Sun Residential Real Estate Investment Trust : Annual 2021 Management Discussion and Analysis

sunresidential

Management's

Discussion and Analysis

Year ended December 31, 2021

SUN RESIDENTIAL REAL ESTATE INVESTMENT TRUST - DECEMBER 31, 2021 MANAGEMENT'S DISCUSSION AND ANALYSIS 1

BASIS OF PRESENTATION

This Management's Discussion and Analysis (MD&A) of Sun Residential Real Estate Investment Trust (Sun, we, our or us) is dated February 8, 2022 and should be read in conjunction with our audited consolidated financial statements for the year ended and as at December 31, 2021. Our consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board. All references herein to "$" are to United States dollars. This MD&A provides information for the year ended December 31, 2021 and is current to February 8, 2022, the date that it was approved by our board of trustees.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

From time to time, we make written or oral forward-looking statements within the meaning of securities laws, including Canadian securities legislation. We may make forward-looking statements in this MD&A, in other reports to unitholders, and in other communications. Forward-looking statements in this MD&A and elsewhere reflect our current assumptions, expectations and projections as to future results. Often, but not always, forward‐looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any those expressed or implied by the forward-looking statements. The forward-looking statements made in this MD&A relate only to events or information as of the date hereof. All forward-looking statements are based on assumptions that may prove to be incorrect. Furthermore, forward-looking statements are qualified in their entirety by the inherent risks, uncertainties and changes in circumstances surrounding future expectations which are difficult to predict and mostly beyond our control.

Except as specifically required by applicable Canadian securities law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date hereof. We caution readers not to place undue reliance on these statements as a number of risk factors could cause our actual results to differ materially from the expectations expressed in such forward-looking statements. Many factors will cause actual results to differ, perhaps materially, from results in the forward-looking statements: please refer to "Risk Factors" below.

ACCOUNTING POLICIES

Our consolidated financial statements for the year ended December 31, 2021 have been prepared in accordance with IFRS. Our accounting policies are described in our consolidated financial statements for the year ended December 31, 2021, which should be read in conjunction with this MD&A. In applying these policies, in certain cases it is necessary to use estimates, for which we use information available to us at the time. We review key estimates quarterly to determine their appropriateness and any change to these estimates is applied prospectively as required by IFRS. The most significant estimates relate to the fair value of investment properties.

NON-IFRS MEASURES

In this MD&A we disclose some financial measures that are not recognized under IFRS and that, therefore, do not have standard meanings prescribed by IFRS. These measures are commonly used by entities in the real estate industry as useful metrics for measuring performance. Since they do not have any standardized meaning under IFRS, they may not be comparable to similar measures presented by other entities. These measures should be considered as supplemental in nature and not as a substitute for financial information prepared in accordance with IFRS.

FFO (funds from operations) is a measure of operating performance based upon funds generated by Sun before reinvestment or provision for other capital needs. AFFO (adjusted funds from operations) is a supplemental

SUN RESIDENTIAL REAL ESTATE INVESTMENT TRUST - DECEMBER 31, 2021 MANAGEMENT'S DISCUSSION AND ANALYSIS 2

measure that adjusts FFO for costs associated with capital expenditures, leasing costs, and tenant improvements. FFO and AFFO as presented are in accordance with the recommendations of the Real Property Association of Canada (REALPAC) as published in its white paper in February 2019, except as noted below.

FFO is defined as IFRS consolidated net income (or loss) adjusted for items such as unrealized changes in the estimated fair value of investment properties, the effect of changes in value of puttable instruments classified as financial liabilities, property taxes accounted for under IFRS Interpretations Committee - 21 Levies (IFRIC 21 - see comment below in discussion of net operating income), transaction costs expensed as a result of the purchase of a property being accounted for as a business combination, changes in the fair value of financial instruments that are economically effective hedges but do not qualify or were not designated for hedge accounting, foreign exchange gains or losses (as noted below) and operational revenue and expenses from right to use assets. FFO should not be considered to be an alternative to net income (loss) or cash flows provided by or used in operating activities determined in accordance with IFRS. Our method of calculating FFO is in accordance with REALPAC's recommendations, except that FFO is also adjusted for foreign exchange gains or losses that do not result from activities related to the property, but may differ from methods used by other issuers. We consider FFO to be a key measure of operating performance.

