“Risk” refers to the possibility of loss of principal, or alternatively to a rate of investment return below expectations or requirements.

Dividend income investments such as securities of real estate investment vehicles are generally considered to be a more conservative investment than other securities, but these types of investments still carry a variety of risks that investors need to be aware of. Diversification can be a good way to minimize many of the risks inherent in real estate securities and is something you should discuss with your professional advisor. Before making investment decisions, investors should carefully consider whether investment products/services are suitable considering their financial position, investment objectives and experiences, risk tolerance and other relevant circumstances. Meanwhile the following is a summary of some of the risks associated with Gatehouse Real Estate Trust (“Gatehouse Trust”), Gatehouse (Proper) Limited Partnership (“Gatehouse Proper LP”) and any future limited partnerships that may be formed by the Gatehouse Group investors should understand.

The existence of material uncertainties may cast significant doubt on our ability to continue as a going concern.

The auditors have issued their opinion on the consolidated financial statements of both Gatehouse Trust and Gatehouse Proper LP. The opinion indicates that the consolidated financial statements were prepared with the assumption that both companies will continue to operate as going concerns. The auditors have agreed with the assessment made by the management of both companies that their continued operations are dependent on their ability to generate future cash flows from operations and acquire additional funding through external financing to support their respective business plans. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to Gatehouse Trust or Gatehouse Proper LP. Even if Gatehouse Trust and/or Gatehouse Proper LP are able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its unitholders, in the case of equity financing.

There is no assurance that the Project will be completed successfully.

There is no assurance that the development and sale of the Proper Property (the “Project”) will be completed successfully. The potential return to investors depends on the revenues generated by the Project. However, there can be no assurance that such business activities will generate revenues sufficient to meet the return objectives of Gatehouse Trust and Gatehouse Proper LP.

The Project will be subject to the risks inherent in the development, servicing, marketing, sale and construction of homes, townhomes and condos in Surrey, British Columbia, including the risk of the inability to obtain Project Financing on reasonable terms or at all, the inability or failure or unwillingness of Gatehouse Developments, when and if required, to provide or procure guarantees, security and other credit support to secure the Mortgage and Project Financing, the inability to sell a sufficient number of homes or townhomes at reasonable prices or at all, the failure or refusal of purchasers of homes, townhomes or condos in the Project to complete their purchases, undisclosed liabilities relating to the Proper Property, the failure to sell the High-density Lands to a third-party purchaser, fluctuations in interest rates, inflation, fluctuations in or volatility of real estate markets (particularly the residential property market in Surrey, British Columbia and the volatility associated with the sale of newly constructed homes, townhomes and condos) and general economic conditions, foreclosures or powers of sale resulting from a failure to repay or refinance mortgages, construction delays due to force majeure, strikes or shortages of materials or labour, competition from other properties, limits on insurance coverage and increases in construction costs caused by general economic conditions.

Certain significant expenditures, including property taxes, maintenance costs, mortgage payments, management fees, insurance costs, professional services and advisory fees and all related charges, must be made throughout the period of ownership of real property regardless of whether the Project is producing sufficient income to service such expenses. Any financing procured for the Project, including, but not limited to, the Mortgage and Project Financing, will require debt service payments, and, in the event of a default, one or more lenders could exercise their rights, including foreclosure or the sale of the Proper Property.

If we are unable to obtain or are delayed in getting all required development approvals for the Project the profitability of the Project could be materially adversely affected.

A zoning by-law amendment application has been submitted, together with an application for approval of a plan of subdivision of the Proper Property. While city staff are supportive of the development, none of the Development Approvals have been obtained.

Prior to development, the Proper Property, or a portion thereof, must be rezoned, subdivision plans must be approved, site plan approvals must be obtained and conservation authority development permits must be obtained for designated portions of the Proper Property. The Project must also progress through the approvals process in time to obtain an allocation of the available sanitary capacity from the City of Surrey. There is also a risk of an appeal to the British Columbia Land Tribunal, which could delay the completion of the Project.

To the extent that the Project’s viability and/or the profitability of Gatehouse Proper LP rely on achieving a specific yield on the Proper Property, viability and/or profitability may be materially adversely affected if the development of the Proper Property cannot proceed as contemplated in the Development Plan. Until such time as the required Site Plan Approvals and building permits for the Project are secured, the Project’s design and yield may be subject to change.

The Project’s viability and the profitability of Gatehouse Trust are also dependent on a certain construction timeline being met. If there should be a significant delay in advancement of the Project, the provision of servicing (including “external” servicing such as sanitary system extensions and downstream wastewater treatment plant capacity) may cause further delays. Construction, and further Development Approvals could also cause delays. Should any or all of these eventualities arise, the viability and profitability of the Project, and by extension the profitability of Gatehouse Proper LP, may be materially adversely affected. There can be no guarantee that any or all of the Development Approvals will be obtained and implemented or obtained on a timely basis or at all.

