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Marketwired
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Primaris Retail REIT Announces Strong Fourth Quarter Financial Results

TORONTO, ONTARIO -- (Marketwire) -- 03/07/13 -- Primaris Retail REIT (TSX: PMZ.UN) is pleased to report fourth quarter operating results for the period ending December 31, 2012. These results have been prepared in accordance with International Financial Reporting Standards ("IFRS").

President and CEO, John Morrison, commented "We are very pleased with our strong operating results for the 2012 fourth quarter and calendar year. Operating FFO per unit showed 5% growth over the fourth quarter of 2011, after adjusting for the dilution from our equity offering, debt retirement fees, and the material non-recurring charges related to an unsolicited takeover bid recorded in 2012. Our tenant sales trend has turned positive, having begun the year in negative territory. The portfolio occupancy rate improved throughout the year contributing to the excellent financial results. These strong results are directly attributable to the passionate and dedicated team at Primaris.

"As announced on February 5, 2013, Primaris has entered into an Arrangement Agreement and various conditional sales agreements whereby the assets of Primaris will be purchased by a KingSett Capital-led consortium and H&R REIT, and Primaris will become a wholly-owned subsidiary of H&R REIT. These transactions are subject to many conditions more fully described in a circular dated February 19, 2013. The circular is available on SEDAR and on Primaris' website."

Bill Biggar, chair of the Independent Committee of the Primaris board of trustees, commented "The board strongly endorses these transactions and encourages Unitholders to vote in favour of the transactions at the Unitholders' meeting on March 22, 2013."

Highlights

Funds from Operations (FFO)

--  FFO for the quarter ended December 31, 2012 was $29.7 million, down $5.0
    million from the $34.7 million reported for the fourth quarter of 2011.
    On a per unit diluted basis, FFO for the fourth quarter of 2012 was
    $0.307, down $0.100 from the $0.407 reported in the same quarter of
    2011.

--  FFO includes $10.5 million of non-recurring charges related to a
    takeover. When these takeover charges are excluded, Operating FFO for
    the fourth quarter is $0.415 per unit on a diluted basis. This is an
    increase of $0.008 from the fourth quarter results of 2011. Operating
    FFO for the three months and year ended December 31, 2012 also included
    a charge for early debt repayment of $0.9 million. There was no similar
    charge in the prior periods.

--  FFO for the year ended December 31, 2012 was $132.1 million, up $21.3
    million from the $110.8 million reported for the prior year. On a per
    diluted unit basis, FFO for the 2012 year was $1.439, as compared to the
    $1.415 for the prior year.

--  Operating FFO on a per unit diluted basis for the year ended December
    31, 2012 was $1.549, up $0.098 from the $1.451 result of the 2011 year
    end.

--  FFO, and Operating FFO, are not terms defined under IFRS and may not be
    comparable to similar measures used by other Trusts. A reconciliation of
    net income to FFO and Operating FFO is included.

Net Operating Income (NOI)

--  NOI for the quarter ended December 31, 2012 was $63.9 million, an
    increase of $4.6 million from the $59.3 million recorded in the fourth
    quarter of 2011.

--  NOI for the year ended December 31, 2012 was $237.8 million, an increase
    of $29.5 million from the $208.3 million recorded in 2011.

--  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, 2012, for the 32
    properties held continually for the past 24 months, increased 4.0% from
    the comparative three month period.

--  NOI for the year ended December 31, 2012, for the 27 properties held
    continually for the past 24 months, increased $7.8 million or 4.2% from
    2011. Lease surrender revenue in 2012 was considerably higher than 2011.
    Removing the effects of lease-surrender revenue in 2012, NOI would be
    3.1% higher than the comparative year.

Net Income

--  Net income for the quarter ended December 31, 2012 was $61.1 million, a
    decrease of $95.3 million from the $156.4 million recorded in the fourth
    quarter of 2011. The decrease is driven by fluctuations in the recording
    of investment properties at fair value and one time takeover expenses.

--  Net income for the year ended December 31, 2012 was $266.4 million, an
    increase of $34.6 million from the $231.8 million recorded in 2012.
    Again, the change is principally due to the fluctuations in the fair
    values of investment properties.

