Inovalis Real Estate Investment Trust : REIT Q1 2024 MD&A

Quarterly Report

March 31, 2024

Contents
Letter to Unitholders	3
Highlights	4
Management's Discussions and Analysis	6
Basis of Presentation	6
Forward-Looking Information	6
Market and Industry Data	7
Business Overview and Strategy	8
Foreign Currency Environment	8
Business Environment	9
Outlook	9
Portfolio Overview	10
Occupancy and Leasing Activity	13
Lease Maturities	13
Discussion of Financial Performance	15
Non-GAAP Financial Measures and Other Measures	15
FFO and AFFO Calculation	17
Overview - GAAP and Non-GAAP	18
Consolidated Financial Information	19
Selected Consolidated Balance Sheet Information	23
Capital Management	24
Financial Instruments	29
Quarterly Information - Last Eight Quarters	32
Related party transactions	32
Investment in Joint Ventures, Reconciliation	33
Risks and Uncertainties	35
Critical Accounting Policies and Estimates	41
Disclosure Controls and Procedures and Internal Controls Over Financial Reporting	42

All amounts in the MD&A are presented in thousands of Canadian dollars or Euros, except rental rates, per unit amounts or as otherwise stated. Information contained in this MD&A is based on information available to management as of May 8, 2024.

Inovalis REIT - Q1 2024 Management's Discussions & Analysis

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Letter to Unitholders

I am pleased to provide you with an update on our ongoing efforts to advance our property recycling strategy. As you are aware, one of our key objectives has been to optimize our property portfolio to enhance long-term value for our unitholders. Through strategic divestments, acquisitions, and redevelopments, we aim to ensure that our real estate assets align with our overall business objectives and market dynamics.

Our property recycling strategy is progressing according to plan, with significant milestones achieved since our last update. We have received a non-binding offer on the Arcueil property and, in the coming weeks, management will continue to advance the negotiations. This offer has provided the REIT with an updated market value for the property and accordingly, the fair market value for Arcueil has been adjusted in the REIT's financial statements. Progress has also been made on the sale of the Sabliere property and currently, the City of Paris is considering its legal pre-emptive right to acquire the property as the next step prior to further negotiations on the sale. These prospective dispositions will be executed in line with our rigorous evaluation criteria, ensuring that we maximize returns for our unitholders while minimizing risk exposure. The sale of these assets will enable us to unlock value and streamline our portfolio.

We also have developments regarding our efforts to strengthen and diversify our rental revenue streams through innovative leasing initiatives which are yielding results, contributing to enhanced stability and growth in rental income. Here's a closer look at our recent progress:

Tenant Diversification: We have undertaken proactive steps to diversify our tenant base, reducing concentration risk and enhancing the resilience of our rental revenue streams. At the Duisburg property, a new lease in Q1 2024 increased the number of tenants in the building to four, compared to one tenant in 2022. By targeting a diverse mix of tenants across industries and sizes, we are better positioned to mitigate the impact of economic fluctuations and capitalize on emerging growth sectors.

Flexible Lease Structures: Recognizing the evolving nature of workplace dynamics, we have introduced flexible lease

structures tailored to meet the varying needs of modern tenants. This includes offering shorter-term leases and scalable office spaces that provide greater flexibility and agility for our tenants, fostering long-term relationships and occupancy stability. In Q1 2024, management signed a new two-year lease for 6,100 square feet in the Sabliere property which will contribute revenue until such time as the disposition is finalized.

Banking relationships remain an important aspect of our strategy, particularly given the dynamic nature of the lending market post-mid-2022. With fluctuating interest rates and heightened risk perceptions within the office market, both in terms of leasing and investment, our approach involves maintaining proactive engagement with our lending partners. This ensures that we are well-positioned to navigate potential challenges and optimize opportunities for future loan extensions.

As I explained at our Annual General Meeting of Unitholders held in Toronto this morning, we will continue to execute on these leasing initiatives and remain focused on delivering sustainable value for our unitholders while maintaining a prudent approach to risk management and capital allocation. Although the operating environment may present challenges, we are confident in our ability to adapt and capitalize on opportunities, guided by our unwavering commitment to unitholder value.

Thank you for your continued support and confidence in our vision. Together, we are building a resilient and forward- thinking REIT poised for long-term success.

