Centurion Apartment REIT

1. Product Overview — What You Are Buying

Centurion Apartment REIT is a private, non-traded real estate investment trust organized as an unincorporated open-ended trust under Ontario law. When you buy units, you become a unitholder of the trust — you own a proportionate economic interest in a portfolio of Canadian apartment buildings, student housing properties, and mortgage investments. However, you do not own shares in a corporation. Units do not trade on any stock exchange or secondary market. The only way to exit your investment is through the trust's own redemption program, which is subject to monthly limits, a three-month notice period, and trustee discretion.

The trust is entirely externally managed — it does not employ its own senior management team. All management functions are performed by Centurion Asset Management Inc. ("CAMI"), a private company wholly owned by Gregory Romundt, the trust's president. Mr. Romundt controls the asset manager that runs the REIT, sits on the board that oversees it, and sets the policies that determine the unit price, distribution levels, and fee arrangements. This dual role creates structural conflicts of interest that are identified in Section 5.

A. Unit Structure

The trust offers three classes of units to investors. All three classes own the same underlying assets. The differences relate to how the dealer is compensated and, therefore, how much of the distribution reaches you:

Feature	Class A	Class F	Class I
Who can buy	Any investor via a registered dealer	Fee-based advisory accounts only	Institutional / direct purchase
Dealer trailer fee embedded	0.50%–1.00% p.a. (varies by purchase option)	None	None
Annual distribution per unit	$0.96	$1.16	$1.16
Implied yield at $24.24 price	3.96%	4.79%	4.79%
Units outstanding (Sep 30, 2025)	75,851,538	76,050,889	21,904,203

How the price is determined: The unit price is set monthly by the trustees, in their sole discretion. Investors buy and redeem at this management-set price. There is no market-clearing mechanism — no exchange, no auction, no bid/ask. The trustees can change the valuation methodology used to calculate the price at any time, without notice to or approval from unitholders.

B. Current Valuation Snapshot

There are three different ways to assess what a unit is worth, and they produce significantly different answers:

Valuation Measure	Per Unit	Source	What It Means
Management Unit Price (Posted Price)	$24.24	OM — Sep 2025 price	The price at which you buy and redeem. Set by management using their valuation methodology including non-IFRS "Adjustment Factors."
IFRS NAV per Unit	$20.10	Forensic Analysis — Q3 2025	The per-unit value of net assets on the trust's audited balance sheet, before management's non-IFRS adjustments. This is the accounting value.
Forensic-Implied NAV (5.0% Cap Rate)	$17.85	Forensic Analysis — based on FY2026E projected NOI	What the properties are worth using a market-appropriate capitalization rate applied to actual (not "normalized") earnings, divided by total units.

C. Income & Return Profile

Distribution Yield

Class	Annual Distribution	Yield at $24.24
Class A	$0.96	3.96%
Class F	$1.16	4.79%
Class I	$1.16	4.79%

Is the Distribution Sustainable?

The forensic analysis examines whether the properties generate enough cash to cover the distributions being paid, using two independent measures:

Sustainability Metric	FY2024	What "Good" Looks Like	Assessment
RF-AFFO Payout Ratio — Distributions as a percentage of cash earnings after maintenance costs (forensic calculation)	130%	Below 90%	Paying $1.30 for every $1.00 earned
CFS-FCF Payout Ratio — Distributions as a percentage of actual cash generated from operations after capital expenditures	180%	Below 100%	Paying $1.80 for every $1.00 of cash

Historical Tax Character of Distributions (Class A)

"Return of capital" means the distribution is not coming from income the trust earned — it is a return of your original investment. Return of capital reduces the cost base of your units, which increases your taxable capital gain when you eventually sell or redeem. In recent years, the return-of-capital component has risen sharply:

Year	Return of Capital	Capital Gains	Other Income
2020	66.8%	9.4%	23.7%
2021	53.2%	13.4%	33.5%
2022	77.0%	—	23.0%
2023	84.0%	0.5%	15.5%
2024	85.0%	0.5%	14.5%

The rising return-of-capital percentage is consistent with the forensic finding that distributions substantially exceed operating cash flows. An 85% return-of-capital composition means only 15 cents of every distribution dollar comes from actual trust income.

D. Forward-Looking Economic Return

The forensic analysis projects forward returns under a base-case scenario that assumes continued but declining capital inflows. This is a scenario, not a forecast — actual results will depend on capital market conditions, interest rates, and management decisions.

Scenario Component	Assumption	Projected Outcome
Entry Price	$24.50 (management price)	—
Same-Store NOI Growth	3.8% declining to 3.0%	Supports property values
Gross Subscriptions	Declining from $350M to $225M annually	Insufficient to offset fee drag
Cumulative Distributions (5 years)	$0.96/unit × 5 = $4.80/unit	Cash received
Projected Economic NAV (FY2030E)	—	~$18.95 per unit
Projected 5-Year Total Return CAGR	—	-0.6% annually

Source: Forensic Analysis, Return Profile tab. This projection assumes current distribution levels, current fee structure, and a gradual decline in capital inflows. It does not assume any distribution cut, fee reduction, or structural change.

