Primaris Retail REIT Announces Record Fourth Quarter and Annual Financial Results

TORONTO, ONTARIO--(Marketwire - March 1, 2012) - Primaris Retail REIT (TSX:PMZ-UN.TO - News) is pleased to report positive operating results for the fourth quarter of 2011. These results have been prepared in accordance with International Financial Reporting Standards ("IFRS"). Prior year's results have been restated to conform to this change.

President and CEO, John Morrison, commented "We are very pleased with our results for 2011. Funds from Operations for the fourth quarter were 16% stronger than our previous quarterly record. We completed a significant $572 million dollar acquisition during the year, establishing Primaris as the third largest and only public enclosed shopping centre owners in the country. In addition to the property acquisitions we added many strong people to our team, both at the property level and at our corporate offices. The strong financial results resulted from acquisitions, strict expense controls at the G&A level, and from seasonal occupancy gains during the fourth quarter. With a prudent financial structure and strong liquidity, Primaris is well positioned for the future."

Highlights

Funds from Operations (FFO)

-- Funds from operations for the fourth quarter ended December 31, 2011
were $34.6 million, up $4.8 million from the $29.8 million reported for
the fourth quarter of 2010 as restated. On a per unit diluted basis,
funds from operations for the fourth quarter of 2011 were $0.407, down
$0.009 from the $0.416 reported for the fourth quarter of 2010.
-- FFO for the year ended December 31, 2011 were $110.8 million, up $11.9
million from the $98.9 million reported for the prior year. On a per
diluted unit basis, fund from operations for the 2011 year were $1.415,
as compared to the $1.451 reported for the prior year. The one time
convertible debenture placement costs of $3,029 account for the
difference. Without these additional finance costs Operating FFO per
unit on a diluted basis for the year ended December 31, 2011 would be
$1.451, unchanged from the prior year.
-- FFO is not a term defined under International Financial Reporting
Standards (IFRS) and may not be comparable to similar measures used by
other Trusts. A reconciliation of net income to FFO is included.

Net Operating Income (NOI)

-- NOI for the fourth quarter ended December 31, 2011 was $59.3 million, an
increase of $9.6 million from the $49.7 million recorded in the fourth
quarter of 2010.

-- NOI for the year ended December 31, 2011 was $208.3 million, an increase
of $26.8 million from the $181.5 million recorded in 2010.

-- NOI is not a term defined under IFRS and may not be comparable to
similar measures used by other Trusts. A calculation of NOI is
included.

Same Properties - Net Operating Income

-- NOI for the fourth quarter ended December 31, 2011, for the properties
held continually for the past twenty-four months, increased 0.5% from
the comparative three month period.

-- NOI for the year ended December 31, 2011, on a same property basis,
increased $1.2 million or 0.7% from 2010.

Net Income

-- Net income for the fourth quarter ended December 31, 2011 was $156.4
million, a decrease of $194.4 million from the $350.8 million recorded
in the fourth quarter of 2010. There was a large, non-cash deferred
income tax recovery recorded in 2010 that did not recur in 2011.

-- Net income for the year ended December 31, 2011 was $231.8 million, a
decrease of $173.7 million from the $405.5 million recorded in 2010.
Again, the change is principally due to the change in deferred income
tax recoveries.

Operations

-- Primaris renewed or leased 280,446 square feet of space during the
fourth quarter. The weighted average new rent in these leases, on a cash
basis, represented a 4.3% increase over the previous rent paid (7.8% if
the major tenants are excluded).

-- Primaris renewed or leased 1,235,102 square feet of space during 2011,
which includes the renewal of 17 major tenants. The weighted average new
rent in these leases, on a cash basis, represented a 5.7% increase over
the previous rent paid (6.9% increase if the majors are excluded).

-- The portfolio occupancy is relatively stable. It was 97.1% at December
31, 2011, compared to 96.5% at September 30, 2011, and 97.1% at December
31, 2010.

