartment REIT | 2022 Annual Report 11Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) The construction of the three development projects will add approximately 1,097 suites to the REIT's portfolio at an estimated total cost of $822,0001, generating an expected average yield between 3.75% and 4.75%. Increases in rental rates are expected to offset any cost inflation to preserve expected yields. Access to Urban Pipeline in Target Markets Through MPI and Affiliates The REIT has entered into agreements to extend convertible development loans to MPI and partnerships in which MPI is a partner. Convertible development loan projects provide a host of benefits to the REIT including insulation from development risk, an opportunity to earn interest income during the development period, the option to purchase newly constructed rental housing at a discounted price, the potential to provide a more economic entry into markets compared to acquisitions of existing properties, and the preservation of development capacity under the DOT for intensification projects. When the REIT's Unit price is trading at a significant discount to NAV, as is currently the case, the REIT will be selective in the pursuit of any new convertible development loan opportunities. The REIT currently has the following convertible development loan projects: Location and Project Name Ottawa, ON Fifth + Bank Beechwood North Vancouver, BC Lonsdale Square Vancouver, BC 810 Kingsway Victoria, BC University Heights Estimated Suites Estimated Project Costs1 Status Construction Start Date Estimated Stabilization Maximum Loan Amount2 Advanced as of December 31, 20222 163 227 113 108 93,000 137,000 Under construction Stabilized Q3 2020 Q4 2021 Q2 2022 Q1 2025 $30,000 51,400 $30,000 25,550 83,000 Under construction Q2 2021 Q1 2024 14,000 13,784 78,000 Under construction Q1 2022 Q3 2024 19,650 15,357 594 401,000 Pre-development Q4 2022 (est.) Q2 2026 51,700 12,893 Fifth + Bank involves the redevelopment of a commercial property located at 99 Fifth Avenue in the Glebe neighbourhood of Ottawa into a mixed-used multi-residential rental and retail property. Construction of 163 rental suites was completed in Q3 2021 and the property stabilized at the end of Q2 2022. MPI continues to work toward the record of site condition approval from the provincial Ministry of Environment, Conservation and Parks. In Q4 2022, MPI extended the REIT's property purchase option to June 30, 2023, and the REIT extended the maturity of the convertible development loan to July 31, 2023. The REIT has not yet made a decision regarding the exercise of its purchase option and any decision will be based on market conditions and other factors at that time. Beechwood involves the development of a nine-storey property comprising 227 suites and 6,039 square feet of retail space on a land assembly located at 78-88 Beechwood Avenue and 69-93 Barrette Street in Ottawa. Excavation and shoring has been completed and formwork is currently underway. Stabilization is expected by Q1 2025. Lonsdale Square is part of a large master-planned community on a 99-year land lease with the City of North Vancouver. The building will comprise 113 rental suites and approximately 8,000 square feet of retail space. Building superstructure was topped off in October 2022 and the building achieved water-tightness in December 2022. Retail leasing is underway and construction completion is expected by Q2 2023 and the property is expected to be stabilized in Q1 2024. 810 Kingsway involves the development of a six-storey mixed-used building in Vancouver comprising 108 rental suites and approximately 11,500 square feet of at-grade retail space. Excavation and shoring was completed and slab on-grade work is underway. Pre-leasing of the retail component has commenced. The property is expected to be stabilized in Q3 2024. University Heights involves the development of five buildings containing 594 rental suites and 113,485 square feet of grocery- anchored retail on an 11.5 acre parcel in Victoria currently containing the University Heights Shopping Centre. Additionally, the site contains a Home Depot which will continue to operate throughout the development. The site is in proximity to two post- secondary institutions: The University of Victoria and Camosun College’s Lansdowne Campus, with a combined 46,000+ students and 6,500+ faculty members. The first phase of parkade restoration is nearing completion and construction will be executed in a phased approach, with construction of the first building expected to commence in Q2 2023. The project is expected to be fully stabilized in Q2 2026. 1 Estimated project costs are presented at 100% rather than the REIT's proportionate share. 2 Maximum loan amounts and amounts advanced include amounts to fund interest costs. 2022 Annual Report | Minto Apartment REIT 12Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) In connection with these financings, the REIT has the exclusive option, upon project stabilization, to purchase the property at Fifth + Bank, Lonsdale Square and Beechwood, MPI's 85% indirect ownership interest in 810 Kingsway and MPI's 45% indirect ownership interest in University Heights, each at 95% of its then-appraised fair market value as determined by independent and qualified third-party appraisers. If all of the CDL Options are exercised, these projects will add approximately 1,205 suites to the REIT's portfolio. The exercise of each of the CDL Options would require approval by the independent members of the Board of Trustees. Capital Recycling Program The REIT's capital recycling program is an important element of the strategic plan as it represents an internal source of equity capital. Management continuously evaluates its portfolio for relative NOI growth potential, NOI margin, repositioning programs, geographic exposure and average age of the portfolio. This program will allow the REIT to reinvest any equity proceeds into opportunities with enhanced returns that are aligned with the REIT's strategy, which may include investing in high growth acquisitions, repayment of high cost debt and unit buybacks. The capital recycling program is an attractive alternative to raising equity from the capital markets which is currently dilutive to existing unitholders. On March 7, 2023, the REIT completed its disposition of Hi-Level Place in Edmonton for a sale price of $9,920, generating net proceeds of $2,832. Minto Apartment REIT | 2022 Annual Report 13Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Section II - Financial Highlights and Performance Key Performance Indicators The REIT's operating results are affected by seasonal variations and other factors, including rising interest rates and inflation. As a result, the operating performance and metrics in one quarter may not be indicative of future quarters. The following tables highlight certain key IFRS and non-IFRS financial and operating measures used by the REIT. Operating Number of properties Total suites1 Average monthly rent2 Occupancy - end of the period2 Occupancy - average for the period2 Average monthly rent2 - Same Three months ended December 31, Year ended December 31, 2022 2021 Change 2022 2021 Change $ 32 8,291 1,732 97.6 % 97.1 % $ 30 7,538 1,641 95.5 % 95.0 % 2 753 5.5 % $ 210 bps 210 bps 32 8,291 1,732 97.6 % 95.6 % $ 30 7,538 1,641 95.5 % 92.5 % 2 753 5.5 % 210 bps 310 bps Property Portfolio $ 1,738 $ 1,662 4.6 % $ 1,738 $ 1,662 4.6 % Occupancy - average for the period2 - Same Property Portfolio Financial Revenue NOI2 NOI margin2 Net (loss) income and comprehensive (loss) income Revenue - Same Property Portfolio NOI2 - Same Property Portfolio NOI margin2 - Same Property Portfolio FFO2,3 FFO per unit2,3 AFFO2,3 AFFO per unit2,3 AFFO Payout Ratio2 Distribution per unit Distribution yield2 based on Unit closing price 97.3 % 95.1 % 220 bps 95.7 % 92.5 % 320 bps $ $ $ $ $ $ $ $ $ 37,916 22,947 $ $ 32,429 19,940 16.9 % $ 143,790 15.1 % $ 87,796 $ 123,547 76,247 $ 60.5 % 61.5 % (100) bps 61.1 % 61.7 % (32,432) $ $ 34,656 $ 21,218 24,933 32,196 19,802 (230.1) % $ 225,400 7.6 % $ 133,547 7.2 % $ 81,793 $ 94,161 $ 123,314 76,109 $ 61.2 % 61.5 % (30) bps 61.2 % 61.7 % 12,864 0.1960 11,160 0.1700 $ $ $ $ 13,245 0.2147 11,656 0.1890 (2.9) % $ (8.7) % $ (4.3) % $ (10.1) % $ 54,177 0.8353 47,443 0.7315 $ $ $ $ 48,530 0.8128 42,234 0.7073 71.3 % 63.1 % (820) bps 65.4 % 65.1 % $ 0.1212 $ 0.1171 3.5 % $ 0.4775 $ 0.4584 16.4 % 15.1 % (60) bps 139.4 % 8.3 % 7.5 % (50) bps 11.6 % 2.8 % 12.3 % 3.4 % (30) bps 4.2 % 3.49 % 2.14 % 135 bps 3.40 % 2.09 % 131 bps 1 At December 31, 2022, includes 2,664 (December 31, 2021 - 2,163) suites co-owned with institutional partners. 2 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures" 3 In Q4 2022, the REIT received a one-time insurance recovery of approximately $304. Excluding this recovery, decreases in FFO and FFO per unit were 5.2% and10.9%, respectively, and decreases in AFFO and AFFO per unit were 6.9% and 12.5% respectively, as compared to Q4 2021. For FY 2022, after adjustments for one-time insurance recoveries of approximately $898 received in 2022, offset by a one-time property tax refund of approximately $600 received in 2021, increases in FFO and FFO per unit were 11.2% and 2.3%, respectively, and increases in AFFO and AFFO per unit were 11.8% and 2.9%, respectively. 2022 Annual Report | Minto Apartment REIT 14Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) As at Leverage Debt-to-Gross Book Value ratio1 Debt Service Coverage ratio1 Debt-to-Adjusted EBITDA ratio1,2 Weighted average term to maturity on fixed rate debt1 Weighted average interest rate on fixed rate debt1 Weighted average interest rate on variable rate debt1 Interest expense, other financing charges and distributions on Class C LP Units December 31, 2022 December 31, 2021 Change 40.6 % 1.66 x 12.43 x 4.27 3.06 % 6.87 % 36.5 % 1.76 x 11.75 x 4.69 2.82 % 2.19 % (410) bps (0.10)x (0.68)x (0.42) years (24) bps (468) bps 32,648 24,874 31.30 % Valuation NAV1 NAV per unit1 $ $ 1,575,395 24.00 $ $ 1,508,416 24.00 4.4 % — % Review of Financial Performance The following tables highlight selected financial information for the REIT's Same Property Portfolio and Total Portfolio for the three months and years ended December 31, 2022 and 2021. Same Property Portfolio Revenue from investment properties $ Property operating costs Property taxes Utilities Operating expenses NOI1 NOI margin1 $ Three months ended December 31, Year ended December 31, 2022 34,656 6,615 3,514 3,309 13,438 21,218 2021 32,196 6,118 3,486 2,790 12,394 19,802 $ $ % Change 2022 2021 7.6 % $ 133,547 (8.1) % 26,080 (0.8) % 14,056 (18.6) % 11,618 (8.4) % 51,754 7.2 % $ 81,793 $ 123,314 23,909 13,300 9,996 47,205 76,109 $ 61.2 % 61.5 % (30) bps 61.2 % 61.7 % % Change 8.3 % (9.1) % (5.7) % (16.2) % (9.6) % 7.5 % (50) bps 1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures" 2 For FY 2022 and FY 2021, the REIT added finance income to Adjusted EBITDA. Minto Apartment REIT | 2022 Annual Report 15Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Total Portfolio Revenue from investment properties $ Property operating costs Property taxes Utilities Operating expenses NOI1 NOI margin1 General and administrative expenses Finance costs - operations Finance income Fair value loss (gain) on: Investment properties Class B LP Units Interest rate swap Unit-based compensation Fees and other income Net (loss) income and comprehensive (loss) income Net Operating Income1 Three months ended December 31, Year ended December 31, 2022 37,916 7,414 3,872 3,683 14,969 22,947 $ 2021 32,429 6,161 3,508 2,820 12,489 19,940 60.5 % 61.5 % 2,554 13,184 (1,492) 12,209 29,617 (6) 354 (1,041) 1,849 8,798 (879) (3,133) (10,701) (421) (98) (408) % Change 2022 16.9 % $ 143,790 (20.3) % 28,387 2021 $ 123,547 23,952 % Change 16.4 % (18.5) % (10.4) % (30.6) % (19.9) % 15.1 % (100) bps (38.1) % (49.9) % 69.7 % (98.6) % 155.1 % 15,116 12,491 55,994 87,796 13,322 10,026 47,300 76,247 61.1 % 61.7 % 9,303 44,590 (4,818) 18,828 (197,531) (2,391) (2,246) (3,339) 7,602 35,310 (3,129) (89,188) 34,609 (1,625) 137 (1,630) (13.5) % (24.6) % (18.4) % 15.1 % (60) bps (22.4) % (26.3) % 54.0 % 47.1 % 104.8 % $ (32,432) $ 24,933 $ 225,400 $ 94,161 139.4 % Same Property Portfolio NOI for Q4 2022 increased by 7.2%, driven by rental revenue growth of 7.6%. Rental revenue growth was spurred by unfurnished suite revenue growth of 9.2% over Q4 2021 driven by favourable occupancy and average monthly rents. This was partially offset by an 8.4% increase in property operating expenses, particularly from higher gas rates, salaries and repair and maintenance costs. For FY 2022, Same Property Portfolio NOI increased by 7.5% and was driven by rental revenue growth of 8.3%. This was largely due to an 8.5% increase in unfurnished suite revenue from strong occupancy and average monthly rents. This was augmented by furnished suites revenue growing 11.9% driven by very strong rates and increased occupancy despite decreasing the overall suite count. Revenue growth was partially offset by an increase in property operating expenses of 9.6% due largely to elevated gas rates and increased property operating costs for salaries, repairs and maintenance, bad debt expense, and insurance premiums. A one-time property tax refund received in Q2 2021 pertaining to select Ottawa properties of approximately $600 resulted in lower property tax for FY 2021. Excluding the impacts of this one-time property tax refund, the Same Property NOI growth would have increased by 80 bps to 8.3% for FY 2022 as compared to FY 2021 and NOI margin would have been flat year over year. For Q4 2022 and FY 2022, the NOI variance between Same Property Portfolio results and Total Portfolio results is due to the properties acquired: Le Hill-Park in Q4 2021, and Niagara West and The International in Q2 2022. As such, the discussion for items associated with determining NOI will primarily be focused from the context of Same Property Portfolio results. 1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures" 2022 Annual Report | Minto Apartment REIT 16Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Revenue from Investment Properties Same Property Portfolio Rental revenue Unfurnished suites Furnished suites Commercial leases Parking revenue Other property income Total Portfolio Rental revenue Unfurnished suites Furnished suites Commercial leases Parking revenue Other property income Three months ended December 31, Year ended December 31, 2022 2021 % Change 2022 2021 % Change 29,720 2,075 521 1,178 1,162 27,204 2,108 644 1,160 1,080 9.2 % (1.6) % (19.1) % 1.6 % 7.6 % 114,190 8,595 1,693 4,857 4,212 105,199 7,678 2,268 4,423 3,746 8.5 % 11.9 % (25.4) % 9.8 % 12.4 % $ 34,656 $ 32,196 7.6 % $ 133,547 $ 123,314 8.3 % Three months ended December 31, Year ended December 31, 2022 2021 % Change 2022 2021 % Change $ 32,467 $ 2,075 705 1,367 1,302 27,420 2,108 644 1,168 1,089 18.4 % $ (1.6) % 9.5 % 17.0 % 19.6 % 123,043 $ 8,595 2,182 5,374 4,596 105,415 7,678 2,268 4,431 3,755 16.7 % 11.9 % (3.8) % 21.3 % 22.4 % $ 37,916 $ 32,429 16.9 % $ 143,790 $ 123,547 16.4 % Revenue from investment properties consists of rental revenue from residential lease agreements relating to unfurnished suites and furnished suites, commercial lease agreements, parking revenue and other property income. Other property income consists of ancillary revenue from laundry facilities, telecommunication commission revenue, membership fee revenue, other fee income from tenants and recoveries of utility charges, operating costs and property taxes. Rental Revenue from Unfurnished Suites For Q4 2022, rental revenue from unfurnished suites for the Same Property Portfolio increased 9.2% from Q4 2021, primarily due to improved occupancy and higher average monthly rents, as well as reduced amortization of promotions. Same Property Portfolio average occupancy for Q4 2022 was 97.3% compared to 95.1% for Q4 2021. As at December 31, 2022, average monthly rent increased to $1,738, which was 4.6% per month higher than Q4 2021. Use of lease promotions has continued to diminish as the rental market has strengthened. For FY 2022, Same Property Portfolio rental revenue from unfurnished suites was 8.5% higher than FY 2021, primarily due to higher occupancy and average monthly rents. Same Property Portfolio average occupancy of 95.7% for FY 2022 was 320 bps higher than FY 2021. Average monthly rent for the year ended December 31, 2022 increased 5.5% to $1,732. Minto Apartment REIT | 2022 Annual Report 17Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Same Property Portfolio Revenue and Occupancy - Average for the Period1 Same Property Portfolio Occupancy - average for the period1 Toronto Ottawa Alberta Montreal Three months ended December 31, Year ended December 31, 2022 2021 Change 2022 2021 Change 98.2 % 98.2 % 97.0 % 93.8 % 97.3 % 94.2 % 96.5 % 94.6 % 92.3 % 400 bps 170 bps 240 bps 150 bps 95.1 % 220 bps 96.8 % 96.4 % 95.3 % 92.5 % 95.7 % 91.2 % 93.5 % 92.3 % 91.1 % 560 bps 290 bps 300 bps 140 bps 92.5 % 320 bps In 2021 Management offered promotions to residents to increase occupancy, which peaked in Q2 2021. The use of promotions has since been reduced substantially as the REIT's occupancy has improved and the need for such incentives has declined. In addition, the majority of the promotions offered during the peak period have been fully amortized. For Q4 2022, revenue from unfurnished suites for the Total Portfolio was 18.4% higher as compared to Q4 2021, of which 9.2% related to the acquisitions. Total Portfolio average monthly rent was $1,732 at December 31, 2022, an increase of 5.5% from December 31, 2021. Total Portfolio average occupancy for Q4 2022 was 97.1%, an increase of 210 bps from Q4 2021. For FY 2022, revenue from unfurnished suites for the Total Portfolio was 16.7% higher as compared to FY 2021, 7.8% of which related to acquisitions. The balance of the revenue gain was driven by a 5.5% increase in average monthly rent over FY 2021 and growth in average occupancy of 310 bps to 95.6% for FY 2022. Total Portfolio Occupancy - average for the period1 Toronto Ottawa Alberta Montreal Three months ended December 31, Year ended December 31, 2022 2021 Change 2022 2021 Change 98.1 % 98.2 % 96.9 % 93.8 % 97.1 % 94.2 % 96.5 % 94.6 % 92.4 % 390 bps 170 bps 230 bps 140 bps 95.0 % 210 bps 96.7 % 96.4 % 95.5 % 92.6 % 95.6 % 91.2 % 93.5 % 92.3 % 91.1 % 550 bps 290 bps 320 bps 150 bps 92.5 % 310 bps In Q4 2022, there were 427 move-outs and 446 move-ins, compared to 420 move-outs and 514 move-ins for Q4 2021. The graph below sets out the REIT's quarterly move-in/move-out metrics for the past five quarters (100% basis), and illustrates the return to typical seasonal leasing patterns of higher leasing activity in Q2 and Q3 and reduced activity in the late fall and winter months. 1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures" 2022 Annual Report | Minto Apartment REIT 29,99929,88531,23432,42931,66532,91834,30834,65691.1%91.5%92.9%95.0%94.3%94.8%96.3%97.3%Revenue ($)Occupancy - average for the period (%)Q1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022$15,000$20,000$25,000$30,000$35,00085%88%90%93%95%98%100%18Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Quarterly Move-ins/Move-outs At December 31, 2022, the REIT's Total Portfolio had vacancy of 201 unfurnished suites (2.4% of total unfurnished suites), of which 70 unfurnished suites (0.8% of total unfurnished suites) were leased for future occupancy, 46 unfurnished suites (0.6% of total unfurnished suites) were held offline undergoing post move-out repairs and maintenance or under renovation for repositioning programs, and 85 unfurnished suites (1% of total unfurnished suites) were rent ready. Vacancy Composition of Unfurnished Suites at December 31, 2022 Rental Revenue from Furnished Suites For Q4 2022, rental revenue from furnished suites for the Same Property Portfolio and Total Portfolio was 1.6% lower than Q4 2021. Increased average monthly rent for furnished suites of $4,848 for Q4 2022 represents a substantial increase over $4,078 for Q4 2021, but was offset by reduced occupancy of 77.35% compared to 80.50% and the average suite count decreased by 21 suites from Q4 2021. For FY 2022, rental revenue from furnished suites for the Same Property Portfolio and Total Portfolio was 11.9% higher than FY 2021. Average monthly rent for furnished suites of $4,695 was significantly higher than $3,941 for FY 2021. Average occupancy of 79.35% also increased over FY 2021, which had average occupancy of 76.20%. The positive revenue result was attained while reducing the average suite count by 28 suites over the course of FY 2022 as compared to FY 2021. These metrics have improved over the course of FY 2022 following a considerable recovery in demand from business travel, corporate relocations, easing restrictions on non-essential travel and inflation. Rental Revenue from Commercial Leases For Q4 2022 and FY 2022, revenue from commercial leases for the Same Property Portfolio was 19.1% and 25.4% lower as compared to the same periods in 2021. This decrease was due mainly to promotions offered in Ottawa. As compared to the same periods in 2021, revenue from commercial leases for the Total Portfolio was 9.5% higher for Q4 2022 driven by the acquisition of Niagara West but 3.8% lower for FY 2022 with gains from Niagara West being more than offset by promotions offered in Ottawa. The commercial space at Niagara West accounted for increases of 35.3% and 28.9% in Q4 2022 and FY 2022, respectively, over the Same Property Portfolio. Parking Revenue For Q4 2022 and FY 2022, parking revenue for the Same Property Portfolio increased by 1.6% and 9.8%, respectively over the same periods in 2021, mainly due to improved occupancy and higher rates charged to tenants. For Q4 2022 and FY 2022, parking revenue for the Total Portfolio was 17.0% and 21.3% higher as compared to the same periods in 2021, of which 16.0% and 10.6%, respectively, related to the acquisitions. Minto Apartment REIT | 2022 Annual Report 420324492562427514310585691446Move-outsMove-insQ4 2021Q1 2022Q2 2022Q3 2022Q4 20221503004506007502.4%97.6%OccupiedVacantFuture Lease SignedHeld OfflineRent Ready Total Portfolio2.4%0.8%0.6%1.0%VacancyVacancy Composition19Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Other Property Income For Q4 2022 and FY 2022, other property income for the Same Property Portfolio increased by 7.6% and 12.4% as compared to the same periods in 2021, primarily as a result of higher revenue from laundry, storage rentals and guest suites. For Q4 2022 and FY 2022, other property income for the Total Portfolio was 19.6% and 22.4% higher as compared to the same periods in 2021, of which 12.0% and 9.1%, respectively, related to the acquisitions. Property Operating Costs Same Property Portfolio Three months ended December 31, Year ended December 31, 2022 2021 % Change 2022 2021 % Change Property operating costs $ 6,615 $ 6,118 (8.1) % $ 26,080 $ 23,909 (9.1) % Total Portfolio Three months ended December 31, Year ended December 31, 2022 2021 % Change 2022 2021 % Change Property operating costs $ 7,414 $ 6,161 (20.3) % $ 28,387 $ 23,952 (18.5) % Property operating costs relate to direct costs associated with operating the properties and providing services to tenants, including repairs and maintenance, insurance, site staff salaries, cleaning costs, leasing costs, supplies, and waste removal. For Q4 2022, Same Property Portfolio property operating costs were 8.1% higher compared to Q4 2021, mainly as a result of an increase in salaries and wages, in addition to repairs and maintenance. The increase in salaries was mainly a result of filling staffing vacancies and annual salary increases. For FY 2022, property operating costs for the Same Property Portfolio were 9.1% higher than FY 2021, mainly due to increased salaries and wages, repairs and maintenance, bad debt expense, insurance premiums, professional fees, and property administrative expenses. For Q4 2022 and FY 2022, property operating costs for the Total Portfolio were 20.3% and 18.5% higher as compared to the same periods in 2021, of which 12.1% and 8.8%, respectively, related to the acquisitions. Same Property Portfolio property operating costs were 19.1% of revenue for Q4 2022, compared to 19.0% for Q4 2021. For Q4 2022, Total Portfolio property operating costs were 19.6% of revenue, compared to 19.0% for Q4 2021. For FY 2022, Same Property Portfolio property operating costs were 19.5% of revenue, compared to 19.4% for FY 2021. For FY 2022, Total Portfolio property operating costs were 19.7% of revenue, compared to 19.4% for FY 2021. Property Taxes Same Property Portfolio Three months ended December 31, Year ended December 31, 2022 2021 % Change 2022 2021 % Change Property taxes $ 3,514 $ 3,486 (0.8) % $ 14,056 $ 13,300 (5.7) % Total Portfolio Three months ended December 31, Year ended December 31, 2022 2021 % Change 2022 2021 % Change Property taxes $ 3,872 $ 3,508 (10.4) % $ 15,116 $ 13,322 (13.5) % Property taxes for the Same Property Portfolio for Q4 2022 increased slightly as compared to Q4 2021, primarily due to changes in assessed values and tax rates across the portfolio. 2022 Annual Report | Minto Apartment REIT 20Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Property taxes for the Same Property Portfolio for FY 2022 were 5.7% higher than FY 2021, primarily due to changes in assessed values and tax rates across the portfolio, as well as refunds received in Q2 2021 from successful property tax appeals of approximately $600 relating to certain properties in Ottawa. For Q4 2022 and FY 2022, property taxes for the Total Portfolio were 10.4% and 13.5% higher as compared to the same periods in 2021, of which 10.2% and 7.5%, respectively, related to the acquisitions. Same Property Portfolio property taxes were 10.1% of revenue for Q4 2022, compared to 10.8% for Q4 2021. Total Portfolio property taxes were 10.2% of revenue for Q4 2022, compared to 10.8% for Q4 2021. For FY 2022, Same Property Portfolio property taxes were 10.5% of revenue, compared to 10.8% for FY 2021. For FY 2022, Total Portfolio property taxes were 10.5% of revenue, compared to 10.8% for FY 2021. Utilities Same Property Portfolio Electricity Natural gas Water Total Portfolio Electricity Natural gas Water Three months ended December 31, Year ended December 31, $ 2022 935 $ 1,598 776 2021 936 1,129 725 % Change 0.1 % $ (41.5) % (7.0) % 2022 3,996 $ 4,610 3,012 2021 3,938 3,081 2,977 % Change (1.5) % (49.6) % (1.2) % $ 3,309 $ 2,790 (18.6) % $ 11,618 $ 9,996 (16.2) % Three months ended December 31, Year ended December 31, $ 2022 1,120 $ 1,767 796 2021 941 1,154 725 % Change (19.0) % $ (53.1) % (9.8) % 2022 4,403 $ 5,005 3,083 2021 3,943 3,106 2,977 % Change (11.7) % (61.1) % (3.6) % $ 3,683 $ 2,820 (30.6) % $ 12,491 $ 10,026 (24.6) % Utilities consist of electricity, natural gas and water for the rental properties. Utility costs are seasonal and can be highly variable from one period to the next. In addition to seasonality-driven usage, utility rates and commodity prices impact costs. Same Property Portfolio utilities for Q4 2022 were 18.6% higher compared to Q4 2021 primarily due to an increase in natural gas expense. The natural gas expense increased by 41.5% as a result of significant increases in rates and federal carbon levies across all geographic nodes. Heating degree days were 12.7% higher which drove a slight increase in consumption from Q4 2022 over Q4 2021. Same Property Portfolio utilities for FY 2022 were 16.2% higher compared to FY 2021 primarily due to an increase in natural gas expense. The increase in Same Property Portfolio natural gas expense of 49.6% is a combination of higher rates and federal carbon levies. A colder winter and spring led to increased consumption as heating degree days were 11.2% higher for the first two quarters of 2022 when compared to the same periods in 2021 in addition to colder Q4 2022 compared to Q4 2021 . For Q4 2022 and FY 2022, utilities for the Total Portfolio were 30.6% and 24.6% higher as compared to the same periods in 2021, of which 11.3% and 7.5%, respectively, related to the acquisitions. Natural gas supply rates are expected to continue to decrease into 2023 from peak Q3 2022 rates. Usage of natural gas is highly seasonal and weather dependent with peaks in Q4 and Q1 of any given year. Same Property Portfolio utilities represent 9.5% of revenue, compared to 8.7% for Q4 2021. Total Portfolio utilities for Q4 2022 represent 9.7% of revenue, compared to 8.7% for Q4 2021. For FY 2022, Same Property Portfolio utilities represent 8.7% of revenue, compared to 8.1% for FY 2021. Total Portfolio utilities for FY 2022 represent 8.7% of revenue, compared to 8.1% for FY 2021. Minto Apartment REIT | 2022 Annual Report 21Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Same Property Portfolio Utilities as a Proportion of Revenue1 General and Administrative Expenses General and administrative expenses relate to the administration of the REIT, including: audit fees, legal fees, salaries and benefits for REIT employees, Trustee fees and costs associated with support services provided under the Administrative Support Agreement ("ASA") between the REIT and MPI. The general and administrative expenses for Q4 2022 and FY 2022 increased 38.1% and 22.4% respectively, primarily driven by executive compensation and Unit-based compensation for the hiring of the new President and Chief Operating Officer, higher professional fees, and travel costs. Finance Costs - Operations Interest expense on mortgages and loans Interest expense and standby fees on credit facility Amortization of financing charges Amortization of mark-to-market adjustments Capitalized interest expense Interest expense and other financing charges Distributions on Class B LP Units Distributions on Class C LP Units Three months ended December 31, Year ended December 31, 2022 2021 % Change 2022 2021 % Change $ 6,419 $ 4,161 (54.3) % $ 21,802 $ 16,605 (31.3) % 2,344 328 (179) (484) 8,428 3,122 1,634 410 145 (192) (68) 4,456 2,665 1,677 (471.7) % (126.2) % (6.8) % 611.8 % (89.1) % (17.1) % 2.6 % 5,128 938 (743) (1,051) 26,074 11,942 6,574 1,750 640 (193.0) % (46.6) % (769) (95) (3.4) % 1,006.3 % 18,131 10,436 6,743 (43.8) % (14.4) % 2.5 % $ 13,184 $ 8,798 (49.9) % $ 44,590 $ 35,310 (26.3) % Finance costs comprise interest expense on fixed and variable rate mortgages and a construction loan, interest expense and standby fees on the revolving credit facility, amortization of financing charges and mark-to-market adjustments on debt, and distributions on Class B LP Units and Class C limited partnership units ("Class C LP Units") of the Partnership, offset by capitalized interest expense. Finance costs for Q4 2022 were higher by $4,386 compared to Q4 2021, primarily as a result of additional interest expense on variable rate debt acquired in connection with the acquisitions of Niagara West and The International, higher interest expense on the credit facility and an increase in distributions on Class B LP Units. Higher interest expense on the credit facility is a result of increased usage and higher interest rates. For Q4 2022 the average outstanding balance was $144,856 with an average borrowing rate of 6.03%, compared to $28,121 in Q4 2021 with an average borrowing rate of 2.19%. The increase in mortgage interest expense is primarily driven by the mortgages associated with Niagara West and The International, which account for $1,842 of the increase over Q4 2021; at December 31, 2022 their weighted average interest rate was 7.45%. Management is actively working to secure CMHC-insured fixed rate mortgages for both of these properties. Class B LP Unit distributions for Q4 2022 were higher by $457 compared to Q4 2021 primarily due to the additional Class B LP Units issued in connection with the Niagara West acquisition and the monthly distribution increase effective for November 2022 onward that increased the monthly distributions from $0.03958 to $0.04083 per Class B LP Unit. Finance costs for FY 2022 were $9,280 higher compared to FY 2021, primarily as a result of increased interest expense from the credit facility due to higher interest rates and increased usage, an increase of $5,014 of interest expense on mortgages secured by the three properties acquired since Q4 2021, and $1,506 from higher distributions on Class B LP Units. 