Surrey, British Columbia Real Estate Market.

The Project is subject to the risks associated with fluctuations in or the volatility of the Surrey, British Columbia real estate market and, specifically, the market for homes, townhomes and condos in such market. The demand for newly constructed homes, townhomes and condos in Surrey, British Columbia is affected by numerous factors, including, but not limited to, interest rates, inflation, availability of financing, mortgage rules, the supply of residential housing units, and participation by foreign investors in the Surrey real estate market, general economic conditions The Surrey real estate market is subject to change, and there can be no assurance that demand for newly constructed homes, townhomes and condos in Surrey will not decline. A drop in the demand for, or increase in the supply of, homes, townhomes and condos in such market could materially adversely affect the Project’s viability, and, as a result, the Project could be temporarily delayed or cancelled altogether.

British Columbia Housing Market Regulatory Risks.

Over the last several years, an unprecedented number of regulatory measures have been implemented by the federal, provincial and municipal governments and financial regulators, in an attempt to ensure that the Canadian housing market is appropriately regulated and does not overheat.

Changes to the regulation of the Canadian housing market, including those described in this Offering Memorandum, may result in potential purchasers being less willing to purchase residential real estate properties located in British Columbia in general, and in the Lower Mainland in particular, and may result in lenders being less willing to lend to would-be purchasers of residential real estate properties in the British Columbia, including Surrey, British Columbia.

Either of these two factors, if it materializes, may reduce the pool of potential eligible homebuyers and indirectly reduce demand for newly constructed homes, townhomes and condos in the Project, which, in turn, could materially adversely affect the Project’s profitability.

The Project will need a significant amount of capital to develop and sell the Proper Property. Unless additional funding can be secured, the Project may be forced to discontinue its development plans and to sell to a third party at a loss.

The Project will not be able to fund its future capital needs from the Offering or from income generated from operations. The Project, therefore, will have to rely on a loan from Gatehouse Development or third party sources of financing, which may or may not be available on favourable terms, if at all. In particular, a construction mortgage will be necessary to secure the Proper Property and servicing financing and construction financing will be required to complete the Project.

Interest rates may fluctuate during the term of the Project and thus affect the cost of borrowing and potentially the feasibility of the Project and the profits of Gatehouse Trust and Gatehouse Proper LP.

Interest rates may fluctuate during the term of the Project and thus affect the cost of borrowing and potentially the feasibility of the Project and the profits of Gatehouse Trust and Gatehouse Proper LP.

Competition.

The market for homes, townhomes and condos in Surrey, British Columbia is highly competitive, with numerous developers undertaking and marketing projects. The Project will compete with several real estate project developers in Surrey, British Columbia and surrounding areas. These developers own or may in the future develop and/or own developments that compete directly with the Project and may have greater capital resources than Gatehouse Proper LP and Gatehouse Developments.

Limitations on Liability and Recovery of Damages.

Should Gatehouse Proper LP be required to defend or settle any claim for damages in respect of the Project, it could have a material adverse effect on the value of Gatehouse Proper LP’s interest in the Proper Property and the Project (and Gatehouse Trust’s indirect interest therein), on the ability of Gatehouse Proper LP to recover Gatehouse Proper LP Capital Contribution and, consequently, on the return on investment of Unitholders.

Changes in Applicable Laws.

The Project must comply with numerous federal, provincial, and local laws and regulations, some of which may conflict with one another or be subject to limited judicial or regulatory interpretations. These laws and regulations may include land use and zoning laws, building codes, land development regulations, utility and infrastructure requirements and other laws generally applicable to the development of real property in British Columbia and Surrey, British Columbia. Non-compliance with laws could expose the Project and Gatehouse Proper LP to liability. Unanticipated changes in applicable laws could negatively affect the viability or profitability of the Project.

Risk of Change in Investment Return.

There is no guarantee that an investment in Units will earn any positive return in the short or long term. The value of the Trust Units may increase or decrease depending on market, economic, political, regulatory, and other conditions affecting the Issuer. Investment in the Units may be more volatile and risky than some other forms of investments. The net income earned by Gatehouse Proper LP at the end of each phase of the Project is expected to be distributed to Gatehouse Trust as a holder of LP Units, which net income may be insignificant or there may not be any net income at all for Gatehouse Proper LP to distribute. If the income generated in the early phases of the Project is not significant, then Gatehouse Proper LP may choose to dispose of the Land or to repurpose the Project, in which case the distributions, if any, to Unitholders may be limited or may not occur at all. Furthermore, subsequent offerings of LP Units and LP Units or other securities of Gatehouse Proper LP may have a dilutive effect and may negatively impact distributions to Gatehouse Trust and, as a result, the distributions to the to Unitholders. All prospective Subscribers should consider an investment in Gatehouse Trust within the overall context of their investment policies. Distributions and any redemption obligations are not guaranteed by an independent third party.