-- Same tenant sales per square foot, for the 17 properties owned during
all of the 24 months ended December 31, 2011 was $458 as compared to
$462 for the previous 12 months.

Liquidity

-- At December 31, 2011, $6,779 of Primaris' $100.0 million credit facility
was in use.

Financial Results

FFO for the fourth quarter ended December 31, 2011 were $34.6 million, up $4.8 million from the $29.8 million reported for the fourth quarter of 2010 as restated. On a per unit diluted basis, funds from operations for the fourth quarter of 2011 were $0.407, down $0.009 from the $0.416 reported for the fourth quarter of 2010.

FFO for the year ended December 31, 2011 were $110.8 million, up $11.9 million from the $98.9 million reported for the prior year. On a per diluted unit basis, fund from operations for the 2011 year were $1.415, as compared to the $1.451 reported for the prior year. The one time convertible debenture placement costs of $3,029 account for the difference. Without these additional finance costs Operating FFO per unit on a diluted basis for the year ended December 31, 2011 would be $1.451, unchanged from the prior year.

Net income for the fourth quarter ended December 31, 2011 was $156.4 million, a decrease of $194.4 million from the $350.8 million recorded in the fourth quarter of 2010. There was a large, non-cash deferred income tax recovery recorded in 2010 that did not recur in 2011.

Net income for the year ended December 31, 2011 was $231.8 million, a decrease of $173.7 million from the $405.5 million recorded in 2010. Again, the change is principally due to the change in deferred income tax recoveries.

The FFO distribution payout ratio for the fourth quarter of 2011, calculated on a diluted basis, was 74.9% as compared to a 73.2% payout ratio for the fourth quarter of 2010 and 87.4% for the previous quarter September 30, 2011. The payout ratios are sensitive to both seasonal operating results and financial leverage.

The FFO distribution ratio for the 2011 year was 86.1% as compared to an 84.0% payout ratio for 2010.

At December 31, 2011, Primaris' total enterprise value was approximately $3.4 billion (based on the market closing price of Primaris' units on December 31, 2011 plus total debt outstanding). At December 31, 2011 Primaris had $1,679.3 million of outstanding debt, equating to a debt to total enterprise value ratio of 49.6%. Primaris' debt consisted of $1,432.3 million of fixed-rate senior debt with a weighted average interest rate of 5.4% and a weighted average term to maturity of 5.8 years, $6.8 million utilization of the operating line of credit, $2.8 million of 6.75% fixed-rate convertible debentures, $93.5 million of 5.85% fixed-rate convertible debentures, $68.9 million of 6.30% fixed-rate convertible debentures and $75.0 million of 5.40% fixed-rate convertible debentures.

Primaris had a debt to total asset ratio, as defined under the Declaration of Trust (to be ratified), of 46.6%. During the three months ended December 31, Primaris had an interest coverage ratio of 2.5 times as expressed by EBITDA divided by interest expense on mortgages, convertible debentures and bank indebtedness. Primaris defines EBITDA as net income increased by depreciation, finance costs, income tax expense and amortization of leasing costs and straight-line rent. EBITDA is not a term defined under IFRS and may not be comparable to similar measures used by other Trusts. See below under "Non-IFRS/GAAP Measures".

Operating Results

Net Operating Income - Same Properties
In thousands of dollars


(unaudited) (unaudited)
Three months Three months Variance to
ended ended Comparative Period
December 31, December 31, Favourable/
2011 2010 (Unfavourable)
----------------------------------------------------

Operating revenue $ 82,490 $ 80,905 $ 1,585
Less operating expenses (36,065) (34,707) (1,358)
----------------------------------------------------
Net operating income $ 46,425 $ 46,198 $ 227
----------------------------------------------------
----------------------------------------------------

NOI is not a term defined under IFRS and may not be comparable to similar measures used by other Trusts. Operating revenue from properties includes an adjustment for amortization of tenant improvement allowances, tenant inducements and straight-line rent to remove non-cash transactions from revenue for the calculation of net operating income. Operating expenses include operating expenses from properties, property taxes and ground rent.

