Nova Net Lease REIT : MD&A for June 30, 2022

Nova Net Lease REIT

Management's Discussion and Analysis

For the Three and Six Months ended June 30, 2022 (unaudited) (Amounts in U.S. Dollars)

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion of performance, financial condition and prospects of Nova Net Lease REIT (the "REIT") should be read in conjunction with the unaudited condensed interim consolidated financial statements and accompanying notes for the three and six months ended June 30, 2022 (the "Unaudited Interim Financial Statements"), as well as the REIT's audited consolidated financial statements and accompanying notes for the period from July 27, 2021 (date of formation) to December 31, 2021 (the "2021 Audited Financial Statements"), and the accompanying MD&A and annual information form (the "Annual Information Form"). Our filed documents can be accessed under the REIT's profile at www.sedar.com or on the REIT's website at www.novanetleasereit.com.

This Management's Discussion and Analysis ("MD&A") is prepared as of August 23, 2022, and outlines the REIT's formation, operating activities, risk considerations and analysis of its financial results as presented in the Unaudited Interim Financial Statements. The Unaudited Interim Financial Statements have been prepared by management in accordance with International Financial Reporting Standards ("IFRS") and with interpretation of the International Financial Reporting Interpretations Committee ("IFRIC"). The REIT's financial information is expressed in United States dollars. In addition to reviewing this MD&A, readers are encouraged to read our public information that has been filed on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com including the final prospectus for the REIT for its initial public offering of trust units (the "Prospectus") on the Canadian Securities Exchange (the "CSE").

The trust units of the REIT (the "Units") are listed on the CSE in U.S. dollars under the symbol "NNL.U" and the U.S.-based OTCQB under the symbol "NNLRF".

Cautionary Statement Regarding Forward-Looking Statements

This document may contain "forward-looking statements" (as defined under applicable securities laws). These forward-looking statements relate to future events or future performance including with respect to our objectives and priorities for fiscal year 2022 and beyond.

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

The forward-looking statements contained in this MD&A are presented to assist investors in understanding business and strategic priorities and objectives of the REIT as at the periods indicated and may not be appropriate for other purposes. Forward-looking statements contained in this MD&A are not guarantees of future performance and, while forward-looking statements are based on certain assumptions that we consider reasonable, actual events and results could differ materially from those expressed or implied by forward-looking statements made by us. Readers are cautioned to consider these and other factors carefully when making decisions with respect to the REIT and not place

1

Nova Net Lease REIT

Management's Discussion and Analysis

For the Three and Six Months ended June 30, 2022 (Amounts in U.S. Dollars)

undue reliance on forward-looking statements. Circumstances affecting us may change rapidly. Except as may be expressly required by applicable law, the REIT does not undertake any obligation to update publicly or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

Non-IFRS Financial Measures

It is common in the real estate industry for entities to report certain financial measures that are not defined under IFRS. These metrics are used to measure, compare and explain the operating results, financial performance and cash flows of a REIT. However, they do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly traded entities. These measures should be considered supplemental in nature and not as a substitute for related financial information prepared in accordance with IFRS.

Funds from Operations and Adjusted Funds from Operations

In January 2022, the Real Property Association of Canada ("REALPAC") issued a publication titled "REALPAC Funds from Operations (FFO) & Adjusted Funds from Operations (AFFO) for IFRS". The purpose of the publication is to provide reporting issuers and investors with guidance on the definition of funds from operations ("FFO") and adjusted funds from operations ("AFFO") and to help promote more consistent disclosure from reporting issuers. FFO is defined as IFRS consolidated net income (loss) adjusted for items such as distributions on redeemable or exchangeable units recorded as finance cost under IFRS (including distributions on the redeemable Class B Units (the "Class B Units") of Nova Net Lease Operating LLC (the "Operating Partnership")), unrealized fair value adjustments to investment properties, unrealized fair value adjustments to puttable instruments classified as financial liabilities (Class B Units), gain on disposition of investment properties, and depreciation. FFO should not be construed as an alternative to net income (loss) 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 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.

AFFO is defined as FFO adjusted for items such as maintenance capital expenditures, and certain non-cash items such as straight-line rent. AFFO should not be construed as an alternative to net income (loss) 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, but may differ from other issuers' methods and, accordingly, may not be comparable to AFFO reported by other issuers. The REIT regards AFFO as an important performance measure to determine the sustainability of future distributions paid to unitholders after a provision for maintenance capital expenditures and certain other non-cash items.

The REIT believes these non-IFRS financial measures and ratios can provide useful supplemental information to both management and investors in measuring the operating performance, financial performance and financial condition of the REIT. The REIT may also use FFO and AFFO in assessing its distribution paying capacity.