In addition, the projected return forecasts are based on various assumptions and subject to a number of variables and other factors related to the Project. In the event that the actual outcome of these variables and factors are inconsistent with the assumptions made in formulating the Forecasts, the Forecasts will not be indicative of the Project’s actual financial results and the projected investor returns outlined therein will not be representative of an investor’s ultimate realized return. There can be no assurances that the Forecasts will prove to be accurate, and investors may sustain a loss.

The Partnership May Have Substantial Amount of Debt.

Gatehouse Proper LP may have substantial debt. This debt could result in the increased risk of potential insolvency of Gatehouse Proper LP, which will have a significant material impact on Gatehouse Trust and Gatehouse Proper LP and their ability to continue operations. It is expected that the lenders of any debt financing entered into by Gatehouse Proper LP well, unless such lenders determine otherwise in their sole discretion, place restrictions on Gatehouse Proper LP's ability to make distributions on the Units until such financing has been paid in full. In addition, lenders providing financing with respect to the Project may require that Gatehouse Proper LP provide to such lenders security in the Proper Property and the Project and other assets of Gatehouse Proper LP, to secure the indebtedness of Gatehouse Proper LP under such lenders financing this may further delay Gatehouse Proper LP’s ability to make distributions on the Units.

Default on Indebtedness.

If Gatehouse Proper LP defaults on the repayment of any indebtedness, including unpaid obligations to builders, contractors and tradespeople, or becomes insolvent, the creditors holding such indebtedness will be entitled to exercise available legal remedies against Gatehouse Proper LP, including among other things, preventing any distributions on the Units, declaring the full amount of such loans immediately repayable and exercising the right against the assets of Gatehouse Proper LP, including the Proper Property and the Project. There is no assurance that there will be assets available to recover any portion of a Unitholders investment.

Encumbrances, Conditions, and Covenants on the Proper Property.

The Proper Property may be subject to encumbrances, conditions, or covenants that could negatively impact the completion and development of the property. The Proper Property may be subject to liens, mortgages, easements, and other similar encumbrances that may restrict the use of the property, limit access, or otherwise affect its value. Additionally, the Proper Property may be subject to various conditions or covenants that require the satisfaction of certain obligations or restrict the use of the property in specific ways. These conditions and covenants may impose additional costs or restrictions on the development of the Proper Property, resulting in delays, increased expenses, or even the inability to complete the Project. Therefore, you should carefully review all relevant documentation to fully understand the nature and potential impact of any encumbrances, conditions, or covenants before investing in the Proper Property.

Broad Authority of the General Partner.

Gatehouse GP is granted broad authority under the Limited Partnership Agreement to manage and control Gatehouse Proper LP 's business, which includes the development of the Proper Property. As a result, Unitholders do not have the ability to manage or control of the Proper Property or to select a different developer for the Proper Property. This lack of control may result in decisions by the Gatehouse GP that do not align with your investment objectives and could potentially lead to a negative impact on the performance of Gatehouse Trust and Gatehouse Proper LP. Therefore, you should carefully review the Limited Partnership Agreement and associated documentation to fully understand the scope of the Gatehouse GP’s authority and the associated risks before investing.

General Economic Conditions.

The success of Gatehouse Proper LP activities will be affected by general economic and market conditions, such as interest rates, availability of credit, credit defaults, inflation rates, economic uncertainty and national and international political circumstances (including wars, terrorist acts or security operations). The revenues generated by Gatehouse Proper LP may be adversely affected in the event of disrupted markets and other extraordinary events in which historical pricing relationships become materially distorted. The availability, terms and cost of mortgage financing and other types of credit may be less favourable in disrupted markets.

Limited Operating History.

Gatehouse Trust and Gatehouse Proper LP are newly organized entities with no operating history. There is no assurance that Gatehouse Trust or Gatehouse Proper LP will be able to successfully implement their business plans or operate profitably over the short term or an extended period.

Environmental Risks.

Environmental legislation, policies and standards have become increasingly stringent in recent years. Under various environmental laws, the Joint Venturers could be liable for the costs of abatement, removal or remediation of hazardous substances present or released on, at or under the Proper Property. The failure to abate, remove or remediate such substances, if any, could adversely affect the ability of Gatehouse Proper to sell the Proper Property or to borrow using the Proper Property as collateral, and any such failure could also potentially result in claims by private plaintiffs. In addition, enforcement actions could be taken against Gatehouse Proper by governmental authorities in connection with such substances, including, but not limited to, fines and penalties and orders requiring Gatehouse Proper to take steps to study, contain, stop or remedy contamination. Such orders can be issued against property owners even in circumstances where those owners did not cause or contribute to the contamination.