2. How You Get In — Subscription & Cost of Entry

There are five purchase options. The choice of option determines who pays the dealer, how much, and what penalties apply if you leave early. All options require a minimum initial investment of $25,000 and a minimum additional investment of $5,000.

Purchase Options Summary

Option	Unit Class	Upfront Commission	Trailer Fee (Annual)	Early Exit Penalty
1. DSC (Deferred Sales Charge)	Class A	5.0% (paid by REIT to dealer)	0.50%	6.0% Year 1, declining to 0% after Year 5
2. Low Load	Class A	3.0% (paid by REIT to dealer)	0.75%	3.5% first 18 months, 3.0% second 18 months
3. Front Load	Class A	Negotiated (investor pays directly)	1.00%	3.0% if redeemed in first 6 months
4. Fee-Based	Class F	None	None	Not disclosed
5. Institutional	Class I	Not disclosed	Not disclosed	3.0% if redeemed in first 6 months

Day-One Cost Summary

Purchase Option	Upfront Cost to Trust	Year 1 Total Cost to Trust	5-Year Total Cost to Trust (on $100K)
1. DSC (Class A)	$5,000	$5,500	$7,500
2. Low Load (Class A)	$3,000	$3,750	$6,750
3. Front Load (Class A)	$0*	$1,000	$5,000
4. Fee-Based (Class F)	$0	$0	$0
5. Institutional (Class I)	Not disclosed	Not disclosed	Not disclosed

*Front Load: the investor pays the dealer directly; no trust assets are used for the upfront commission. The 1.0% trailer is paid from trust assets.

3. How You Get Out — Redemption & Liquidity

A. The Redemption Process

To redeem your units, you must follow a multi-step process:

1. Submit a written redemption request by the 15th of a given month (the "Notice Date").
2. Wait three months. Your redemption will be processed on the designated day of the month that is three full months after the Notice Date. If you miss the 15th deadline by even one day, your notice rolls to the next month — adding another month of waiting.
3. Monthly cash cap: $50,000. Total cash redemptions across all unitholders are limited to $50,000 per month unless the trustees waive the limit at their discretion. With ~$4.2 billion in NAV outstanding, a $50,000 monthly cash cap means the trust is only contractually required to redeem 0.001% of NAV per month.
4. If the cap is exceeded: All requests received during the notice period are pooled and redeemed pro rata. The unredeemed portion gives you two options:
   • Cancel the request and resubmit in a future period, or
   • Accept COT Notes — unsecured 5-year promissory notes issued by a related entity (Centurion Operating Trust) that pay interest at an undisclosed rate described only as "below the then distribution rates expected."

B. The Honest Liquidity Assessment

The trust's historical redemption data tells an important story:

Period	Units Redeemed	Dollar Value	Outstanding at Period End	Trustee Waived Cap?
FY2023	13,592,408	$312,399,220	Nil	Yes (implicitly — $312M far exceeds $600K annual cap)
FY2024	16,964,013	$401,485,275	Nil	Yes
YTD Sep 2025	14,682,747	$356,035,185	Nil	Yes

The trust has honored all redemption requests to date by exercising trustee discretion to waive the $50,000 monthly cap. The contractual cap of $50,000/month would produce a maximum of $600,000/year in mandatory cash redemptions — the trust actually paid out $401 million in FY2024, nearly 700 times the contractual minimum.

This is good news historically — but it is entirely discretionary. The trustees can reinstate the $50,000 monthly limit at any time, without notice, and for any reason. The OM explicitly states: "The Trustees may from time to time set and revise the Redemption Policy…impose further conditions on the redemption of Units."

C. What This Means

4. What You Are Paying — Complete Fee Analysis

A. Fee Inventory

1. Asset Management Fee — 0.90% of NAV per year (temporarily reduced from 1.00%)

This is the annual fee paid to CAMI for managing the trust's assets. It is calculated monthly on the total Net Asset Value (before deducting the fee itself or any distributions). On a $100,000 investment, this costs approximately $900 per year. The fee can revert to the contractual 1.00% rate ($1,000/year) at any time — the reduction is voluntary, not contractual.

2. Carry Allocation (Performance Fee) — 15% of returns above 7.25% hurdle

When the trust's total return exceeds 7.25% per year, the asset manager's affiliate receives 15% of the excess. This arrangement includes a monthly full recovery lookback — explained in detail below.

3. Dealer Trailer Fees — 0.50% to 1.00% per year (Class A only)

Ongoing annual payments from trust assets to the dealer who sold you the units. Class F and Class I units do not carry trailer fees. On a $100,000 Class A position (Option 3, Front Load), this costs $1,000 per year — more than the management fee.

4. Upfront Dealer Commissions — Up to 5.0% (Class A DSC)

Paid from trust capital on the day of purchase. These are one-time costs that reduce the net proceeds available for investment.

5. Entity-Level G&A — Approximately $37.1 million (FY2024)

General and administrative expenses borne by the trust — audit, legal, trustee compensation, insurance, transfer agent, regulatory filings, and other overhead. These are deducted from trust income before distributions. Based on FY2024 data from the forensic analysis, G&A was $37.1 million, representing approximately 0.97% of average NAV.

6. No Acquisition, Disposition, or Development Fees

7. Property Management — Internalized

Property management was brought in-house in 2015. No separate property management fee is charged.