Stéphane Amine

President and Chief Executive Officer

Inovalis Real Estate Investment Trust

Inovalis REIT - Q1 2024 Management's Discussions & Analysis

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Q1 2024	Net Rental
Income
	$0.9
	Million

Highlights

Net Rental Income

For the portfolio that includes assets owned entirely by the REIT ("IP Portfolio"), Net Rental Income ("NOI") for the three months ended March 31, 2024 ("Q1 2024"), decreased significantly to $912 (€623) compared to $3,962 (€2,703) for the three months ended March 31, 2023 ("Q1 2023"). This aligned with expectations given the vacancy of the Arcueil property since July 1, 2023 and the departure of the main tenant from the Bad Homburg property in January 2024.

In Q1 2024, Net Rental Income, adjusted for IFRIC 211 for the portfolio that includes the REIT's proportionate share in joint ventures ("Total Portfolio"), was $6,458 (€4,473), compared to $8,322 (€5,678) for Q1 2023, a decrease due to the same reasons described above with respect to the IP Portfolio.

Leasing Operations

As at March 31, 2024, occupancy of the REIT's IP Portfolio was 50.2% and occupancy of the REIT's Total Portfolio was 59.8%. The greatest contributors to the decrease in occupancy are the assets included in the asset recycling plan (Arcueil, Sabliere and Baldi) as well as the Bad Homburg property following the departure of the main tenant in January 2024. The occupancy rate of the Total Portfolio excluding properties in the asset recycling plan would be 82.4%.

Steady interest from prospective tenants throughout 2023 and Q1 2024, for both long and short-term leases reaffirms confidence in our Parisian, German and Spanish portfolio. To bolster leasing efforts, notably with on-field brokers, management is selectively undertaking tenant improvements to attract tenants and maximize rent.

1 Net rental Income adjusted for IFRIC 21 is a Non-GAAP Measure. See the "Net Rental Income" section for further discussion on the composition and usefulness of this metric and as well as a quantitative reconciliation to its most directly comparable financial measure. See the section "Non-GAAP

Inovalis REIT - Q1 2024 Management's Discussions & Analysis

Adjusted Net
Rental Income -	Quarterly	Quarterly
IFRIC 211
	FFO/Unit	AFFO/Unit

$3.5	$0.03	$0.02
Million

Asset Recycling Plan

Management is advancing plans for the sale of the Sabliere and Arcueil properties negotiating terms of offers received in Q1 2024. Management engaged with a redeveloper on an exclusive basis for a year on the Arcueil property and now Arcueil city hall has validated the redevelopment project. The conditional Arcueil offer and pricing have been confirmed, leading to a reduction in the fair value adjustment of $14,321. The sale is subject to approval of a building permit application which could be finalized with a sale commitment in Q2 2024 and an exchange contract in Q4 2025.

On Sabliere, the assessment of an offer to acquire the property is ongoing and could lead to a sale in Q4 2024.

The Arcueil (Fair Value $72,340), Sabliere (Fair Value $27,493) and Baldi properties (Fair Value $27,162) are being marketed for sale as part of the REIT's previously announced Asset Recycling Plan. These are mature assets and management believes that it is the optimal time to extract value. Upon the sale of these properties, management and the Board will consider the best uses of the new capital including the options to pay down debt, make capital investments to support leasing, invest in redevelopment opportunities and make opportunistic acquisitions. Refer to the "Portfolio Overview - Asset Recycling Plan" section of this MD&A for more detailed discussion.

Joint Venture ("JV") Arrangement Wind Up

Management is executing on its previously announced commitment to wind up the current joint ventures in accordance with their respective agreements. Marketing agreements were signed in January 2024 for each of the Stuttgart and Duisburg properties and the properties are being actively marketed. JV arrangement maturities for the Kosching and Neu Isenburg properties were extended for one year, aligned with the financing expiry term, The JV arrangement for Delizy does not expire until 2029. Refer to the "Portfolio Overview - Joint Venture Arrangement Wind Up" section of this MD&A for more detailed discussion.

Financial Measures and Other Measures" for more information on the REIT's non-GAAP financial measures.

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Capital Market Considerations

Since Q2 2023, there has been significant downward pressure on net asset values due to volatile economic conditions driven by high inflation and energy costs in the Euro-zone. Unitholders' equity as at March 31, 2024 was $232,671 (€159,222), which implies a book value per Unit at that date of $7.14/Unit or $6.97/Unit on a fully-diluted basis, using the weighted average number of Units for the period.