The same-property comparison consists of the 26 properties that were owned throughout both the current and comparative three month periods. NOI, on a same-property basis, increased $0.2 million, or 0.5%, in relation to the comparable three month period.

Liquidity

At December 31, 2011, $6,779 of Primaris' $100.0 million credit facility was in use.

Tenant Sales

For the 17 reporting properties owned throughout both the twelve month periods ended December 31, 2011 and 2010, sales per square foot, on a same-tenant basis, have decreased slightly to $458 from $462 per square foot. For the same 15 properties the all tenant total sales volume has increased 0.1%.

(unaudited)
Same Tenant
Sales per Square Foot Variance
2011 2010 $ %
------------------------------------------------------
------------------------------------------------------
Dufferin Mall 545 542 3 0.6%
Eglinton Square 351 361 (10) -2.9%
Heritage Place 307 314 (7) -2.3%
Lambton Mall 333 346 (13) -3.9%
Place d'Orleans 448 465 (17) -3.7%
Place Du Royaume 419 414 5 1.3%
Place Fleur De Lys 319 320 (1) -0.2%
Stone Road Mall 524 515 9 1.7%
Aberdeen Mall 370 372 (2) -0.5%
Cornwall Centre 558 542 16 2.9%
Grant Park 537 529 8 1.5%
Midtown Plaza 562 555 7 1.2%
Northland Village 462 464 (2) -0.4%
Orchard Park 485 492 (7) -1.4%
Park Place Mall 477 481 (4) -0.9%
Sunridge Mall 478 499 (21) -4.2%
Woodgrove Centre 473 492 (19) -3.9%
------------------------------------------------------
458 462 (4) -0.9%
------------------------------------------------------
------------------------------------------------------

(unaudited)
All Tenant
Total Sales Volume Variance
2011 2010 $ %
------------------------------------------------------
------------------------------------------------------
Dufferin Mall 91,485 90,469 1,016 1.1%
Eglinton Square 30,452 27,614 2,838 10.3%
Heritage Place 25,663 25,739 (76) -0.3%
Lambton Mall 45,582 49,140 (3,558) -7.2%
Place d'Orleans 104,224 108,302 (4,078) -3.8%
Place Du Royaume 114,596 113,130 1,466 1.3%
Place Fleur De Lys 70,846 71,918 (1,072) -1.5%
Stone Road Mall 115,795 112,318 3,477 3.1%
Aberdeen Mall 48,779 48,219 560 1.2%
Cornwall Centre 85,939 81,343 4,596 5.7%
Grant Park 26,850 27,255 (405) -1.5%
Midtown Plaza 133,996 131,692 2,304 1.7%
Northland Village 43,668 44,440 (772) -1.7%
Orchard Park 131,738 129,999 1,739 1.3%
Park Place Mall 76,755 76,644 111 0.1%
Sunridge Mall 91,893 93,153 (1,260) -1.4%
Woodgrove Centre 92,234 97,983 (5,749) -5.9%
------------------------------------------------------
1,330,495 1,329,358 1,135 0.1%
------------------------------------------------------
------------------------------------------------------

The same tenants' sales decreased 0.9% per square foot, while the national average tenant sales as reported by the International Council of Shopping Centers ("ICSC") for the 12-month period ended December 31, 2011, increased 4.1%. Primaris' sales productivity of $458 is lower than the ICSC average of $589, largely because the ICSC includes sales from super regional malls that have the highest sales per square foot in the country.

Leasing Activity

Primaris Retail REIT's property portfolio remains well leased.

The portfolio occupancy rate is relatively stable. It was 97.1% at December 31, 2011, compared to 96.5% at September 30, 2011, and 97.1% at December 31, 2010. These percentages include space for which signed leases are in place but where the tenant may not yet be in occupancy.

Primaris renewed or leased 280,446 square feet of space during the fourth quarter of 2011. Approximately 48.2% of the leased spaces during the fourth quarter of 2011 consisted of the renewal of existing tenants. The weighted average new rent in these leases, on a cash basis, represented a 4.3% increase over the previous rent.