8. Additional Services — Open-Ended

The asset manager or its affiliates may provide "additional services" beyond the management agreement and be compensated "as agreed to by the Independent Trustees." This open-ended provision creates potential for undisclosed future fees.

9. Make-Whole Payment on Termination

If unitholders vote to terminate the asset management agreement (after September 2030) to bring management in-house or pursue another strategic transaction, the trust must pay a make-whole equal to the sum of all management fees and carry allocations paid over the preceding 36 months. Based on current fee levels (approximately $45M/year in management fees plus carry), this could exceed $150 million — approximately $0.87 per unit.

The Full Recovery Lookback — What It Means for You

The carry allocation uses a monthly full recovery lookback. This is a critical detail that affects how much performance compensation the manager earns over a full market cycle. Here is how it works:

In a simple annual hurdle (the more common arrangement), the manager earns 15% of returns above 7.25% in each individual year. If the trust returns 5% in Year 1, the manager earns nothing — and that underperformance is forgotten. Year 2 starts fresh.

In a full recovery lookback, the shortfall is not forgotten. Instead, it accumulates. When cumulative returns eventually exceed the cumulative hurdle, the manager recovers the entire shortfall — earning carry on the full cumulative excess, not just the current-period excess. Underperforming periods do not reduce the manager's lifetime compensation; they only delay it.

High Water Mark Interaction

The carry allocation also includes a high water mark, which prevents the manager from earning carry on the same NAV gains twice. If NAV rises from $20 to $22 and carry is earned, but then NAV falls back to $21, the manager does not earn carry again until NAV exceeds $22 (the prior high). The lookback and high water mark together create an asymmetric profile: the manager is protected from permanently losing carry (via lookback) while the investor is partially protected from paying carry twice on the same gains (via high water mark).

Post-2025 Carry Structure Change

B. Total Cost Load

This is the most important section for dealers assessing this product.

Cost Component	Annual Rate (% of NAV)	Annual Cost on $100,000	Source
Asset Management Fee	0.90%	$900	OM — temp reduced from 1.00%
Carry Allocation (est. annual cost)*	~1.05%	~$1,050	Forensic — ~180 bps of NOI ÷ NAV
Entity-Level G&A	~0.97%	~$970	Forensic — FY2024 G&A $37.1M ÷ avg NAV
Dealer Trailer Fee (Class A, Option 3)	1.00%	$1,000	OM — highest trailer rate
EFFECTIVE MER (Class A, Option 3)	3.92%	$3,920
EFFECTIVE MER (Class F — no trailer)	2.92%	$2,920

*Carry allocation estimate based on forensic analysis decomposition showing ~180 basis points of NOI attributable to performance fees in FY2024. Actual carry varies by year depending on returns vs. hurdle. The carry rate could be zero in a year where returns are below 7.25%.

Public REIT Cost Comparison Context

For dealers assessing fee competitiveness, it is essential to understand how private REIT costs compare to the alternatives:

• Publicly traded REITs do not charge a separate external management fee. Their costs — executive salaries, G&A, overhead — are internalized. They run through the entity's income statement and are deducted before FFO and AFFO. The investor does not see a separate fee line item. A public REIT's effective cost to the investor is its G&A ratio, which typically runs 0.20–0.40% of gross assets for large-cap REITs.
• An externally managed private REIT has a fundamentally different cost structure: the management fee sits on top of entity-level G&A. The investor pays both the trust's own operating expenses and the external manager's fee. This is why the effective MER for externally managed vehicles is structurally higher.
• For investors who access public REITs through an ETF, the ETF MER (typically 0.50–0.75%) is an additional layer — but even with the ETF fee, the total cost is often dramatically lower than the private REIT's effective MER.

Vehicle	Effective All-In Cost (% of NAV)	Annual Cost on $100,000
This entity (Class A, Option 3)	~3.92%	$3,920
This entity (Class F)	~2.92%	$2,920
Comparable public REIT (G&A ratio only)	0.20–0.40%	$200–$400
Public REIT via ETF (G&A + ETF MER)	0.50–0.75%	$500–$750

Multi-Year Compounding Example

Fees compound. Here is what the cost difference looks like over time on a $100,000 investment, assuming both vehicles earn 7.0% gross annual returns before fees:

	Centurion Class A (Opt 3)		Public REIT ETF		Dollar Difference
Year	Effective MER	Portfolio Value	Effective MER	Portfolio Value
Entry	3.92%	$100,000	0.60%	$100,000	$0
Year 5	3.92%	$116,017	0.60%	$137,009	-$20,992
Year 10	3.92%	$134,599	0.60%	$187,714	-$53,115

Assumes 7.0% gross return before all fees, with costs deducted annually. Centurion net return = 3.08% (7.0% − 3.92%). ETF net return = 6.40% (7.0% − 0.60%). No distributions reinvested for simplicity. This example illustrates fee impact only; actual returns will differ.

C. Fee Comparison

Insufficient coverage data for direct comparison at this time.