The REIT has addressed the volatile risks in the current capital markets by implementing short term leasing initiatives for properties in the REIT's Asset Recycling Plan, maintaining

1. conservative debt-to-gross-book value ratio, currently 46.4%.

Funds From Operations and Adjusted Funds From Operations

In Q1 2024, due to the vacancy and increased finance costs, the REIT reported FFO and AFFO1 per Unit of $0.03 and $0.02 respectively, in line with management's forecast. Refer to the "Non-GAAPFinancial Measures and Other Measures" section of this MD&A for a more detailed discussion on FFO and AFFO.

Financing Activity

The REIT is financed almost exclusively with asset-level, non- recourse financing with an average term to maturity of 2.7 years for the Total Portfolio (3.0 years for the IP Portfolio).

In Q1 2024, the Neu-Isenburg and Kosching mortgage loans were extended and refinanced for one year until Q1 2025. This strategy to obtain such mortgage extensions is intended to facilitate the eventual exit from the joint venture ownership of these properties, while seeking improved financing terms in Q1 2025. Refer to the "Portfolio Overview - Joint Venture Arrangement Wind Up" section of this MD&A for more detailed discussion.

For the quarter ended March 31, 2023, the weighted average interest rate across the Total Portfolio was 4.29% compared to 2.75% as at December 31, 2023. This increase reflects the higher interest rate on most of the REIT's mortgage loan, now bearing interest at a floating rate indexed on EURIBOR, as well as the current penalty interest of the Trio mortgage loan (8.6% annually). As at March 31, 2024, 28% of the REIT's debt for the Total Portfolio was at fixed interest rates, mostly on short term loans or within properties being marketed for sale.

In its last economic bulletin, published in March 2024, the European Central Bank ("ECB") announced that key lending rates remained unchanged and inflation has declined further.

1 FFO and AFFO are non-GAAP measures. See the "Non-GAAPFinancial Measures and Other Measures" section for more information on the REIT's

Inovalis REIT - Q1 2024 Management's Discussions & Analysis

ECB staff have revised their growth projection for 2024 to 0.6%, with economic activity expected to remain subdued in the near term. Thereafter, the ECB expects the economy to grow at the rates of 1.5% in 2025 and 1.6% in 2026, supported initially by consumption and later also by investment. With this outlook, management will continue to seek financing opportunities through its banking networks in Europe, leveraging the quality of its properties, lease terms and high caliber tenants.

Environmental, Social and Governance (ESG)

Integrating ESG objectives and strategies into the REIT's business reflects the growing importance these factors play with many of our key stakeholders. Investors recognize the risks associated with changing regulatory requirements, tenants are including sustainability considerations in their leasing decisions, and employees want to work for responsible and socially-focused organizations. The REIT is working to improve its long-term environmental performance, and also investing in "human capital" for the implementation and monitoring of all ESG initiatives.

The Spanish property Delgado is pursuing LEED Platinum certification that is expected in Q3 2024.

On the German portfolio, offers for a green electricity procurement policy are to be received in 2024, in addition to the implementation of smart water-saving equipment.

Non-GAAP measures. A reconciliation of FFO and AFFO to Net Income can be found under the "Non-GAAPReconciliation (FFO and AFFO)".

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Management's Discussions and Analysis

Basis of Presentation

The following management's discussion and analysis ("MD&A") of the financial condition and results of operations of Inovalis Real Estate Investment Trust (the "REIT") should be read in conjunction with the REIT's unaudited consolidated financial statements as at and for the three months ended March 31, 2024, and 2023, and to the notes thereto, prepared in accordance with International Financial Reporting Standards ("IFRS") and notably with International Accounting Standard ("IAS") 34; Interim Financial Reporting..

Dollar amounts in this MD&A are presented in thousands of Canadian dollars and Euros, except rental rates, per unit amounts or as otherwise stated. Historical results, including trends which might appear in this MD&A, should not be taken as indicative of future operations or results. See "Forward-Looking Information" for further details. Information contained in this MD&A, including forward- looking information, is based on information available to management as of May 8, 2024. Additional information about Inovalis REIT has been filed with applicable Canadian securities regulatory authorities and is available at www.sedarplus.ca.