1 Same Property Portfolio utilities as a percentage of revenue is representative of Total Portfolio utilities as a percentage of revenue. 2022 Annual Report | Minto Apartment REIT 9.0%7.4%6.9%8.7%11.0%7.7%6.7%9.5%Q1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 20226.0%9.0%12.0%15.0%22Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Finance Income Finance income comprises interest income on convertible development loans, a Unit purchase loan made to a member of Management, and interest on bank deposits. For Q4 2022 and FY 2022, finance income was 69.7% and 54.0% higher, respectively, when compared to the same periods in 2021, primarily as a result of higher interest income earned on convertible development loans. As at December 31, 2022, the REIT had advanced $12,893 on one new convertible development loan commitment and an additional $21,379 on four existing commitments, thus driving higher interest income throughout Q4 2022 and FY 2022. Fair Value Gain (Loss) on Investment Properties Fair value of residential investment properties is predominantly determined using the direct capitalization approach, by applying an appropriate capitalization rate to the estimated 12-month stabilized forecasted NOI for each property, reduced by an estimate of five-year future capital expenditures. Estimated 12-month stabilized forecasted net operating income is based on the respective property’s forecasted results, less estimated aggregate future capital expenditures. Capitalization rates reflect the characteristics, location and market of each property. Fair value is determined based on internal valuation models incorporating market data and valuations performed by external appraisers. The fair value gain (loss) on investment properties was a result of movement in the following: Forecast NOI Capitalization rates Capital expenditure reserve COVID-19 reserve Three months ended December 31, Year ended December 31, $ 2022 68,134 $ (69,987) (10,356) — 2021 6,605 $ 10,262 (13,734) — 2022 151,368 $ (117,503) (52,693) — 2021 11,682 122,753 (47,928) 2,681 $ (12,209) $ 3,133 $ (18,828) $ 89,188 Increases in capitalization rates of 12.5 bps to 25.0 bps on various assets across all geographies were offset by forecast NOI growth in Q4 2022 due to strong realized and forecasted leasing results continuing to outpace expense inflation. The weighted average capitalization rate used for the Q4 2022 valuation of residential properties was 3.80%, compared to 3.68% in Q3 2022 and 3.60% in Q4 2021. The adjustment is derived from market data indicating mild capitalization rate expansion on multi-family assets due to the rising interest rate environment. In addition, the capital expenditure reserve increased based on timing changes of planned capital projects and sustainability initiatives. Collectively, adjustments to capitalization rates, forecast NOI, and capital expenditure reserve resulted in a $12,209 fair value loss. The fair value loss in FY 2022 was due to capitalization rate expansion of 12.5 bps to 25.0 bps across all geographies based on their individual rental fundamentals and the changing debt market, as well as the progression of planned capital projects, partially offset by increased forecast NOI as a result of stronger leasing across all geographies. The capitalization rates of the portfolio for each of the REIT's residential rental markets were as follows: As at Ottawa, Ontario Toronto, Ontario Edmonton, Alberta Calgary, Alberta Montreal, Quebec Weighted-average capitalization rate December 31, 2022 December 31, 2021 Low 3.88% 3.25% 4.38% 4.28% 3.75% High 4.25% 3.50% 4.38% 4.63% 4.00% 3.80% Low 3.63% 3.13% 4.25% 4.15% 3.50% High 4.00% 3.25% 4.25% 4.50% 3.75% 3.60% Minto Apartment REIT | 2022 Annual Report 23Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Fair Value Loss (Gain) on Class B LP Units The Class B LP Units are economically equivalent to Units, in that they receive distributions equivalent to the distributions paid on Units and are exchangeable into Units at the holder's option. The Class B LP Units are classified as financial liabilities and measured at fair value with any changes in fair value recorded in net income. The fair value gain or loss on Class B LP Units is measured every period by reference to the closing trading price of the Units. An increase in the Unit closing price over the period results in a fair value loss, whereas a decrease in the Unit closing price over the period results in a fair value gain. The change in Unit price for the periods presented was as follows: Unit price - opening Unit price - closing Three months ended December 31, Year ended December 31, $ 2022 12.90 14.05 $ 2021 22.36 21.89 $ 2022 21.89 14.05 $ 2021 20.37 21.89 The increase in Unit price for Q4 2022 resulted in a fair value loss on Class B LP Units of $29,617, compared to a decrease in Unit price resulting in a fair value gain of $10,701 for Q4 2021. For FY 2022, the decrease in Unit price resulted in a fair value gain of $197,531, whereas an increase in Unit price for FY 2021 resulted in a fair value loss of $34,609. Fair Value Loss (Gain) on Interest Rate Swap The REIT has an interest rate swap to receive variable interest based on one-month bankers' acceptance plus 185 bps and pay fixed interest at 3.38%. The swap is remeasured at each reporting date using discounted cash flow analysis. For Q4 2022 and FY 2022, the REIT recognized fair value gains of $6 and $2,391, respectively, compared to fair value gains of $421 and $1,625 for the same periods in 2021. The fair value gains were primarily a result of an increase in variable interest rates. Fair Value Loss (Gain) on Unit-Based Compensation The REIT has issued Deferred Units to its Trustees and executives. The liability is remeasured at each reporting date based on the closing Unit price with changes in the value recorded in net income. For Q4 2022, the REIT recognized a fair value loss of $354 due to an increase in the Unit price, whereas for Q4 2021 the REIT recognized a gain of $98 due to a decrease in the Unit price. For FY 2022, the REIT recognized a fair value gain of $2,246 due to a decrease in the Unit price, whereas for FY 2021, an increase in Unit price resulted in a fair value loss of $137. Fees and Other Income Fees and other income represent revenue from asset, project and property management services provided by the REIT in connection with four properties co-owned with institutional partners and other income, including insurance recoveries. For Q4 2022 and FY 2022, the REIT recognized $1,041 and $3,339, respectively, in fees and other income, with the increase over the same periods in 2021 primarily driven by the addition of Niagara West to the portfolio on April 22, 2022 and approximately $898 in one-time insurance recoveries received in 2022. For Q4 2022, the REIT recognized a $304 insurance recovery relating to a property in Ottawa damaged by a storm. After normalization of this one-time insurance recovery, FFO per unit and AFFO per unit decreased by 10.9% and 12.5%, respectively, when compared to Q4 2021. For FY 2022, the REIT recognized $898 in one-time insurance recoveries. After normalization of these one-time recoveries, FFO per unit and AFFO per unit grew 1.1% and 1.5%, respectively, as compared to the same period in 2021. 2022 Annual Report | Minto Apartment REIT 24Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Summary of Quarterly Results Total assets Investment properties Total liabilities Total non-current liabilities Revenue from investment properties NOI1 NOI margin1 Net (loss) income and comprehensive (loss) income FFO1 FFO per unit1 AFFO1 AFFO per unit1 Distributions declared2 AFFO Payout Ratio1 Distribution per unit Q3 2022 Q2 2022 Q4 2022 Q1 2021 $ 2,734,812 $ 2,714,856 $ 2,706,092 $ 2,474,897 $ 2,440,714 $ 2,326,515 $ 2,286,697 $ 2,211,191 $ 2,611,094 $ 2,600,273 $ 2,599,891 $ 2,384,753 $ 2,360,565 $ 2,252,643 $ 2,206,078 $ 2,145,174 $ 1,521,275 $ 1,464,049 $ 1,487,430 $ 1,435,014 $ 1,430,713 $ 1,419,443 $ 1,456,426 $ 1,385,520 $ 1,189,744 $ 1,145,584 $ 1,244,872 $ 1,273,661 $ 1,248,071 $ 1,331,990 $ 1,394,275 $ 1,273,525 Q3 2021 Q1 2022 Q4 2021 Q2 2021 $ $ $ $ $ $ $ $ $ 37,916 $ 22,947 $ 60.5% 37,838 $ 24,224 $ 64.0% 35,510 $ 21,839 $ 61.5% 32,526 $ 18,786 $ 57.8% 32,429 $ 19,940 $ 61.5% 31,234 $ 19,405 $ 62.1% 29,885 $ 19,018 $ 63.6% 29,999 17,884 59.6% (32,432) $ 12,864 $ 0.1960 $ 11,160 $ 0.1700 $ 7,960 $ 71.3% 0.1212 $ 39,655 $ 183,537 $ 13,680 $ 15,654 $ 0.2100 $ 0.2380 $ 11,983 $ 13,952 $ 0.1840 $ 0.2121 $ 7,816 $ 7,804 $ 65.2% 55.9% 0.1187 $ 0.1187 $ 34,640 $ 11,979 $ 0.1906 $ 10,348 $ 0.1647 $ 7,462 $ 72.1% 0.1187 $ 24,933 $ 13,245 $ 0.2147 $ 11,656 $ 0.1890 $ 7,356 $ 63.1% 0.1171 $ 80,928 $ 12,453 $ 0.2109 $ 10,883 $ 0.1842 $ 6,718 $ 61.7% 0.1138 $ 8,727 $ 11,941 $ 0.2022 $ 10,373 $ 0.1757 $ 6,717 $ 64.8% 0.1138 $ (20,427) 10,891 0.1845 9,322 0.1579 6,716 72.0% 0.1138 The REIT's operating results are affected by seasonal variations and other factors, including changing interest rates and inflation. As a result, the operating performance and metrics in one quarter may not be indicative of future quarters. The winter months typically tend to generate weaker performance due to higher energy consumption and snow clearing costs, as well as lower suite turnover. The best performing quarters in any given year are typically the second and third quarters, where stronger leasing demand and higher turnover provide an opportunity to realize more of the gain-to-lease potential. Q4 2022 marks yet another strong quarter for the REIT's operations, driven by favourable long-term market demand conditions for unfurnished suites which drive revenue and NOI. Average monthly rents and occupancy continued their upward trajectory. While inflation increased the cost of utilities and property operating expenses, by the end of 2022 it showed signs of slowing. FFO and AFFO were impacted by higher short term interest rates, which affected variable rate mortgages and the credit facility in particular, and had a negative impact on financing costs. Overall, the REIT achieved strong results in the balance of these challenges and opportunities, and was able to increase the monthly distributions by 3.2% while maintaining a conservative payout ratio. 1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures" 2 Includes distributions on Units and Class B LP Units. Minto Apartment REIT | 2022 Annual Report 25Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Summary of Annual Results As at and for the year ended December 31, Total assets Investment properties Total liabilities Total non-current liabilities Revenue from investment properties NOI1 NOI margin1 Interest expense and other financing charges Net income and comprehensive income FFO1 FFO per unit1 AFFO1 AFFO per unit1 Distributions declared2 AFFO Payout Ratio1 Distribution per unit NAV1 NAV per unit1 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2022 2,734,812 $ 2,611,094 $ 1,521,275 $ 1,189,744 $ 143,790 $ 87,796 $ 61.1% 26,074 $ 225,400 $ 54,177 $ 0.8353 $ 47,443 $ 0.7315 $ 31,042 $ 65.4% 0.4775 $ 1,575,395 $ 24.00 $ 2021 2,440,714 $ 2,360,565 $ 1,430,713 $ 1,248,071 $ 123,547 $ 76,247 $ 61.7% 15,002 $ 94,161 $ 48,530 $ 0.8128 $ 42,234 $ 0.7073 $ 27,507 $ 65.1% 0.4584 $ 1,508,416 $ 24.00 $ 2020 2,203,284 2,138,101 1,353,060 1,243,761 124,929 78,620 62.9% 16,698 179,638 49,981 0.8465 43,733 0.7407 26,351 60.3% 0.4463 1,314,030 22.26 The REIT began FY 2022 with a portfolio of 30 multi-residential rental properties comprising 7,5383 suites across Ottawa, Toronto, Montreal, Calgary and Edmonton with a value of $2,440,714. Two new properties were added to the portfolio during the year: an ownership stake of 28.35% in Niagara West in Toronto, and The International, a wholly-owned property in Calgary, bringing the total suite count to 8,291.3 The REIT also extended an additional convertible development loan to MPI to finance the development of University Heights in Victoria, which provides the REIT the option to purchase MPI's 45% indirect ownership share of an expected 594 suites. Despite the challenges presented throughout 2022, including numerous interest rate hikes, soaring inflation, and volatile capital markets, the REIT continued to generate rental revenue and NOI growth through gains on suite turnovers as new leases were set to market rates and increased average occupancy across the portfolio. 1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures" 2 Includes distributions on Units and Class B LP Units. 3 Total suites includes suites co-owned with institutional partners: 2,163 at December 31, 2021 and 2,664 at December 31, 2022. 2022 Annual Report | Minto Apartment REIT 26Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Section III - Assessment of Financial Position Investment Properties The following table summarizes the changes in investment properties: Balance, December 31, 2021 Additions Acquisition Capital expenditures Development expenditures Other Fair value (loss) gain Residential properties 2,306,493 $ $ Commercial properties Land under development 18,850 $ 35,222 $ Total 2,360,565 186,579 52,348 — (715) (19,250) 12,702 48 — — (3,772) — — 18,395 — 4,194 199,281 52,396 18,395 (715) (18,828) Balance, December 31, 2022 $ 2,525,455 $ 27,828 $ 57,811 $ 2,611,094 Acquisition of Investment Properties On April 22, 2022, the REIT completed the acquisition of a 28.35% managing ownership interest in Niagara West, a mixed-use multi-residential property in Toronto, Ontario for a total acquisition cost of $112,667. The acquisition was financed by the issuance of Class B LP Units, the assumption of an existing variable rate mortgage and working capital liabilities, and cash. On May 6, 2022, the REIT completed the acquisition of The International, a multi-residential property in Calgary, Alberta for a total acquisition cost of $86,614. The acquisition was financed by the assumption of an existing variable rate mortgage and working capital liabilities, and cash. Both acquisitions were accounted for as asset acquisitions and contributed to the operating results effective from their respective acquisition dates. Through December 31, 2022, Niagara West and The International have achieved strong average monthly rents of $2,639 and $1,620, respectively. This is supported by stable average occupancy since acquisition of 95.6% and 96.0%, respectively. Their strong performance in both rents and occupancy, along with those of Le Hill Park, have contributed to Total Portfolio NOI growth of 15.1% for YTD 2022 over YTD 2021. Capital Expenditures The REIT has a capital improvement program in place that is designed to extend the useful life of its investment properties, improve operating efficiency, increase curb appeal, enhance and maintain earnings capacity and meet the expectations of its tenants. The REIT’s capital expenditures are classified into two main categories: value-enhancing capital expenditures and maintenance capital expenditures. Total capital expenditures Value-enhancing capital expenditures Building improvements Suite upgrades Maintenance capital expenditures Maintenance capital expenditures per suite Three months ended December 31, Year ended December 31, 2022 2021 2022 $ 18,433 $ 10,350 $ 52,396 $ 11,273 5,921 17,194 1,239 6,039 2,523 8,562 1,788 30,280 15,945 46,225 6,171 2021 36,453 15,518 14,640 30,158 6,295 $ 183 $ 288 $ 927 $ 1,025 Minto Apartment REIT | 2022 Annual Report 27Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Value-enhancing capital expenditures consist of either building improvements or suite upgrades. Building improvements include common area and amenity space upgrades, energy conservation projects, building envelope enhancements and suite enhancements performed, when necessary, as suites turn over. Suite upgrades represent capital expenditures incurred on larger repositioning programs that are designed to generate incremental returns. The repositioning programs include full-scale suite renovations that strategically target certain properties or certain geographic locations, as discussed previously in Section I - "Overview - Financial and Operating Highlights - Value Creation - Repositioning" and Section I - "Overview - Outlook". Value-enhancing renovations are intended to generate NAV accretion, long term AFFO accretion and increase tenant satisfaction, however they tend to be AFFO dilutive in the short term owing to vacancy during renovation. Maintenance capital expenditures include expenditures that are incurred in order to maintain the existing earning capacity of the REIT’s investment properties. Any exterior work is highly dependent on favourable weather conditions and as a result, a significant portion of the exterior work is performed between the months of May and September and therefore actual maintenance capital expenditures in a given quarter may not be indicative of future quarters. The actual maintenance capital expenditures for Q4 2022 and FY 2022 were $1,239 and $6,171 or $183 and $927 per suite, respectively, and primarily related to maintenance of plumbing, electrical and mechanical systems, parking garages, fire-life safety systems and common areas at various buildings. Management targets approximately $900 per suite on average for maintenance capital expenditures on an annual basis, subject to costing pressures from inflation, availability of trades and supply chain constraints. Development Expenditures Development expenditures are a component of the REIT's growth and value-creation strategy. These include projects which add to the REIT's existing suite count through intensification or redevelopment of existing assets. Development expenditures are intended to generate NAV accretion and long term AFFO accretion. The REIT is currently developing two projects on excess land available at Richgrove and Leslie York Mills and is pursuing the development of a third project at High Park Village, as discussed under Section I - "Outlook - Development of Purpose-Built Rental Properties and Intensification on Existing Sites". The breakdown of development expenditures incurred in connection with these projects is as follows: Richgrove Leslie York Mills High Park Village Three months ended December 31, Year ended December 31, $ $ 2022 3,261 $ 2,020 31 2021 11,274 $ 430 131 2022 12,364 $ 5,407 624 2021 13,079 792 348 5,312 $ 11,835 $ 18,395 $ 14,219 The construction of the Richgrove project continues as planned, with development expenditures primarily related to the first phase of below-grade construction which was completed in November 2022. Expenditures on the second phase of below-grade construction will continue throughout 2023. As of December 31, 2022, the REIT has incurred costs of $26,368, and forecasts $90,632 in remaining expenditures, an internal rate of return ("IRR") of 17.17% and stabilization in Q2 2026. Development at Leslie York Mills also continues to progress, with the demolition of the existing parking structure and site servicing complete. Preparation of the temporary parking structure is underway. As of December 31, 2022, the REIT has incurred costs of $17,917, and forecasts $167,083 in remaining expenditures, an IRR of 12.46% and stabilization in Q2 2026. The High Park Village development rezoning was completed in Q3 2022, however the final project specifications remain subject to municipal as well as investment partner approval through the Site Place Approval process, with expenditures incurred as the project progresses through the pre-development phase. As of December 31, 2022, the REIT has incurred costs of $7,549, and forecasts $512,451 in remaining expenditures, an IRR of 14% to 17% and stabilization in Q3 2029. Valuation Refer to Section II, "Review of Financial Performance - Fair Value Loss (Gain) on Investment Properties" for details on the valuation method used for the REIT's investment properties. 2022 Annual Report | Minto Apartment REIT 28Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Class B LP Units The Class B LP Units receive distributions equivalent to the distributions paid on Units and are exchangeable at the holder’s option into Units. One Special Voting Unit in the REIT is issued to the holder of Class B LP Units for each Class B LP Unit held. The limited IAS 32 exception for presentation as equity does not extend to Class B LP Units. As a result, the Class B LP Units are classified as financial liabilities. On April 22, 2022, as partial consideration for the acquisition of Niagara West, 2,985,956 Class B LP Units were issued. As at December 31, 2022, there were 25,755,029 (December 31, 2021 - 22,769,073) Class B LP Units outstanding. Class C LP Units The Class C LP Units provide for monthly distributions to the holder of such Class C LP Units to be paid in priority to distributions to holders of the Units and Class B LP Units. Due to the nature of such distributions, the Class C LP Units are classified as financial liabilities. As at December 31, 2022 and December 31, 2021, there were 22,978,700 Class C LP Units outstanding. The mortgages of investment properties to which the distributions on the Class C LP Units relate bear a weighted average contractual interest rate of 3.16% (December 31, 2021 - 3.16%) and mature at various dates between 2023 and 2030. Secured Debt Secured debt includes mortgages, a construction loan and the REIT's revolving credit facility. The REIT maintains mortgages with both fixed and variable interest rates that are secured by investment properties. The fixed rate mortgages bear interest at a weighted average contractual interest rate of 3.03% (December 31, 2021 - 2.71%) and mature at various dates between 2023 and 2023. The REIT's fixed rate mortgages include a variable rate mortgage that is fixed at 3.38% through an interest rate swap. On February 10, 2022, the REIT obtained CMHC-insured mortgages for each of its three Edmonton properties for a total of $32,975. Proceeds from the new mortgages were used to repay the existing mortgages of $16,300 and pay down the credit facility. The new mortgages bear interest at 2.85% and mature on September 1, 2032. In connection with the acquisitions of Niagara West and The International, the REIT assumed $108,378 in variable rate mortgage financing. The Niagara West mortgage bears interest at bankers' acceptance plus 200 bps or prime plus 100 bps. The International's mortgage bears interest at bankers' acceptance rate plus 250 bps or prime plus 100 bps. In Q1 2023, the maturity dates of both mortgages were extended to April 30, 2023. At December 31, 2022, the weighted average variable interest rate of these mortgages was 7.45%, an increase of 1.31% from September 30, 2022. The REIT is actively working on refinancing both mortgages as CMHC-insured fixed rate mortgages. The REIT has a fixed rate non-revolving construction loan to finance its Richgrove development. The $93,745 construction loan bears interest at 2.39% and matures on March 1, 2032. As at December 31, 2022, $8,006 (December 31, 2021 - $nil) was drawn. Payments are made monthly on an interest-only basis. On June 30, 2022, the REIT increased the total commitment on its revolving credit facility from $200,000 to $300,000. As at December 31, 2022, the REIT had available credit of $267,115 (December 31, 2021 - $200,000) which is the lesser of the total commitment and the lending value. The increase enables the REIT to maintain financial flexibility and continue to capitalize on opportunities to drive long term NAV growth. In addition to the commitment increase, the REIT extended the maturity date of the credit facility by one year to July 3, 2025. The credit facility is secured by several investment properties and is used to fund working capital requirements, acquisitions, letters of credit and for general corporate purposes. The credit facility bears interest at bankers' acceptance rate plus 175 bps or prime plus 75 bps and as at December 31, 2022, the weighted average variable interest rate was 6.47% (December 31, 2021 - 2.19%). Minto Apartment REIT | 2022 Annual Report 29December 31, 2021 200,000 200,000 51,754 442 52,196 147,804 $ 714,121 (3,248) 710,873 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Committed Available Utilized Amounts drawn Letter of credit Undrawn amount available Units December 31, 2022 300,000 $ 267,115 157,158 442 157,600 109,515 $ $ $ The following table presents the change in and outstanding amount of Units for the year ended December 31, 2022: Opening balance, December 31, 2021 Cancellation of Units under NCIB Closing balance, December 31, 2022 Normal Course Issuer Bid Units 40,069,839 $ (182,227) 39,887,612 $ On July 15, 2022, the Toronto Stock Exchange ("TSX") accepted the REIT's notice to initiate a normal course issuer bid ("NCIB"). The NCIB period is from July 21, 2022 to July 20, 2023 and permits the REIT to acquire up to 3,847,284 Units, representing approximately 10% of the REIT’s public float. Under the terms of the NCIB, the REIT may acquire up to 33,965 Units on any given trading day, being approximately 25% of the REIT’s average daily trading volume for the six most recently completed calendar months prior to initiating the NCIB. Purchases under the NCIB are made in the open market through the facilities of the TSX or through Canadian Alternative Trading Systems. The REIT’s Board of Trustees authorized the NCIB because it believes that, from time to time, the purchase of Units at prices below the REIT's NAV may be an attractive and appropriate use of the REIT's funds, benefiting remaining Unitholders by increasing the NAV per unit of the REIT. Decisions regarding the timing of purchases of Units will be based on market conditions, Unit price and other factors such as liquidity and the need to prioritize capital. For FY 2022, the REIT purchased and cancelled 182,227 Units under the NCIB, at a weighted average purchase price of $15.15 per Unit, for a total cost of $2,764, including commissions. The difference between the purchase price and the weighted average historical Unit issuance price of $17.82 per Unit was recorded as an increase to retained earnings. Distributions On November 8, 2022, the Board of Trustees approved a 3.2% increase to the REIT's annual distribution from $0.4750 per Unit to $0.4900 per Unit. The monthly distribution will be $0.04083 per Unit, up from $0.03958 per Unit, effective from the November 2022 distribution paid on December 15, 2022. Management believes this distribution increase is aligned with its goal of maintaining a conservative AFFO payout ratio, which was 65.4% for FY 2022, to facilitate the reinvestment of capital to fund the REIT's growth initiatives. Distributions are paid monthly, to Unitholders of record at the close of business on the last day of a month, on or about the 15th day of the following month. Distributions must be approved by the Board of Trustees and are subject to change depending on the general economic outlook and financial performance of the REIT. For FY 2022, distributions to Unitholders of $19,100 (December 31, 2021 - $17,071) were declared based on approved monthly distributions of $0.03958 per Unit for the months of January to October and $0.04083 for the months of November and December (2021 - $0.03792 per Unit for the months of January to October 2021 and $0.03958 per Unit for the months of November and December 2021). 2022 Annual Report | Minto Apartment REIT 30Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Section IV - Liquidity, Capital Resources and Contractual Commitments Liquidity and Capital Resources The REIT's capital structure, shown in the table below, is Class B LP Units, Class C LP Units, mortgages, a construction loan, a credit facility and Unitholders' equity. As at Liabilities (principal amounts outstanding): Class B LP Units Class C LP Units Mortgages Construction loan Credit facility Unitholders' equity December 31, 2022 December 31, 2021 $ 361,858 $ 206,673 740,334 8,006 157,158 1,474,029 1,213,537 $ 2,687,566 $ 498,415 212,183 627,534 — 51,754 1,389,886 1,010,001 2,399,887 Class B LP Units are economically equivalent to Units and are exchangeable for Units at the Class B LP unitholder’s option. Due to their exchange feature, IAS 32 requires Class B LP Units to be accounted for as a financial liability. Class B LP Units are not indebtedness for borrowed money and are not included in the determination of Debt-to-Gross Book Value ratio. The objective of the REIT’s capital strategy is to arrange capital at the lowest possible cost while maintaining diversity in its lending base, balance in its maturity schedule and sufficient liquidity to fund the ongoing operations of the REIT and pay distributions. At December 31, 2022, 63% (December 31, 2021 - 72%) of the REIT's total debt is CMHC insured and approximately 76% (December 31, 2021 - 94%) is fixed rate, including variable rate debt fixed through an interest rate swap. The REIT uses a prudent amount of debt financing in its capital structure. Pursuant to the REIT’s DOT, overall indebtedness, as measured by the Debt-to-Gross Book Value ratio, is not to exceed 65% (or 70% of Gross Book Value including convertible debentures). Notwithstanding this limit, it is Management’s current intention to maintain a more conservative Debt-to-Gross Book Value ratio. The REIT’s Debt-to-Gross Book Value ratio and liquidity as a percentage of total debt are calculated as follows: As at Class C LP Units Mortgages Construction loan Credit facility Total debt Total assets Debt-to-Gross Book Value ratio1 Total liquidity Liquidity as a percentage of total debt $ December 31, 2022 208,086 $ 738,314 8,006 157,158 1,111,564 2,734,812 40.6% 114,838 10.3% December 31, 2021 214,069 626,120 — 51,754 891,943 2,440,714 36.5% 150,655 16.9% The REIT continues to maintain a conservative overall leverage position with a Debt-to-Gross Book Value ratio of 40.6% at December 31, 2022. While the REIT has sufficient liquidity, Management manages its liquidity prudently given the current capital market conditions. The REIT's liquidity ratio (total liquidity as a percentage of total debt) was 10.3% at December 31, 2022, compared to 16.9% at December 31, 2021. 