Primaris renewed or leased 1,235,102 square feet of space during 2011. Approximately 59.7% of the leased spaces during 2011 consisted of the renewal of existing tenants. The weighted average new rent in these leases, on a cash basis, represented a 5.7% increase over the previous rent (a 6.9% increase when renewals of major tenants are excluded).

At year end, Primaris had a weighted average term to maturity of leases of 5.4 years.

Development Activity

During 2009 Primaris completed phase one of a three phase redevelopment at Lambton Mall in Sarnia, Ontario. Although this first phase created a vacant anchor store location, it provided an opportunity not only to add a food court where none existed previously, but also to backfill the anchor store with a new large tenant.

Construction is complete on the second phase which introduced a new eight unit food court that opened December 1, 2011. Negotiations have advanced significantly with regard to replacements for the vacant anchor space.

A redevelopment project at Orchard Park Shopping Centre in Kelowna, British Columbia for the construction of approximately 25,000 square feet of new retail space and the redevelopment of about 10,000 square feet of existing area was completed in mid-November 2011. The project brought Best Buy, a dynamic first-to-market tenant, to the centre and relocated the mall administration offices.

A redevelopment project is well underway at Grant Park Shopping Centre in Winnipeg, Manitoba to accommodate an expanded and repositioned Manitoba Liquor Control Commission ("MLCC") store, and relocated retail tenants. This project also includes the realignment and upgrade of almost 11,500 square feet of common area with new floor and ceiling finishes which has revitalized the west end of the shopping centre. A portion of the exterior of the building and the west mall entrance is being renovated to provide a marquee entry to the new redevelopment inside. Construction activities commenced in June 2011, with relocated retail tenants opening October 2011, and a targeted spring 2012 opening for the MLCC expansion. The project is on budget and is expected to cost $6.5 million. This phased redevelopment has already created an additional consumer draw to the centre.

Comparison to Prior Period Financial Results - in thousands of dollars


Three Months Three Months Comparative
Ended Ended December Period
December 31, 31, 2010 Favourable/
2011(unaudited) (unaudited) (Unfavourable)
--------------------------------------------------

Revenue
Minimum rent $ 61,833 $ 50,015 $ 11,818
Recoveries from
tenants 38,620 30,977 7,643
Percent rent 893 918 (25)
Parking 1,998 1,920 78
Other income 719 417 302
---------------- ---------------------------------
104,063 84,247 19,816

Expenses
Property operating 27,382 22,001 (5,381)
Property tax 18,597 14,698 (3,899)
Ground rent 332 295 (37)
General &
administrative 2,110 545 (1,565)
Depreciation 282 283 1
---------------- ---------------------------------
48,703 37,822 (10,881)

Income from operations $ 55,360 $ 46,425 $ 8,935

Finance income 72 28 44
Finance costs (32,951) (19,815) (13,136)
Fair value adjustment on
investment properties 133,956 30,653 103,303
Deferred income tax
recovery - 293,514 (293,514)
---------------- ---------------------------------
Net income $ 156,437 $ 350,805 $ (194,368)

Fair value adjustment on
investment properties (133,956) (30,653) (103,303)
Fair value adjustment on
convertible debentures 9,000 (277) 9,277
Fair value adjustment on
exchangeable units 240 44 196
Fair value adjustment on
unit-based compensation 108 113 (5)
Distributions on
exchangeable units 667 676 (9)
Amortization of tenant
improvement allowances 2,176 2,641 (465)
Deferred income taxes - (293,514) 293,514
---------------- ---------------------------------
Funds from operations(1) $ 34,672 $ 29,835 $ 4,837
---------------- ---------------------------------
---------------- ---------------------------------