Forward-Looking Information

Certain statements contained, or contained in documents incorporated by reference, in this MD&A constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to the REIT's future outlook and anticipated events or results and may include statements regarding the future financial position, distributions, business strategy, budgets, occupancy rates, rental rates, productivity, projected costs, capital investments, development and development opportunities, financial results, taxes, plans and objectives of or involving the REIT. Particularly, statements regarding the REIT's future results, performance, achievements, prospects, costs, opportunities, and financial outlook, including those relating to acquisition and capital investment strategies and the real estate industry generally, are forward-looking statements. In some cases, forward-looking information can be identified by terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or the negative thereof, or other similar expressions concerning matters that are not historical facts. Forward-looking statements are based on certain factors and assumptions regarding expected growth, results of operations, performance, and business prospects and opportunities.

Although management believes that the expectations reflected in the forward-looking information are reasonable, no assurance can be given that these expectations will prove to be correct, and since forward-looking information inherently involves risks and uncertainties, undue reliance should not be placed on such information.

Certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such forward-looking statements. The estimates and assumptions, which may prove to be incorrect, include, but are not limited to, the various assumptions set forth in this document as well as the following:

1. the ability to continue to receive financing on acceptable terms;
2. the future level of indebtedness and the REIT's future growth potential will remain consistent with current expectations;
3. there will be no changes to tax laws adversely affecting the REIT's financing capability, operations, activities, or structure;
4. the REIT will retain and continue to attract qualified and knowledgeable personnel as the portfolio and business grow;
5. the impact of the current economic climate and the current global financial conditions on operations, including the REIT's financing capability and asset value, will remain consistent with current expectations;
6. there will be no material changes to government and environmental regulations that could adversely affect operations;
7. conditions in the international and, in particular, the French, German, Spanish and other European real estate markets, including competition for acquisitions and the market for dispositions, will be consistent with past conditions; and
8. the demand for the REIT's properties and global supply chains and economic activity in general.

Inovalis REIT - Q1 2024 Management's Discussions & Analysis

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The REIT cautions that this list of assumptions is not exhaustive. Although the forward-looking statements contained in this MD&A are based upon assumptions that management believes are reasonable based on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements.

When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties. Forward-looking statements should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not, or the times at or by which, such performance or results will be achieved. A number of factors could cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements, including, but not limited to:

• the REIT's ability to execute its asset recycling, growth and capital deployment strategies;
• the impact of changing conditions in the European office market;
• the marketability and value of the REIT's portfolio;
• changes in the attitudes, financial condition and demand in the REIT's demographic markets;
• fluctuation in interest rates and volatility in financial markets;
• the geopolitical conflict around the world on the REIT's business, operations and financial results;
• general economic conditions, including any continuation or intensification of the current economic conditions;
• developments and changes in applicable laws and regulations; and
• such other factors discussed under ''Risk and Uncertainties'' in this MD&A.

If any risks or uncertainties with respect to the above materialize, or if the opinions, estimates or assumptions underlying the forward- looking statements prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking statements. The opinions, estimates or assumptions referred to above and described in greater detail under ''Risks and Uncertainties'' should be considered carefully by readers. Although management has attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other risk factors not presently known or that management believes are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking statements.

Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Certain statements included in this MD&A may be considered a ''financial outlook'' for purposes of applicable Canadian securities laws, and as such, the financial outlook may not be appropriate for purposes other than this MD&A. All forward-looking statements are based only on information currently available to the REIT and are made as of the date of this MD&A. Except as expressly required by applicable Canadian securities 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. All forward-looking statements in this MD&A are qualified by these cautionary statements.

Market and Industry Data

This MD&A includes market and industry data and forecasts that were obtained from third-party sources, industry publications and publicly available information, as well as industry data prepared by Inovalis S.A. based on its knowledge of the commercial real estate industry (including Inovalis S.A. estimates and assumptions relating to the industry based on that knowledge). Inovalis S.A.'s management has knowledge of the real estate industry developed through its 30 plus years of experience and participation in the industry.

Inovalis REIT - Q1 2024 Management's Discussions & Analysis

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Business Overview and Strategy

The REIT is an unincorporated open-ended real estate investment trust governed by the laws of the Province of Ontario. The REIT was founded and sponsored by Inovalis S.A, the asset manager. The REIT's Units have been listed on the Toronto Stock Exchange under the trading symbol INO.UN since April 10, 2013. The head and registered office of the REIT is located at 151 Yonge Street, 11th floor, Toronto, Ontario, M5C 2W7.