1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures" Minto Apartment REIT | 2022 Annual Report 31Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Management measures the Debt-to-Adjusted EBITDA ratio as a measure of the REIT's financial health and liquidity. Generally, the lower the ratio, the lower the credit risk. The REIT’s Debt-to-Adjusted EBITDA ratio is calculated as follows: NOI1 General and administrative expenses Finance income Fees and other income Impact on NOI of stabilized earnings from acquisitions Adjusted EBITDA1 Total debt Cash Total debt, net of cash Debt-to-Adjusted EBITDA ratio1 $ December 31, 2022 87,796 $ (9,303) 4,818 3,339 86,650 2,351 89,001 1,111,564 5,323 1,106,241 12.43x December 31, 2021 76,247 (7,602) 3,129 1,630 73,404 2,286 75,690 891,943 2,851 889,092 11.75x For FY 2022 and FY 2021, the REIT added finance income to Adjusted EBITDA as the amounts earned have become material to the operations of the REIT, making EBITDA more comparable to net income prior to adjustments. The REIT's Debt-to-Adjusted EBITDA ratio increased by 0.68x compared to December 31, 2021. The primary reasons for the increase is the assumption of the mortgages for Niagara West and The International, additional draws on the credit facility, and the refinancing on the Edmonton properties. In addition, the REIT uses a combination of equity and debt to finance the intensification of existing sites and the issuance of convertible development loans (refer to Section I - "Overview - Outlook"). Any increased debt arising from these latter transactions is not immediately matched by increased NOI until the development projects stabilize or the REIT decides to exercise its CDL Options, resulting in temporary increase to the Debt-to-Adjusted EBITDA ratio. The REIT has staggered the maturities of its debt financings, including distributions payable on the Class C LP Units, to reduce interest rate risk and its risk related to refinancing. As at December 31, 2022, the weighted average term to maturity on fixed rate debt was 4.27 years (December 31, 2021 - 4.69 years) and the weighted average interest rate on fixed rate debt was 3.06% (December 31, 2021 - 2.82%). The contractual payments under the REIT’s debt financing are summarized in the table below. Principal Repayments Principal at Maturity Year 2023 2024 2025 2026 2027 2028 Thereafter Mortgages $ Class C LP Units Mortgages Credit facility Construction loan Class C LP Units 12,933 $ 11,053 10,077 8,598 8,155 8,362 14,387 5,271 $ 4,321 3,067 1,283 1,327 598 998 226,262 $ 48,182 41,016 72,524 — — 278,785 — $ — $ — 157,158 — — — — — — — — — 8,006 44,963 $ 46,178 60,474 — 21,425 — 16,768 Total % of Total 26.0 % 9.9 % 24.4 % 7.4 % 2.8 % 0.8 % 28.7 % 289,429 109,734 271,792 82,405 30,907 8,960 318,944 Interest Rate2 5.40 % 3.04 % 5.08 % 3.00 % 3.31 % — % 2.67 % $ 73,565 $ 16,865 $ 666,769 $ 157,158 $ 8,006 $ 189,808 $ 1,112,171 100 % Of the REIT's debt financings at December 31, 2022, $265,536 incurs interest at variable interest rates and the weighted average interest rate was 6.87%. Two of the variable rate financings, making up $108,378 of the total variable debt, mature in Q2 2023 and Management is actively working to secure new fixed rate CMHC-insured financing for both. As of December 31, 2022, current liabilities of $331,531 (December 31, 2021 - $182,642) exceeded current assets of $42,422 (December 31, 2021 - $38,909), resulting in a net working capital deficit of $289,109 (December 31, 2021 - $143,733). Current liabilities as of December 31, 2022 include $271,225 (December 31, 2021 - $127,833) of mortgage financing which the REIT is actively in the process of refinancing. The REIT's immediate liquidity needs are met through cash-on-hand, cash flow from operations, refinancing of maturing mortgages and availability on its credit facility. As of December 31, 2022, liquidity was $114,838 (December 31, 2021 - $150,655), consisting of cash of $5,323 (December 31, 2021 - $2,851) and $109,515 (December 31, 2021 - $147,804) of available borrowing capacity under the credit facility. Management believes that there is sufficient liquidity to meet the REIT’s financial obligations for the foreseeable future. 1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures" 2 Weighted average interest rates for maturing mortgages, construction loan, credit facility and Class C LP Units. 2022 Annual Report | Minto Apartment REIT 32Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) The REIT had a short form base shelf prospectus that allowed for the issuance, from time to time, of Units, debt securities and subscription receipts, or any combination thereof, for an aggregate amount of up to $800,000. This prospectus was effective for a 25-month period from the date of issuance on December 8, 2020. On October 29, 2021, the REIT raised gross proceeds of $86,716 from the issuance of Units under the short form base shelf prospectus. As at December 31, 2022, the amount available to be raised pursuant to the short form base shelf prospectus was $713,284. Due to the volatility in the capital markets, the REIT did not renew the short form base shelf prospectus on its expiry in January 2023. Cash Flows The REIT held a cash balance of $5,323 as at December 31, 2022 (December 31, 2021 - $2,851). The sources and use of cash flow for the three months and years ended December 31, 2022 and 2021 are as follows: Operating activities Financing activities Investing activities Three months ended December 31, Year ended December 31, $ 2022 18,389 $ 10,787 (29,424) 2021 27,295 $ 80,401 (107,932) 2022 82,499 $ 45,659 (125,686) 2021 72,119 81,238 (153,113) Cash provided by operating activities and cash distributions The following table outlines the differences between cash from operating activities, net income and cash distributions in accordance with National Policy 41-201, Income Trusts and Other Indirect Offerings: Three months ended December 31, Year ended December 31, 2022 2021 2022 2021 Net (loss) income and comprehensive (loss) income $ Add: distributions on Class B LP Units Less: distributions paid1 (Shortfall) excess of net (loss) income and comprehensive (loss) income over total distributions paid Cash provided by operating activities $ $ Add: interest received Less: interest paid Less: distributions paid1 Excess of cash provided by operating activities over total distributions and interest paid (32,432) $ 24,933 $ 225,400 $ 3,122 (29,310) (7,875) (37,185) $ 18,389 $ 522 (10,087) 8,824 (7,875) 2,665 27,598 (7,109) 20,489 $ 27,295 $ 603 (6,153) 21,745 (7,109) 11,942 237,342 (30,849) 206,493 $ 82,499 $ 1,868 (32,981) 51,386 (30,849) 949 14,636 20,537 Distributions declared2 $ 7,960 $ 7,356 $ 31,042 $ 94,161 10,436 104,597 (27,260) 77,337 72,119 1,829 (25,150) 48,798 (27,260) 21,538 27,507 For Q4 2022, total distributions exceeded net income and comprehensive income, whereas for FY 2022 net income and comprehensive income was in excess total distributions paid. Distributions are better evaluated in the context of operating cash flows rather than net income as net income is impacted by several non-cash items, including fair value gains or losses on investment properties, Class B LP Units, Unit-based compensation and an interest rate swap. While cash flows provided by operating activities are generally sufficient to cover distribution requirements, the timing of expenses and fluctuations in non-cash working capital may result in a temporary shortfall. In these cases, some portion of distributions may come from the REIT's capital or financing sources other than cash flows provided by operating activities. For Q4 2022 and FY 2022, cash provided by operating activities was in excess of total distributions and interest paid. 1 Distributions paid on REIT Units and Class B LP Units. 2 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures" Minto Apartment REIT | 2022 Annual Report 33Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Cash provided by financing activities Proceeds from issuance of Units, net of issue costs Proceeds from mortgage financing Net proceeds (repayments) on credit facility Proceeds from construction loan CMHC premiums and financing costs Principal repayments on mortgages Forgivable loan transferred from restricted cash Distributions paid on various classes of units Interest paid Purchase and cancellation of Units Three months ended December 31, Year ended December 31, 2022 2021 2022 $ — $ — 82,726 $ 41,000 $ — $ 34,623 $ 28,567 5,183 (84) (3,522) (25,246) — (199) (3,265) 105,404 8,006 (1,419) (30,201) 2021 82,726 49,558 19,806 — (222) (12,879) — — 1,350 — (9,270) (10,087) — (8,462) (6,153) — (36,359) (32,981) (2,764) (32,601) (25,150) — $ 10,787 $ 80,401 $ 45,659 $ 81,238 For Q4 2022, cash flows used in financing activities included principal and interest on mortgages, distributions on various classes of units, payments of financing costs, and interest on the credit facility. These were entirely offset by net proceeds on the credit facility and draws on the construction loan in connection with the Richgrove development. For FY 2022, cash flows from financing activities included net proceeds on the credit facility, new mortgage financing for the Edmonton properties, upward refinancing for Le Hill-Park, draws on the construction loan and a forgivable loan received in relation to the Richgrove intensification. These activities were partially offset by principal and interest payments on mortgages, distributions on various classes of units, purchases made under the NCIB, payments of CMHC premiums and financing costs, and interest on the credit facility. Cash used in investing activities Acquisition of investment property Capital additions to investment properties Development expenditures Loans advanced to related parties Interest received $ Three months ended December 31, Year ended December 31, 2022 — $ (10,261) (4,108) (15,577) 522 2021 (80,007) $ (10,842) $ (6,742) (10,944) 603 2022 (28,761) $ (49,203) $ (17,550) (32,040) 1,868 2021 (80,007) (37,429) (17,482) (20,024) 1,829 $ (29,424) $ (107,932) $ (125,686) $ (153,113) Cash flows used in investing activities for Q4 2022 included capital expenditures on investment properties, development expenditures on the active Richgrove and Leslie York Mills projects and the pursuit of the High Park Village development, and loan advances on the Beechwood, 810 Kingsway and University Heights convertible development loans, offset by interest received from related parties. Cash flows used in investing activities for FY 2022 include the acquisitions of Niagara West and The International, capital expenditures on investment properties, development expenditures on the three development projects described above, advances on the Beechwood, 810 Kingsway and University Heights convertible development loans and a loan advance to Management, partially offset by interest received from related parties. 2022 Annual Report | Minto Apartment REIT 34Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Reconciliation of Non-IFRS Financial Measures and Ratios The following section includes reconciliations of Non-IFRS Financial Measures and Ratios used by the REIT. Refer to Section VI - "Supplemental Information - Non-IFRS and Other Financial Measures" for definitions of each of these measures. FFO and AFFO FFO and AFFO are Non-IFRS Financial Measures. The REIT's method of calculating FFO and AFFO are substantially in accordance with REALPAC’s recommendations, but may differ from other issuers’ methods and, accordingly, may not be comparable to FFO and AFFO reported by other issuers. FFO and AFFO are used for evaluating operating performance and are calculated as follows: Net income and comprehensive income Distributions on Class B LP Units Issuance costs on Class B LP Units Fair value loss (gain) on: Investment properties Class B LP Units Interest rate swap Unit-based compensation Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021 $ (32,432) $ 39,655 $ 183,537 $ 34,640 $ 24,933 $ 80,928 $ 3,122 — 3,058 — 3,058 175 2,704 — 2,665 — 2,591 — 8,727 $ (20,427) 2,590 2,590 — — 12,209 29,617 (6) 354 18,689 (44,813) (302) (633) 2,325 (172,772) (776) (1,867) (14,395) (9,563) (1,307) (100) (3,133) (10,701) (421) (34,663) (35,976) (145) (98) (282) (50,478) 50,775 3 324 (914) 30,511 (1,062) 193 Funds from operations (FFO) $ 12,864 $ 15,654 $ 13,680 $ 11,979 $ 13,245 $ 12,453 $ 11,941 $ 10,891 Maintenance capital expenditure reserve Amortization of mark-to-market (1,525) (1,524) (1,506) (1,436) (1,397) (1,377) (1,377) (1,376) adjustments (179) (178) (191) (195) (192) (193) (191) (193) Adjusted funds from operations (AFFO) $ 11,160 $ 13,952 $ 11,983 $ 10,348 $ 11,656 $ 10,883 $ 10,373 $ 9,322 Distributions on Class B LP Units Distributions on Units AFFO Payout Ratio Weighted average number of Units and Class B LP Units issued and outstanding FFO per unit AFFO per unit 3,122 4,838 7,960 3,058 4,746 7,804 3,058 4,758 7,816 2,704 4,758 7,462 2,665 4,691 7,356 2,591 4,127 6,718 2,590 4,127 6,717 2,590 4,126 6,716 71.3% 55.9% 65.2% 72.1% 63.1% 61.7% 64.8% 72.0% 65,642,641 65,769,904 65,135,801 62,838,912 61,683,912 59,043,912 59,043,912 59,043,912 $ 0.1960 $ 0.2380 $ 0.2100 $ 0.1906 $ 0.2147 $ 0.2109 $ 0.2022 $ 0.1845 $ 0.1700 $ 0.2121 $ 0.1840 $ 0.1647 $ 0.1890 $ 0.1843 $ 0.1757 $ 0.1579 For Q4 2022, FFO was lower as compared to Q4 2021 driven mainly by a 49.9% increase in operating finance costs spurred by the variable rate mortgages and increased draws and interest rates on the credit facility. This was partially offset by a 15.1% increase in NOI driven mainly by an improvement in occupancy and average monthly rent and the additional revenues from the acquisitions of Le Hill-Park, Niagara West, and The International. AFFO was lower as compared to Q4 2021, primarily as a result of lower FFO as well as the increase in maintenance capital expenditure reserve applied to the acquisitions. The operations from acquisitions completed since Q4 2021 added $1,782 to the FFO and $1,635 to the AFFO for Q4 2022. The decline of Q4 2022 FFO per unit and AFFO per unit over Q4 2021 would have been 10.9% and 12.5%, respectively, with the exclusion of the impacts of a one-time insurance recovery of approximately $304 received in Q4 2022. Minto Apartment REIT | 2022 Annual Report 35December 31, 2020 179,638 10,162 (78,701) (63,298) 2,429 (249) 49,981 (5,478) (770) 43,733 10,162 16,189 26,351 60.3% (5,527) (769) 42,234 $ 10,436 17,071 27,507 65.1% Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) December 31, 2022 December 31, 2021 $ Net income and comprehensive income Distributions on Class B LP Units Issuance costs on Class B LP Units Fair value loss (gain) on: Investment properties Class B LP Units Interest rate swap Unit-based compensation 225,400 $ 11,942 175 18,828 (197,531) (2,391) (2,246) 94,161 $ 10,436 — (89,188) 34,609 (1,625) 137 Funds from operations (FFO) $ 54,177 $ 48,530 $ Maintenance capital expenditure reserve Amortization of mark-to-market adjustments (5,991) (743) Adjusted funds from operations (AFFO) $ 47,443 $ Distributions on Class B LP Units Distributions on Units AFFO Payout Ratio Weighted average number of Units and Class B LP Units issued and outstanding FFO per unit AFFO per unit $ $ 11,942 19,100 31,042 65.4% 64,858,981 59,709,337 0.8353 $ 0.7315 $ 0.8128 $ 0.7073 $ 59,043,912 0.8465 0.7407 For FY 2022, FFO was higher as compared to FY 2021, reflecting a 15.1% increase in NOI due to an improvement in occupancy and average monthly rent and the additional revenues from the acquisitions made since Q4 2021. AFFO for FY 2022 was higher as compared to FY 2021, primarily as a result of higher FFO, offset by an increase in the maintenance capital expenditure reserve. The operations from acquisitions made since Q4 2021 added $3,981 to FFO and $3,687 to AFFO for FY 2022. Maintenance capital expenditures include expenditures that are incurred in order to maintain the existing earning capacity of the REIT’s investment properties. The maintenance capital expenditure reserve amount included in the AFFO calculation is based on the REIT's expectation of spending approximately $900 per suite on an annual basis, which is slightly lower than the three-year historical average of actual maintenance capital expenditures of $935. The pandemic restrictions caused a temporary slow down in activity and the subsequent recovery led to an increase in costs as deferred maintenance was completed. Management believes as these deferred expenditures are completed and maintenance activity normalizes, annual maintenance capital expenditure per suite will be approximately $900 per suite, subject to costing pressures from inflation, and further disruptions due to the trades availability and supply chain constraints. Refer to Section III - "Assessment of Financial Position - Investment Properties - Capital Expenditures" for a more detailed discussion of maintenance capital expenditures. NOI and NOI Margin Same Property Portfolio Three months ended December 31, Year ended December 31, 2022 2021 2022 Revenue from investment properties $ 34,656 $ 32,196 $ 133,547 $ Property operating expenses NOI NOI margin 13,438 21,218 61.2% 12,394 51,754 19,802 $ 81,793 $ 61.5% 61.2% 2021 123,314 47,205 76,109 61.7% 2022 Annual Report | Minto Apartment REIT 36Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Total Portfolio Revenue from investment properties Property operating costs NOI NOI margin $ Debt-to-Gross Book Value Ratio Three months ended December 31, Year ended December 31, 2022 37,916 $ 14,969 22,947 60.5% 2021 32,429 12,489 19,940 61.5% $ $ 2022 143,790 $ 55,994 87,796 $ 61.1% 2021 123,547 47,300 76,247 61.7% Refer to Section IV - "Liquidity, Capital Resources and Contractual Commitments - Liquidity and Capital Resources" for a reconciliation of Debt-to-Gross Book Value ratio. Debt Service Coverage Ratio The Debt Service Coverage ratio is calculated as follows: NOI Interest expense and standby fees on credit facility Distributions on Class C LP Units: Principal repayments Finance costs Mortgages and construction loan: Principal repayments Finance costs Total debt service Debt Service Coverage ratio December 31, 2022 $ 87,796 $ December 31, 2021 76,247 5,128 5,510 6,574 13,901 21,802 52,915 $ 1.66x 1,750 5,341 6,743 12,879 16,605 43,318 1.76x $ The decline in Debt Service Coverage ratio for FY 2022 from FY 2021 was primarily a result of higher interest on variable rate debt specifically relating to increased borrowings on the credit facility and new mortgages from the acquisitions of Niagara West and The International. This was further attributable to higher fixed interest on the refinanced mortgages at the Edmonton properties, from the acquisition of Le-Hill Park, and from the construction loan for the Richgrove development project. The foregoing was partially offset by an increase in NOI driven by higher rents and occupancy. Debt-to-Adjusted EBITDA Ratio Refer to Section IV - "Liquidity, Capital Resources and Contractual Commitments - Liquidity and Capital Resources for a reconciliation of Debt-to-Adjusted EBITDA ratio. For FY 2022 and FY 2021, the REIT added finance income to Adjusted EBITDA as the amounts earned have become material to the operations of the REIT, making EBITDA more comparable to net income prior to adjustments. NAV and NAV per unit As at Net assets (Unitholders' equity) Add: Class B LP Units NAV Number of Units and Class B LP Units NAV per unit December 31, 2022 December 31, 2021 1,213,537 $ 361,858 1,575,395 $ 65,642,641 1,010,001 $ 498,415 1,508,416 $ 62,838,912 December 31, 2020 850,224 463,806 1,314,030 59,043,912 24.00 $ 24.00 $ 22.26 $ $ $ Minto Apartment REIT | 2022 Annual Report 37Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Section V - Accounting Estimates and Policies, Controls and Procedures and Risk Analysis Critical Judgments in Applying Accounting Policies The following are the critical judgments that have been made in applying the REIT’s accounting policies: Investment property acquisitions The REIT must assess whether an acquisition transaction should be accounted for as an asset acquisition or a business combination under IFRS 3. This assessment requires the REIT to make judgments on whether the assets acquired and liabilities assumed constitute a business as defined in IFRS 3 and if the integrated set of activities, including inputs and processes acquired, are capable of being conducted and managed as a business and the REIT obtains control of the business. Income taxes The REIT is a "mutual fund trust" and a "real estate investment trust" as defined in the Income Tax Act (Canada). The REIT is not liable to pay Canadian income taxes provided that its taxable income is fully distributed to Unitholders each year. The REIT is a "real estate investment trust" if it meets the prescribed conditions under the Income Tax Act (Canada) relating to the nature of its assets and revenue. The REIT uses judgment in reviewing the real estate investment trust conditions and assessing their interpretation and application to the REIT’s assets and revenue, and it has determined that it qualifies as a "real estate investment trust" for the current period. Interest in joint operations The REIT assesses whether an arrangement should be accounted for as a joint operation or a joint venture under IFRS 11, Joint Arrangements. This assessment requires the REIT to make judgments on whether the REIT's rights and obligations arising from the arrangement constitute a joint operation or a joint venture. Recognition of government grants For acquired residential properties financed through forgivable loans, the REIT assesses whether throughout the remaining term of forgivable loans the REIT is expected to meet the conditions for forgiveness, that the outflow of economic resources is not probable and that in accordance with IAS 37 – Provision, Contingent Liabilities and Contingent Assets no financial liability is required to be recorded. For development properties financed through forgivable loans to support affordable housing, the REIT assesses whether throughout the remaining term of the forgivable loans there is reasonable assurance that the REIT will meet the conditions for forgiveness and if this is not the case that the balance that is forgiven is to be recognized over time. Critical Accounting Estimates and Assumptions The REIT makes estimates and assumptions that affect the carrying amounts of assets and liabilities and the reported amount of income for the period. Actual results could differ from estimates. The estimates and assumptions that the REIT considers critical include the valuation of residential investment properties. In applying the REIT's policy with respect to investment properties, estimates and assumptions are required to determine the valuation of the properties under the fair value model. The REIT has used the best information available as at December 31, 2022, in determining the potential impact of economic factors and COVID-19 on the carrying amounts of assets and liabilities, earnings for the period and risks disclosed in the consolidated financial statements for the years ended December 31, 2022 and 2021. The estimates that could be most significantly impacted by economic factors and COVID-19 include those underlying the valuation of investment properties and the estimated credit losses on accounts receivable. Actual results may differ from those estimates. 2022 Annual Report | Minto Apartment REIT 38Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Risks and Uncertainties The REIT faces a variety of diverse risks, many of which are inherent in the business conducted by the REIT. They include the following: Current Economic Environment The REIT is subject to risks involving the economy in general, including inflation, deflation or stagflation, unemployment, geopolitical issues and a local, regional, national or international outbreak of a contagious disease, including coronavirus. Poor economic conditions could adversely affect the REIT’s revenues, thereby reducing its operating income and earnings and could harm the REIT’s financial condition. In weak economic environments, the REIT’s tenants may be unable to meet their rental payments and other obligations due to the REIT, which could have a material and adverse effect on the REIT. In addition, fluctuation in interest rates or other financial market volatility may adversely affect financing costs on variable rate debt as well as the REIT's ability to refinance existing Indebtedness on its maturity or on terms that are as favourable as the terms of the existing Indebtedness, which may impact negatively on AFFO, may restrict the availability of financing for future prospective purchasers of the REIT’s investments and could potentially reduce the value of such investments, or may adversely affect the ability of the REIT to complete acquisitions on financially desirable terms. Changes in Legislation interest), zoning, building standards, The REIT is subject to laws and regulations governing the ownership and leasing of real property (including laws restricting the acquisition of certain categories of residential real property by entities like the REIT in which non-residents have at least a three landlord/tenant relationships, construction, employment standards, percent environmental matters, taxes and other matters, including laws and regulations imposing restrictions relating to or arising from contagious disease, which at times have included laws and regulations limiting rent increases and imposing a moratorium on the ability of landlords to evict tenants for the non-payment of rent. It is possible that future changes in applicable federal, provincial, municipal or common laws or regulations or changes in their enforcement or regulatory interpretation could result in changes in the legal requirements affecting the REIT (including with retroactive effect). Any changes in the laws to which the REIT is subject could materially adversely affect the REIT’s rights and title to its assets or its ability to carry on its business in the ordinary course. Access to Capital The real estate industry is highly capital intensive. The REIT will require access to capital to fund its growth strategy and certain capital expenditures from time to time. There can be no assurances that the REIT will have access to sufficient capital or access to capital on terms favourable to the REIT for future property acquisitions, financing or refinancing of properties, funding operating expenses or other purposes. Market conditions and unexpected volatility or illiquidity in financial markets may inhibit the REIT’s access to financing in the Canadian equity capital markets. As a result, it is possible that financing which the REIT may require in order to grow and expand its operations, upon the expiry of the term of financing, upon refinancing any particular property owned by the REIT or otherwise, may not be available or, if it is available, may not be available on favourable terms to the REIT. Failure by the REIT to access required capital could have a material adverse effect on the REIT’s business, cash flows, financial condition and financial performance and ability to make distributions to Unitholders. Tax-Related Risk i) Mutual Fund Trust Status - The REIT intends to qualify at all relevant times as a “mutual fund trust” for purposes of the Tax Act. There can be no assurance that Canadian federal income tax laws and the administrative policies and practices of the CRA respecting the treatment of mutual fund trusts will not be changed in a manner that adversely affects the Unitholders. Minto Apartment REIT | 2022 Annual Report 39Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) ii) The REIT Exception - Canadian tax legislation relating to the federal income taxation of Specified Investment Flow Through trusts or partnerships provide that certain distributions from a SIFT will not be deductible in computing the SIFT’s taxable income and that the SIFT will be subject to tax on such distributions at a rate that is substantially equivalent to the general tax rate applicable to Canadian corporations. However, distributions paid by a SIFT as return of capital should generally not be subject to tax. Under the SIFT rules, the taxation regime will not apply to a real estate investment trust that meets prescribed conditions relating to the nature of its assets and revenue (the “REIT Exception”). The REIT Exception is comprised of a number of technical tests and the determination as to whether the REIT qualifies for the REIT Exception in any particular taxation year can only be made with certainty at the end of that taxation year. The REIT expects to qualify for the REIT Exception in 2022 and subsequent taxation years, such that it will be exempt from the SIFT rules. However, no assurances can be given that the REIT will satisfy the REIT Exception in any particular year. If the SIFT rules apply to the REIT, they may adversely affect the marketability of the Units, the amount of cash available for distributions and the after- tax return to investors. iii) General Taxation - There can be no assurance that Canadian federal or provincial tax laws, the judicial interpretation thereof, or the administrative and assessing practices and policies of the CRA, the Department of Finance (Canada) and any other tax authority or tax policy agency will not be changed in a manner that adversely affects the REIT, its affiliates or Unitholders, or that any such taxing authority will not challenge tax positions adopted by the REIT and its affiliates. Any such change or challenge could increase the amount of tax payable by the REIT or its affiliates or could otherwise adversely affect Unitholders by reducing the amount available to pay distributions or changing the tax treatment applicable to Unitholders in respect of such distributions. Rent Control Risk Rent control exists in some provinces in Canada, limiting the percentage of annual rental increases to existing tenants. The REIT is exposed to the risk of the implementation of, or amendments to, existing legislative rent controls in the markets in which it operates, which may have an adverse impact on the REIT’s operations. Of the jurisdictions in which the REIT currently operates, Ontario and Quebec have rent controls. Real Estate Industry Risk Real estate investments are generally subject to varying degrees of risk depending on the nature of the property. These risks include changes in general economic conditions (such as the availability and cost of mortgage funds), local conditions (such as an oversupply of space or a reduction in demand for real estate in the area), government regulations (such as new or revised residential tenant legislation or regulations affecting the availability and cost of CMHC mortgage insurance), the attractiveness of the properties to tenants, competition from others with available space and the ability of the owner to provide adequate maintenance at an economic cost. The performance of the economy in each of the areas in which the REIT’s properties are located, including the financial results and labour decisions of major local employers, can have an impact on revenues from the properties and their underlying values. An investment in real estate is relatively illiquid, with the degree of liquidity generally fluctuating in relation to demand for and the perceived desirability of such investments. Such illiquidity may limit the REIT’s ability to vary its Portfolio promptly in response to changing economic, investment or other conditions. If it were necessary to accelerate the liquidation of the REIT's real property investments, the proceeds to the REIT might be significantly less than the aggregate carrying or Net Asset Value of its properties. The REIT’s exposure to general risks associated with real estate investments is mitigated by its geographic diversification. Certain significant expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs and related charges, must be made regardless of whether or not a property is producing sufficient income to service these expenses. The REIT’s properties are subject to mortgages, which require significant debt service payments. If the REIT were unable to meet mortgage payments on any property, losses could be sustained as a result of the mortgagee’s exercise of its rights of foreclosure or of sale. Many of the REIT’s properties were constructed in the 1960’s and 1970’s and require ongoing capital expenditures. While management has implemented comprehensive property maintenance programs and monitors property conditions constantly, annual maintenance expenditures could exceed the REIT’s existing reserve estimates which could have a material adverse effect upon distributable income. The nature of the REIT’s business is such that refurbishment and structural repairs are required periodically, in addition to regular on-going maintenance. 