D. Fee Evolution (2020 → 2025)

Fee Component	2020 OM	2025 OM	Impact on Unitholder
Acquisition Fee	1.0% of purchase price	Eliminated	Improved — saves ~$5-10M/year
Asset Management Fee	None (compensation via Class M dilution)	0.90% of NAV (temp; contractual 1.00%)	Shifted form — explicit fee replaces dilutive equity
Performance Compensation	~5.26% perpetual equity dilution (Class M Units) — no hurdle, no cap	15% carry above 7.25% hurdle with high water mark	Improved — hurdle and HWM added; but carry is more transparent and potentially lower in weak years
Borrower-Paid Fees	Retained by AM affiliate	Paid to the REIT (no fee to AM for mortgage brokerage)	Improved
Make-Whole on Termination	Not disclosed	36 months of fees + carry	Worsened — creates a massive barrier to internalization
Dealer Commissions & Trailers	Identical structure	Identical structure	No change

The September 2023 restructuring replaced a perpetual dilutive equity arrangement (Class M Units — an unconditional 5.26% claim on all NAV and income with no hurdle) with a conventional management fee plus performance carry structure with a 7.25% hurdle. On balance, the carry structure is more aligned with investor interests than the old Class M mechanism, but the new make-whole payment creates a powerful deterrent to ever terminating the external manager.

5. Who Is Running It — Governance & Conflicts

A. Board Composition

Name	Role	Independent?	Compensation (2025)	Units Held	Notes
Gregory Romundt	President, Trustee	No — Centurion Appointee; 100% owner of AM	$0 from Trust	2,398,778 (1.38%)	Residence: Grand Cayman
John McKinlay	President & CEO (AM), Trustee	No — Centurion Appointee; AM employee	$525,000 from AM	—
Paul Chin	EVP, CIO, Trustee	No — Centurion Appointee; AM employee	$425,000 from AM	—
Andrew Jones	Trustee	Yes	$70,000	7,974	Audit Committee. Only trustee present in both 2020 and 2025.
Ansil Miller	Trustee	Yes	$100,000	—	Audit Committee
Peter Smith	Trustee	Yes	$70,000	—	Governance & Compensation
Michael Lovett	Advisor (not Trustee)	Yes	$40,000	—

Appointment Mechanics: During the asset management agreement, CAMI is entitled to appoint 3 of 7 trustees (the current configuration). A majority must be independent. However, the independent trustees other than the Centurion Appointees have minimal economic alignment with unitholders — only Andrew Jones holds any units (7,974 units, worth approximately $193,000). Two independent trustees and the advisor hold zero units.

B. Asset Manager Relationship

Centurion Asset Management Inc. is wholly owned (indirectly) by Gregory Romundt. It is registered as an exempt market dealer, investment fund manager, and restricted portfolio manager. The trust has no internal management team — all senior management (CEO, CFO, CIO, COO) are employees of the asset manager, not the trust.

Termination difficulty: The asset management agreement can only be terminated by unitholders for "poor performance" after the initial term (September 2028), and only with: (a) a two-thirds vote of Independent Trustees, and (b) a two-thirds vote of unitholders excluding units held by the asset manager and its affiliates. For internalization after September 2030, a make-whole payment equal to 36 months of fees (~$150 million+) is required. This makes termination economically prohibitive.

C. Conflict of Interest Map

Conflict	Nature	Mitigation
Fee-Valuation Circularity	The asset manager's fee is calculated on NAV. The asset manager determines the inputs to NAV (Normalized NOI, cap rates, adjustment factors). Higher NAV = higher fees.	External appraisers provide cap rates quarterly. However, management provides the NOI inputs and discretionary adjustment factors.
Pricing Control	The asset manager sets the price at which investors buy and redeem. Higher prices mean more capital raised per unit issued, which means more NAV to charge fees on.	None disclosed. Trustees have sole discretion.
Personnel Conflict	The trust's CEO (McKinlay) and CFO (Orr) are employees of the asset manager, not the trust. They report to and are compensated by the asset manager.	Independent Trustee approval required for "Independent Trustee Matters."
Opportunity Allocation	The asset manager may manage future funds. Investment opportunities are allocated at the AM's discretion — "no requirement that the Asset Manager allocate investment opportunities on a pro-rata basis."	None disclosed.
Connected Issuer	The trust is a "connected issuer, and may be considered to be a related issuer" of CAMI. Romundt is president of both. AM holds >20% board appointment rights.	Connected issuer disclosure provided in OM.

D. Governance Comparison

Insufficient coverage data for direct comparison at this time.

E. Governance Evolution (2020 → 2025)

Governance Feature	2020 OM	2025 OM	Impact
Independent Trustees	6 of 7 (86%)	4 of 7 (57%)	Worsened — reduced independent representation
Centurion Appointees	1 (Romundt only)	3 (Romundt, McKinlay, Chin)	Worsened — tripled management board presence
Operating Policy Changes	Required 66⅔% unitholder vote	Trustees alone, no unitholder approval	Worsened — fundamental governance right removed
Management Structure	Hybrid — internal management team with external advisory	Fully external — trust has no employees	Worsened — increased dependency on AM
AM Ownership Description	"Mr. Romundt and his family"	"Mr. Romundt indirectly"	Changed — family reference removed
AMA Termination for Poor Performance	Not available	Available after initial term, but dual supermajority required	Improved — right added, though heavily conditioned

6. How It Is Valued — NAV Methodology & Transparency

A. The Valuation Process

NAV is calculated monthly by the asset manager using the following process:

1. Quarterly, external appraisers determine capitalization rates and provide comparable sales data for the property portfolio.
2. The asset manager's internal team assembles property-specific data, inputs cap rates, and calculates "Normalized Net Operating Income" (NNOI) for each property using management's own assumptions about future rent growth, occupancy, and operating costs.
3. Each property's value is calculated as: NNOI ÷ Cap Rate.
4. Non-IFRS Adjustment Factors are then added (see below).
5. Total assets minus total liabilities, plus adjustment factors, divided by total units outstanding = NAV per unit (the posted price).