The REIT's long-term objectives are to:

• generate cash distributions on a tax-efficient basis from investments in income-producing office properties;
• grow the asset base, primarily in France, Germany and Spain, but also opportunistically in other European countries where assets meet the investment criteria;
• identify and sell assets having achieved exceptional valuation growth and redeploy the capital in selected assets with long-term high potential;
• resume distributions to Unitholders, through an accretive acquisition program that successfully leverages Inovalis S.A.'s extensive relationships and depth of commercial property and financing; and
• maximize the long-term value of stable income-generating properties and the net asset value ("NAV") per Unit through active and efficient management.

The REIT's investment criteria encompass office properties outside of Canada with an occupancy level above 80% (unless AFFO accretive), secured rental cash flows, a property value between EUR€20,000 to EUR€60,000 (unless AFFO accretive) and potential future upside with respect to matters including rent and area development. According to management, the target investment size falls within a very liquid segment of the real estate market in Europe, and debt financing for such acquisitions is readily available from local lenders.

Foreign Currency Environment

The REIT's current asset base is located in France, Germany and Spain. Items included in the financial statements of each of the REIT's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The functional currency of the REIT's subsidiaries and joint ventures is the Euro, whereas the functional currency of the Trust, as well as its presentation currency, is the Canadian dollar. As such, although the REIT's main assets and liabilities are denominated in Euros, the REIT's financial results are translated into Canadian dollars for presentation purposes as follows:

• Assets and liabilities are converted to Canadian dollars at the closing rate at the date of the consolidated balance sheet;
• Items presented in the consolidated statement of earnings, consolidated statement of comprehensive income and consolidated statement of cash flows are translated at average exchange rates during the period (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income, expenses and cash flows are translated at the rate on the dates of the transactions); and
• All resulting exchange differences are recognized in other comprehensive income and recognized as a cumulative translation adjustment account in "Accumulated other comprehensive income" in equity.

A change in the €/$ foreign exchange rate therefore may have a material impact on the REIT's consolidated financial statements and results.

The exchange rate used throughout this MD&A for statement of earnings items is the average rate during the applicable period, which for the periods ended March 31, 2024 and 2023 was $1.4638 and $1.4512 respectively (1% increase).

For balance sheet items as at March 31, 2024, projections, or market data, the exchange rate used is $1.4613, stable compared to the $1.4624 closing rate as at December 31, 2023.

Inovalis REIT - Q1 2024 Management's Discussions & Analysis

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Business Environment

The REIT owns varying interests in real estate entities which hold investment properties. Under IFRS, some of these interests are recorded as joint ventures in which the REIT holds equity. As at March 31, 2024, the REIT's property portfolio consists of ownership interest in eight properties that are consolidated and included in "Investment properties" ("IP") on the consolidated balance sheet, and partial ownership interests in five properties that are included within "Investments in joint ventures". As such, the results of these investments in joint ventures are not included in certain of our consolidated financial and operating metrics, unless specifically indicated that such metrics are presented on a "Total Portfolio" basis in which case such results are prepared on a proportionate share basis.

Together, the REIT's share of these 13 properties (6 located in France, 6 located in Germany and 1 in Spain) is approximately 1.5 million square feet of gross leasable area ("GLA")

The assets denoted in the maps below are owned entirely by the REIT except where joint venture (JV) is noted.

Outlook

In the context of the prevailing macroeconomic challenges, the anticipated outlook for 2024 entails the effective recycling of certain properties in our portfolio, aimed at distributing returns to Unitholders. Drawing upon our extensive experience as seasoned investors and stewards of European office real estate, the Inovalis team is adept at navigating through dynamic economic landscapes with resilience and profitability. In the upcoming year, the REIT's management is concentrated on three primary focal points.

1. organic growth through leasing vacant space and renewing expiring leases;
2. execution of the Asset Recycling Plan with the repositioning/disposition of the Sablière, Arcueil and Baldi properties, and
3. winding up ownership arrangements for the properties held under joint venture arrangements by selling the properties.