2022 Annual Report | Minto Apartment REIT 40Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Competition for Real Property Investments The REIT competes for suitable real property investments with a variety of investors (both Canadian and foreign) that are presently seeking, or that may seek in the future, real property investments similar to those desired by the REIT. Many of these investors will have greater financial resources than those of the REIT. An increase in the availability of investment funds, and an increase in interest of real property investments, would tend to increase competition for real property investments, thereby increasing purchase prices and reducing yields therefrom. In addition, the REIT may require additional equity and/or debt financing to complete future real property acquisitions, which may not be available on terms acceptable to the REIT. Cyber Security Risks A cyber incident is any adverse event that threatens the confidentiality, integrity or availability of the REIT’s information technology resources. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to information systems to disrupt operations, corrupt data or steal confidential information. The REIT’s primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to its reputation, damage to relationships with its vendors and tenants and disclosure of confidential vendor or tenant information. The REIT, and Minto as a service provider under the Administrative Support Agreement, have implemented processes, procedures and controls to detect and mitigate these risks, but these measures, as well as its increased awareness of a risk of a cyber incident, do not guarantee that a cyber incident will not occur or that its financial results will not be negatively impacted by such an incident. Property Acquisition Risk The REIT’s business plan includes, among other things, growth through identifying suitable acquisition and/or development opportunities, pursuing such opportunities, consummating acquisitions and leasing acquired properties. The acquisition of properties entails general risks associated with any real estate investment, including the risk that the investments will fail to perform in accordance with expectations, that the properties will not achieve anticipated occupancy levels and that estimates of the costs of improvements to bring an acquired property up to standards established for the intended market position for that property may prove inaccurate. If the REIT is unable to make accretive acquisitions or otherwise manage its growth effectively, it could adversely impact the REIT’s financial position and financial performance and decrease the amount of cash available for distribution. There can be no assurance as to the pace of growth through property acquisitions or that the REIT will be able to acquire assets on an accretive basis and, as such, there can be no assurance that distributions to Unitholders will increase in the future. Risks Associated with the Administrative Support Agreement The REIT relies upon Minto with respect to the provision of certain services as described in the REIT's Annual Information Form dated March 8, 2023, under the section "Arrangements with Minto - Administrative Support Agreement", available on SEDAR at www.sedar.com. If the REIT were to lose the services provided by Minto, or if Minto fails to perform its obligations under the Administrative Support Agreement, the REIT may experience an adverse impact on its business operations. The REIT may be unable to duplicate the quality and depth or the cost of the services available to it by handling such services internally or by retaining another service provider. Utility and Property Tax Risk Utility and property tax risk relates to the potential additional costs the REIT may experience as a result of higher commodity prices as well as its exposure to significant increases in property taxes. Over the past few years, property taxes have increased as a result of higher property assessments of municipal properties and property tax rates. Utility expenses, mainly consisting of natural gas and electricity service charges, have been subject to considerable price fluctuations over the past several years. Any significant increase in these commodity costs that the REIT cannot pass on to the tenant may have a negative material impact on the REIT. The REIT mitigates part of this risk by submetering many of its suites to measure the consumption of electricity and passing on the cost to tenants and by investing in technology and property improvements that are aimed at reducing consumption. Currently, approximately 95% of the suites in the Portfolio are submetered or directly metered for electricity and approximately 86% of tenants pay the cost of electricity consumed in their suites. The REIT will seek to pass on the cost of electricity for those suites that are submetered but where the tenants do not currently pay for electricity, as the suites' tenancies turn over. Minto Apartment REIT | 2022 Annual Report 41Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Rental Income Risks The short-term nature of residential tenant leases exposes the REIT to the effects of a declining market rent, which could materially adversely affect the REIT’s results from operations and ability to make distributions to Unitholders. Most of the REIT’s residential tenant leases will be for a term of one year or less. Because the REIT’s residential tenant leases generally permit residents to leave at the end of their lease term without any penalty, the REIT’s rental revenue may be materially adversely affected by declines in market rents more quickly than if such leases were for longer terms. Further, the operating costs of a suite or property may increase at a faster rate than the rental rate for such suite, which could negatively impact the financial condition of the REIT. Renovation and Development Risk There is a risk that renovations or developments undertaken by the REIT will exceed original cost estimates or will experience unforeseen delays and that renovated or new suites may not lease in the anticipated timeframe or at anticipated rents. During suite renovations, suites are unavailable for occupancy and do not generate income. Environmental Risk As an owner of real estate, the REIT is subject to federal, provincial and municipal environmental regulations. These regulations may require the REIT to fund the costs of removal and remediation of certain hazardous substances on its properties or releases from its properties. The failure to remediate such properties, if any, could adversely affect the REIT’s ability to borrow using the property as collateral or to sell the real estate. The REIT is not aware of any material non-compliance with environmental laws at any of its properties nor is it currently aware of any environmental condition with respect to any properties that it believes would involve material expenditures by the REIT. The REIT has made, and will continue to make, the necessary capital expenditures to comply with environmental laws and regulations. The REIT conducts due diligence on all properties prior to acquisition and this process includes independent expert assessment of environmental risk for each property. It is the REIT's policy to obtain a Phase I environmental site assessment conducted by a qualified environmental consultant as a condition of acquiring any additional property. See "Investment Guidelines and Operating Policies - Operating Policies". Environmental laws and regulations can change rapidly, and the REIT may be subject to more stringent environmental laws and regulations in the future. Climate-Related Risk The REIT's properties may be impacted by climate-related events. Among the most significant of those risks is the risk of flooding, including flash flooding. Depending on the severity, these events could cause significant damage to the REIT's properties, interrupt normal operations and threaten the safety of tenants. The REIT's ability to generate revenue from impacted properties may also be significantly impaired. Climate-related events also may negatively impact certain costs of operation of the REIT's properties, including the cost of utility consumption due to abnormally hot or cold temperatures and the cost of snow removal. More generally, the increase in catastrophic losses worldwide from climate-related events has resulted in significant payouts by property insurers. This has resulted in a significant increases in property insurance premiums generally, including the property insurance premiums payable by the REIT. There is a risk of insurers being required to make payments on account of future climate-related catastrophic losses, which may result in further increases in the property insurance premiums payable by the REIT. Joint Venture Risk The REIT participates in co-ownerships for three of its properties and may participate in other co-ownerships or partnerships in the future. There is a risk that the co-owners or partners may fail to fund their share of capital contributions or their economic or business interests or goals may change in a manner to differ from or become inconsistent with those of the REIT. Disputes with the co-owners or partners may negatively affect the operations of and returns from co-owned or partnership properties, or give rise to an obligation to purchase the interest of the co-owner or partner or to sell the REIT's interest to the co-owner or partner at a time or on terms that may adversely impact the REIT’s financial position and financial performance. 2022 Annual Report | Minto Apartment REIT 42Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Potential Conflicts of Interest with Minto Minto’s continuing businesses may lead to conflicts of interest between Minto and the REIT. The REIT may not be able to resolve such conflicts, and, even if it does, the resolution may be less favourable to the REIT than if it were dealing with a party that was not a holder of a significant interest in the REIT. In addition, the ongoing relationships between Minto and each of Roger Greenberg, Philip Orsino and Michael Waters may lead to conflicts of interest between such persons and the REIT. In order to mitigate part of the risk associated with conflicts of interest, all related party transactions with Minto are reviewed and approved on behalf of the REIT by the REIT's independent trustees only. Social Media Risk The use of social media could cause the REIT to suffer brand damage or information leakage. Negative posts or comments about the REIT or its properties on any social networking website could damage the REIT’s reputation. In addition, employees or others might disclose non-public sensitive information relating to the REIT’s business through external media channels. The continuing evolution of social media will present the REIT with new challenges and risks. Increased Supply Risk Each segment of the real estate business is competitive. Numerous other residential developers and apartment owners compete in seeking tenants. Although the REIT’s strategy is to own multi-residential properties in desirable locations in each market in which it operates, some of the properties of the REIT’s competitors may be newer, better located or better capitalized. In addition, the desirability of property locations may change over time. The existence of alternative housing could have a material adverse effect on the REIT’s ability to lease space in its properties and on the rents charged or concessions granted, and could adversely affect the REIT’s revenues and its ability to meet its obligations. Appraisals of Properties An appraisal is an estimate of market value and caution should be used in evaluating data with respect to appraisals. It is an estimate of value based on information gathered in the investigation, appraisal techniques employed and reasoning both quantitative and qualitative, leading to an opinion of value. The analysis, opinions and conclusions in an appraisal are typically developed based on, and in conformity with, or interpretation of the guidelines and recommendations set forth in the Canadian Uniform Standards of Appraisal Practice. Appraisals are based on various assumptions of future expectations of property performance and while the appraiser’s internal forecast of net income for the properties appraised are considered to be reasonable at that time, some of the assumptions may not materialize or may differ materially from actual experience in the future. Appraisals are not guarantees of present or future value and there is no assurance that an appraised value actually reflects an amount that would be realized upon a current or future sale of any of the properties or that any projections included in the appraisal will be attainable. In addition, as prices in the real estate market fluctuate over time in response to numerous factors, the value of a property as shown in an appraisal may be an unreliable indication of its current market value. A publicly traded real estate investment trust will not necessarily trade at values determined solely by reference to the underlying value of its real estate assets. Accordingly, the Units may trade at a premium or a discount to values implied by appraisals. General Litigation Risks In the ordinary course of the REIT’s operations, whether directly or indirectly, it may become involved in, named as a party to or be the subject of various legal proceedings, including regulatory proceedings, tax proceedings and legal actions relating to personal injuries, property damage, property taxes, land rights, the environment, cyber-risks and contract disputes. The outcome with respect to outstanding, pending or future proceedings cannot be predicted with certainty and may be determined in a manner adverse to the REIT and as a result, could have a material adverse effect on the REIT’s assets, liabilities, business, financial condition and financial performance. Even if the REIT prevails in any such legal proceedings, the proceedings could be costly and time-consuming and may divert the attention of management and key personnel from the REIT’s business operations. Minto Apartment REIT | 2022 Annual Report 43Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) General Uninsured Losses The REIT carries comprehensive general liability, fire, flood, extended coverage and rental loss insurance with policy specifications, limits and deductibles customarily carried for similar properties. The REIT will continue to procure insurance for such risks, subject to certain standard policy limits and deductibles and will continue to carry such insurance if it is economical to do so. There are, however, certain types of risks (generally of a catastrophic nature such as war or environmental contamination), which are either uninsurable or not economically insurable. Should an uninsured or underinsured loss occur, the REIT could lose its investment in, and anticipated profits and cash flows from, one or more of its properties, and would continue to be obligated to repay any recourse mortgage indebtedness on such properties. There is a risk that any significant increase in insurance costs will impact negatively upon the profitability of the REIT. Key Personnel The REIT's executive and other senior officers have a significant role in the REIT's success and oversee the execution of the REIT's strategy. The REIT's ability to retain its management team or attract suitable replacements should any members of management leave is dependent on, among other things, the competitive nature of the employment market. The REIT has experienced departures of key professionals in the past and may do so in the future, and it cannot predict the impact that any such departures may have on its ability to achieve its objectives. The loss of services from key members of the management team or a limitation on their availability could adversely impact the REIT's financial condition and cash flow. The REIT mitigates key personnel risk through succession planning, but does not maintain key personnel insurance. Other Tax Matters i) Non-Resident Ownership - Under current law, a trust may lose its status under the Tax Act as a mutual fund trust if it can reasonably be considered that the trust was established or is maintained primarily for the benefit of Non-Residents, except in limited circumstances. Accordingly, the DOT provides that Non-Residents may not be the beneficial owners of more than 49% of the Units (determined on a basic or a fully-diluted basis). The Trustees also have various powers that can be used for the purpose of monitoring and controlling the extent of Non-Resident ownership of the Units. The REIT mitigates this risk by regularly monitoring the residency of Unitholders. ii) Tax-Basis of Acquired Properties - The Partnership has acquired, and may from time to time in the future acquire, certain properties on a fully or partially tax-deferred basis, such that the tax cost of these properties will be less than their fair market value. If one or more of such properties are disposed of, the gain realized by the Partnership for tax purposes (including any income inclusions arising from the recapture of previously claimed CCA on depreciable property) will be in excess of that which it would have realized if it had acquired the properties at a tax cost equal to their fair market values. For the purpose of claiming CCA, the UCC of such properties acquired by the Partnership will be equal to the amounts jointly elected by the Partnership and the transferor on the tax-deferred acquisition of such property. The UCC of such property will be less than the fair market value of such property. As a result, the CCA that the Partnership may claim in respect of such properties will be less than it would have been if such properties had been acquired with a tax cost basis equal to their fair market values. iii) Eligibility for Investment - The Tax Act imposes penalties for the acquisition or holding of investments that are not “qualified investments” within the meaning of the Tax Act by registered retirement savings plans, registered education savings plans, registered retirement income funds, deferred profit sharing plans, registered disability savings plans or tax- free savings accounts (collectively, “Exempt Plans”). Although the REIT will endeavour to ensure that the Units continue to be qualified investments for Exempt Plans, any property distributed to a Unitholder on an in specie redemption of Units may not be qualified investments under the Tax Act. iv) Non-Residents of Canada - The Tax Act may impose additional withholding or other taxes on distributions made by the REIT to Unitholders who are Non-Residents. These taxes and any reduction thereof under a tax treaty between Canada and another country may change from time to time. The tax consequences under the Tax Act for Non-Resident Unitholders may be more adverse than the consequences to other Unitholders. Non-Resident Unitholders should consult their own tax advisors 2022 Annual Report | Minto Apartment REIT 44Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Financial Risk Management The REIT's activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. Market Risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk consists of interest rate risk, currency risk and other price risk. Interest rate risk As the REIT’s interest-bearing assets mainly comprise fixed rate instruments, changes in market interest rates do not have any significant direct effect on the REIT’s income. The REIT's financial liabilities comprise both fixed rate and variable rate instruments. The REIT faces interest rate risk on its fixed rate debt due to the expected requirement to refinance such debt in the year of maturity or shortly thereafter. The REIT manages interest rate risk by structuring its financings to stagger the maturities of its debt, thereby mitigating its exposure to interest rate and other credit market fluctuations. For the portion of the REIT’s financial liabilities that comprise variable rate instruments, from time to time the REIT may enter into interest rate swap contracts or other financial instruments to modify the interest rate profile of its outstanding debt without an exchange of the underlying principal amount. As at December 31, 2022, the REIT has a committed variable rate credit facility of $267,115 (December 31, 2021 - $200,000) with an outstanding balance of $157,600 (December 31, 2021 - $51,754). A 100 bps change in prevailing variable interest rates would change annualized interest charges incurred by $1,572 (December 31, 2021 - $518). As at December 31, 2022, the REIT also has two variable rate mortgages with outstanding balance of $108,378 (December 31, 2021 - $nil). A 1% change in prevailing interest rates would change annualized interest charges incurred by $1,084 (December 31, 2021 - $nil). The REIT intends to refinance these mortgages as CMHC-insured fixed rate mortgages. Currency risk The REIT’s financial statement presentation currency is Canadian dollars. Operations are located in Canada and the REIT has limited operational transactions in foreign-denominated currencies. As such, the REIT has no significant exposure to currency risk. Other price risk Other price risk is the risk of variability in fair value due to movements in equity prices or other market prices such as commodity prices and credit spreads. The REIT is exposed to other price risk on its Class B LP Units. A 1% change in the prevailing market price of the Units as at December 31, 2022 would have a $3,619 (December 31, 2021 - $4,984) change in the fair value of the Class B LP Units. Credit Risk Credit risk is the risk that tenants and/or debtors may experience financial difficulty and be unable to fulfill their lease commitments or loan repayments. An allowance for impairment is taken for all expected credit losses ("ECL"s). The REIT’s risk of credit loss from tenants experiencing financial difficulties is mitigated through diversification. The REIT’s residential rental business is carried on in the Toronto, Montreal, Ottawa, Calgary and Edmonton regions. The nature of this business involves a high volume of tenants with individually small monthly rent amounts. The REIT monitors the collection of residential rent receivables on a regular basis with strictly followed procedures designed to minimize credit loss in cases of non- payment. The REIT is also exposed to the concentration of credit risk in relation to the loans advanced, in the event that the borrowers default on the contractual terms of repayment of amounts owing to the REIT. The REIT provides financing to MPI for strategic developments and, in turn, receives an option to purchase or acquire an ownership interest in those developments. Management mitigates this risk by the ensuring there is sufficient security provided by the development assets in addition to guarantees provided by MPI. Minto Apartment REIT | 2022 Annual Report 45Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Liquidity Risk Liquidity risk is the risk that the REIT will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The REIT’s liquidity is subject to macroeconomic, financial, competitive and other factors that are beyond the REIT’s control. Liquidity risk is managed through cash flow forecasting. Management monitors forecasts of the REIT’s liquidity requirements to ensure it has sufficient cash to meet operational needs through maintaining sufficient cash and/or availability on the undrawn credit facility and ensuring that it meets its financial covenants related to debt agreements. Such forecasting takes into consideration the current and projected macroeconomic conditions, the REIT's cash collection efforts, debt financing plans and covenant compliance required under the terms of debt agreements. There is a risk that such liquidity forecasts may not be achieved and that currently available debt financing may no longer be available to the REIT at terms and conditions that are favorable to the REIT, or at all. The REIT mitigates liquidity risk by staggering the maturity dates of its borrowing, maintaining borrowing relationships with various lenders, proactively renegotiating expiring credit agreements well in advance of the maturity date and by maintaining sufficient availability on its credit facility. As of December 31, 2022, liquidity was $114,838 (December 31, 2021 - $150,655), consisting of cash of $5,323 (December 31, 2021 - $2,851) and $109,515 (December 31, 2021 - $147,804) of available borrowing capacity under the credit facility. An analysis of the contractual cash flows associated with the REIT's financial liabilities is set out below: Mortgages Construction loan Credit facility Class C LP Units Interest obligation1 Tenant rental deposits Due to related parties Accounts payable and accrued liabilities 2023 239,195 $ $ — 239,195 — 50,234 33,816 10,464 2,936 2024 59,235 $ — 59,235 — 50,499 26,591 — — 2025 51,093 $ — 51,093 157,158 63,541 18,990 — — 2026 81,122 $ — 81,122 — 1,283 10,607 — — 2027 8,155 $ — 8,155 — 22,752 9,539 10 — 2028 and thereafter 301,534 $ 8,006 309,540 — 18,364 24,733 — — Total 740,334 8,006 748,340 157,158 206,673 124,276 10,474 2,936 28,689 412 147 51 — 5,144 34,443 $ 365,334 $ 136,737 $ 290,929 $ 93,063 $ 40,456 $ 357,781 $ 1,284,300 The contractual cash flows do not include any unamortized mark-to-market adjustments or unamortized deferred financing costs. Related Party Transactions Administrative Support Agreement On July 3, 2018, the REIT and MPI, an entity with significant influence over the REIT, entered into a five-year renewable ASA. The ASA provides the REIT with certain advisory, transaction and support services, including clerical and administrative support, operational support for the administration of day-to-day activities of the REIT and office space. These services are provided on a cost recovery basis, subject to a maximum during the initial term of the ASA only for all general and administrative expenses, excluding public company costs, of 32 bps of the gross book value of the REIT's assets. On December 15, 2022, the REIT exercised its option to renew the ASA for an additional term of five years commencing on July 3, 2023. The limitation of all general and administrative expenses, excluding public company costs, of 32 bps of the gross book value of the REIT's assets was removed from the renewed ASA. For the year ended December 31, 2022, the REIT incurred $2,260 (December 31, 2021 - $2,260) for services rendered by MPI and its affiliates under the ASA. 1 Interest obligation on mortgages, construction loan, credit facility and Class C LP Units. 2022 Annual Report | Minto Apartment REIT 46Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Loans receivable from related parties Project 99 Fifth Avenue, Ottawa, ON ("Fifth and Bank") Lonsdale Avenue, North Vancouver, BC ("Lonsdale Square") Beechwood Avenue, Ottawa, ON ("Beechwood") 810 Kingsway, Vancouver, BC ("810 Kingsway") 3958 Shelbourne Street, Victoria, BC ("University Heights") Related Parties Commitment Interest Rate and Maturity December 31, 2022 December 31, 2021 Affiliate of MPI $ 30,000 6% per annum July 31, 2023 $ 30,000 $ 30,000 Limited partnership jointly owned by MPI and a subsidiary of Darwin Properties 14,000 7% per annum May 30, 2024 13,784 12,855 Affiliate of MPI 51,400 6% per annum December 31, 2025 25,550 10,094 MPI MPI 19,650 6% per annum August 1, 2024 51,700 7% per annum December 31, 2026 166,750 700 Variable per annum1 April 27, 2032 $ 167,450 1 $ $ 15,357 10,363 12,893 97,584 718 98,302 $ 30,000 68,302 98,302 $ — 63,312 — 63,312 30,000 33,312 63,312 Loan receivable Management Current Non-current All commitments pertaining to projects include a reserve to fund interest costs. In connection with these financings, the REIT has the exclusive option to purchase the property at Fifth and Bank, Lonsdale Square and Beechwood, MPI's 85% indirect ownership interest in 810 Kingsway and MPI's 45% indirect ownership interest in University Heights, upon project stabilization at 95% of its then-appraised fair market value as determined by independent and qualified third-party appraisers. As at December 31, 2022, the ECL based on 12 month expected losses for the loans receivable is $nil (December 31, 2021 - $nil) The following table shows the movement of loans receivable from related parties: Year ended Opening balance Cash flows Advances Interest received Non-cash movement Interest earned Closing balance December 31, 2022 $ 63,312 $ December 31, 2021 41,988 32,040 (1,800) 30,240 4,750 34,990 $ 98,302 $ 20,024 (1,800) 18,224 3,100 21,324 63,312 Fair value of loans receivable relating to projects is calculated based on current market rates plus risk-adjusted spreads on discounted cash flows. As at December 31, 2022, the current market rates plus risk-adjusted spreads ranged from 8.50% to 9.50% and the fair value of the loans receivable relating to projects was $93,441 (December 31, 2021 - carrying value of the loans receivable approximated their fair value) and is considered level 2 within the fair value hierarchy. 