Funds from operations per
unit - basic $ 0.420 $ 0.434 $ (0.014)
Funds from operations per
unit - diluted $ 0.407 $ 0.416 $ (0.009)
Funds from operations -
payout ratio 74.9% 73.2% 1.7%
Distributions per unit $ 0.305 $ 0.305 $ -
Weighted average units
outstanding - basic 82,641,329 68,720,843 13,920,486
Weighted average units
outstanding - diluted 93,987,252 78,316,679 15,670,573
Units outstanding, end of
period 82,740,232 68,794,679 13,945,553

(1) Funds from Operations, which is not a defined term within IFRS, has been
calculated by management, using International Financial Reporting Standards,
in accordance with REALpac's White Paper on Funds from Operations. The White
Paper adds back to net income items that do not arise from operating
activities, such as amortization of tenant improvements, deferred income
taxes and fair value adjustments. Funds from Operations may not be
comparable to similar measures used by other entities. See below under "Non-
IFRS/GAAP Measures".

Funds from operations for the quarter ended December 31, 2011 were $4.8 million greater than the comparative period.

International Financial Reporting Standards ("IFRS")

In February 2008, the Canadian Accounting Standards Board confirmed that IFRS would replace Canadian generally accepted accounting principles ("GAAP"), for Canadian publically accountable profit-oriented enterprises, effective for fiscal periods beginning on or after January 1, 2011. The December 31, 2011 consolidated financial statements and related disclosures include 2010 comparative results restated to IFRS and reconciliations to the previously reported Canadian GAAP statements.

Supplemental Information

Primaris' consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the three-month periods ended December 31, 2011 and 2010 are available on Primaris' website at www.primarisreit.com.

Forward-Looking Information

The MD&A contains forward-looking information based on management's best estimates and the current operating environment. These forward-looking statements are related to, but not limited to, Primaris' operations, anticipated financial performance, business prospects and strategies. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan" or similar words suggesting future outcomes. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements.

In particular, certain statements in this document discuss Primaris' anticipated outlook of future events. These statements include, but are not limited to:

(i) the accretive acquisition of properties and the anticipated extent
of the accretion of any acquisitions, which could be impacted by
demand for properties and the effect that demand has on acquisition
capitalization rates and changes in the cost of capital;

(ii) reinvesting to make improvements and maintenance to existing
properties, which could be impacted by the availability of labour
and capital resource allocation decisions;

(iii) generating improved rental income and occupancy levels, which could
be impacted by changes in demand for Primaris' properties, tenant
bankruptcies, the effects of general economic conditions and supply
of competitive locations in proximity to Primaris locations;

(iv) overall indebtedness levels, which could be impacted by the level of
acquisition activity Primaris is able to achieve and future
financing opportunities;

(v) tax exempt status, which can be impacted by regulatory changes
enacted by governmental authorities;

(vi) anticipated distributions and payout ratios, which could be impacted
by capital expenditures, results of operations and capital resource
allocation decisions;

(vii) the effect that any contingencies could have on Primaris' financial
statements;

(viii) anticipated replacement of expiring tenancies, which could be
impacted by the effects of general economic conditions and the
supply of competitive locations; and

(ix) the development of properties which could be impacted by real estate
market cycles, the availability of labour and general economic
conditions.

Although the forward-looking statements contained in this document are based on what management of Primaris believes are reasonable assumptions, forward-looking statements involve significant risks and uncertainties. They should not be read as guarantees of future performance or results and will not necessarily be an accurate indicator of whether or not such results will be achieved. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future results to differ from targets, expectations or estimates expressed in the forward-looking statements. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include: a less robust retail environment; relatively stable interest costs; access to equity and debt capital markets to fund, at acceptable costs, the future growth program and to enable Primaris to refinance debts as they mature, and the availability of purchase opportunities for growth.

Except as required by applicable law, Primaris undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Non-IFRS/GAAP Measures

Funds from operations ("FFO"), net operating income ("NOI") and earnings before interest, taxes, depreciation and amortization ("EBITDA") are widely used supplemental measures of a Canadian real estate investment trust's performance and are not defined under IFRS. Management uses these measures when comparing itself to industry data or others in the marketplace. Primaris' MD&A describes FFO, NOI and EBITDA and provides reconciliations to net income, as defined under IFRS, for FFO and EBITDA. A reconciliation of FFO to net income, as defined by IFRS, and a calculation of NOI also appear at the end of the press release. FFO, NOI and EBITDA should not be considered alternatives to net income or other measures that have been calculated in accordance with IFRS and may not be comparable to measures presented by other issuers.

