Sun Residential Real Estate Investment Trust : Q4 2022 Financial Statements

sunresidential

Consolidated

Financial

Statements

Year ended December 31, 2022

(expressed in United States dollars)

Independent auditor's report

To the Unitholders of Sun Residential Real Estate Investment Trust

Our opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Sun Residential Real Estate Investment Trust and its subsidiaries (together, the Trust) as at December 31, 2022 and 2021, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).

What we have audited

The Trust's consolidated financial statements comprise:

• the consolidated statements of financial position as at December 31, 2022 and 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
• the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information.

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 consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Trust in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.

PricewaterhouseCoopers LLP

200 Apple Mill Road, Vaughan, Ontario, Canada L4K 0J8 T: [phone], F: [phone]

"PwC" refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2022. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

	Key audit matter		How our audit addressed the key audit matter
	Valuation of investment property		Our approach to addressing the matter included the
	Refer to note 2 − Basis of presentation, note 3 −		following procedures, among others:
		∙ Tested how management determined the fair
	Summary of significant accounting policies and
		value of investment property, which included
	note 4 − Investment property to the consolidated
		the following:
	financial statements.
		- Evaluated the appropriateness of the cap
	The Trust accounts for investment property using		rate method.
	the fair value method. Investment property is		- Tested the underlying data used in the
	initially recognized at its purchase price, including
	directly attributable acquisition costs. Subsequent		valuation.
		- With the assistance of professionals with
	to initial recognition, investment property is carried
	at fair value, with changes in the fair value of the		specialized skill and knowledge in the field
	investment property recognized in net income		of real estate valuations, evaluated the
	(loss) in the period in which they arise. As at		reasonableness of the capitalization rate
	December 31, 2022, investment property was		and the SNOI used in the valuation by
	valued at $70.6 million. The fair value of investment		comparing to accounting records and/or
	property is established by management annually		market information, as applicable.
	using a qualified, independent appraiser.
	Management determined the fair value of
	investment property by applying the direct income
	capitalization (cap rate) method. The most
	significant assumptions used in the cap rate
	method are the capitalization rate and the stabilized
	net operating income (SNOI).

We considered this a key audit matter due to

1. significant judgments made by management when determining the fair value of investment property including the development of the most significant assumptions, and (ii) significant audit effort and a high degree of complexity in assessing audit evidence to support the most significant assumptions used by management. In addition, the audit effort involved the use of professionals with

Key audit matter	How our audit addressed the key audit matter

specialized skill and knowledge in the field of real estate valuations.

Other information

Management is responsible for the other information. The other information comprises the Management's Discussion and Analysis.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated 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 consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Trust'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 Trust or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Trust's financial reporting process.

Auditor's responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated 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