1 The interest rate is set quarterly at the greater of prime and the prescribed interest rate as determined by the Regulations of the Income Tax Act (Canada), subject to a maximum of 5%. Interest is payable annually in arrears. Minto Apartment REIT | 2022 Annual Report 47Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Related Parties December 31, 2022 December 31, 2021 Due to related parties Item Current Class B LP Units distributions Class C LP Units distributions Property operating costs payable Development costs and fees Unit distribution Limited partnership wholly- owned by MPI and MPI affiliates $ Limited partnership wholly- owned by MPI MPI and its affiliates Affiliate of MPI MPI Rental and service revenue receivable MPI and its affiliates Revenue, expenses, capital expenditures and distributions Related Parties / Item Revenue from MPI, its affiliates and jointly-owned limited partnerships Rental and service revenue Interest income on loans advanced 1,052 $ 546 $ 493 $ 1,357 $ 37 $ 3,485 $ (549) $ 2,936 $ 901 561 411 535 35 2,443 (521) 1,922 December 31, 2022 December 31, 2021 863 $ 4,750 $ $ $ $ $ $ $ $ $ $ Expenses and distributions to MPI, its affiliates, its wholly-owned and jointly-owned limited partnerships Property operating expenses Development costs and fees Distribution on Class B LP Units (finance costs) Distribution on Class C LP Units (finance costs) Distribution on Class C LP Units (principal) Distributions on Units Compensation of key management personnel Paid to executives Unit-based compensation Executives Trustees in lieu of annual retainer and meeting fees 1,315 1,231 11,942 6,574 5,510 427 770 1,502 579 716 3,100 713 — 10,436 6,743 5,341 411 635 1,304 560 Additional compensation to key management personnel for services provided to the REIT was paid by MPI and its affiliate. Property acquisitions On April 22, 2022, the REIT acquired a 28.35% ownership interest in a 501-suite multi-residential rental property located in Toronto, Ontario from a limited partnership in which an associate of MPI and certain current and former executives of MPI owned a minority interest. The acquisition cost of $112,667, including transaction costs of $2,896, was settled by the REIT assuming a $46,158 mortgage, the issuance of 2,985,956 Class B LP Units with a fair value of $60,974, paying $4,990 in cash, and assuming working capital liabilities of $545. On May 6, 2022, the REIT acquired a 252-suite multi-residential rental property located in Calgary, Alberta from a limited partnership in which a subsidiary of MPI owned a minority interest. The acquisition cost of $86,614, including transaction costs of $99, was settled with the REIT assuming a mortgage of $62,220, paying $23,771 in cash, and assuming working capital liabilities of $623. 2022 Annual Report | Minto Apartment REIT 48Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Contingencies and Commitments The REIT is subject to claims and legal actions that arise in the ordinary course of business. It is the opinion of Management that any ultimate liability that may arise from such matters would not have a significant adverse effect on the consolidated financial statements of the REIT. The REIT has an off-balance sheet arrangement at one of its properties in the Toronto area which was acquired in 2018 pursuant to which the City of Toronto provided a forgivable loan to support affordable housing at this property. Provided that certain conditions are met, the REIT will not need to make repayments under this arrangement. As of December 31, 2022, the remaining unforgiven balance of the loan is $13,464 (December 31, 2021 - $14,688). To date, the REIT has met all conditions related to this forgivable loan and Management has assessed that throughout the remaining term of the loan the REIT is likely to continue to meet the conditions for forgiveness and that the outflow of economic resources to settle the loan is not probable. As such, no liability has been recorded by the REIT. The REIT has an off-balance sheet arrangement at one of its properties in the Calgary area which was acquired in 2018 pursuant to which the Province of Alberta provided a forgivable loan to support affordable housing at this property. Provided that certain conditions are met, the REIT will not need to make repayments under the arrangement. As of December 31, 2022, the remaining unforgiven balance of the loan is $3,360 (December 31, 2021 - $3,696). To date, the REIT has met all conditions related to this forgivable loan and Management has assessed that throughout the remaining term of the loan the REIT is likely to continue to meet the conditions for forgiveness and that the outflow of economic resources to settle the loan is not probable. As such, no liability has been recorded by the REIT. As at December 31, 2022, the REIT has committed to advance an additional $50,087 (December 31, 2021 - $40,926) to related parties in order to support the development of several projects and an additional $19,079 (December 31, 2021 - $10,812) to fund interest costs. The REIT is a guarantor on a joint and several basis for mortgage debt held through one of its joint operations. As at December 31, 2022, the maximum potential obligation resulting from this guarantee is $12,690 (December 31, 2021 - $13,042). Future Changes in Accounting Standards The following accounting standards under IFRS have been issued or revised, however are not yet effective and as such have not been applied by the REIT: Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) On February 12, 2021, the IASB issued amendments to IAS 1 – Presentation of Financial Statements to assist entities in determining which accounting policies to disclose in the financial statements. The amendments apply to annual reporting periods beginning on or after January 1, 2023. Earlier adoption is permitted. The amendments to IAS 1 require that an entity disclose its material accounting policies, instead of its significant accounting policies. Further amendments explain how an entity can identify a material accounting policy. The REIT intends to adopt the amendments in its consolidated financial statements beginning on January 1, 2023, when the amendments become effective. The REIT has assessed the impact of the amendments and expects to shorten its disclosure on accounting policies in the REIT's consolidated financial statements based on the guidance in the amendments. Definition of Accounting Estimates (Amendments to IAS 8) On February 12, 2021, the IASB issued amendments to IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, to assist entities to distinguish between accounting policies and accounting estimates. The amendments apply to annual periods beginning on or after January 1, 2023. Earlier adoption is permitted. The amendments to IAS 8 replace the definition of a "change in accounting estimates" with a definition of "accounting estimates". Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”. Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. The amendments confirm that a change in an accounting estimate that results from new information or new developments is not the correction of an error. The REIT intends to adopt the amendments in its consolidated financial statements beginning on January 1, 2023, when the amendments become effective. The REIT is assessing the potential impact of the amendments, however does not expect them to have a material impact on the REIT's consolidated financial statements. Minto Apartment REIT | 2022 Annual Report 49Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) On January 23, 2020, the IASB issued amendments to IAS 1, providing a more general approach to the classification of liabilities based on the contractual agreements in place at the reporting date. The amendments apply to annual reporting periods beginning on or after January 1, 2024. Earlier adoption is permitted. The amendments to IAS 1 affect only the presentation of liabilities in the balance sheet and seek to clarify that the classification of liabilities as current or non-current should be based on the rights that are in existence at the end of the reporting period. Further, the amendments make clear that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability and that the settlement of a liability refers to the transfer to the counterparty of cash, equity instruments, other assets or services. The REIT intends to adopt the amendments in its consolidated financial statements beginning on January 1, 2024, when the amendments become effective. The REIT has assessed the potential impact of the amendments and they will have no material impact on the REIT's consolidated financial statements. Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) On September 22, 2022, the IASB issued amendments to IFRS 16 – Leases confirming that the measurement of a right-of-use asset and lease liability is unlikely to be $nil if variable lease payments arise in a sale-and-leaseback transaction. On initial recognition, the seller-lessee includes variable lease payments when it measures a lease liability arising from a sale-and- leaseback transaction. After initial recognition, the seller-lessee applies the general requirements for subsequent accounting of the lease liability such that it recognizes no gain or loss relating to the right-of-use it retains. The REIT intends to adopt the amendments in its annual financial statements beginning on January 1, 2024, when the standard becomes effective. The REIT is assessing the potential impact of the amendments, however does not expect them to have a material impact on the REIT's consolidated financial statements. Disclosure Controls and Internal Controls Over Financial Reporting Management is responsible for establishing and maintaining a system of disclosure controls and procedures ("DC&P") to provide reasonable assurance that all material information relating to the REIT that is required to be publicly disclosed is recorded, processed, summarized and reported on a timely basis and within the time period specified in securities legislation. Management is also responsible for establishing and maintaining adequate internal controls over financial reporting ("ICFR") to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial reports for external purposes in accordance with IFRS. In designing such controls, it should be recognized that due to inherent limitations, any controls, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives and may not prevent or detect misstatements. Additionally, Management is required to use judgment in evaluating controls and procedures. The Chief Executive Officer and the Chief Financial Officer have evaluated, or caused an evaluation under their direct supervision of, the design and operating effectiveness of DC&P and ICFR (as defined in National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings) as at December 31, 2022. As a result of this evaluation, Management has concluded that as of December 31, 2022, the design and operation of the REIT’s DC&P were effective to ensure that material information relating to the REIT would have been known to them and that information required to be disclosed by the REIT is recorded, processed, summarized, and reported on a timely basis and within the time period specified in securities legislation. Management has also concluded that as of December 31, 2022, the REIT's ICFR were appropriately designed and operating effectively in accordance with the 2013 Guidance on Internal Control published by the Committee of Sponsoring Organizations of the Treadway Commission. During the year ended December 31, 2022, the REIT completed the conversion to a new ERP system. The ERP system conversion has not resulted in any significant changes in internal controls during the year ended December 31, 2022, and the REIT's Management employed appropriate procedures to ensure internal controls over financial reporting were in place during and after the conversion. Subsequent Events On March 7, 2023, the REIT completed its disposition of Hi-Level Place in Edmonton for a sale price of $9,920, generating net proceeds of $2,832. 2022 Annual Report | Minto Apartment REIT 50Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Section VI - Supplemental Information Property Portfolio Property Toronto 1 High Park Village Leslie York Mills 2 3 Richgrove 4 Martin Grove 5 Minto Yorkville1 6 Roehampton 7 Niagara West Ottawa Parkwood Hills Garden Homes & Townhomes 8 Minto one80five1 9 10 Aventura 11 Huron 12 Seneca 13 Castleview 14 Skyline Garden Homes, Maisonettes & Walkups 15 The Carlisle 16 Castle Hill 17 Grenadier 18 Tanglewood 19 Eleanor 20 Frontenac 21 Stratford Montreal 22 Rockhill 23 Le 4300 24 Haddon Hall 25 Le Hill-Park Edmonton 26 The Lancaster House 27 York House 28 Hi-Level Place Calgary 29 The Quarters 30 The Laurier 31 Kaleidoscope 32 The International Portfolio Total Total Suites REIT Ownership Interest Effective Ownership Interest (Suites) 750 409 258 237 181 148 501 2,484 417 393 354 251 251 241 259 193 176 158 122 117 104 59 3,095 1,004 318 210 261 1,793 98 92 64 254 199 144 70 252 665 8,291 40% 50% 100% 100% 100% 100% 28.35% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 50% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 300 205 258 237 181 148 142 1,471 417 393 354 251 251 241 259 193 176 158 122 117 104 59 3,095 502 318 210 261 1,291 98 92 64 254 199 144 70 252 665 6,776 1 Suite counts for Minto Yorkville and Minto one80five include furnished suites, representing approximately 31% of the total suites at these properties. Minto Apartment REIT | 2022 Annual Report 51Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) Average Rent Per Square Foot Geographic Node Toronto Ottawa Alberta Montreal Average Average monthly rent per occupied suite $2,061 1,621 1,436 1,856 Average sq. ft. per occupied suite 776 836 672 975 Average rent per sq. ft per suite $2.66 1.94 2.14 1.90 $1,732 827 $2.09 Non-IFRS and Other Financial Measures The REIT's financial statements are prepared in accordance with IFRS. Management's Discussion and Analysis also contains certain non-IFRS and other financial measures which are measures commonly used by publicly traded entities in the real estate industry. Management believes that these metrics are useful for measuring different aspects of performance and assessing the underlying operating and financial performance on a consistent basis. However, these measures do not have a standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly traded entities. These measures should strictly be considered supplemental in nature and not a substitute for financial information prepared in accordance with IFRS. The REIT has adopted the guidance under NI 52-112 Non-GAAP and Other Financial Measures Disclosure for the purpose of this Management's Discussion and Analysis. These non-IFRS and other financial measures and ratios are defined below: Non-IFRS Financial Measures and Ratios • "FFO" is defined as IFRS consolidated net income adjusted for items such as unrealized changes in the fair value of investment properties, effects of puttable instruments classified as financial liabilities and changes in fair value of financial instruments and derivatives. FFO should not be construed as an alternative to net income or cash flows provided by or used in operating activities determined in accordance with IFRS. The REIT's method of calculating FFO is substantially in accordance with REALPAC’s recommendations under the revised publication titled ‘‘REALPAC Funds from Operations (FFO) & Adjusted Funds from Operations (AFFO) for IFRS’’ published in January 2022, but may differ from other issuers’ methods and, accordingly, may not be comparable to FFO reported by other issuers. The REIT regards FFO as a key measure of operating performance. For reconciliation refer to Section IV – “Liquidity, Capital Resources and Contractual Commitments – Reconciliation of Non-IFRS Financial Measures and Ratios”. • "FFO per unit" is calculated as FFO divided by the weighted average number of Units of the REIT and Class B LP Units of the Partnership outstanding over the period. The REIT regards FFO per unit as a key measure of operating performance. For reconciliation refer to Section IV – “Liquidity, Capital Resources and Contractual Commitments – Reconciliation of Non-IFRS Financial Measures and Ratios”. • "AFFO" is defined as FFO adjusted for items such as maintenance capital expenditures and straight-line rental revenue differences. AFFO should not be construed as an alternative to net income or cash flows provided by or used in operating activities determined in accordance with IFRS. The REIT’s method of calculating AFFO is substantially in accordance with REALPAC’s recommendations under the revised publication titled ‘‘REALPAC Funds from Operations (FFO) & Adjusted Funds from Operations (AFFO) for IFRS’’ published in January 2022, except that it adjusts for certain non-cash items (such as adjustments for the amortization of mark-to-market adjustments related to debt), but may differ from other issuers’ methods and, accordingly, may not be comparable to AFFO reported by other issuers. The REIT regards AFFO as a key measure of operating performance. The REIT also uses AFFO in assessing its capacity to make distributions. For reconciliation refer to Section IV – “Liquidity, Capital Resources and Contractual Commitments – Reconciliation of Non-IFRS Financial Measures and Ratios”. • "AFFO per unit" is calculated as AFFO divided by the weighted average number of Units of the REIT and Class B LP Units of the Partnership outstanding over the period. The REIT regards AFFO per unit as a key measure of operating performance. For reconciliation refer to Section IV – “Liquidity, Capital Resources and Contractual Commitments – Reconciliation of Non- IFRS Financial Measures and Ratios”. • "AFFO Payout Ratio" is the proportion of the total distributions on Units and Class B LP Units to AFFO. The REIT uses AFFO Payout Ratio in assessing its capacity to make distributions. For reconciliation refer to Section IV – “Liquidity, Capital Resources and Contractual Commitments – Reconciliation of Non-IFRS Financial Measures and Ratios”. 2022 Annual Report | Minto Apartment REIT 52Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) • "Debt-to-Adjusted EBITDA ratio" is calculated by dividing interest-bearing debt (net of cash) by Adjusted EBITDA. Adjusted EBITDA is a non-IFRS Financial Measure and used for evaluation of the REIT's financial health and liquidity. Adjusted EBITDA is calculated as the trailing twelve-month NOI adjusted for a full year of stabilized earnings including finance income, fees and other income and general and administrative expenses from recently completed acquisitions, but excluding fair value adjustments. The REIT regards Debt-to-Adjusted EBITDA ratio as a measure of financial health and liquidity. For reconciliation refer to Section IV – “Liquidity, Capital Resources and Contractual Commitments – Liquidity and Capital Resources”. Capital Management Measures • "Weighted average contractual interest rate" is calculated as the weighted average contractual interest rate on mortgages. • "Weighted average interest rate on fixed rate debt" is calculated as the weighted average of the stated interest rates on the outstanding balances of fixed rate mortgages, a variable rate mortgage fixed through an interest rate swap and Class C LP Units. • "Weighted average term to maturity on fixed rate debt" is calculated as the weighted average of the term to maturity on the outstanding fixed rate mortgages, a variable rate mortgage fixed through an interest rate swap and Class C LP Units. • "Weighted average interest rate on variable rate debt" is calculated as the weighted average interest rate on the revolving credit facility and the variable rate mortgages for the period, excluding the variable rate mortgage fixed through an interest rate swap. Supplementary Financial Measures • "Average annual unlevered return" refers to the return on repositioning activities, and is calculated by dividing the average annual rental increase per suite after repositioning by the average repositioning cost per suite, excluding the impact of financing costs. • "Debt Service Coverage ratio" is the ratio of NOI to total debt service. • "Debt-to-Gross Book Value ratio" is calculated by dividing total interest-bearing debt consisting of fixed and variable rate mortgages, credit facilities, construction loans and Class C LP Units of the Partnership by Gross Book Value and is used as the REIT's primary measure of its leverage. • "Distribution yield per unit" is calculated as the annualized distribution per Unit and Class B LP Unit, divided by the Unit closing price as of the balance sheet date. • "Gain-to-lease" refers to the gap between rents achieved on new leases as compared to expiring leases. • "Gain-to-lease potential" refers to the gap between Management's estimate of monthly market rent and average monthly in-place rent per suite. • "Gross Book Value" is defined as the total assets of the REIT as at the balance sheet date. • "NAV" is calculated as the sum of the value of Unitholders' equity and Class B LP Units as at the balance sheet date. • "NAV per unit" is calculated by dividing NAV by the number of Units and Class B LP Units outstanding as at the balance sheet date. • "NOI" is defined as revenue from investment properties less property operating costs, property taxes and utilities (collectively referred to as "property operating expenses") prepared in accordance with IFRS. NOI should not be construed as an alternative to net income determined in accordance with IFRS. The REIT’s method of calculating NOI may differ from other issuers’ methods and, accordingly, may not be comparable to NOI reported by other issuers. The REIT regards NOI as an important measure of the income generated from income-producing properties and is used by Management in evaluating the performance of the REIT’s properties. It is also a key input in determining the value of the REIT’s properties. • "NOI margin" is defined as NOI divided by revenue from investment properties. • "Total debt" is calculated as the sum of value of interest-bearing debt consisting of fixed and variable rate mortgages, credit facilities, construction loans and Class C LP Units of the Partnership. • "Total debt, net of cash" is calculated as Total debt, reduced by cash balance. • "Total debt service" is calculated as the sum of interest expense recorded as finance costs and principal payments on mortgages, construction loan, credit facility and distributions on Class C LP Units. Minto Apartment REIT | 2022 Annual Report 53Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022 (in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data) • "Total liquidity" is calculated as the sum of the undrawn balance under the revolving credit facility and cash. • "Property operating costs as a percentage of revenue" is calculated as property operating costs for the period, divided by revenue from investment properties for the period. • "Property taxes as a percentage of revenue" is calculated as property taxes for the period, divided by revenue from investment properties for the period. • "Utilities as a percentage of revenue" is calculated as Utilities expense for the period, divided by revenue from investment properties for the period. Operating Performance Measures • "Annualized turnover rate" is calculated as the trailing twelve-month new leases signed for the period divided by total number of suites in the portfolio, excluding furnished suites and suites held offline for repositioning. • "Average monthly rent" or "AMR" represents the average monthly rent per suite for occupied unfurnished suites at the end of the period. • "Average monthly rent for furnished suites" represents the average daily rent per suite for furnished suites for the period multiplied by 30. • "Occupancy for furnished suites" is the ratio of occupied furnished suites to the total furnished suites in the portfolio for the period. • "Occupancy - average of the period" is defined as the ratio of occupied unfurnished suites to the total unfurnished suites in the portfolio for the period. Occupancy as an average for the period is a useful indicator to evaluate the unfurnished rental performance. • "Occupancy - end of the period" is defined as the ratio of occupied unfurnished suites to the total unfurnished suites in the portfolio at the end of the period. Occupancy at end of the period is a useful indicator to evaluate the unfurnished rental performance. 2022 Annual Report | Minto Apartment REIT 54KPMG LLP Bay Adelaide Centre 333 Bay Street, Suite 4600 Toronto, ON M5H 2S5 Canada Tel 416-777-8500 Fax 416-777-8818 INDEPENDENT AUDITOR’S REPORT To the Unitholders of Minto Apartment Real Estate Investment Trust Opinion We have audited the consolidated financial statements of Minto Apartment Real Estate Investment Trust (the “Entity”), which comprise: • • • • • the consolidated balance sheets as at December 31, 2022 and December 31, 2021 the consolidated statements of net income and comprehensive income for the years then ended the consolidated statements of changes in unitholders’ equity for the years then ended the consolidated statements of cash flows for the years then ended and notes to the consolidated financial statements, including a summary of significant accounting policies (Hereinafter referred to as the “financial statements”). In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2022 and December 31, 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section of our auditor’s report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. © 2023 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Minto Apartment Real Estate Investment Trust March 8, 2023 Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2022. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matter described below to be the key audit matter to be communicated in our auditor’s report. Evaluation of the fair value of residential investment properties Description of the matter We draw attention to Note 2(f), Note 2(s) and Note 3 of the financial statements. The Entity uses the fair value method to account for real estate classified as investment property. The Entity has recorded residential investment properties for an amount of $2,525,455 thousand, representing the most significant portion of investment properties. Significant assumptions in determining the fair value of residential properties include: • • estimated 12-month stabilized forecasted net operating income for each property capitalization rates. Why the matter is a key audit matter We identified the evaluation of the fair value of residential investment properties as a key audit matter. This matter represented an area of significant risk of material misstatement given the magnitude of residential investment properties and the high degree of estimation uncertainty in determining the fair value of residential investment properties. Additionally, significant auditor judgment and involvement of those with specialized skills and knowledge were required in evaluating the results of our audit procedures due to the sensitivity of the fair value of residential investment properties to minor changes in significant assumptions. How the matter was addressed in the audit The primary procedures we performed to address this key audit matter included the following: For a selection of residential investment properties, we assessed the Entity’s ability to forecast by comparing the Entity’s estimated 12-month stabilized forecasted net operating income used in the prior year’s estimate of the fair value of residential investment properties to actual results. For a selection of residential investment properties, we compared the estimated 12-month stabilized forecasted net operating income for each selected property to the actual historical net operating income by: • • taking into account the changes in conditions and events affecting the residential investment properties considering the adjustments, or lack of adjustments, made by the Entity in arriving at the estimated 12-month stabilized forecasted net operating income. Minto Apartment Real Estate Investment Trust March 8, 2023 We involved valuations professionals with specialized skills and knowledge who assisted in evaluating the capitalization rates of the overall portfolio of residential investment properties. These rates were evaluated by comparing them to published reports of real estate industry commentators and considering the various characteristics of the portfolio. Other Information Management is responsible for the other information. Other information comprises: • • the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions the information, other than the financial statements and the auditor’s report thereon, included in a document entitled “2022 Annual Report”. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated. We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions and the 2022 Annual Report as of the date of the auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditor’s report. We have nothing to report in this regard. 