Conference Call

Primaris invites you to participate in the conference call that will be held on Friday March 2, 2012 at 9am EST to discuss these results. Senior management will speak to the results and provide a brief corporate update. The telephone numbers for the conference call are: 416-340-8530 (within Toronto), and 1-877-240-9772 (within North America).

Audio replays of the conference call will be available for 24 hours immediately following the completion of the conference call, by dialling 905-694-9451 or 1-800-408-3053 and using pass code 1208535. The audio replay will also be available for download at www.primarisreit.com/q4conference.

Primaris is a TSX listed real estate investment trust (TSX:PMZ-UN.TO - News). Primaris owns 32 income-producing properties comprising approximately 13.5 million square feet located in Canada. As of February 29, 2012, Primaris had 83,159,632 units issued and outstanding (including exchangeable units for which units have not yet been issued).

PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Consolidated Statements of Financial Position
(In thousands of dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, December 31, January 1,
2011 2010 2010
----------------------------------------------------------------------------
Assets

Non-current assets:
Investment properties $ 3,557,900 $ 2,804,900 $ 2,541,700

Current assets:
Rents receivable 7,387 6,096 4,907
Other assets and receivables 25,010 11,006 12,083
Cash and cash equivalents - 6,500 15,452
--------------------------------------------------------------------------
32,397 23,602 32,442

----------------------------------------------------------------------------
$ 3,590,297 $ 2,828,502 $ 2,574,142
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and Equity

Non-current liabilities:
Mortgages payable $ 1,372,871 $ 1,103,084 $ 1,061,153
Convertible debentures 268,766 196,703 189,847
Exchangeable units 45,079 43,325 37,239
Accounts payable and other
liabilities 1,205 533 410
Deferred tax liability - - 264,286
--------------------------------------------------------------------------
1,687,921 1,343,645 1,552,935

Current liabilities:
Current portion of mortgages
payable 53,004 61,685 25,929
Bank indebtedness 6,779 10,000 15,000
Accounts payable and other
liabilities 61,744 51,324 53,519
Distribution payable 8,251 6,809 6,358
--------------------------------------------------------------------------
129,778 129,818 100,806
----------------------------------------------------------------------------
1,817,699 1,473,463 1,653,741

Equity 1,772,598 1,355,039 920,401

----------------------------------------------------------------------------
$ 3,590,297 $ 2,828,502 $ 2,574,142
----------------------------------------------------------------------------
----------------------------------------------------------------------------

PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Consolidated Statements of Income and Comprehensive Income
(In thousands of dollars, except per unit amounts)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(unaudited)
Three months ended Year ended
December 31, December 31,
2011 2010 2011 2010
Revenue:
Minimum rent $ 61,833 $ 50,015 $ 219,113 $ 188,704
Recoveries from tenants 38,620 30,977 135,464 114,607
Percentage rent 893 918 2,652 2,658
Parking 1,998 1,920 6,556 6,308
Other income 719 417 1,568 1,274
--------------------------------------------------------------------------
104,063 84,247 365,353 313,551
Expenses:
Property operating 27,382 22,001 92,745 79,601
Property taxes 18,597 14,698 68,569 56,469
Ground rent 332 295 1,246 1,178
General and administrative 2,110 545 9,840 9,150
Depreciation 282 283 1,039 1,433
--------------------------------------------------------------------------
48,703 37,822 173,439 147,831
----------------------------------------------------------------------------

Income from operations 55,360 46,425 191,914 165,720

Finance income 72 28 168 83
Finance costs (32,951) (19,815) (109,396) (99,928)
Fair value adjustment on
investment properties 133,956 30,653 149,113 75,890
Gain on sale of land - - - 74
----------------------------------------------------------------------------