The key concern: "Normalized" NOI is not current actual NOI. It includes management's assumptions about what properties will earn once renovated, re-leased, or stabilized. The forensic analysis found that management's NNOI has historically exceeded actual NOI by 11–44%, and that actual organic growth delivery closed only 44–67% of the NNOI gaps year over year. This means properties are being valued based on earnings projections that have consistently overstated what the properties actually delivered.

B. Non-IFRS Adjustment Factors

Adjustment Factor	Description	Discretionary?	Concern
(a) Portfolio Premiums	Adjusts individual property values upward to reflect the premium a buyer might pay for an assembled portfolio	Yes	Size and basis not disclosed. No requirement to validate against market transactions.
(b) Capitalization of Capital Expenses	Adds value for capital improvements that may not yet be reflected in IFRS valuations due to timing lag	Yes	Double-counting risk — capex may already be partially reflected in NNOI or IFRS valuations.
(c) Inter-Quarter Timing Adjustments	Adjusts between quarterly external appraisals to produce monthly NAV updates	Yes	Smoothing mechanism that may mask volatility.
(d) Discretionary Adjustments	Catch-all — any other adjustment the trustees deem appropriate	Yes	Unlimited scope. No disclosure requirement. No unitholder approval.

C. Three-NAV Comparison

NAV Measure	Per Unit	Total ($M)	Key Driver of Difference
Management Posted Price (incl. Adjustments)	$24.24	~$4,213M	Uses NNOI (11-44% above actual NOI), 4.36% cap rate, plus non-IFRS Adjustment Factors
IFRS NAV (audited balance sheet)	$20.10	$3,660M	Uses IFRS fair value model (IAS 40) — closer to actual NOI, but still uses management's cap rates
Forensic-Implied NAV (5.0% cap rate)	$17.85	~$3,252M	Uses actual NOI, 5.0% market-appropriate cap rate, no adjustment factors

The $6.39 gap between the management posted price ($24.24) and the forensic-implied NAV ($17.85) means that 26 cents of every dollar you invest is absorbed by valuation methodology differences. If the forensic analysis is correct about the economic value, an investor buying today would need the properties to appreciate by 36% just to break even on NAV.

D. Valuation Comparison

Insufficient coverage data for direct comparison at this time.

7. Key Risks — What the Dealer Must Understand

The following risks are curated from the OM's 33 risk factors and the forensic analysis, ordered by materiality. Each risk is assessed using forensic evidence where available.

1. Distribution Sustainability Risk

Category: Distribution Risk  |  Severity: CRITICAL

The trust's distributions exceed both earnings and cash flow by a wide margin. The RF-AFFO payout ratio is 130% and the CFS-FCF payout ratio is 180%. Over six years, cumulative distributions exceeded cumulative free cash flow by $402 million. This deficit has been funded by continuously raising new investor capital. The OM itself warns: "Distributable Income is calculated before deducting items such as principal repayments and capital expenditures and, accordingly, may exceed actual cash available."

What to monitor: Quarterly payout ratios, return-of-capital percentage of distributions, net capital flows (subscriptions minus redemptions).

2. Capital Market Dependency Risk

Category: Liquidity / Structural Risk  |  Severity: CRITICAL

The trust's financial model requires continuous gross subscriptions exceeding $450 million annually to offset the structural cash deficit from distributions, redemptions, and fees. In Q3 2025, net capital flows turned negative for the first time — more money is leaving through redemptions than entering through subscriptions. Credit facility utilization has risen to 61% ($182M of $300M), providing approximately 12-18 months of deficit funding at current burn rates.

What to monitor: Monthly subscription and redemption volumes, credit facility utilization, COT Note issuance volume.

3. Fee Structure Extraction Risk

Category: Fee / Structural Risk  |  Severity: SEVERE

The external management structure consumes approximately 452 basis points annually of the returns that the same properties would generate under a public REIT cost structure. Total fee extraction equals 42.4% of NOI — nearly half of the operating income generated by the properties is absorbed by fees before reaching unitholders. The forensic analysis classifies this as "SEVERE" — the highest category.

What to monitor: Total fee load relative to NOI, any fee restructuring announcements, management fee reductions or waivers.

4. Valuation and NAV Credibility Risk

Category: Valuation Risk  |  Severity: HIGH

Management's unit price exceeds IFRS book value by 21% and forensic-implied economic value by 36%. The NNOI premium (management's "normalized" NOI above actual NOI) has averaged 11-44% over the observation period. Management can change the valuation methodology without unitholder notice or approval. There is no independent price-setting mechanism. The same people who set the price earn fees calculated on it.