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 International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity’s financial reporting process. Minto Apartment Real Estate Investment Trust March 8, 2023 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 generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our 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 Entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Minto Apartment Real Estate Investment Trust March 8, 2023 • Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. • Determine, from the matters communicated with those charged with governance, those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Chartered Professional Accountants, Licensed Public Accountants The engagement partner on the audit resulting in this auditor’s report is Thomas Rothfischer. Toronto, Canada March 8, 2023 Minto Apartment Real Estate Investment Trust Consolidated Balance Sheets (in thousands of Canadian dollars, except Unit and per Unit amounts) Note December 31, 2022 December 31, 2021 Assets Investment properties Loans receivable from related parties Prepaid expenses and other assets Resident and other receivables Cash Liabilities and Unitholders' Equity Liabilities Class B LP Units Class C LP Units Mortgages and loans Credit facility Tenant rental deposits Due to related parties Accounts payable and accrued liabilities Unitholders' equity Contingencies and commitments Subsequent event 3 12 6 7 8 9 10 11 12 13 18 24 $ $ $ $ $ 2,611,094 $ 98,302 16,806 3,287 5,323 2,734,812 $ 361,858 $ 208,086 746,320 157,158 10,474 2,936 34,443 1,521,275 $ 2,360,565 63,312 11,898 2,088 2,851 2,440,714 498,415 214,069 626,120 51,754 10,136 1,922 28,297 1,430,713 1,213,537 1,010,001 2,734,812 $ 2,440,714 See accompanying notes to the consolidated financial statements. 2022 Annual Report | Minto Apartment REIT 60Minto Apartment Real Estate Investment Trust Consolidated Statements of Net Income and Comprehensive Income For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) Revenue from investment properties 16 $ 143,790 $ 123,547 Note December 31, 2022 December 31, 2021 Property operating expenses Property operating costs Property taxes Utilities Property operating income Other expenses (income) General and administrative Finance costs - operations Finance income Fair value loss (gain) on: Investment properties Class B LP Units Interest rate swap Unit-based compensation Fees and other income 28,387 15,116 12,491 55,994 87,796 9,303 44,590 (4,818) 18,828 (197,531) (2,391) (2,246) (3,339) (137,604) 17 3 8, 17 6, 17 22 Net income and comprehensive income $ 225,400 $ See accompanying notes to the consolidated financial statements. 23,952 13,322 10,026 47,300 76,247 7,602 35,310 (3,129) (89,188) 34,609 (1,625) 137 (1,630) (17,914) 94,161 Minto Apartment REIT | 2022 Annual Report 61Minto Apartment Real Estate Investment Trust Consolidated Statements of Changes in Unitholders' Equity For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) Note Units Distributions Retained earnings Total Balance, December 31, 2020 $ 631,434 $ (30,204) $ 248,994 $ 850,224 Net income and comprehensive income Units issued, net of issue costs Distributions Balance, December 31, 2021 Net income and comprehensive income Cancellation of Units under normal course issuer bid Distributions 14 14 14 14 — 82,687 — — — (17,071) 94,161 — — 94,161 82,687 (17,071) $ 714,121 $ (47,275) $ 343,155 $ 1,010,001 — (3,248) — — — (19,100) 225,400 225,400 484 — (2,764) (19,100) Balance, December 31, 2022 $ 710,873 $ (66,375) $ 569,039 $ 1,213,537 See accompanying notes to the consolidated financial statements. 2022 Annual Report | Minto Apartment REIT 62Minto Apartment Real Estate Investment Trust Consolidated Statements of Cash Flows For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) Note December 31, 2022 December 31, 2021 Cash provided by (used in): Operating activities Net income Adjustments for: Finance costs - operations Finance income Fair value loss (gain) on: Investment properties Class B LP Units Interest rate swap Unit-based compensation Change in non-cash working capital Cash provided by operating activities Financing activities Proceeds from issuance of Units, net of issue costs Proceeds from mortgage financing CMHC premiums paid Financing costs Principal repayments on mortgages Net proceeds from credit facility Proceeds from construction loan Forgivable loan Distributions on Class B LP Units Distributions on Class C LP Units, used to repay principal Distribution on Units Interest paid Purchase and cancellation of Units Cash provided by financing activities Investing activities Acquisition of investment properties Capital additions to investment properties Development of investment properties Loans advanced to related parties Interest received Cash used in investing activities Change in cash during the year Cash, beginning of the year Cash, end of the year 17 3 8, 17 6, 17 22 21 10 10 11 10 9 14 4 12 See accompanying notes to the consolidated financial statements. Minto Apartment REIT | 2022 Annual Report $ 225,400 $ 44,590 (4,818) 18,828 (197,531) (2,391) (2,246) 667 82,499 — 34,623 (882) (537) (30,201) 105,404 8,006 1,350 (11,791) (5,510) (19,058) (32,981) (2,764) 45,659 (28,761) (49,203) (17,550) (32,040) 1,868 (125,686) 2,472 2,851 $ 5,323 $ 94,161 35,310 (3,129) (89,188) 34,609 (1,625) 137 1,844 72,119 82,726 49,558 — (222) (12,879) 19,806 — — (10,399) (5,341) (16,861) (25,150) — 81,238 (80,007) (37,429) (17,482) (20,024) 1,829 (153,113) 244 2,607 2,851 63Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) 1. Description of the entity Minto Apartment Real Estate Investment Trust (the "REIT") is an unincorporated, open-ended real estate investment trust established pursuant to a Declaration of Trust dated April 24, 2018, which was amended and restated on June 27, 2018, and is amended from time to time. The REIT owns, develops and operates a portfolio of income-producing multi-residential rental properties located in Canada. The REIT was established under the laws of the Province of Ontario. The principal and registered office of the REIT is 200-180 Kent Street, Ottawa, Ontario. At December 31, 2022, the REIT's portfolio consists of interests in 32 multi-residential rental properties, including four mixed- use residential apartment and commercial buildings, all of which are held by Minto Apartment Limited Partnership (the "Partnership"), which is consolidated by the REIT. 2. Significant accounting policies (a) Basis of presentation and measurement These consolidated financial statements have been prepared on a historical cost basis, except for investment properties, Class B units of the Partnership ("Class B LP Units"), Unit-based compensation and interest rate swap, which have been measured at fair value. The consolidated financial statements have been presented in Canadian dollars, which is the REIT's functional currency. The REIT's business faces risk from economic factors that have grown in prominence, specifically, rising interest rates and inflation. The REIT has used all information available as at December 31, 2022 that it considers relevant in determining the potential impact of these economic factors and COVID-19 on the carrying amounts of assets and liabilities, earnings for the period and risks disclosed in the consolidated financial statements for the years ended December 31, 2022 and 2021. The estimates and judgements that could be most significantly impacted by economic factors and COVID-19 include those underlying the valuation of investment properties. Actual results could differ from those estimates. Investment properties (Note 3) and risk management (Note 19) include disclosures of the potential impacts of economic factors and COVID-19 on the fair value of investment properties and liquidity risk. The REIT continues to monitor and assess the impact that economic factors and COVID-19 will have on its business activities and financial results. (b) Statement of compliance These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and using the accounting policies described herein. These consolidated financial statements were approved by the Board of Trustees of the REIT and authorized for issuance on March 8, 2023. (c) Basis of consolidation The consolidated financial statements include the financial statements of the REIT and its subsidiaries, including the Partnership. Subsidiaries are consolidated from the date of acquisition, being the date on which the REIT obtains control, and continue to be consolidated until the date when control is lost. Control exists when the REIT is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The accounting policies of subsidiaries have been modified when necessary to align them with the policies adopted by the REIT. All intra-group balances, transactions and unrealized gains and losses are eliminated in full upon consolidation. 2022 Annual Report | Minto Apartment REIT 64Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) (d) Business combinations At the time of acquisition of property, whether through a controlling share investment or directly, the REIT considers whether a transaction results in an asset acquisition or a business combination. The amendments to IFRS 3, Business Combinations ("IFRS 3"), adopted on January 1, 2020, include an election to use a concentration test. This is a simplified assessment that results in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. If the REIT chooses not to apply the concentration test, or the test is failed, then the assessment focuses on the existence of a substantive process. If no substantive processes are acquired, the acquisition is treated as an asset acquisition rather than a business combination. The cost of a business combination is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the acquisition date. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at fair value at the date of acquisition. The REIT recognizes assets or liabilities, if any, resulting from a contingent consideration arrangement at their acquisition date fair value and such amounts form part of the cost of the business combination. Subsequent changes in the fair value of contingent consideration arrangements are recognized in the consolidated statements of net income and comprehensive income. The difference between the purchase price and the fair value of the acquired identifiable net assets and liabilities is goodwill. On the date of acquisition, positive goodwill is recorded as an asset. A bargain purchase gain is recognized immediately in the consolidated statements of net income and comprehensive income. The REIT expenses transaction costs associated with business combinations in the period incurred. When an acquisition does not meet the criteria for business combination accounting treatment, it is accounted for as an acquisition of a group of assets and liabilities, the cost of which includes transaction costs that are allocated upon initial recognition to the assets and liabilities acquired based upon their relative fair values. Measurement period adjustments are adjustments that arise from additional information obtained during the “measurement period”, which cannot exceed one year from the acquisition date, about facts and circumstances that existed at the acquisition date. Subsequent changes in fair value of contingent consideration classified as assets or liabilities that do not qualify as measurement period adjustments are recognized as a gain or loss in the consolidated statements of net income and comprehensive income. (e) Joint arrangements The REIT has joint arrangements in and joint control of certain investment properties which it manages. The REIT has assessed the nature of its joint arrangements and determined them to be joint operations. The REIT accounts for joint operations by recognizing in relation to its interest its share of revenues, expenses, assets and liabilities, which are included in their respective captions on the consolidated balance sheets and consolidated statements of net income and comprehensive income. All balances and effects of transactions between joint operations and the REIT have been eliminated to the extent of the REIT's interest in the joint operations. (f) Investment properties The REIT uses the fair value method to account for real estate classified as investment property. Property that is held for long term rentals or for capital appreciation or both is classified as investment property. Investment property also includes property that is being constructed or developed for future use as investment property and land held for future development to earn rental income. Subsequent capital expenditures are added to the carrying value of the investment properties only when it is probable that future economic benefits will flow to the property and the cost can be measured reliably. All repairs and maintenance costs are expensed as incurred. The acquisition of investment properties is initially measured at cost including directly attributable acquisition costs, except when acquired through a business combination, where such costs are expensed as incurred. Directly attributable acquisition costs include professional fees, land transfer taxes and other transaction costs. Minto Apartment REIT | 2022 Annual Report 65Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) After initial recognition, investment properties are carried at fair value, which is determined based on available market evidence at each reporting date, including capitalization rates that reflect the characteristics, location and market of each property. Gains or losses arising from changes in fair value are included in the consolidated statements of net income and comprehensive income during the period in which they arise. When an investment property is disposed of, the gain or loss is determined as the difference between the disposal proceeds, net of selling costs and the carrying amount of the property and is recognized in the consolidated statements of net income and comprehensive income in the period of disposal. Fair value for residential properties is determined using the direct capitalization approach by applying an appropriate capitalization rate which reflects the characteristics, location and market of each property to the estimated 12 month stabilized forecasted net operating income for each property, and deducting estimated aggregate future capital expenditures. Estimated 12 month stabilized forecasted net operating income is based on the respective property's forecasted results, adjusted to reflect market occupancy rates and expenditure levels. Fair value is determined based on internal valuation models. Fair value for commercial properties is determined using the discounted future cash flow approach over a term of ten years plus a terminal value. Discount rates and terminal capitalization rates reflect the characteristics, location and market of each property. Future cash flows are based on estimated rental revenue from future leases less related estimated future cash outflows. Fair value is determined based on internal valuation models. Fair value for land held for development is determined by reference to comparable market prices for similar assets. Fair value for land under development is determined by reference to comparable market prices for similar assets plus development costs incurred to date. These costs include costs directly attributable to the development, construction costs, property taxes, directly attributable labour costs and borrowing costs on both specific and general debt. Direct and indirect borrowing costs, development costs and property taxes are capitalized when the activities necessary to prepare an asset for development or redevelopment begin, and continue until the date that construction is substantially complete and all necessary occupancy and related permits have been received, whether or not the space is leased. Capitalization of borrowing costs is suspended if there are prolonged periods when development activity is interrupted. Interest is capitalized using the REIT's weighted average cost of borrowing after adjusting for borrowing associated with specific developments. Where borrowing is associated with specific developments, the amount capitalized is the gross interest incurred on such borrowing less any investment income arising on temporary investment of such borrowing. As part of the internal valuation process, the REIT considers external valuations performed by independent national real estate valuation firms for a cross-section of properties that represent different geographical locations across the REIT’s portfolio. On a quarterly basis, Management reviews and updates, as deemed necessary, the valuation models to reflect current market data. (g) Financial instruments Financial instruments are generally measured at fair value on initial recognition. The classification and measurement of financial assets consists of the following categories: (i) measured at amortized cost, (ii) fair value through profit and loss ("FVTPL"), and (iii) fair value through other comprehensive income (‘‘FVTOCI’’). Financial assets classified at amortized cost are measured using the effective interest method. Financial assets classified as FVTPL are measured at fair value with gains and losses recognized in the consolidated statements of net income and comprehensive income. Financial assets classified as FVTOCI are measured at fair value with gains or losses recognized through other comprehensive income, except for gains and losses pertaining to impairment or foreign exchange which are recognized through the consolidated statements of net income and comprehensive income. The classification and measurement of financial liabilities consists of the following categories: (i) measured at amortized cost and (ii) FVTPL. Financial liabilities classified at amortized cost are measured using the effective interest method. Financial liabilities classified as FVTPL are measured at fair value with changes in fair value attributable to changes in the credit risk of the liability recognized in other comprehensive income, and the remaining amount of change in fair value recognized in the consolidated statements of net income and comprehensive income. 2022 Annual Report | Minto Apartment REIT 66Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) The REIT has made the following classifications for its financial instruments: Amount Loans receivable from related parties Restricted cash Interest rate swap Resident and other receivables Cash Class B LP Units Class C LP Units Mortgages and loans Credit facility Tenant rental deposits Due to related parties Accounts payable and accrued liabilities Measurement Amortized cost Amortized cost FVTPL Amortized cost Amortized cost FVTPL Amortized cost Amortized cost Amortized cost Amortized cost Amortized cost Amortized cost The REIT derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. The REIT derecognizes a financial liability when, and only when, the REIT's obligations are discharged, canceled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in the consolidated statements of net income and comprehensive income. Transaction costs other than those related to financial instruments classified as FVTPL, which are expensed as incurred, are capitalized to the carrying amount of the instrument and amortized using the effective interest method. These costs include interest, amortization of discounts or premiums relating to borrowings, fees and commissions paid to agents, brokers and advisers, transfer taxes and duties, and a portion of Canada Mortgage and Housing Corporation ("CMHC") insurance premiums related to current mortgages. Units Trust units of the REIT ("Units") are redeemable at the holder's option and therefore are considered to be a puttable instrument in accordance with IAS 32, Financial Instruments: Presentation ("IAS 32"). Puttable instruments are required to be accounted for as financial liabilities, except where certain conditions are met in accordance with IAS 32, in which case the puttable instruments may be presented as equity. The Units meet the exemption conditions of IAS 32 and are presented as equity. Units represent a Unitholder's proportionate undivided beneficial interest in the REIT. No Unit has any preference or priority over another. No Unitholder has or is deemed to have any right of ownership in any of the assets of the REIT. Each Unit confers the right to one vote at any meeting of Unitholders and to participate pro rata in any distributions and, on liquidation, to a pro rata share of the residual net assets remaining after preferential claims thereon of debtholders. The REIT does not report an earnings per unit calculation, as per IAS 33, Earnings Per Share, as the Units meet the definition of a financial liability under IAS 32. Unitholders have the right to redeem their Units at the lesser of (i) 90% of the market price of the Units and (ii) 100% of the closing market price on the redemption date. The redemption price will be satisfied by cash up to a limit of $50 for all redemptions in a calendar month, which can be waived at the discretion of the REIT's Trustees. Minto Apartment REIT | 2022 Annual Report 67Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) Class B LP Units The Class B LP Units are economically equivalent to Units, receive distributions equal to the distributions paid on Units and are exchangeable at the holder’s option into Units. One Special Voting Unit in the REIT is issued to the holder of Class B LP Units for each Class B LP Unit held, which entitles the holder to one vote per Special Voting Unit at any meeting of the Unitholders. The limited IAS 32 exception for presentation as equity does not extend to the Class B LP Units. As a result, the Class B LP Units have been classified as financial liabilities and are measured at FVTPL. The fair value of the Class B LP Units is measured every period by reference to the traded value of the Units, with changes in measurement recorded in the consolidated statements of net income and comprehensive income. Distributions on the Class B LP Units are recorded as a finance cost in the consolidated statements of net income and comprehensive income in the period in which the distributions become payable. Class C LP Units The Class C units of the Partnership ("Class C LP Units") provide for monthly distributions from the Partnership to the holder of such Class C LP Units to be paid in priority to distributions to holders of the Units and Class B LP Units. Due to the nature of such distributions, the Class C LP Units have been classified as financial liabilities and are carried at amortized cost. Distributions on the Class C LP Units consist of principal repayments and interest expense, with principal repayments reducing the outstanding liability and interest expense recorded in finance costs in the consolidated statements of net income and comprehensive income in the period in which the distributions become payable. Derivative financial instruments The REIT uses derivative financial instruments to manage risks from fluctuations in interest rates. All derivative instruments are designated and valued at FVTPL in the consolidated financial statements. Impairment of financial assets The REIT has adopted the practical expedient to estimate the expected credit loss ("ECL") on resident and other receivables using a provision matrix based on historical credit loss experience adjusted for current and forecasted future economic conditions. Resident and other receivables are initially measured at fair value and are subsequently measured at amortized cost less a provision for impairment. The REIT recognizes loss allowances for ECL on the remaining financial assets measured at amortized cost, unfunded loan commitments and financial guarantee contracts. The REIT applies a three-stage approach to measure allowance for credit losses. The REIT measures loss allowance at an amount equal to 12 months of expected losses for performing loans if the credit risk at the reporting date has not increased significantly since initial recognition (Stage 1) and at an amount equal to lifetime expected losses on performing loans that have experienced a significant increase in credit risk since origination (Stage 2) and at an amount equal to lifetime expected losses which are credit impaired (Stage 3). The determination of a significant increase in credit risk takes into account different factors and varies by nature of investment. The REIT assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due or certain criteria are met which are specific to the individual borrower based on judgment. The REIT considers a financial asset to be credit impaired when the borrower is more than 90 days past due and when there is objective evidence that there has been a deterioration of credit quality to the extent the REIT no longer has reasonable assurance as to the timely collection of the full amount of principal and interest or when the REIT has commenced enforcement remedies available to it under its contractual agreements. Measurement of ECL's Loss allowances for ECLs are probability-weighted estimates of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the REIT in accordance with the contract and the cash flows that the REIT expects to receive) and incorporate significant assumptions including the probability of default as well as the estimated loss given default. ECLs are discounted at the effective interest rate of the financial asset. 2022 Annual Report | Minto Apartment REIT 68Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. 12- month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period considering when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk. The determination of ECLs of a collateralized impaired loan reflects the expected realization of the underlying security, net of expected costs and any amounts legally required to be paid to the borrower. When determining the allowance for ECLs, the REIT considers reasonable and supportable information that is relevant and available without undue cost or effort. Management considers past events, current market conditions and reasonable forward-looking supportable information about future economic conditions. In assessing information about possible future economic conditions, management utilized multiple economic scenarios including a base case, which represents the most probable outcome and is consistent with management's view of the financial asset. In considering the lifetime of a loan, the contractual period of the loan, including prepayment, extension and other options is generally used. The estimation of ECLs also includes assumptions about local real estate market conditions, availability and terms of financing, underlying value of the security and various other factors. These assumptions are limited by the availability of reliable comparable market data, economic uncertainty and the uncertainty of future events. Accordingly, by their nature, estimates of impairment are subjective and may not necessarily be comparable to the actual outcome. Should the underlying assumptions change, the estimated future cash flows could vary. (h) Fair value measurement The REIT measures financial instruments, such as Class B LP Units, interest rate swap and Unit-based compensation, and non-financial assets, such as investment properties, at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: • • In the principal market for the asset or liability; or In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the REIT. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability assuming that market participants act in their economic best interests. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The REIT uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: • • • Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable Minto Apartment REIT | 2022 Annual Report 69Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the REIT determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. Cash, restricted cash, resident and other receivables, due to related parties, tenant rental deposits and accounts payable and accrued liabilities are carried at amortized cost, which, due to their short term nature, approximates fair value. Additionally, the credit facility is carried at amortized cost, which, due to its variable rate, approximates fair value. The REIT estimates the fair value of its mortgages and Class C LP Units based on the rates that could be obtained for similar debt instruments with similar terms and maturities. Their fair value qualifies as level 2 in the fair value hierarchy above. The fair value of Class B LP Units and Unit-based compensation is measured every period by reference to the traded value of Units and is considered Level 2 in the fair value hierarchy. The fair value of the interest rate swap is determined using widely accepted valuation techniques, including discounted cash flow analysis on expected cash flows of the derivatives, using observable market-based inputs including interest rate curves and implied volatilities, and is considered level 2 in the fair value hierarchy. The fair value of the loans receivable from related parties is determined by reference to rates that could be obtained for similar instruments with similar terms and maturities and is considered level 2 in the fair value hierarchy. There were no transfers of assets or liabilities between fair value levels during the periods presented herein. (i) CMHC premiums CMHC mortgage insurance premiums provide coverage over the loan amortization period, typically 25 to 40 years. The portion related to the term of currently outstanding mortgages is accounted for as a financing charge and amortized over the life of respective mortgages using the effective interest method. The remaining portion of the CMHC mortgage insurance premiums is classified as a prepaid expense. (j) Restricted cash Restricted cash consists of tenant security deposits and a capital asset replacement reserve fund held in trust accounts. The capital asset replacement reserve fund was established as a condition of a forgivable loan provided by the City of Toronto to support affordable housing at a certain Toronto property. (k) Cash Cash includes cash on hand and cash maintained in bank accounts. (l) Income taxes The REIT is a "mutual fund trust" and a "real estate investment trust" as defined in the Income Tax Act (Canada). Under current tax legislation, a “real estate investment trust” is entitled to deduct distributions of taxable income such that it is not liable to pay income taxes provided that its taxable income is fully distributed to Unitholders. The REIT qualifies as a “real estate investment trust” and intends to make distributions not less than the amount necessary to ensure that the REIT will not be liable to pay income taxes. Accordingly, no net current tax expenses or current or deferred income tax asset or liability has been recorded in the consolidated financial statements. (m) Revenue recognition The REIT retains substantially all of the risks and benefits of ownership of its investment properties and therefore accounts for leases with its tenants as operating leases. Rental revenue includes base rents earned from tenants under operating lease agreements which is allocated to lease components based on relative stand-alone selling prices. The stand-alone selling prices of the rental component are determined using an adjusted market assessment approach and the stand-alone selling prices of the service components are determined using an expected cost plus a margin approach. 