Income (loss) before income
taxes 156,437 57,291 231,799 141,839

Deferred income tax recovery - 293,514 - 263,692
----------------------------------------------------------------------------

Net income (loss) 156,437 350,805 231,799 405,531

Other comprehensive income:
Amortization of deferred net
loss on cash flow hedges 57 58 230 236
Tax effect of deferred loss
on cash flow hedges - 681 - 594

----------------------------------------------------------------------------
Comprehensive income (loss) $ 156,494 $ 351,544 $ 232,029 $ 406,361
----------------------------------------------------------------------------
----------------------------------------------------------------------------

PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Consolidated Statements of Cash Flows
(In thousands of dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Year ended
December 31,
2011 2010
----------------------------------------------------------------------------

Cash flows from operating activities:
Net income $ 231,799 $ 405,531
Adjustments for:
Amortization of tenant improvement allowances 7,419 6,931
Amortization of tenant inducements 168 235
Amortization of straight-line rent (2,030) (1,950)
Value of units and options granted under unit-
based compensation plan 1,957 1,765
Depreciation of fixtures and equipment 1,039 1,433
Net finance costs 109,228 99,845
Fair value adjustments on investment properties (149,113) (75,890)
Gain on sale of land - (74)
Deferred income taxes - (263,692)
------------------------------------------------------------------------
200,467 174,134
Other non-cash operating working capital (7,892) (7,019)
Leasing commissions (773) (519)
Tenant improvements (18,078) (7,008)
Tenant inducements (15) (1,000)
--------------------------------------------------------------------------
Cash generated from operating activities 173,709 158,588
Interest received 168 83
--------------------------------------------------------------------------
Net cash from operating activities 173,877 158,671

Cash flows from financing activities:
Mortgage principal repayments (28,146) (22,748)
Proceeds of new mortgage financing 333,600 105,000
Proceeds of bridge financing 57,500 -
Repayment of financing (99,933) (3,685)
Repayment of bank indebtedness (3,221) (5,000)
Interest paid on financing (83,378) (72,667)
Additions to capitalized debt placement costs (2,736) (1,021)
Issuance of units 270,239 101,735
Unit issue costs (11,144) (4,472)
Issuance of convertible debentures 75,000 -
Convertible debenture issuance costs (3,029) -
Distributions to Unitholders (92,730) (80,092)
Purchase of units under normal course issuer bid (589) (1,130)
--------------------------------------------------------------------------
Net cash flow from financing activities 411,433 15,920

Cash flows from investing activities:
Acquisitions of investment properties (585,388) (169,322)
Additions to buildings and building improvements (13,778) (7,927)
Additions to recoverable improvements (12,087) (6,248)
Additions to fixtures and equipment (390) (134)
Gross proceeds of disposition 19,833 88
--------------------------------------------------------------------------
Net cash flow used in investing activities (591,810) (183,543)
----------------------------------------------------------------------------

Decrease in cash and cash equivalents (6,500) (8,952)

Cash and cash equivalents, beginning of period 6,500 15,452

----------------------------------------------------------------------------
Cash and cash equivalents, end of period $ - $ 6,500
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Supplemental disclosure of non-cash operating,
financing and investing activities:
Value of units issued from conversion of convertible
debentures 17,926 7,846
Value of units issued upon exchange 597 1,605
----------------------------------------------------------------------------
----------------------------------------------------------------------------

PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Consolidated Statements of Cash Flows
(In thousands of dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Unaudited)
Three months ended
December 31,
2011 2010
----------------------------------------------------------------------------