What to monitor: NNOI premium trend, management price vs. IFRS NAV gap, any changes to valuation methodology or Adjustment Factors.

5. Liquidity and Redemption Risk

Category: Liquidity Risk  |  Severity: HIGH

The contractual monthly cash redemption limit is $50,000. The trust has waived this limit historically, but the waiver is entirely discretionary and can be revoked at any time. If net capital outflows continue and credit facility capacity is exhausted, the trust may be forced to either reinstate the cap, issue COT Notes (unsecured, 5-year, below-market-rate instruments not eligible for registered plans), or gate redemptions entirely. The 3-month notice period (extended from 30 days since 2020) adds delay.

What to monitor: Redemption queue length, COT Note issuance, credit facility draws, any changes to redemption policy.

6. Leverage and Refinancing Risk

Category: Leverage / Financing Risk  |  Severity: ELEVATED

Net Debt/EBITDA of 12.7x is elevated for the apartment sector. $731 million (21.3% of total debt) matures within three years, during the projected period of maximum capital market stress. The weighted average mortgage rate of 3.32% will rise on refinancing in the current interest rate environment. A +200 basis point refinancing stress scenario would add $65 million in annual interest costs.

What to monitor: Debt maturity schedule, refinancing rates, credit facility renewals, LTV ratios.

7. Governance Erosion Risk

Category: Governance Risk  |  Severity: ELEVATED

Since 2020, the board's independent representation has decreased from 86% to 57%, management's board seats have tripled from 1 to 3, unitholder approval for operating policy changes has been eliminated, and management has been fully externalized. The near-complete turnover of independent trustees during the governance restructuring period raises questions about board independence and the oversight dynamic.

What to monitor: Board composition changes, any further reduction in unitholder approval rights, Independent Trustee tenure.

8. Rent Control and Regulatory Risk

Category: Regulatory / Tax Risk  |  Severity: MODERATE

50% of the diluted rental units are subject to some form of rent control or cap. Ontario's rent control regime limits annual rent increases on most pre-2018 units to a government-prescribed guideline. 22% of units are fully rent-controlled, and 28% are hybrid. The EIFEL rules (interest deductibility limits) could increase the taxable component of distributions.

What to monitor: Provincial rent guideline increases, legislative changes to rent control scope, EIFEL implementation impacts.

9. Key Person Risk

Category: Key Person Risk  |  Severity: MODERATE

Gregory Romundt, the trust's founder, controls 100% of the asset manager, sits on the board, and has relocated to Grand Cayman. The trust has no internal management team — it is entirely dependent on the asset manager's personnel. Asset manager employees "devote only such time as reasonably necessary."

What to monitor: Key personnel changes, asset manager's financial health, any new fund launches by the AM that could divert resources.

10. COT Note Structural Risk

Category: Structural / Tax Risk  |  Severity: MODERATE

COT Notes are unsecured, pay below-market interest, have 5-year maturities, and are not eligible for registered plans. Investors holding units in RRSPs, TFSAs, or other registered plans who are forced to accept COT Notes face a tax compliance problem. The OM does not disclose the interest rate on COT Notes.

What to monitor: COT Note issuance volumes, interest rate disclosure, any changes to COT Note terms.

8. Reasonable Range of Alternatives

A. The Comparison Framework

For suitability purposes, the relevant comparison is between this private REIT and publicly traded apartment REITs accessible to Canadian retail investors. Both invest in the same type of asset (Canadian apartment buildings), in the same markets, using similar financing structures (CMHC-insured mortgages). The differences are structural: how the vehicle is managed, how it is priced, how you get in and out, and what it costs.

B. Side-by-Side Comparison

Insufficient coverage data for a direct entity-by-entity comparison table at this time. However, the following structural comparison can be made using the forensic analysis data:

Feature	Centurion Apartment REIT (Private)	Typical Large-Cap Canadian Apartment REIT (Public)
Distribution Yield	3.96% (Class A)	3.0–4.5% (varies by entity)
RF-AFFO Payout Ratio	130%	60–90% (typical range)
Effective MER	2.92–3.92%	0.20–0.40% (G&A only)
Leverage (ND/EBITDA)	12.7x	7–10x (typical range)
Liquidity	3-month notice + $50K/mo cap + trustee discretion	Instant — sell on TSX during market hours
Pricing	Management-set NAV; no market mechanism	Market price; continuous price discovery
Governance	External; AM appoints 3/7 trustees; AM controls valuation	Internal; board elected by shareholders; independent valuation
Disclosure	Annual OM; limited interim reporting	Quarterly financial statements; annual information form; earnings calls; continuous disclosure

C. The Risk Framing — Both Perspectives

A common argument made for private REITs is that they are "less risky" because their unit price does not fluctuate with stock market volatility. Here are both sides of this argument:

Perspective 1: Private REITs as Lower Risk

The unit price of Centurion Apartment REIT has moved from $18.72 in January 2020 to $24.24 in September 2025 — a smooth, upward trajectory with no negative months. By contrast, publicly traded apartment REITs experienced 30-40% drawdowns during the COVID-19 selloff in March 2020 and the interest rate shock of 2022. An investor holding Centurion through these periods would not have experienced the psychological stress of watching their portfolio decline. The stable posted price also prevents forced selling at depressed prices.