2022 Annual Report | Minto Apartment REIT 70Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) Rental revenue from the rental component is recognized on a straight-line basis over the lease term. When the REIT provides incentives to its tenants, the cost of incentives is recognized over the lease term, on a straight-line basis, as a reduction of revenue. Revenue from services represents the service component of the REIT’s leases and is accounted for in accordance with IFRS 15, Revenue from Contracts with Customers (‘‘IFRS 15’’). These services consist primarily of the recovery of utility, property maintenance and amenity costs where the REIT has determined it is acting as a principal and is recognized over time when the services are provided. Payments are due at the beginning of each month and any payments made in advance of scheduled due dates are recorded as contract liabilities. Management fees are earned from asset, project and property management of jointly controlled properties. Management fees are recorded in fees and other income as the services are provided. Payments for property management fees are due at the beginning of each month, asset management fees are due at the beginning of each quarter and project management fees are due 30 days in arrears. (n) Expenses Operating expenses and general and administrative expenses are recognized in the consolidated statements of net income and comprehensive income in the period in which they are incurred. (o) Finance costs Finance costs are comprised of interest expense on secured debt and unsecured debt, amortization of mark-to-market adjustments and financing charges, distributions on Class B LP Units and Class C LP Units, fair value loss (gain) on Class B LP Units and fair value loss (gain) on an interest rate swap. Finance costs associated with financial liabilities presented at amortized cost are presented in the consolidated statements of net income and comprehensive income using the effective interest method. (p) Unit-based compensation The REIT maintains an Amended and Restated Omnibus Equity Incentive Plan (the "Plan") for its Trustees and executives pursuant to which eligible participants may receive Deferred Units, Performance Units, Restricted Units or other similar types of security based compensation. Awards under the Plan may be settled by Units issued from treasury or, if so elected by the participant and subject to the approval of the Board of Trustees, cash. The grant date value is recognized as part of general and administrative expenses over the vesting period, with a corresponding increase in liabilities over the service period related to the award. The grant date value is calculated using the market price of the Units on the grant date for Deferred Units and using a pricing model for Performance Units. Market price is defined as the volume weighted average closing price of the Units on the Toronto Stock Exchange for the five trading days immediately preceding such date. The grant date value estimate for Performance Units requires determination of relevant inputs to the pricing model. The liability is remeasured at each reporting date and settlement date using the closing market price of the Units as defined in the Plan or the updated pricing model as of the date of measurement. Any changes in the value of the liability are recognized as fair value adjustments through the consolidated statements of net income and comprehensive income. (q) Government grant The REIT receives financial assistance from the government to help fund the development and operation of affordable rental suites. Government grants are not recognized until there is reasonable assurance that the REIT will comply with the conditions attached to them and that the grants will be received. In accordance with IAS 20 – Accounting for Government Grants and Disclosure of Government Assistance (“IAS 20”), grant proceeds related to development properties will be recognized in profit or loss on a systematic basis over the periods in which the REIT recognizes revenue or incurs expenses. Minto Apartment REIT | 2022 Annual Report 71Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) (r) Significant judgments in applying accounting policies The following are the significant judgments that have been made in applying the REIT’s accounting policies and that have the most significant effect on the amounts in the consolidated financial statements: Investment property acquisitions The REIT must assess whether an acquisition transaction should be accounted for as an asset acquisition or a business combination under IFRS 3. This assessment requires the REIT to make judgments on whether the assets acquired and liabilities assumed constitute a business as defined in IFRS 3 and if the integrated set of activities, including inputs and processes acquired, are capable of being conducted and managed as a business and the REIT obtains control of the business. Income taxes The REIT is a "mutual fund trust" and a "real estate investment trust" as defined in the Income Tax Act (Canada). The REIT is not liable to pay Canadian income taxes provided that its taxable income is fully distributed to Unitholders each year. The REIT is a "real estate investment trust" if it meets the prescribed conditions under the Income Tax Act (Canada) relating to the nature of its assets and revenue. The REIT uses judgment in reviewing the real estate investment trust conditions and assessing their interpretation and application to the REIT’s assets and revenue, and it has determined that it qualifies as a "real estate investment trust" for the current period. Interest in joint operations The REIT assesses whether an arrangement should be accounted for as a joint operation or a joint venture under IFRS 11, Joint Arrangements. This assessment requires the REIT to make judgments on whether the REIT's rights and obligations arising from the arrangement constitute a joint operation or a joint venture. Recognition of government grants For acquired residential properties financed through forgivable loans, the REIT assesses whether throughout the remaining term of forgivable loans the REIT is expected to meet the conditions for forgiveness, that the outflow of economic resources is not probable and that in accordance with IAS 37 – Provision, Contingent Liabilities and Contingent Assets no financial liability is required to be recorded. For development properties financed through forgivable loans to support affordable housing, the REIT assesses whether throughout the remaining term of the forgivable loans there is reasonable assurance that the REIT will meet the conditions for forgiveness and if this is not the case that the balance that is forgiven is to be recognized over time. (s) Significant accounting estimates and assumptions The REIT makes estimates and assumptions that affect the carrying amounts of assets and liabilities and the reported amount of income for the period. Actual results could differ from estimates. The estimates and assumptions that have the most significant effect on the reported amounts in the consolidated financial statements include: Residential Investment properties valuation In applying the REIT’s policy with respect to investment properties, significant accounting estimates and assumptions are required to determine the valuation of the residential properties under the fair value model. Significant accounting estimates and assumptions used in the REIT's internal valuation model include the estimated 12 month stabilized forecasted net operating income for each property and the capitalization rates that reflect the characteristics, location and market for each property. 2022 Annual Report | Minto Apartment REIT 72Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) (t) Future changes in accounting standards Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) On February 12, 2021, the IASB issued amendments to IAS 1 – Presentation of Financial Statements to assist entities in determining which accounting policies to disclose in the financial statements. The amendments apply to annual reporting periods beginning on or after January 1, 2023. Earlier adoption is permitted. The amendments to IAS 1 require that an entity disclose its material accounting policies, instead of its significant accounting policies. Further amendments explain how an entity can identify a material accounting policy. The REIT intends to adopt the amendments in its consolidated financial statements beginning on January 1, 2023, when the amendments become effective. The REIT has assessed the impact of the amendments and expects to shorten its disclosure on accounting policies in the REIT's consolidated financial statements based on the guidance in the amendments. Definition of Accounting Estimates (Amendments to IAS 8) On February 12, 2021, the IASB issued amendments to IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, to assist entities to distinguish between accounting policies and accounting estimates. The amendments apply to annual periods beginning on or after January 1, 2023. Earlier adoption is permitted. The amendments to IAS 8 replace the definition of a "change in accounting estimates" with a definition of "accounting estimates". Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”. Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. The amendments confirm that a change in an accounting estimate that results from new information or new developments is not the correction of an error. The REIT intends to adopt the amendments in its consolidated financial statements beginning on January 1, 2023, when the amendments become effective. The REIT is assessing the potential impact of the amendments, however does not expect them to have a material impact on the REIT's consolidated financial statements. Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) On January 23, 2020, the IASB issued amendments to IAS 1, providing a more general approach to the classification of liabilities based on the contractual agreements in place at the reporting date. The amendments apply to annual reporting periods beginning on or after January 1, 2024. Earlier adoption is permitted. The amendments to IAS 1 affect only the presentation of liabilities in the balance sheet and seek to clarify that the classification of liabilities as current or non-current should be based on the rights that are in existence at the end of the reporting period. Further, the amendments make clear that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability and that the settlement of a liability refers to the transfer to the counterparty of cash, equity instruments, other assets or services. The REIT intends to adopt the amendments in its consolidated financial statements beginning on January 1, 2024, when the amendments become effective. The REIT has assessed the potential impact of the amendments and they will have no material impact on the REIT's consolidated financial statements. Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) On September 22, 2022, the IASB issued amendments to IFRS 16 – Leases confirming that the measurement of a right-of- use asset and lease liability is unlikely to be nil if variable lease payments arise in a sale-and-leaseback transaction. On initial recognition, the seller-lessee includes variable lease payments when it measures a lease liability arising from a sale- and-leaseback transaction. After initial recognition, the seller-lessee applies the general requirements for subsequent accounting of the lease liability such that it recognizes no gain or loss relating to the right-of-use it retains. The REIT intends to adopt the amendments in its annual financial statements beginning on January 1, 2024, when the standard becomes effective. The REIT is assessing the potential impact of the amendments, however does not expect them to have a material impact on the REIT's consolidated financial statements. Minto Apartment REIT | 2022 Annual Report 73Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) 3. Investment properties The following table presents the change in investment properties by type: Balance, December 31, 2020 $ Residential properties 2,098,052 $ Commercial properties Land under development 22,490 $ 17,559 $ Total 2,138,101 Additions Acquisition (Note 4) Capital expenditures Development expenditures Fair value gain (loss) 82,604 36,404 — 89,433 — 49 — (3,689) — — 14,219 3,444 82,604 36,453 14,219 89,188 Balance, December 31, 2021 $ 2,306,493 $ 18,850 $ 35,222 $ 2,360,565 Additions Acquisitions (Note 4) Capital expenditures Development expenditures Other Fair value (loss) gain 186,579 52,348 — (715) (19,250) 12,702 48 — — (3,772) — — 18,395 — 4,194 199,281 52,396 18,395 (715) (18,828) Balance, December 31, 2022 $ 2,525,455 $ 27,828 $ 57,811 $ 2,611,094 For the year ended December 31, 2022, the REIT capitalized $1,051 (December 31, 2021 - $95) in interest costs associated with the REIT's general borrowings and the construction loan to the respective developments. The REIT's weighted average borrowing rate on general borrowings was 4.52% (December 31, 2021 - 2.21%). Interest costs associated with the construction loan were capitalized to the related development using the actual borrowing rate associated with the loan. The fair value methodology for the REIT’s investment properties is considered level 3, as significant unobservable inputs are required to determine fair value. The fair value of investment properties is based on internal valuations and as at December 31, 2022, the entire portfolio was internally valued. The REIT's internal valuation team consists of qualified individuals who hold recognized relevant professional qualifications and have recent experience in the location and category of the respective properties. The REIT also engaged leading independent national real estate appraisal firms with representation and expertise across Canada, and specifically in the markets in which the REIT operates, in order to ensure that every REIT property is externally appraised at least once every three years. These external appraisals were used by Management to assist in the validation of the market assumptions and market data used as part of its internal valuation model. For the year ended December 31, 2022, the REIT obtained external property appraisals representing approximately 53% (December 31, 2021 - 52%) of the REIT's investment properties. The REIT continues to review market capitalization, discount and terminal capitalization rates, as well as its future cash flow projections and their impact on the valuation of its properties in light of economic factors and COVID-19 (Note 2). The carrying value of the REIT's investment properties reflects Management's best estimate of fair value in terms of the assessed highest and best use as at December 31, 2022. It is not possible to forecast with certainty the duration or full scope of the financial impact that economic factors and COVID-19 will have on the REIT's business and operations, both in the short and long term. Any long- term effects on market rents, occupancy, turnover, and future demand and of a sustained increase in interest rates would ultimately impact the underlying valuation of investment properties and such impact may be material. 2022 Annual Report | Minto Apartment REIT 74Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) Fair value for residential properties is predominantly determined using the direct capitalization approach and includes a deduction for estimated aggregate future capital expenditures. For the year ended December 31, 2022, the aggregate five-year estimated future capital expenditures deducted was $89,329 (December 31, 2021 - $83,852) in determining the fair value of residential properties. The following table summarizes the significant unobservable inputs in determining fair value of residential properties: Significant unobservable inputs Capitalization rates Inter-relationship between significant unobservable inputs and fair value measurement There is an inverse relationship between the capitalization rates and the fair value; in other words, the higher the capitalization rates, the lower the estimated fair value. Estimated 12 month stabilized forecasted net operating income ("NOI") There is a direct relationship between the estimated 12-month stabilized forecasted NOI and the fair value; in other words, the higher the estimated 12-month stabilized forecasted NOI, the higher the estimated fair value. The following table summarizes the capitalization rates used in determining the fair value of the REIT's residential properties: Capitalization rate December 31, 2022 December 31, 2021 Min 3.25% Max 4.63% Weighted average 3.80% Min 3.13% Max 4.50% Weighted average 3.60% The following table summarizes the sensitivity of the fair value of residential properties to changes in capitalization rates and estimated 12 month stabilized forecasted NOI as at December 31, 2022: December 31, 2022 Capitalization rate -50 basis points -25 basis points Base rate +25 basis points +50 basis points -3 % -1 % NOI +1 % +3 % $ 2,831,592 $ 2,625,751 2,447,012 2,290,353 2,151,920 2,891,817 $ 2,681,732 2,499,308 2,339,419 2,198,132 2,921,929 $ 2,709,722 2,525,455 2,363,951 2,221,237 2,952,042 $ 2,737,713 2,551,603 2,388,484 2,244,343 3,012,267 2,793,694 2,603,899 2,437,550 2,290,554 The following table summarizes the sensitivity of the fair value of residential properties to changes in capitalization rates and estimated 12 month stabilized forecasted NOI as at December 31, 2021: December 31, 2021 Capitalization rate -50 basis points -25 basis points Base rate +25 basis points +50 basis points -3 % -1 % NOI +1 % +3 % $ 2,608,163 $ 2,407,561 2,234,782 2,084,414 1,952,361 2,663,669 $ 2,458,930 2,282,589 2,129,120 1,994,345 2,691,421 $ 2,484,615 2,306,493 2,151,474 2,015,337 2,719,174 $ 2,510,300 2,330,396 2,173,827 2,036,329 2,774,679 2,561,669 2,378,203 2,218,533 2,078,312 Minto Apartment REIT | 2022 Annual Report 75Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) 4. Acquisition of investment properties The REIT completed the acquisition of two investment properties for the year ended December 31, 2022: Property 39 Niagara Street, 29–33 Bathurst Street, Toronto, ON ("Niagara West") 220 4 Avenue SW, Calgary, AB ("The International") Date of acquisition Total acquisition cost Variable rate mortgage financing April 22, 2022 $ 112,667 $ 46,158 May 6, 2022 86,614 62,220 $ 199,281 $ 108,378 Interest rate and maturity at date of acquisition Bankers' acceptance + 2% or Prime + 1% November 30, 2022 Bankers' acceptance + 2.5% or Prime + 1% September 30, 2022 Ownership interest 28.35% 100% The REIT completed the following investment property acquisition during the year ended December 31, 2021: Property 4530 Chemin de la Côte-des-Neiges, Montreal, QC ("Le Hill-Park") Date of acquisition Total acquisition cost Mortgage financing Interest rate and maturity Ownership interest December 7, 2021 $ 82,604 $ 41,000 1.22% April 1, 2022 100% Cash used in the acquisition of investment properties was as follows: Total acquisition cost Mortgage financing assumed Issuance of Class B LP Units (Note 8) Transaction costs payable Working capital assumed Cash consideration paid on close 5. Joint operations December 31, 2022 (199,281) $ 108,378 60,974 — 1,168 (28,761) $ December 31, 2021 (82,604) — — 2,431 166 (80,007) $ $ The REIT jointly owns and operates four investment properties. The REIT has determined them to be joint operations. Accordingly, the consolidated financial statements of the REIT include its share of revenues, expenses, assets and liabilities from the joint operations. The REIT's ownership interests in the joint operations are as follows: Property Leslie York Mills Rockhill High Park Village Niagara West Date of acquisition May 1, 2019 May 7, 2019 August 1, 2019 April 22, 2022 Location Toronto, ON Montreal, QC Toronto, ON Toronto, ON Ownership interest 50% 50% 40% 28.35% 2022 Annual Report | Minto Apartment REIT 76Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) 6. Prepaid expenses and other assets Prepaid expenses Prepaid CMHC premiums Restricted cash Deposits and other prepayments Interest rate swap Current Non-current December 31, 2022 2,729 $ 8,825 1,434 1,120 2,698 16,806 $ 3,812 12,994 16,806 $ December 31, 2021 2,305 6,940 1,218 1,128 307 11,898 3,970 7,928 11,898 $ $ $ The following table is a summary of the REIT's interest rate swap and the respective fair value of the asset: Instrument Maturity Fixed rate Original notional amount Notional amount December 31, 2022 December 31, 2021 Interest rate swap1 1 The REIT has a 40% ownership interest in this contract through the ownership of a joint operation. April 2026 $42,360 $36,257 3.38% $ 2,698 $ 307 The fair value of the interest rate swap is determined using widely accepted valuation techniques, including discounted cash flow analysis on expected cash flows of the derivatives, using observable market-based inputs including interest rate curves and implied volatilities, and is considered level 2 in the fair value hierarchy. The following table summarizes the beginning and ending fair value of the swap: Year ended Opening balance Non-cash movement Fair value gain Closing balance December 31, 2022 307 $ 2,391 2,698 $ December 31, 2021 (1,318) 1,625 307 $ $ Minto Apartment REIT | 2022 Annual Report 77Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) 7. Resident and other receivables Current Resident receivables Other receivables Less: Allowance for credit losses December 31, 2022 December 31, 2021 $ $ 1,844 $ 2,375 (932) 3,287 $ 1,388 1,294 (594) 2,088 There is no significant concentration of credit risk with respect to resident receivables as the REIT has a high volume of tenants with individually small monthly rent amounts. 8. Class B LP Units The following table reconciles the changes in cash flows and outstanding units for the Class B LP Units of the Partnership: Balance, December 31, 2020 Non-cash movement Fair value loss Balance, December 31, 2021 Non-cash movement Issued, April 22, 2022 (Note 4) Fair value gain Balance, December 31, 2022 Class B LP Units 22,769,073 $ — 22,769,073 $ 2,985,956 — 2,985,956 25,755,029 $ $ 463,806 34,609 498,415 60,974 (197,531) (136,557) 361,858 For the year ended December 31, 2022, distributions of $11,942 (December 31, 2021 - $10,436) to Class B LP Unitholders were declared. The fair value methodology for the Class B LP Units is considered level 2 within the fair value hierarchy. 9. Class C LP Units Class C LP Units Unamortized mark-to-market adjustments Current Non-current December 31, 2022 December 31, 2021 206,673 $ 1,413 208,086 $ 50,642 157,444 208,086 $ 212,183 1,886 214,069 5,982 208,087 214,069 $ $ $ 2022 Annual Report | Minto Apartment REIT 78Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) As at December 31, 2022 there were 22,978,700 (December 31, 2021 - 22,978,700) Class C LP Units of the Partnership outstanding. The following table reconciles the changes in cash flows for the Class C LP Units: Year ended Opening balance Cash flows Distributions used to repay principal Non-cash movement Amortization of mark-to-market adjustments December 31, 2022 $ 214,069 $ December 31, 2021 219,885 (5,510) (473) (5,983) (5,341) (475) (5,816) 214,069 Closing balance $ 208,086 $ For the year ended December 31, 2022, the REIT also made distributions of $6,574 (December 31, 2021 - $6,743) to the Class C LP Unitholder that were accounted for as finance costs. The mortgages of investment properties to which the distributions on the Class C LP Units relate bear a weighted average contractual interest rate of 3.16% (December 31, 2021 - 3.16%) and mature at various dates between 2023 and 2030 (December 31, 2021 - 2023 and 2030). Distributions on Class C LP Units as at December 31, 2022, excluding unamortized mark-to-market adjustments, are due as follows: 2023 2024 2025 2026 2027 2028 and thereafter $ $ 50,234 50,499 63,541 1,283 22,752 18,364 206,673 Fair value for the Class C LP Units is calculated based on current market rates plus risk-adjusted spreads on discounted cash flows. As at December 31, 2022, the current market rates plus risk-adjusted spreads ranged from 4.29% to 5.91% (December 31, 2021 - 1.65% to 3.26%) and the fair value of the Class C LP Units was $199,200 (December 31, 2021 - $218,599) and is considered level 2 within the fair value hierarchy. Minto Apartment REIT | 2022 Annual Report 79Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) 10. Mortgages and loans December 31, 2022 December 31, 2021 Weighted Average Interest Rate 3.03% 7.45% 2.39% Mortgages - fixed rate Mortgages - variable rate Construction loan Unamortized mark-to-market adjustments Unamortized deferred financing costs Current Non-current Mortgages Balance Outstanding 631,956 108,378 8,006 748,340 882 (2,902) 746,320 238,800 507,520 746,320 $ $ $ Weighted Average Interest Rate 2.71% — — Balance Outstanding 627,534 — — 627,534 1,152 (2,566) 626,120 140,862 485,258 626,120 $ $ $ The fixed and variable rate mortgages are secured by investment properties and mature at various dates between 2023 and 2030 (December 31, 2021 - 2022 and 2030). The fixed rate mortgages include a $36,257 (December 31, 2021 - $37,262) variable interest mortgage fixed through an interest rate swap. Construction loan The REIT has a fixed rate non-revolving construction loan commitment of $93,745 and as at December 31, 2022, $8,006 (December 31, 2021 - $nil) was drawn. The construction loan is used to finance the construction of a new 225-suite residential rental property on surplus land at the REIT's Richgrove property in Toronto, Ontario (the "Richgrove Development") and is secured by a first priority mortgage on the project. The loan bears fixed interest at 2.39% and matures on March 1, 2032. Payments are made monthly on an interest-only basis. The mortgages and construction loan, excluding unamortized mark-to-market adjustments and deferred financing costs, are due as follows: 2023 2024 2025 2026 2027 2028 and thereafter 239,195 59,235 51,093 81,122 8,155 309,540 748,340 $ 2022 Annual Report | Minto Apartment REIT 80Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) The following tables reconcile the changes in cash flows for the mortgages and loan payable: Balance, December 31, 2020 $ 598,079 $ — $ Fixed and variable rate mortgages Construction loan Cash flows Issued1 Deferred financing costs incurred Repayments Non-cash movement Funds held in escrow1 Amortization of mark-to-market adjustment Deferred financing amortization Balance, December 31, 2021 Balance, December 31, 2021 Cash flows Issued Deferred financing costs incurred Deferred financing CMHC premiums Repayments $ $ Non-cash movement Assumed on acquisition Amortization of mark-to-market adjustment Deferred financing charges transferred from prepaid CMHC premiums Deferred financing amortization 49,558 (138) (12,879) 36,541 (8,558) (294) 352 (8,500) 626,120 $ 626,120 $ 34,623 (537) (319) (30,201) 3,566 108,378 (270) (75) 595 108,628 — — — — — — — — — $ — $ 8,006 — — — 8,006 — — — — — Balance, December 31, 2022 8,006 $ $ 1 Proceeds of $8,558 from a fixed rate mortgage that were held in escrow July 2020 were released in September 2021. 738,314 $ Total 598,079 49,558 (138) (12,879) 36,541 (8,558) (294) 352 (8,500) 626,120 626,120 42,629 (537) (319) (30,201) 11,572 108,378 (270) (75) 595 108,628 746,320 As at December 31, 2022 and December 31, 2021, the REIT was in compliance with all financial covenants relating to its debt obligations. Fair value of fixed rate mortgages and the construction loan is calculated based on current market rates plus risk-adjusted spreads on discounted cash flows. As at December 31, 2022, the current market rates plus risk-adjusted spreads ranged from 4.25% to 5.87% (December 31, 2021 - 1.03% to 3.46%) and the fair value of fixed rate mortgages and construction loan was $595,760 (December 31, 2021 - $634,412) and is considered level 2 within the fair value hierarchy. Given the variable nature of the variable rate mortgages, their carrying value approximates their fair value. Minto Apartment REIT | 2022 Annual Report 81Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) 11. Credit facility Committed Available Utilized Amounts drawn Letter of credit Undrawn amount available December 31, 2022 300,000 $ 267,115 157,158 442 157,600 109,515 $ December 31, 2021 200,000 200,000 51,754 442 52,196 147,804 $ $ The following tables reconcile the changes in cash flows for the credit facility: Year ended Opening balance Cash flows Issued Repayments December 31, 2022 51,754 $ December 31, 2021 31,948 115,404 (10,000) 105,404 157,158 $ 102,806 (83,000) 19,806 51,754 $ $ The REIT has a revolving credit facility that is secured by several investment properties, matures on July 3, 2025 and is used to fund working capital requirements, acquisitions, letters of credit and for general corporate purposes. The credit facility bears interest at one month bankers' acceptance plus 175 bps or prime plus 75 bps. At December 31, 2022, the weighted average variable interest rate was 6.47% (December 31, 2021 - 2.19%). Given the variable nature of the credit facility, its carrying value approximates its fair value. As at December 31, 2022 and December 31, 2021, the REIT was in compliance with all financial covenants relating to its credit facility. 12. Related-party transactions In the normal course of operations, the REIT enters into various transactions with related parties. In addition to the related party transactions disclosed elsewhere in these consolidated financial statements, related party transactions include: (a) Administrative Support Agreement On July 3, 2018, the REIT and Minto Properties Inc. ("MPI"), an entity with significant influence over the REIT, entered into a five-year renewable Administrative Support Agreement ("ASA"). The ASA provides the REIT with certain advisory, transaction and support services, including clerical and administrative support, operational support for the administration of day-to-day activities of the REIT and office space. These services are provided on a cost recovery basis, subject to a maximum during the initial term of the ASA only for all general and administrative expenses, excluding public company costs, of 32 bps of the gross book value of the REIT's assets. On December 15, 2022, the REIT exercised its option to renew the ASA for an additional term of five years commencing on July 3, 2023. The limitation of all general and administrative expenses, excluding public company costs, of 32 bps of the gross book value of the REIT's assets was removed from the renewed ASA. For the year ended December 31, 2022, the REIT incurred $2,260 (December 31, 2021 - $2,260) for services rendered by MPI and its affiliates under the Administrative Support Agreement. 