Cash flows from operating activities:
Net income $ 156,437 $ 350,805
Adjustments for:
Amortization of tenant improvement allowances 2,176 2,641
Amortization of tenant inducements 70 124
Amortization of straight-line rent (669) (328)
Value of units and options granted under unit-
based compensation plan 359 (227)
Depreciation of fixtures and equipment 282 283
Net finance costs 32,879 19,787
Fair value adjustments on investment properties (133,956) (30,653)
Gain on sale of land - -
Deferred income taxes - (293,514)
------------------------------------------------------------------------
57,578 48,918
Other non-cash operating working capital 4,918 10,636
Leasing commissions (408) (132)
Tenant improvements (6,576) (2,179)
Tenant inducements (15) -
--------------------------------------------------------------------------
Cash generated from operating activities 55,497 57,243
Interest received 72 28
--------------------------------------------------------------------------
Net cash from operating activities 55,569 57,271

Cash flows from financing activities:
Mortgage principal repayments (8,033) (6,238)
Proceeds of new mortgage financing - -
Repayment of financing (5,394) -
Repayment of bank indebtedness (221) (5,000)
Interest paid on financing (21,259) (18,317)
Additions to capitalized debt placement costs 7 (33)
Issuance of units 2,079 1,480
Unit issue costs (50) (11)
Issuance of convertible debentures - -
Convertible debenture issuance costs - -
Distributions to Unitholders (25,242) (20,985)
Purchase of units under normal course issuer bid - (1,130)
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Net cash flow used in financing activities (58,113) (50,234)

Cash flows from investing activities:
Acquisitions of investment properties (3,005) -
Additions to buildings and building improvements (5,748) (3,148)
Additions to recoverable improvements (7,821) (3,051)
Additions to fixtures and equipment (286) (6)
Gross proceeds of disposition 18,266 -
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Net cash flow from (used in) investing activities 1,406 (6,205)
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Increase (decrease) in cash and cash equivalents (1,138) 832

Cash and cash equivalents, beginning of period 1,138 5,668

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Cash and cash equivalents, end of period $ - $ 6,500
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Supplemental disclosure of non-cash operating,
financing and investing activities:
Value of units issued from conversion of
convertible debentures 2,037 4,192
Value of units issued upon exchange - -

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PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Reconciliation of Net Income to Funds from Operations
(In thousands of dollars)
----------------------------------------------------------------------------
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(unaudited) (unaudited)
Three Months Ended Three Months Ended
December 31, 2011 December 31, 2010
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Net income $ 156,437 $ 350,805
Fair value adjustment on
investment properties (133,956) (30,653)
Fair value adjustment on
convertible debentures 9,000 (277)
Fair value adjustment on
exchangeable units 240 44
Fair value adjustment on unit-
based compensation 108 113
Distributions on exchangeable
units 667 676
Amortization of tenant improvement
allowances 2,176 2,641
Deferred income taxes - (293,514)
-------------------- --------------------
Funds from operations $ 34,672 $ 29,835
-------------------- --------------------
-------------------- --------------------

Funds from Operations, which is not a defined term within IFRS, has been
calculated by management, using International Financial Reporting Standards,
in accordance with REALpac's White Paper on Funds from Operations. The White
Paper adds back to net income items that do not arise from operating
activities, such as amortization of tenant improvements, deferred income
taxes and certain fair value adjustments. Funds from Operations may not be
comparable to similar measures used by other entities.

Calculation of Net Operating Income All Properties
(In thousands of dollars)

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----------------------------------------------------------------------------
(unaudited) (unaudited)
Three Months Ended Three Months Ended
December 31, 2011 December 31, 2010
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Revenue $ 104,063 $ 84,247

Add: Amortization of leasing
costs 1,577 2,437
Less: Property operating
expenses (27,382) (22,001)
Property tax expense (18,597) (14,698)
Ground Rent (332) (295)
-------------------- --------------------
Net operating income $ 59,329 $ 49,690
-------------------- --------------------
-------------------- --------------------

Net Operating Income is not a defined term within IFRS. Net Operating
Income may not be comparable to similar measures used by other entities.

Contacts

John R. Morrison
Primaris Retail REIT
President & Chief Executive Officer
(416) 642-7860

Louis M. Forbes
Primaris Retail REIT
Executive Vice President & Chief Financial Officer
(416) 642-7810
www.primarisreit.com