Perspective 2: Smooth Pricing as Opacity, Not Safety

The forensic analysis presents substantial evidence that the smooth price trajectory does not reflect the underlying economic reality. IFRS NAV per unit — the accounting value on the trust's own audited balance sheet — has actually declined from $20.68 in FY2019 to $20.10 in Q3 2025, even as the management-set price increased from $18.72 to $24.24. The management price has diverged from book value by an increasing margin (from -7.4% in 2020 to +21.2% in 2025). The properties experienced the same interest rate environment, the same cap rate expansion, and the same economic conditions as public REIT properties — but the management-controlled pricing mechanism smoothed away the volatility rather than reflecting it.

Public REIT price volatility is transparency, not risk. When a public REIT's stock price drops 30% during a market selloff, the market is rapidly incorporating new information about interest rates, cap rates, and rental demand into the price. The investor can see the adjustment in real time and make informed decisions. When a private REIT's management-set price does not adjust, the underlying risk still exists — it is simply hidden by the pricing mechanism. NAV smoothing conceals volatility; it does not eliminate it.

The forensic evidence supports the second perspective in this case. The widening gap between management pricing and IFRS book value, the persistent use of NNOI assumptions that overstate actual property performance, and the discretionary Adjustment Factors all suggest that the smooth price trajectory reflects management's pricing choices rather than the underlying economic trajectory of the assets.

D. What This Means for Suitability

Dealers should consider the following factors when assessing suitability:

• Liquidity needs: This investment is appropriate only for investors with a genuine long-term horizon who do not anticipate needing the capital for at least 5-7 years. The 3-month redemption notice, potential for gating, and COT Note risk make this unsuitable for any investor who may need liquidity.
• Fee tolerance: At 2.92–3.92% effective MER, this product costs 4–8x more than a comparable public REIT ETF. The investor must believe the private structure generates sufficient additional value to justify this cost differential — the forensic analysis suggests it does not.
• Tax situation: The 85% return-of-capital composition of distributions reduces current taxable income but erodes cost base. Investors in registered plans do not benefit from the return-of-capital tax deferral.
• Risk understanding: The investor must understand that the smooth price trajectory does not mean the investment is lower risk — it means the pricing mechanism obscures the underlying volatility that public REITs display openly.
• COT Note risk for registered plan holders: If redemptions are satisfied with COT Notes (not eligible for registered plans), the investor faces a forced deregistration event with immediate tax consequences.

9. Disclosure Gaps & Dealer Recommendations

Gap	What Is Missing	Why It Matters	What to Ask Management
COT Note Interest Rate	The OM describes the rate only as "a fixed rate of interest below the then distribution rates expected" — no actual rate is disclosed.	Investors who receive COT Notes need to know the return they will earn over 5 years. "Below" distribution rates could mean 1% or 3% — the difference is material.	Request the current COT Note coupon rate and the formula used to determine it. Ask whether the rate is fixed at issuance or floats.
Class F Short-Term Trading Fee	The OM does not disclose whether Class F units are subject to a short-term trading fee.	Fee-based account investors need to know all exit costs.	Request confirmation whether Class F units are subject to any early redemption penalty.
Class I Commission & Trailer	The OM does not disclose the upfront commission or trailer fee structure for Class I institutional units.	Institutional investors and their advisors cannot assess the true cost of the investment.	Request the complete fee schedule for Class I units, including any negotiated fee arrangements.
Reimbursable Expenses	The asset management agreement references "certain agreed reimbursable expenses" for transferred personnel but does not specify them.	These could represent material additional costs above the stated 0.90% management fee.	Request a schedule of reimbursable expenses, their annual dollar amount, and whether they are capped.
Adjustment Factor Amounts	The non-IFRS Adjustment Factors are described conceptually but their dollar amounts are not disclosed.	These adjustments account for the entire $4.14/unit gap between IFRS NAV ($20.10) and the posted price ($24.24). Investors deserve to know how much of that gap comes from each adjustment category.	Request a breakdown of each Adjustment Factor by dollar amount and percentage of NAV for the most recent quarter.
Impaired/Non-Performing Loans	The mortgage portfolio summary does not disclose impaired or non-performing loan balances.	With $290 million in mortgage investments (81% maturing in 2025), default risk is a material consideration. 17% of committed mortgage LTV is 80-90%.	Request the current balance of impaired and watchlist loans, and the allowance for credit losses.
Entity-Level MER	The OM does not disclose a management expense ratio or total expense ratio. G&A expenses must be derived from financial statement appendices.	Without a stated MER, dealers cannot easily compare the total cost of this product to alternatives. This is a fundamental KYP requirement.	Request the current total MER or TER, including all expenses borne by the trust (management fee, G&A, carry allocation, trailer fees) expressed as a percentage of average NAV.
Fee Comparison Context	The OM provides no comparison of its fee structure to industry benchmarks, competitor products, or public REIT cost structures.	Without context, investors cannot assess whether the fee load is competitive. The 2020 OM compared Class M Units to "performance incentive fees typically associated with a real estate asset management agreement that typically range between 20% and 50% of profits" — this comparison is no longer relevant and was not replaced.	Request management's view on how the total cost structure compares to (a) other private REITs in the exempt market, and (b) publicly traded Canadian apartment REITs.