2022 Annual Report | Minto Apartment REIT 82Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) (b) Loans receivable from related parties Project 99 Fifth Avenue, Ottawa, ON ("Fifth and Bank") Lonsdale Avenue, North Vancouver, BC ("Lonsdale Square") Beechwood Avenue, Ottawa, ON ("Beechwood") 810 Kingsway, Vancouver, BC ("810 Kingsway") 3958 Shelbourne Street, Victoria, BC ("University Heights") Related Parties Commitment Interest Rate and Maturity December 31, 2022 December 31, 2021 Affiliate of MPI $ 30,000 6% per annum July 31, 2023 $ 30,000 $ 30,000 Limited partnership jointly owned by MPI and a subsidiary of Darwin Properties 14,000 7% per annum May 30, 2024 13,784 12,855 Affiliate of MPI 51,400 6% per annum December 31, 2025 25,550 10,094 MPI MPI 19,650 6% per annum August 1, 2024 51,700 7% per annum December 31, 2026 166,750 700 Variable per annum1 April 27, 2032 $ 167,450 15,357 10,363 12,893 97,584 718 98,302 $ 30,000 68,302 98,302 $ — 63,312 — 63,312 30,000 33,312 63,312 $ $ Loan receivable Management Current Non-current 1 The interest rate per annum is set quarterly at the greater of prime and the prescribed interest rate as determined by the Regulations of the Income Tax Act (Canada) to a maximum of 5%. Interest is payable annually in arrears. All commitments pertaining to projects include a reserve to fund interest costs. If the interest reserve is fully utilized, the interest is paid to the REIT on a monthly basis. In connection with these financings, the REIT will have the exclusive option to purchase the property at Fifth and Bank, Lonsdale Square and Beechwood, MPI's 85% indirect ownership interest in 810 Kingsway and MPI's 45% indirect ownership interest in University Heights, upon project stabilization at 95% of then-appraised fair market value as determined by independent and qualified third-party appraisers. As at December 31, 2022, the expected credit loss ("ECL") based on 12 month expected losses for the loans receivable is $nil (December 31, 2021 - $nil) Minto Apartment REIT | 2022 Annual Report 83Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) The following table shows the movement of loans receivable from related parties: Year ended Opening balance Cash flows Advances Interest received Non-cash movement Interest earned Closing balance December 31, 2022 $ 63,312 $ December 31, 2021 41,988 32,040 (1,800) 30,240 4,750 34,990 $ 98,302 $ 20,024 (1,800) 18,224 3,100 21,324 63,312 Fair value of loans receivable relating to projects is calculated based on current market rates plus risk-adjusted spreads on discounted cash flows. As at December 31, 2022, the current market rates plus risk-adjusted spreads ranged from 8.50% to 9.50% and the fair value of the loans receivable relating to projects was $93,441 (December 31, 2021 - carrying value of the loans receivable approximated their fair value) and is considered level 2 within the fair value hierarchy. (c) Due to related parties Item Current Related Parties December 31, 2022 December 31, 2021 Class B LP Units distributions Class C LP Units distributions Property operating costs payable Development costs and fees Unit distribution Limited partnership wholly- owned by MPI and MPI affiliates Limited partnership wholly- owned by MPI MPI and its affiliates Affiliate of MPI MPI Rental and service revenue receivable MPI and its affiliates 1,052 $ 546 493 1,357 37 3,485 (549) $ 2,936 $ 901 561 411 535 35 2,443 (521) 1,922 2022 Annual Report | Minto Apartment REIT 84Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) (d) Revenue, expenses, capital expenditures and distributions Related Parties / Item December 31, 2022 December 31, 2021 Revenue from MPI, its affiliates and jointly-owned limited partnerships Rental and service revenue Interest income on loans advanced $ 863 $ 4,750 Expenses and distributions to MPI, its affiliates, its wholly-owned and jointly-owned limited partnerships Property operating expenses Development costs and fees Distributions on Class B LP Units (finance costs) Distributions on Class C LP Units (finance costs) Distributions on Class C LP Units (principal) Distributions on Units Compensation of key management personnel Paid to executives Unit-based compensation Executives Trustees in lieu of annual retainer and meeting fees 1,315 1,231 11,942 6,574 5,510 427 770 1,502 579 716 3,100 713 — 10,436 6,743 5,341 411 635 1,304 560 Additional compensation to key management personnel for services provided to the REIT was paid by MPI and its affiliate. (e) Property acquisitions On April 22, 2022, the REIT acquired a 28.35% ownership interest in a 501-suite multi-residential rental property located in Toronto, Ontario from a limited partnership in which a subsidiary of MPI and certain current and former executives of MPI owned a minority interest. The acquisition cost of $112,667, including transaction costs of $2,896, was settled by the REIT assuming a $46,158 mortgage, the issuance of 2,985,956 Class B LP Units with a fair value of $60,974, paying $4,990 in cash, and assuming working capital liabilities of $545. On May 6, 2022, the REIT acquired a 252-suite multi-residential rental property located in Calgary, Alberta from a limited partnership in which a subsidiary of MPI owned a minority interest. The acquisition cost of $86,614, including transaction costs of $99, was settled with the REIT assuming a mortgage of $62,220, paying $23,771 in cash, and assuming working capital liabilities of $623. 13. Accounts payable and accrued liabilities December 31, 2022 4,711 $ 18,457 1,592 4,539 5,144 34,443 $ 28,689 5,754 34,443 $ December 31, 2021 9,154 8,884 1,550 4,915 3,794 28,297 23,776 4,521 28,297 $ $ $ Accounts payable Accrued liabilities Distributions payable Unit-based compensation Forgivable loan Current Non-current Minto Apartment REIT | 2022 Annual Report 85Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) During the year ended December 31, 2021, the REIT commenced construction of the Richgrove Development. In connection with the Richgrove Development, the REIT completed a contribution agreement with the City of Toronto whereby the City will contribute funds towards the construction of 100 affordable rental suites as part of the new property and will also provide relief from development charges and certain other fees. Funding and relief from development charges and certain other fees will be in the form of a forgivable loan, with loan forgiveness commencing on the first anniversary of first occupancy of the affordable rental suites, at 4% per year over a period of 25 years. For the year ended December 31, 2022, $1,350 of funding was received in connection with the Richgrove Development and has been recorded as forgivable loan payable in connection with the terms of the contribution agreement (December 31, 2021 - $3,794 of development charges and other fees were exempt or waived). 14. Units Authorized Units issued and outstanding: Balance, December 31, 2020 Issued, October 29, 2021, net Balance, December 31, 2021 Cancellation of Units under Normal Course Issuer Bid Balance, December 31, 2022 Units Unlimited 36,274,839 $ 3,795,000 40,069,839 (182,227) 39,887,612 $ $ 631,434 82,687 714,121 (3,248) 710,873 On October 29, 2021, the REIT completed the issuance of 3,795,000 Units from treasury at a price of $22.85 per Unit for net proceeds of $82,687. The issuance included 495,000 Units sold pursuant to the full exercise of an over-allotment option granted to the underwriters. Underwriters' fees and expenses relating to the issuance were $4,029. For the year ended December 31, 2022, distributions to Unitholders of $19,100 (December 31, 2021 - $17,071) were declared, representing monthly distributions of $0.03958 per Unit for the months of January to October and $0.04083 for the months of November and December (2021 - $0.03792 per Unit for the months of January to October 2021 and $0.03958 per Unit for the months of November and December 2021). Normal Course Issuer Bid ("NCIB") On July 15, 2022, the Toronto Stock Exchange accepted the REIT's notice to initiate a NCIB for a portion of its Units. The NCIB is authorized from July 21, 2022 through to July 20, 2023 and permits the REIT to acquire up to 3,847,284 Units including up to 33,965 Units on any given trading day. For the year ended December 31, 2022, the REIT purchased and cancelled 182,227 Units under the NCIB, at a weighted average purchase price of $15.15 per Unit, for a total cost including commissions of $2,764. The difference between the purchase price and the weighted average historical unit issuance price was recorded as an increase to retained earnings. 15. Segment reporting The REIT owns, manages and operates 32 multi-residential rental properties located in Canada, including four mixed-use residential apartment and commercial buildings. Management, when measuring the REIT's performance, does not distinguish or group its operations on a geographical or any other basis. Accordingly, the REIT has a single reportable segment for disclosure purposes in accordance with IFRS. 2022 Annual Report | Minto Apartment REIT 86Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) 16. Revenue from investment properties Rental revenue Revenue from services 17. Finance costs Interest expense on mortgages & loans Interest expense & standby fees on credit facility Amortization of financing charges Amortization of mark-to-market adjustments Capitalized interest Interest expense & other financing charges Distributions on Class B LP Units (Note 8) Distributions on Class C LP Units (Note 9) Finance costs - operations Fair value loss (gain) on: Class B LP Units (Note 8) Interest rate swap (Note 6) Finance costs December 31, 2022 121,554 $ 22,236 143,790 $ December 31, 2021 100,150 23,397 123,547 December 31, 2022 21,802 $ 5,128 938 (743) (1,051) 26,074 11,942 6,574 44,590 $ (197,531) (2,391) (155,332) $ December 31, 2021 16,605 1,750 640 (769) (95) 18,131 10,436 6,743 35,310 34,609 (1,625) 68,294 $ $ $ $ $ 18. Contingencies and commitments The REIT is subject to claims and legal actions that arise in the ordinary course of business. It is the opinion of Management that any ultimate liability that may arise from such matters would not have a significant adverse effect on the consolidated financial statements of the REIT. The REIT has an off-balance sheet arrangement at one of its properties in the Toronto area which was acquired in 2018 pursuant to which the City of Toronto provided a forgivable loan to support affordable housing at this property. Provided that certain conditions are met, the REIT will not need to make repayments under this arrangement. As of December 31, 2022, the remaining unforgiven balance of the loan is $13,464 (December 31, 2021 - $14,688). To date, the REIT has met all conditions related to this forgivable loan and Management has assessed that throughout the remaining term of the loan the REIT is likely to continue to meet the conditions for forgiveness and that the outflow of economic resources to settle the loan is not probable. As such, no liability has been recorded by the REIT. The REIT has an off-balance sheet arrangement at one of its properties in the Calgary area which was acquired in 2018 pursuant to which the Province of Alberta provided a forgivable loan to support affordable housing at this property. Provided that certain conditions are met, the REIT will not need to make repayments under the arrangement. As of December 31, 2022, the remaining unforgiven balance of the loan is $3,360 (December 31, 2021 - $3,696). To date, the REIT has met all conditions related to this forgivable loan and Management has assessed that throughout the remaining term of the loan the REIT is likely to continue to meet the conditions for forgiveness and that the outflow of economic resources to settle the loan is not probable. As such, no liability has been recorded by the REIT. Minto Apartment REIT | 2022 Annual Report 87Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) As at December 31, 2022, the REIT has committed to advance an additional $50,087 (December 31, 2021 - $40,926) to related parties in order to support the development of several projects and an additional $19,079 (December 31, 2021 - $10,812) to fund interest costs. The REIT is a guarantor on a joint and several basis for mortgage debt held through one of its joint operations. As at December 31, 2022, the maximum potential obligation resulting from this guarantee is $12,690 (December 31, 2021 - $13,042). 19. Risk management The REIT's activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. Market Risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk consists of interest rate risk, currency risk and other price risk. (a) Interest rate risk As the REIT’s interest-bearing assets mainly comprise fixed rate instruments, changes in market interest rates do not have any significant direct effect on the REIT’s income. The REIT's financial liabilities comprise both fixed rate and variable rate instruments. The REIT faces interest rate risk on its fixed rate debt due to the expected requirement to refinance such debt in the year of maturity or shortly thereafter. The REIT manages interest rate risk by structuring its financings to stagger the maturities of its debt, thereby mitigating its exposure to interest rate and other credit market fluctuations. For the portion of the REIT’s financial liabilities that comprise variable rate instruments, from time to time the REIT may enter into interest rate swap contracts or other financial instruments to modify the interest rate profile of its outstanding debt without an exchange of the underlying principal amount. As at December 31, 2022, the REIT has a committed variable rate credit facility of $300,000 (December 31, 2021 - $200,000) with an availability of $267,115 (December 31, 2021 - $200,000) and outstanding balance of $157,158 (December 31, 2021 - $51,754). A 1% change in prevailing interest rates would change annualized interest charges incurred by $1,572 (December 31, 2021 - $518). As at December 31, 2022, the REIT also has two variable rate mortgages with outstanding balance of $108,378 (December 31, 2021 - $nil). A 1% change in prevailing interest rates would change annualized interest charges incurred by $1,084 (December 31, 2021 - $nil). The REIT intends to refinance these mortgages as CMHC-insured fixed rate mortgages. (b) Currency risk The REIT’s financial statement presentation currency is Canadian dollars. Operations are located in Canada and the REIT has limited operational transactions in foreign-denominated currencies. As such, the REIT has no significant exposure to currency risk. (c) Other price risk Other price risk is the risk of variability in fair value due to movements in equity prices or other market prices such as commodity prices and credit spreads. The REIT is exposed to other price risk on its Class B LP Units. A 1% change in the prevailing market price of the Units as at December 31, 2022 would have a $3,619 (December 31, 2021 - $4,984) change in the fair value of the Class B LP Units. Credit Risk Credit risk is the risk that tenants and/or debtors may experience financial difficulty and be unable to fulfill their lease commitments or loan repayments. An allowance for impairment is taken for all ECLs. 2022 Annual Report | Minto Apartment REIT 88Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) The REIT’s risk of credit loss from tenants experiencing financial difficulties is mitigated through diversification. The REIT’s residential rental business is carried on in the Toronto, Montreal, Ottawa, Calgary and Edmonton regions. The nature of this business involves a high volume of tenants with individually small monthly rent amounts. The REIT monitors the collection of residential rent receivables on a regular basis with strictly followed procedures designed to minimize credit loss in cases of non- payment. The REIT is also exposed to the concentration of credit risk in relation to the loans advanced, in the event that the borrowers default on the contractual terms of repayment of amounts owing to the REIT. The REIT provides financing to MPI for strategic developments and, in turn, receives an option to purchase or acquire an ownership interest in those developments. Management mitigates this risk by the ensuring there is sufficient security provided by the development assets in addition to guarantees provided by MPI. Liquidity risk Liquidity risk is the risk that the REIT will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The REIT’s liquidity is subject to macroeconomic, financial, competitive and other factors that are beyond the REIT’s control. Liquidity risk is managed through cash flow forecasting. Management monitors forecasts of the REIT’s liquidity requirements to ensure it has sufficient cash to meet operational needs through maintaining sufficient cash and/or availability on the undrawn credit facility and ensuring that it meets its financial covenants related to debt agreements. Such forecasting takes into consideration the current and projected macroeconomic conditions, the REIT's cash collection efforts, debt financing plans and covenant compliance required under the terms of debt agreements. There is a risk that such liquidity forecasts may not be achieved and that currently available debt financing may no longer be available to the REIT at terms and conditions that are favorable to the REIT, or at all. The REIT mitigates liquidity risk by staggering the maturity dates of its borrowing, maintaining borrowing relationships with various lenders, proactively renegotiating expiring credit agreements well in advance of the maturity date and by maintaining sufficient availability on its credit facility. As of December 31, 2022, current liabilities of $331,531 (December 31, 2021 - $182,642) exceeded current assets of $42,422 (December 31, 2021 - $38,909), resulting in a net working capital deficit of $289,109 (December 31, 2021 - $143,733). Current liabilities as of December 31, 2022 include $271,225 (December 31, 2021 - $127,833) of mortgage financing which the REIT is actively in the process of refinancing. The REIT's immediate liquidity needs are met through cash-on-hand, cash flow from operations, refinancing of maturing mortgages and availability on its credit facility. As of December 31, 2022, liquidity was $114,838 (December 31, 2021 - $150,655) consisting of cash of $5,323 (December 31, 2021 - $2,851) and $109,515 (December 31, 2021 - $147,804) of available borrowing capacity under the credit facility. Management believes that there is sufficient liquidity to meet the REIT’s financial obligations for the foreseeable future. Minto Apartment REIT | 2022 Annual Report 89Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) An analysis of the contractual cash flows associated with the REIT's financial liabilities is set out below: Mortgages Construction loan Credit facility Class C LP Units Interest obligation1 Tenant rental deposits Due to related parties Accounts payable and accrued liabilities 2023 239,195 $ $ — 239,195 — 50,234 33,816 10,464 2,936 2024 59,235 $ — 59,235 — 50,499 26,591 — — 2025 51,093 $ — 51,093 157,158 63,541 18,990 — — 2026 81,122 $ — 81,122 — 1,283 10,607 — — 2027 8,155 $ — 8,155 — 22,752 9,539 10 — 2028 and thereafter 301,534 $ 8,006 309,540 — 18,364 24,733 — — Total 740,334 8,006 748,340 157,158 206,673 124,276 10,474 2,936 28,689 412 147 51 — 5,144 34,443 $ 365,334 $ 136,737 $ 290,929 $ 93,063 $ 40,456 $ 357,781 $ 1,284,300 1 Interest obligation on mortgages, construction loan, credit facility and Class C LP Units. The contractual cash flows do not include any unamortized mark-to-market adjustments or unamortized deferred financing costs. 20. Capital risk management The REIT's capital consists of Class B LP Units, Class C LP Units, mortgages, a construction loan, a credit facility and Unitholders' equity. The REIT invests its capital to achieve its business objectives and to generate an acceptable long-term return to the REIT’s Unitholders. Primary uses of capital include property acquisitions, development activities, capital improvements, debt principal repayments and construction development loans. The REIT’s principal objective with respect to debt financing is to minimize its overall borrowing costs while maintaining balance in its maturity schedule, diversity in its lender base and having sufficient liquidity and flexibility to meet current obligations and to pursue new projects. The actual level and type of future financings to fund the REIT’s capital obligations will be determined based on prevailing interest rates, various costs of debt and/or equity capital, capital market conditions and Management’s general view of the appropriate leverage in the business. The REIT closely monitors its capital position. The REIT is also subject to certain financial covenants and is in compliance with these covenants. Management has performed stress testing on the REIT’s covenants to ensure that the REIT continues to meet its covenant obligations in the long term. 2022 Annual Report | Minto Apartment REIT 90Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) The components of the REIT's capital are set out in the table below: Liabilities (principal amounts outstanding): Class B LP Units Class C LP Units Mortgages Construction loan Credit facility Unitholders' equity 21. Supplemental cash flow disclosures Change in non-cash working capital comprises the following: Year ended Prepaid expenses and other assets Resident and other receivables Tenant rental deposits Due to related parties Accounts payable and accrued liabilities 22. Unit-based compensation Executives Deferred Units December 31, 2022 December 31, 2021 361,858 $ 206,673 740,334 8,006 157,158 1,474,029 1,213,537 2,687,566 $ 498,415 212,183 627,534 — 51,754 1,389,886 1,010,001 2,399,887 December 31, 2022 (3,597) $ (1,199) (174) 878 4,759 667 $ December 31, 2021 (1,795) (9) 1,146 769 1,733 1,844 $ $ $ $ Deferred Units granted to executives generally vest on the second, third or fourth anniversaries of the grant date and are settled by Units issued from treasury equivalent to the number of Deferred Units credited, including any distributions paid by the REIT on the Units that have accrued in the form of Deferred Units or, if so elected by the participant and subject to the approval of the Plan Administrator, cash payable upon the participant’s separation from service with the REIT. The Board of Trustees has the discretion to vary the manner in which the Deferred Units vest for any participant. The details of movement in Deferred Units for the executives are as follows: December 31, 2022 December 31, 2021 210,152 85,660 (14,495) (17,982) 7,841 271,176 161,091 56,000 (5,499) (5,499) 4,059 210,152 Opening balance Granted Redeemed Forfeited Distribution equivalents Closing balance Minto Apartment REIT | 2022 Annual Report 91Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) The Deferred Unit plan activity and the value of Unit-based compensation expense for the executives are as follows: Opening balance Unit-based compensation expense Settlement Fair value (gain) loss Closing balance Performance Units December 31, 2022 December 31, 2021 $ $ 2,890 $ 1,502 (211) (1,461) 2,720 $ 1,660 1,304 (121) 47 2,890 Performance Units granted to executives generally vest on the third anniversary of the grant date based on the achievement of performance goals. Performance Units are settled by Units issued from treasury equivalent to the number of Performance Units credited, including any distributions paid by the REIT on the Units that have accrued in the form of Performance Units or, if so elected by the participant and subject to the approval of the Plan Administrator, cash. The Board of Trustees has the discretion to vary the manner in which the Performance Units vest for any participant. The Performance Unit plan activity for the executives is as follows: Opening balance Granted Closing balance Trustees December 31, 2022 December 31, 2021 — 31,750 31,750 — — — Trustees have the option to elect to receive up to 100% of all fees that are otherwise payable in cash (i.e. annual board retainer fee, meeting fees and additional retainers) in the form of Deferred Units. The REIT matches 45% of the total value of annual board retainer fees and board and committee meeting fees that a trustee elected to receive in the form of Deferred Units. Deferred Units granted in respect of a participant’s election to receive Deferred Units in lieu of cash compensation vest immediately upon grant. Deferred Units granted further to any match by the REIT also vest immediately. The Board of Trustees has the discretion to vary the manner in which the Deferred Units vest for any participant. The Deferred Units are settled by Units issued from treasury equivalent to the number of Deferred Units credited, including any distributions paid by the REIT on the Units that have accrued in the form of Deferred Units or, if so elected by the participant and subject to the approval of the Plan Administrator, cash payable following the participant’s separation from service with the REIT. 2022 Annual Report | Minto Apartment REIT 92Minto Apartment Real Estate Investment Trust Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (in thousands of Canadian dollars, except Unit and per Unit amounts) The Deferred Units granted and the value of Unit-based compensation expense recorded for the Trustees are as follows: Balance, December 31, 2020 Granted and vested Distribution equivalents Fair value loss Balance, December 31, 2021 Granted and vested Distribution equivalents Fair value gain Balance, December 31, 2022 23. Operating leases Deferred Units 67,509 $ 23,438 1,591 — 92,538 $ 33,858 3,099 — 129,495 $ $ 1,375 525 35 90 2,025 528 51 (785) 1,819 The REIT has entered into lease agreements on its investment properties. The residential leases typically have lease terms of 1 to 12 months. The commercial leases have lease terms between 1 to 15 years. There were no tenants that accounted for more than 10% of the REIT's total rental revenue for the year ended December 31, 2022 and 2021. The total future contractual minimum rent lease payments expected to be received under residential and commercial leases are as follows: Less than 1 year Between 1 to 5 years 5 years and thereafter 24. Subsequent event December 31, 2022 32,128 $ 1,909 2,972 37,009 $ December 31, 2021 31,654 2,930 574 35,158 $ $ On March 7, 2023, the REIT completed its disposition of Hi-Level Place in Edmonton for a sale price of $9,920, generating net proceeds of $2,832. Minto Apartment REIT | 2022 Annual Report 93Unitholder Information Board of Trustees Officers Michael Waters Chief Executive Officer Jonathan Li President and Chief Operating Officer Edward Fu Chief Financial Officer Glen MacMullin Chief Investment Officer John Moss General Counsel and Corporate Secretary Paul Baron Senior Vice President, Operations Ben Mullen Senior Vice President, Asset Management Martin Tovey Senior Vice President, Investments Stephen Marshall Vice President, Operations Roger Greenberg Chair of Minto Apartment REIT, The Minto Group and Ottawa Sports and Entertainment Group Allan Kimberley( 1,3) Lead Trustee, Director of Orlando Corporation, former Vice Chairman of Investment Banking, Real Estate at CIBC World Markets Heather Kirk(1,2,3) Chief Investment Officer of Revera Inc. Jacqueline Moss(2,3) Chair of the Compensation, Governance and Nominating Committee, Director and Chair of the Human Resources Committee of Investment Management Corporation Ontario and Ontario Health Simon Nyilassy(1,2,3) Chair of the Audit Committee, Founder and CEO of Marigold & Associates Inc. Philip Orsino President and CEO of Brightwaters Strategic Solutions Inc., Director of The Minto Group and former CEO of Jeld- Wen Inc. and Masonite International Corp. Michael Waters Chief Executive Officer of Minto Apartment REIT and Chief Executive Officer of The Minto Group, Trustee and Member of Governance & Nominating Committee and Investment Committee of Crombie REIT Head Office Minto Apartment REIT 180 Kent Street, Suite 200 Ottawa, Ontario K1P 0B6 T: 613-230-7051 Investor Information www.mintoapartments.com info@mintoapartmentreit.com T: 613-230-7051 Auditor KPMG LLP Legal Counsel Goodmans LLP Transfer Agent TSX Trust Company PO Box 700, Postal Station B Montreal, QC H3B 3K3 Unit Listing TSX: MI.UN Unit Distributions January 2022 – October 2022 $0.03958 per Unit per month November 2022 – December 2023 $0.04083 per Unit per month Annual Meeting The Annual General Meeting of Unitholders will be held virtually on Thursday, May 9, 2023 at 1:00pm. (1) Member of the Audit Committee (2) Member of the Compensation, Governance and Nominating Committee (3) Independent 2022 Annual Report | Minto Apartment REIT 94 Fifth + Bank • O t t a w a , O N L o n s d ale Square Rend e r i n g c n a V • C o uver, B U niv e rsity Heights Rendering • V i c t o r i a , B C B e e c h wood Rende r i n g w a, O N O t t a • 8 1 0 Kin gsway Renderi n g o c n V a • u v er, BC Further Expansion in British Columbia Investment in development projects through convertible development loans (“CDLs”) provides the REIT with an option to purchase new, high-quality properties in attractive urban locations at a discount to their then-appraised fair market value without taking any construction or lease-up risk. The REIT made a fifth CDL investment during 2022 by way of the University Heights CDL to support the development of a 594 suite mixed-use multi-residential property in Victoria, BC. CDL Geographic Distribution(1) Vancouver Victoria Ottawa 594 1,205 Suites 390 Ottawa Toronto Calgary Edmonton Montreal Vancouver Victoria 221 Repositioning Program The REIT continually monitors local market demand and competing product offerings to determine an appropriate strategy for each of our properties. In certain locations there are opportunities to renovate and strategically reposition suites. Improvements to suites and common areas improve the quality and desirability of our properties. Strong demand for repositioned suites creates growth in rental revenues and produces accretive financial returns on invested capital. Given the predictable costs and revenue associated with suite repositioning and the ability to disburse capital in small increments, our repositioning program offers superior risk-adjusted returns. (1) Suite counts are presented at 100% ownership share rather than the REIT's proportionate share upon execution of its purchase options. See “Outlook - Access to Urban Pipeline in Target Market Through MPI and Affiliates” in the Management’s Discussion and Analysis included in this annual report. University Heights (Rendering) • Victoria, British Columbia 1.613.230.7051 info@mintoapartmentreit.com Minto Apartment REIT 200-180 Kent Street Ottawa, ON K1P 0B6 www.mintoapartments.com

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