Business Overview

The REIT was formed on July 27, 2021, as a newly created, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario, where one unit of the REIT was issued for $10 in cash. The declaration of trust of the REIT was filed on SEDAR at www.sedar.com in conjunction with the filing of the Prospectus for the REIT's initial public offering of trust units (the "Offering") on the CSE. The REIT's registered office is located at 200 Bay Street, North Tower, Suite 1200, Toronto, Ontario, Canada, M5J 2J2.

2

Nova Net Lease REIT

Management's Discussion and Analysis

For the Three and Six Months ended June 30, 2022 (Amounts in U.S. Dollars)

Prior to September 1, 2021, the REIT had no operations. On September 1, 2021, all of the outstanding shares of Verdant Growth Properties Corp. ("Verdant") were exchanged for shares in the REIT on a 10 for 1 basis, making Verdant a wholly-owned subsidiary of the REIT (the "Share Exchange"). Verdant, a Delaware corporation, was formed on October 27, 2020, for the purpose of owning and leasing, on a triple-net basis, cannabis-related real estate assets in the United States (the "U.S."). From inception until the Share Exchange, Verdant had been preparing for an initial public offering on the CSE. The REIT was formed to affect the cross-border structure whereby the REIT is classified as a U.S. corporation for U.S. federal income tax purposes pursuant to section 7874 of the United States Internal Revenue Code of 1986, as amended (the "Code"). As a result, it is permitted to elect to be treated as a real estate investment trust under the Code, notwithstanding it is organized as a Canadian entity.

The Share Exchange and resulting merger transaction did not constitute a business combination within the scope of IFRS 3 Business Combinations, and accordingly was accounted for as a pooling of interest in the 2021 Audited Financial Statements. According to this method, the REIT prepared its 2021 Audited Financial Statements in order to reflect as if the merger was in effect as of the date the two entities were under common control. The share capital and equity balances were adjusted on September 1, 2021 to reflect the Share Exchange transaction.

The REIT is considered an umbrella partnership real estate investment trust for U.S. federal income tax purposes. Operations of the REIT are conducted primarily through the Operating Partnership, a subsidiary of Verdant, which was formed under the laws of the State of Delaware. At formation, the Operating Partnership was a single member LLC with Verdant owning 100% of the Class A Units.

The MD&A included herein is that of the REIT and its wholly-owned and wholly-controlled subsidiaries, including:

Entity	Date of Formation	Owning Entity	Ownership %
Verdant Growth Properties Corp	October 27, 2020	Nova Net Lease REIT	100% of Common Stock
Nova Net Lease Operating LLC	July 21, 2021	Verdant Growth Properties Corp	100% of Class A Units
521 East Mosel LLC	100% of Class B Units
Nova Kalamazoo LLC	July 27, 2021	Nova Net Lease Operating LLC	100% Sole Member
NNL Kalamazoo LP	November 5, 2021	Nova Kalamazoo LLC	0.01% General Partner
Nova Net Lease Operating LLC	99.9% Limited Partner

Prior to the acquisition of its first property, the REIT did not own investment assets and had not commenced real estate operations. Liquidity was provided by the initial investment in equity by the founders, trustees and management.

On November 24, 2021, the REIT acquired an industrial cannabis facility in Kalamazoo, Michigan, (the "Kalamazoo Property") under terms of a contribution agreement (the "Contribution Agreement") with 521 East Mosel LLC ("Cloud") whereby Cloud agreed to contribute the real estate to the Operating Partnership in exchange for Class B Units valued at $10.0 million. Simultaneous with the closing of the acquisition, the operator of the cultivation facility entered into a triple-net lease with a wholly-owned subsidiary of the Operating Partnership with an initial term of 15 years and two 10-year extension options.

On January 4, 2022, the REIT closed on the Offering, raising gross proceeds of $3,959,348. On January 31, 2022, the REIT raised an additional $300,402 through the exercise of the overallotment by the underwriters. The REIT is listed on the CSE under the ticker symbol, "NNL.U" and the OTCQB under the ticker symbol, "NNLRF".

3

Nova Net Lease REIT

Management's Discussion and Analysis

For the Three and Six Months ended June 30, 2022 (Amounts in U.S. Dollars)

Following the Offering, the Board of Trustees of the REIT (the "Board of Trustees") established the REIT's distribution policy and set the distribution amount to $0.00225 per Unit on a monthly basis, or $0.027 per Unit on an annualized basis, commencing with the month of January 2022. Distributions are generally paid on or about the 15th day following the end of the month to holders of Units of record as of the close of business on the last business day of the month.