Operations

--  During the fourth quarter of 2012, Primaris leased 340,492 square feet
    comprised of 240,347 square feet to 112 smaller tenants and the
    remainder to three major and anchor tenants. Approximately 53.6% of the
    space leased during the current quarter of 2012 resulted from the
    renewal of existing tenants (53.5% if the major tenants are excluded).
    The weighted average new rent for renewals of existing tenants in the
    current quarter, on a cash basis, represented an 11.1% increase over the
    previous rent (9.3% if the major tenants are excluded).

--  During 2012, Primaris leased 1,828,283 square feet comprised of 895,460
    square feet to 514 smaller tenants and the remainder to 17 major and
    anchor tenants. Approximately 67.8% of the space leased during the 2012
    year resulted from the renewal of existing tenants (65.5% if the major
    tenants are excluded). The weighted average new rent for renewals of
    existing tenants in the year, on a cash basis, represented a 6.0%
    increase over the previous rent (7.8% if the major tenants are
    excluded).

--  The portfolio occupancy improved through 2012. It was 97.7% at December
    31, 2012, compared to 97.5%% at September 30, 2012, and 97.1% at
    December 31, 2011.

--  For the 18 reporting properties owned throughout both twelve month
    periods ended December 31, 2012 and 2011, sales per square foot, on a
    same-tenant basis, have increased to $475 per square foot, from $471 in
    the prior year.

Liquidity

--  At December 31, 2012, Primaris had $45.6 cash on hand and $45.0 million
    drawn on its $100 million credit facility. At December 31, 2012 Primaris
    had drawn on its operating line to have cash on hand to repay mortgages
    maturing January 1, 2013.

Financial Results

FFO for the quarter ended December 31, 2012 was $29.7 million, down $5.0 million from the $34.7 million reported for the fourth quarter of 2011. On a per unit diluted basis, FFO for the fourth quarter of 2012 was $0.307, down $0.100 from the $0.407 reported for the fourth quarter of 2011.

FFO, for the three months ended December 31, 2012, includes material non-recurring charges related to a takeover. When these charges are excluded, Operating FFO for the fourth quarter is $0.415 per unit on a diluted basis. This is an increase of $0.008 from the fourth quarter results of 2011.

FFO for the year ended December 31, 2012 was $132.1 million, up $21.3 million from the $110.8 million reported for the prior year. On a per diluted unit basis, FFO for the 2012 year was $1.439, as compared to the $1.415 for the prior year.

Operating FFO on a per unit diluted basis for the year ended December 31, 2012 was $1.549, up $0.098 from the 2011 year end Operating FFO of $1.451.

Operating FFO for the three months and year ended December 31, 2012 included a charge for early debt repayment of $0.9 million. There was no similar charge in the prior periods.

Net income for the quarter ended December 31, 2012 was $61.1 million, a decrease of $95.3 million from the $156.4 million recorded in the fourth quarter of 2011. The decrease is driven by fluctuations in the recording of investment properties at fair value and one time takeover expenses.

Net income for the year ended December 31, 2012 was $266.4 million, an increase of $34.6 million from the $231.8 million recorded in 2012. Again, the change is principally due to the fluctuations in the fair values of investment properties.

The Operating FFO distribution payout ratio for the fourth quarter of 2012, calculated on a diluted basis, was 73.5% as compared to a 74.9% payout ratio for the fourth quarter of 2011 and 79.6% for the previous quarter ended September 30, 2012. The payout ratios are sensitive to both seasonal operating results and financial leverage.

The Operating FFO distribution ratio for the 2012 year was 78.7% as compared to an 84.0% payout ratio for 2011.

At December 31, 2012, Primaris' total enterprise value was approximately $4.4 billion (based on the market closing price of Primaris' units on December 31, 2012 plus total debt outstanding). At December 31, 2012 Primaris had $1,727.4 million of outstanding debt, equating to a debt to total enterprise value ratio of 39.0%. Primaris' debt consisted of $1,589.2 million of fixed-rate senior debt with a weighted average interest rate of 5.1% and a weighted average term to maturity of 6.0 years, $45.0 million drawn on the operating line of credit, and $93.2 million of fixed-rate convertible debentures.