10. OM Change Log (October 2020 → November 2025)

The following table documents every material change between the October 1, 2020 Offering Memorandum and the November 7, 2025 Offering Memorandum. Changes are ordered chronologically by effective date where known, otherwise by section.

#	Change	2020 OM	2025 OM	Effective Date	Unitholder Impact
1	Property Management Internalization	Already internalized (Jan 1, 2015)	Same	Jan 1, 2015	No change
2	CREOT Merger	REIT owned 61.53% of CREOT; two Warehouse Agreements with CREOT and CFIT	CREOT merged into REIT (Jan 2021); Warehouse Agreements not referenced	Jan 4, 2021	Simplified structure; eliminated inter-entity allocation conflicts with CREOT
3	Acquisition Fee Eliminated	1.0% of purchase price on all property acquisitions	Not charged	Sep 1, 2023	Improved — eliminated a ~$5-10M/year cost
4	Class M Units Redesignated	19,372 Class M Units outstanding — perpetual ~5.26% dilution of all Investor Units, no hurdle, unconditional participation in all distributions and NAV	All Class M redesignated as Class A (Sep 1, 2023). AM irrevocably renounced future Class M issuance	Sep 1, 2023	Improved — eliminated perpetual dilutive mechanism
5	Asset Management Fee Introduced	No explicit management fee (compensation via Class M dilution and acquisition fees)	1.00% of NAV per annum (temporarily reduced to 0.90%)	Sep 1, 2023	Shifted form — explicit fee replaces dilutive equity compensation. Net economic impact depends on relative magnitude
6	Carry Allocation Introduced	No performance fee (Class M served as performance compensation substitute)	15% of total returns above 7.25% hurdle, monthly full recovery lookback, high water mark	Sep 1, 2023	Improved vs. Class M — added hurdle rate and high water mark; manager only earns carry when returns exceed threshold. However, the lookback defers rather than eliminates carry in weak periods
7	Borrower-Paid Fees Redirected	Retained by AM affiliate (Centurion Mortgage Capital Corporation)	Paid to the REIT. Mortgage broker "does not charge a fee to the REIT"	Jan 1, 2024 (amalgamation date)	Improved
8	Management Structure Externalized	Hybrid — REIT had internal management team including CFO; AM provided advisory/sourcing	Fully external — "Centurion Apartment REIT does not have an internal management team." All senior officers are AM employees	Sep 1, 2023	Worsened — total dependency on external manager; increased termination difficulty
9	Redemption Notice Period Extended	30 days' notice before Redemption Date	3 months' notice (received by 15th of month, 3 months before intended Redemption Date)	Between 2020 and 2025 (exact date not disclosed)	Worsened — tripled the waiting period to exit
10	COT Notes Introduced	No deferred payment instrument. Excess redemptions queued by priority	COT Notes: unsecured, 5-year, below-market rate, not eligible for registered plans	Between 2020 and 2025	Worsened — investors who cannot be redeemed in cash may receive an inferior, illiquid instrument
11	Operating Policy Approval Rights Removed	"Any of the investment guidelines or operating policies…may be amended only by the vote of a two-thirds majority of the votes cast at a meeting of the Unitholders"	"Operating Policies…may be amended by the Trustees without the approval of the Unitholders"	Between 2020 and 2025	Worsened — fundamental governance right eliminated. Trustees can now change redemption policy, valuation methodology, and operating policies unilaterally
12	Independent Board Composition Reduced	6 of 7 trustees independent (86%); 1 Centurion Appointee	4 of 7 trustees independent (57%); 3 Centurion Appointees	Between 2020 and 2025	Worsened — reduced independent oversight; management increased board control
13	AMA Restructured	Expires Dec 31, 2027; auto-renews 5 years. Termination only for material default or insolvency. No make-whole. No poor performance right	Initial term Sep 1, 2023 – Sep 1, 2028; auto-renews 1 year. Poor performance termination available after initial term (dual supermajority). Internalization after Sep 2030 requires 36-month make-whole	Sep 1, 2023	Mixed — added poor performance termination right (positive) but introduced massive make-whole payment (negative)
14	Development Property Leverage Limit Added	No separate development property leverage limit	85% of value for development properties	Between 2020 and 2025	Mixed — formalizes higher leverage on development vs. stabilized assets
15	Credit Facility Expanded	$180 million consolidated revolving credit facilities	$300 million consolidated revolving credit facilities	Between 2020 and 2025	Neutral — supports larger portfolio but increases borrowing capacity
16	Carry Deferred to Class D LP Units (Post-2025)	N/A	Carry accrues as Class D LP Units exchangeable to Class F REIT Units only on Triggering Events (including discretionary events determined by Trustees)	Jan 2026	Mixed — defers cash outflow but creates growing contingent claim on NAV with discretionary conversion triggers
17	Romundt Residence	Toronto, ON	Grand Cayman, Cayman Islands	Between 2020 and 2025	The trust's founder and controlling person has relocated outside Canada
18	Portfolio Scale	80 buildings / 11,498 rental units	163 buildings / 23,410 rental units	Continuous growth 2020–2025	Diversification improved; but growth funded by $2.4B+ in new equity at above-NAV prices