Inovalis REIT - Q1 2024 Management's Discussions & Analysis

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Portfolio Overview

The REIT's Total Portfolio by geographic region as at March 31, 2024 is as follows:

				REIT's	Gross Leaseable Contribution to Total
				Total	# of	Occupancy	WALT (end	Financing
	% owned	Fair value	Bank debt	Area (GLA)	Portfolio rental
	Portfolio	tenants	rate	of lease)	maturity
				(sq. ft.)	revenue
				Value
Sabliere	100%	27 676	13 405	5%	41 043	4%	7	54%	1,4	2,2
Baldi	100%	27 162	4 991	5%	123 657	4%	11	32%	2,8	3,6
Metropolitain	100%	101 487	53 138	19%	78 818	19%	6	100%	3,8	7,0
Arcueil	100%	72 340	48 089	14%	334 521	0%	0	0%	-	3,3
Gaia	100%	56 711	31 418	11%	119 499	14%	7	80%	4,9	3,0
Delizy (1)	50%	16 176	9 446	3%	71 618	4%	18	68%	3,9	5,4
Subtotal France		301 552	160 487	57%	769 156	45%	49	37,2%	3,9	4,5
Delgado	100%	41 428	22 002	8%	117 274	9%	2	100%	8,0	3,0
Trio	95%	53 630	43 411	10%	193 914	16%	8	90%	2,4	-
Bad Homburg	100%	20 458	none	4%	109 104	3%	4	30%	5,5	none
Duisburg (1)	50%	39 274	24 024	7%	110 210	8%	4	80%	5,1	3,0
Stuttgart (1)	50%	30 865	17 965	6%	121 416	9%	4	96%	5,1	0,4
Neu-Isenburg (1)	50%	24 518	15 665	5%	67 337	5%	6	80%	3,9	0,9
Kosching (1)	50%	17 711	9 731	3%	53 058	5%	1	100%	3,7	0,8
Subtotal Spain & Germany		227 884	132 798	43%	772 313	55%	29	79,1%	4,7	1,3
Total Portfolio		529 436	293 285	100%	1 541 469	100%	78	59,8%	4,4	3,0
IP Portfolio		400 892	216 454	76%	1 117 830	69%	45	50,2%	4,4	3,4
JV Portfolio		128 544	76 830	24%	423 639	31%	33	85,1%	4,5	2,0

1. Represents investments that are classified as joint ventures and subject to equity-accounting. The results included in the table above (excluding the number of tenants, occupancy metrics, weighted average lease term and financing maturity) are presented on a proportionate share basis at the REIT's ownership percentage of the related investment.

General portfolio updates

• At the Gaia property, despite an 80% occupancy, the Effective Occupancy rate is 95% until the beginning of 2025 owing to the vendor-backed rental guarantee that covers both a three-year vacancy, and the cost of rent-free periods. When the effect of this rental guarantee is considered, the Total Portfolio occupancy rate is 1.1% higher.
• At the Trio property, which has a 90% occupancy rate, brokers have been engaged on a retainer basis to pursue fieldwork and release vacant space when the demand grows again. Management is negotiating the extension or refinancing of HCOB's in- place facility which matured in March 2024 with several lenders. In the meantime, the senior lender applies penalty interest (8.6%) and does not call for the repayment of the $43,411 outstanding loan amount. The 8.6% interest over Q2 2024 has already been accrued as at March 31, 2024 for a total of $766, as Management's best estimate of future interest payments before reaching an agreement with HCOB.
• The Delgado property in Spain, acquired in March 2022, is fully leased to two blue-chip tenants on leases maturing at the end of 2024 and in June 2029. In Q1 2024, Management successfully extended a lease on 50% of the leasable areas for 10 years (of which 5 are firm), securing an 8-year WALT (4.3 years including break options).
• At the Duisburg property, the 20% vacancy is only temporary, the time to perform tenant improvement work for the new tenant with which a 10-year firm lease has been signed in Q1 2024 and effective August 1, 2024. As the main tenant Hitachi is continuously reducing its footprint on the building despite a lease maturing in 2027, rent-free periods and tenant improvements costs will be offset by early termination penalties negotiated with Hitachi. The recent reletting showed once again the attractiveness of this property, while a 6.5-year WALT is securing cashflow for joint venture partners, or alternatively attracting potential buyers. Refer to the "Portfolio Overview - Joint Venture Agreement Wind Up" section of this MD&A.

Inovalis REIT - Q1 2024 Management's Discussions & Analysis

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