Primaris had a debt to total asset ratio of 40.8% at December 31, 2012. During the three months ended December 31, 2012, Primaris had an interest coverage ratio of 2.4 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. This coverage ratio would have been 2.9 times if not for the takeover costs incurred during the fourth quarter of 2012. 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 Measures".

Operating Results

Comparison to Prior Period Financial Results (in thousands of dollars)

FFO for the quarter ended December 31, 2012 was $5.0 million ($0.100 per unit diluted) less than the comparative period.

FFO includes takeover expenses. When these expenses are excluded, Operating FFO for the fourth quarter is $5.6 million, or $0.008 per unit on a diluted basis, greater than the fourth quarter results of 2011.

Three Months Ended December 31,     Favourable /
(Unaudited)                          2012             2011   (Unfavourable)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Revenue
 Minimum rent             $        64,345  $        61,833  $         2,512
 Recoveries from tenants           41,362           38,620            2,742
 Percent rent                       1,022              893              129
 Parking                            2,161            1,998              163
 Other income                         556              719             (163)
                         ---------------------------------------------------
                                  109,446          104,063            5,383

Expenses
 Property operating                28,215           27,382             (833)
 Property tax                      19,285           18,597             (688)
 Ground rent                          359              332              (27)
 General & administrative          15,950            2,110          (13,840)
 Depreciation                         207              282               75
                         ---------------------------------------------------
                                   64,016           48,703          (15,313)

Income from operations    $        45,430  $        55,360  $        (9,930)
Finance income                         22               72              (50)
Finance costs                     (28,340)         (32,951)           4,611
Fair value adjustment on
 investment properties             43,997          133,956          (89,959)
                         ---------------------------------------------------
Net income                $        61,109  $       156,437  $       (95,328)

Fair value adjustment on
 investment properties            (43,997)        (133,956)          89,959
Fair value adjustment on
 convertible debentures               936            9,000           (8,064)
Fair value adjustment on
 exchangeable units                 5,348              240            5,108
Fair value adjustment on
 unit-based compensation            2,873              108            2,765
Distributions on
 exchangeable units                   647              667              (20)
Amortization of tenant
 improvement allowances             2,809            2,176              633
                         ---------------------------------------------------
Funds from operations(1)  $        29,725  $        34,672  $        (4,947)

Add back one-time
 expenses                          10,550                -           10,550
                         ---------------------------------------------------
Operating FFO             $        40,275  $        34,672  $         5,603
                         ---------------------------------------------------
                         ---------------------------------------------------

Funds from operations per
 unit - basic             $         0.311  $         0.420  $        (0.109)
Funds from operations per
 unit - diluted           $         0.307  $         0.407  $        (0.100)
Operating FFO per unit -
 diluted                  $         0.415  $         0.407  $         0.008
Operating FFO - payout
 ratio                               73.5%            74.9%            24.4%
Distributions per unit    $         0.305  $         0.305  $             -
Weighted average units
 outstanding - basic           95,617,087       82,641,329       12,975,758
Weighted average units
 outstanding - diluted         97,963,800       93,987,252        3,976,548
Units outstanding, end of
 period (including
 exchangeable units)          100,346,768       82,740,232       17,606,536

(1) Funds from Operations, which is not a defined term within IFRS, has been
    calculated by management, using IFRS, 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 Measures".

Net Operating Income - Same Properties (in thousands of dollars)

The same-property comparison consists of the 32 properties that were owned throughout both the current and comparative three month periods. NOI, on a same-property basis, increased $2.3 million, or 4.0%, in relation to the comparable three month period.

Three Months Ended December 31,     Favourable /
(Unaudited)                          2012             2011   (Unfavourable)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Operating revenue(1)      $       108,071  $       105,640  $         2,431
Less operating expenses           (46,397)         (46,311)             (86)
                         ---------------------------------------------------
Net operating income(1)   $        61,674  $        59,329  $         2,345
                         ---------------------------------------------------
                         ---------------------------------------------------

(1) Not a term defined under IFRS

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.

