Imperial Equities : 2022 – Third Quarter Report

3rd	Quarter Report 2022

Ending June 30, 2022

TABLE OF CONTENTS

President's Report																					01
Management's Discussion and Analysis
Responsibility of management and the Board of Directors					04
Forward-looking information											04
Additional non-IFRS measures										04
Business overview																04
Strategic direction																05
Key performance drivers		05
Key performance indicators										06
Investment properties		07
Leasing activities																08
Financing																	12
Mortgage maturities															13
Activity during the period												14
Performance results														14
Results of operations and cash flows							15
Changes in cash flows												17
Changes in financial position									17
Summary of consolidated quarterly results					19
Outstanding share data										20
Dividends											20
Related party transactions									20
Liquidity, capital resources, and solvency					21
Critical estimates of the current economic environment and outlook				22
Risks and risk management						22
Critical accounting estimates and changes in accounting policies				22
Measures not in accordance with international financial reporting standards		23
Disclosure controls and procedures		23
Off-balance sheet arrangements		23
Financial Statements		24

IMPERIAL EQUITIES INC. 2022 THIRD QUARTER REPORT

PRESIDENT'S REPORT

3rd Quarter June 30, 2022

Report to Shareholders

I am pleased to present our Q3 2022 results and to report on the progress of our Company. Although we've faced a capricious couple of years, we stayed the course, kept the faith and came out stronger than ever before.

Economic forecasts now have Alberta and Saskatchewan at the top of the leaderboard for this year. Alberta is likely to lead the way as the steep climb in crude oil, natural gas and agricultural prices lift incomes in the province. There is no question this will be a busy year for Imperial as we see strong economic growth return. Although exciting news for us, we are mindful that this could potentially be offset by some challenging external conditions, principally inflation and slow supply chains - and the impacts of war on both factors. For us, growth and stability continue to be our main goals, so we monitor our external market, and apply steady management across all activities. As of Q3 2022, we can report on another Quarter of success with our portfolio gaining value ahead of last year's pace and our bottom line remaining profitable.

Strong results never just happen; challenges always arise. For us, the primary challenge is keeping our buildings fully occupied, and therefore performing at their best possible rate of return. While we have close to 15% of our portfolio up for renewal this year, we are making strong progress in both securing renewals and marketing our properties where required.

Historically we've done extremely well here, averaging less than 5% vacancy. We do this first through tenant retention, but vacancies do occur, including one during this Quarter leaving a 34,404 square foot building and yard available for lease. We moved quickly to both prepare the property for a new tenant and to get the word out in the marketplace. We don't like vacancy, so we move quickly to solve it, and our success here, is probably the greatest part of our success over time. Subsequent to this Q3, we were able to complete a long-term lease arrangement with a large national rail company.

Construction to build an additional 33,200 square feet at one of our Fort McMurray, Alberta properties has now begun in earnest. The permitting process along with seasonal challenges caused an eight-month delay in starting the project but I'm pleased to report that that's all behind us now! The new construction will add approximately 8,000 additional square feet to the existing building which will be completed by November 2022 and a new 25,200 square foot independent industrial building to be completed by Q2 2023. This undertaking will now more than double the leasable space at this site.

With new construction underway, we are extremely mindful of the potential impacts of slow supply chains and increased costs. We've worked with our contractor in Fort McMurray to manage the challenges as effectively as possible, by pre- purchasing materials where we were able, and by managing the project timeline to ensure completion of the expansion to the existing building first so our tenant can begin to use this space, while the balance of construction is completed. At this point we are able to manage this expansion project with existing cash, but we are mindful that we will need to consider long-term financing as we near completion so as to free up cash for new investment. For this project and for all our investments, we will continue to monitor the interest rate environment to ensure our best position.

IMPERIAL EQUITIES INC. 2022 THIRD QUARTER REPORT

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The risk of high inflation in Canada is always on the Bank of Canada's (BOC) radar. The BOC has long taken the position that the optimum consumer inflation rate is between one and three percent using two percent as an average. Consumer inflation is measured by the change in the cost of a representative sample of retail goods and services. This year the rate of year over year consumer inflation continued to rise reaching 7.7% in May and followed by 8.1% in June. The increase was the largest yearly change since January 1983. The BOC has always used interest rates to combat inflation and early on this year the BOC began raising its overnight interest rate.

After slashing its rate to record lows at the start of the pandemic, the BOC has now raised its rate four times since March as part of an aggressive campaign to fight inflation, which has risen to its highest level in 40 years and by most accounts it is expected that in September the BOC will raise its rate by a further three-quarters of a percentage point. The BOC must find a "delicate balance" or a "soft landing" as it tries to bring inflation back down without slowing the economy too much and triggering a recession.

And while interest rates, recessionary fears and managing supply chains are key issues for us, perhaps one of the biggest inflationary impacts we are seeing is on the costs of utilities that have spiked across the board and are especially pronounced for our industrial tenant base who conduct energy intensive work. These costs are recoverable for us so they don't outright impact our bottom line, but as they impact our tenants' cash flows, they may impact the potential to achieve lease escalations, or tenant-funded property improvements. Most importantly these escalations provide a strong impetus to accelerate our energy efficiency projects to offset some of the direct costs to our tenants, as well as improve our emissions profile.

Earlier this year we announced the acquisition of two properties in the Coppertone Industrial Common development area. The purchase price was $2.25M. One of the properties is a 1-acre lot with excellent exposure and development potential. The other property contained a vacant 5,840 square foot building situated on 0.72 acres. In this quarter we accepted an unsolicited offer to sell the building for $1.675M and will land bank the 1-acre site for future development.

Imperial's Coppertone Industrial Common now include a total of nine properties and more than 200,000 square feet of industrial space. It has become a preferred industrial area located in Edmonton's central west industrial district.

We continue to look for opportunities to expand in a market that is growing more competitive and seeing significant price escalations. We remain committed to making prudent investments that will build our portfolio by bringing in properties where we can realize strong consistent returns.

We remain confident in our overall position and strong balance sheet. Reflecting our strong long-term optimism about our company, our Board declared a quarterly dividend of $0.02 per share. This dividend was paid on July 29, 2022.

Strong economic indicators and a low-vacancy industrial market are positives for our Company as we seek to close off key lease transactions this year. We are optimistic that we will be successful in managing lease renewals, securing new leases, and making our next investments. A strong market requires careful assessment of opportunity - both in terms of additions and potential timely divestments - but we are excited as we look ahead.

Sincerely,

Sine Chadi

President & CEO

IMPERIAL EQUITIES INC. 2022 THIRD QUARTER REPORT

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MANAGEMENT'S DISCUSSION & ANALYSIS

for the third quarter ending June 30, 2022

IMPERIAL EQUITIES INC. 2022 THIRD QUARTER REPORT

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