Investment Property Portfolio

A property is determined to be an investment property when it is held either to earn rental income, capital appreciation or for both. Investment properties include land, buildings, land improvements, and building improvements. The REIT was formed for the purpose of owning and leasing to operators, on a triple-net basis, cannabis-related real estate assets in the U.S. At June 30, 2022, the REIT owned one investment property, the Kalamazoo Property, which is a 70,000 square foot specialized industrial cannabis cultivation facility in Kalamazoo, Michigan, that also includes 3,000 square feet of retail space. Currently 35,000 square feet of the facility are dedicated to a cultivation operation, and 32,000 square feet are available for future use. The tenant entered into a triple-net lease concurrent with the REIT's acquisition of the property, with a 15-year term and two 10-year renewal options. The annual rent is $1,300,000, and began accruing at the date of acquisition, which coincided with the commencement of the lease term. Rental escalators will begin in year three of the lease term.

The estimated fair value of the Kalamazoo Property was determined using the external appraisal report received in conjunction with the acquisition of the property in November 2021 and updated as at June 30, 2022. The appraiser evaluated the property using several valuation methods, and the income capitalization approach was given the greatest weight in the conclusion of value in the appraiser's report, as the value indication from the income capitalization approach is supported by market data regarding income, expenses and required rates of return, and a typical investor would place greatest reliance on the income capitalization approach. The resulting fair value was determined to be $10,400,000 at the time of the original appraisal, and increased to $10,610,000 as at June 30, 2022.

A reconciliation of the carrying amount for investment properties is set out below:

		As at June 30, 2022	As at December 31, 2021
Investment Properties, Opening Balance	$	10,400,000	$	-
Acquisitions - November 24, 2021		-		10,000,000
Straight-line Rent Receivable		153,480		-
Provision for Class B Liquidity Discount		808,000		-
FV Adjustment		(751,480)		52,155
Transaction costs		-		347,845
Total	$	10,610,000	$	10,400,000

The fair value of investment properties is most sensitive to changes in capitalization rates as applied to rental revenue or net operating income. Changes in capitalization rates would result in a change to the fair value of the REIT's investment properties. Set out below is the impact of a 25 basis-point increase or decrease in the weighted average capitalization rate on the carrying value of investment properties in dollar and percentage terms:

4

Nova Net Lease REIT

Management's Discussion and Analysis

For the Three and Six Months ended June 30, 2022 (Amounts in U.S. Dollars)

Capitalization Rate	$	Increase (Decrease)	% Increase (Decrease)
25-basis point increase	$	(212,156)	(2.00)%
25-basis point decrease	$	220,994	2.08 %

Selected Financial Information

The following table summarizes the relevant financial data for the REIT as at, and for the three and six months ended, June 30, 2022, and should be read with the Unaudited Interim Financial Statements.

Balance Sheet		As at June 30, 2022			As at December 31, 2021
Total Assets	$		13,426,512	$		11,769,854
Total Liabilities			9,727,379				11,559,427
Unitholders' Equity			3,699,133				210,427
		Three Months ended				Six Months ended
Income Statement			June 30, 2022				June 30, 2022
Total Revenues	$	388,656			$	777,311
General and Administrative Expenses			1,065,694				1,756,311
Finance Cost			44,608				104,916
Fair Value Change - Class B Units			(786,703)				(1,937,814)
Fair Value Change - Investment Properties			(226,345)				751,480
Net Income and Comprehensive Income	$	291,402			$	102,418
Net Income and Comprehensive Income
per unit - Basic	$	0.04			$	0.02
Weighted average units outstanding - Basic			6,815,493				6,700,557
Net Income and Comprehensive Income
per unit - Diluted	$	0.02			$	0.01
Weighted average units outstanding - Diluted			14,815,493				14,700,557

Balance Sheet Highlights

Assets

At June 30, 2022, the REIT held cash of $2,096,630 and restricted cash of $325,000. On January 4, 2022, the REIT completed the Offering of 3,167,478 Units, raising gross proceeds of $3,959,348. On January 31, 2022, the overallotment was exercised for 240,322 Units for gross proceeds of $300,402. After payment of closing costs and legal fees, cash proceeds to the REIT were $2,729,340.

Restricted cash represents a tenant security deposit related to the Kalamazoo Property that is being held in escrow on behalf of the REIT by the tenant's attorney. Investment properties include the REIT's initial acquisition of the Kalamazoo Property, a 70,000 square foot cultivation and dispensary property in Kalamazoo, Michigan. The purchase price of the property was $10,000,000, excluding transaction related costs, on November 24, 2021, and the investment was reflected at a fair value of $10,610,000 at June 30, 2022, as determined by an independent appraiser.

5