AFFO is defined as FFO adjusted for maintenance capital expenditures incurred. AFFO should not be considered to be an alternative to net income (loss) or cash flows provided by or used in operating activities in accordance with IFRS. Our method of calculating AFFO is in accordance with REALPAC's recommendations, except for the foreign exchange adjustment noted above, and may differ from methods used by other issuers. We consider AFFO to be a key measure of operating performance.

Net operating income (NOI) is defined as net rental income, which is total revenue from properties less direct property operating expenses, adjusted for realty taxes prepared in accordance with IFRS, except for adjustments related to IFRIC 21. (Therefore, when NOI is calculated quarterly, it includes a quarterly charge for realty taxes, notwithstanding that IFRIC 21 requires that a government levy (such as realty taxes) be recognized in accordance with the relevant legislation. The obligating event for realty taxes occurs during the fourth quarter, consequently under IFRS, the full amount of the expense is recognized at that time. This only affects quarterly reporting.) NOI should not be considered to be an alternative to net income determined in accordance with IFRS. Our method of calculating NOI may differ from methods used by other issuers. We consider NOI to be an important measure of income generated from our income producing properties and we use it to evaluate the performance of our properties. It is also a key input in determining the fair value of our properties.

In this MD&A, we also refer to several other real estate industry metrics that are non-IFRS measures:

Non-IFRS measures are as follows:

• NOI margin is defined as NOI divided by our total revenue.
• FFO per unit is defined as FFO divided by the weighted average units outstanding.
• AFFO per unit is defined as AFFO divided by the weighted average units outstanding.

Other performance measures include:

• "Gross Book Value" means the book value of our total consolidated assets.
• "Debt to Gross Book Value Ratio" is calculated by dividing our debt, which consists of mortgage payable, by Gross Book Value.

See "Reconciliation of Non-IFRS Measures" below.

SUN RESIDENTIAL REAL ESTATE INVESTMENT TRUST - DECEMBER 31, 2021 MANAGEMENT'S DISCUSSION AND ANALYSIS 3

OVERVIEW

Sun Residential Real Estate Investment Trust is an unincorporated open-ended real estate investment trust governed by the laws of the Province of Ontario and established pursuant to a declaration of trust dated January 22, 2019, as amended and restated on March 22, 2019 and November 4, 2020. The business of Sun is to acquire multi-family residential properties in the Sunbelt region of the United States.

Our business operations commenced on January 28, 2020, when we completed a financing and concurrently acquired a 51% interest in a multi-family residential property located in Tallahassee, Florida comprising 12 buildings with 288 rental units as well as various amenities for tenants.

SIGNIFICANT EVENTS AND HIGHLIGHTS

Property revenue for the current quarter was comparable to that of the previous quarters, and the property has performed well despite the Coronavirus pandemic. Occupancy has been in the range of 95% - 99% since the property was acquired, and is currently at 96% leased.

The impact of the novel coronavirus epidemic has not been material to date, although this could change if residents become unable to pay rent. At present it appears that while the effect may be expected to be pervasive, multi- family residential properties in the U.S. Sunbelt have been affected less severely than other types of real estate investment. However, the pandemic has resulted in us pausing our expansion plans as the capital markets have not been favourable for real estate investment trusts. Please refer to "Risk Factors" below.

OUTLOOK

Outlook and growth strategy

We believe that the multifamily sector in the United States Sunbelt offers attractive investment prospects. Our expansion plans have been delayed due to the disruption caused by the coronavirus pandemic to capital and real estate markets.

COVID-19 mitigation and impact

During the current coronavirus pandemic, our priority is the health and safety of our residents and team members. To minimize the spread and impact of COVID-19, various measures have been implemented at our property based on requirements from state and local governments and recommendations from the U.S. Centers for Disease Control and Prevention (CDC).

Westdale Evergreen's property management has been working closely with tenants for rent collections, and each month during the year has ended with at approximately 99% of rent being collected. The Evergreen property management office reopened on March 1, 2021, and some pandemic-related safety protocols remain in place. Operational metrics such as occupancy rates have remained comparable to those of previous periods. Overall, the coronavirus pandemic has had limited adverse impact on our operating results in the quarter.