Arbitrary Determination of Price.

The sale price of Units was arbitrarily determined by Management, having regard to the size of the Offering and the Project’s anticipated financial needs, and is not necessarily related to the Project’s asset or book values, net worth or other relevant criteria.

Nature of Trust Units and Partnership Units.

Neither Gatehouse Trust nor the Gatehouse Proper LP will hold registered title to the Proper Property. Trust Units and LP Units, in and of themselves, do not represent a direct investment in the Proper Property. As holders of Trust Units or LP Units, Unitholders and Limited Partners, respectively, do not have the statutory rights normally associated with ownership of shares of a corporation, such as, for example, the right to bring “oppression” or “derivative” actions.

No Participation in Management and Reliance on Others.

Unitholders will have no right or power to participate in the management or control of the business of Gatehouse Trust or Gatehouse Proper LP and thus must depend solely on the ability of the Trustee and the General Partner, respectively, with respect thereto. In assessing the risks and rewards of an investment in Gatehouse Trust or Gatehouse Proper LP, potential investors should appreciate that they would be relying on the good faith, experience and judgment of the Administrator and the General Partner, as applicable, and their ability to manage the business and affairs of Gatehouse Trust and Gatehouse Proper LP, as applicable.

Limited Marketability.

There is no market for the securities of the Gatehouse Partners Funds, and it is not anticipated that any market will develop. In addition, the Declaration of Trust, and the Limited Partnership Agreement impose restrictions on the resale of Trust Units and LP Units, respectively. As a result, it may be difficult or impossible to resell the Securities.

Net Worth of Trustee and General Partner, and Limitation of Liability.

The Trustee and General Partner each will have nominal net worth. Pursuant to the terms of Gatehouse Trust Administration Agreement and Gatehouse Proper LP Agreement, the Trustee and General Partner respectively are not liable for any act taken or failed to be taken within the scope of authority conferred on the Trustee or General Partner, unless such act or omission constitutes gross negligence or wilful misconduct in the performance of its obligations as respectively required under the Trust Administration Agreement or Partnership Agreement.

Absence of Regulatory Oversight.

Since Trust Units and LP Units are being offered by way of private placement only, the activities of Gatehouse Trust and Gatehouse Proper LP will not be governed by the securities laws applicable to reporting issuers or registrants, such as continuous disclosure rules.

Tax Risks of Investing in Trust Units.

There can be no assurance that Canadian federal income tax laws and the administrative policies and assessing practices of the CRA respecting the treatment of mutual fund trusts will not be changed in a manner which adversely affects Unitholders. If Gatehouse Trust were not to qualify as a “mutual fund trust” under the Tax Act, the federal income tax considerations described in this Offering Memorandum, would, in some respects, be materially and adversely different.

Maintaining “mutual fund trust” status requires meeting certain ongoing requirements. These requirements generally include that, after the 89th day after Gatehouse Trust’s first taxation year (provided that the appropriate tax election has been made), Gatehouse Trust must have at least 150 unitholders of one class each holding a “block of units” of that class of units having an aggregate fair market value of not less than $500. In addition, Gatehouse Trust may cease to be a “mutual fund trust” where it is considered to be established or maintained primarily for the benefit of Non-Residents unless certain requirements are met. If Gatehouse Trust were not to qualify as a “mutual fund trust” under the Tax Act, the federal income tax considerations described in this Offering Memorandum would, in some respects, be materially and adversely different.

If Gatehouse Trust ceases to qualify as a “mutual fund trust” under the Tax Act, the Trust Units will cease to be qualified investments or Plans and DPSPs. There can be no assurance that the Trust Units will continue to be qualified investments for Plans and DPSPs. The Tax Act imposes penalties on Plans, DPSPs, Controllers under certain Plans and beneficiaries of DPSPs for the acquisition or holding of non-qualified investments. Even if the Trust Units are a qualified investment for a Plan, the Controller of such Plan will be subject to a penalty tax in respect of Units held in a trust governed by such a Plan if such Trust Units are a “prohibited investment” for the purposes of the Tax Act.

Canadian federal and provincial tax aspects should be considered prior to investing in Units. The discussion of income tax considerations therein is based upon current Canadian federal income tax laws and regulations and the Tax Proposals (defined below). There can be no assurance that tax laws will not be changed in a manner that adversely affects a Unitholder’s return.