Financing Update & Liquidity

At December 31, 2012, Primaris had $45.6 cash on hand and $45.0 million drawn on its $100 million operating line to have cash on hand to repay $43.7 million of mortgages maturing January 1, 2013. Subsequent to year end Primaris increased its operating line of credit to $138 million.

Subsequent to December 31, 2012, Primaris agreed to purchase two shopping centres and seven complimentary properties in Alberta for $376,680. In order to finance the acquisition, the vendor provided $339,012 of financing and the balance was funded by a draw on the operating line. The acquisition was completed in early March 2013.

Tenant Sales

For the 18 reporting properties owned throughout both twelve month periods ended December 31, 2012 and 2011, sales per square foot, on a same-tenant basis, have increased to $475 per square foot from $471. For the same 18 properties the all-tenant total sales volume has increased 2.1%.

Same Tenant
                                  Sales per Square Foot   Variance
(Unaudited)                           2012         2011          $       %
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Cataraqui                     $        527 $        527 $        -     0.0%
Dufferin Mall                          517          515 $        2     0.3%
Eglinton Square                        402          391 $       11     3.0%
Heritage Place                         306          305 $        1     0.5%
Lambton Mall                           324          323 $        1     0.1%
Place d'Orleans                        442          453 $      (11)   -2.6%
Place Du Royaume                       439          438 $        1     0.3%
Place Fleur De Lys                     330          331 $       (1)   -0.4%
Stone Road Mall                        535          528 $        7     1.3%
Aberdeen Mall                          387          377 $       10     2.5%
Cornwall Centre                        583          569 $       14     2.6%
Grant Park                             655          650 $        5     0.7%
Midtown Plaza                          638          614 $       24     3.8%
Northland Village                      488          493 $       (5)   -1.2%
Orchard Park                           490          490 $        -     0.1%
Park Place Mall                        474          477 $       (3)   -0.6%
Sunridge Mall                          526          499 $       27     5.4%
Woodgrove Centre                       478          476 $        2     0.3%
                             ----------------------------------------------
                              $        475 $        471 $        4     0.9%
                             ----------------------------------------------
                             ----------------------------------------------

                                             All Tenant
                                     Total Sales Volume   Variance
(Unaudited)                           2012         2011          $       %
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Cataraqui                           87,601       86,092      1,509     1.8%
Dufferin Mall                       95,590       91,655      3,935     4.3%
Eglinton Square                     31,416       30,591        825     2.7%
Heritage Place                      26,474       25,689        785     3.1%
Lambton Mall                        44,193       45,865     (1,672)   -3.6%
Place d'Orleans                     97,693       99,890     (2,197)   -2.2%
Place Du Royaume                   113,341      114,445     (1,104)   -1.0%
Place Fleur De Lys                  67,835       69,384     (1,549)   -2.2%
Stone Road Mall                    114,895      116,142     (1,247)   -1.1%
Aberdeen Mall                       49,830       48,815      1,015     2.1%
Cornwall Centre                     91,589       85,590      5,999     7.0%
Grant Park                          26,388       26,560       (172)   -0.6%
Midtown Plaza                      144,704      134,108     10,596     7.9%
Northland Village                   41,881       43,680     (1,799)   -4.1%
Orchard Park                       133,838      131,656      2,182     1.7%
Park Place Mall                     78,564       75,463      3,101     4.1%
Sunridge Mall                      101,525       91,732      9,793    10.7%
Woodgrove Centre                    91,269       92,283     (1,014)   -1.1%
                             ----------------------------------------------
                              $  1,438,626 $  1,409,640 $   28,986     2.1%
                             ----------------------------------------------
                             ----------------------------------------------

The same tenants' sales per square foot increased 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, 2012, increased 2.0%. Primaris' sales productivity of $475 is lower than the ICSC average of $596, 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 improved through the year. It was 97.7% at December 31, 2012, compared to 97.5% at September 30, 2012, and 97.1 % at December 31, 2011. These percentages include space for which signed leases are in place, but where the tenant may not yet be in occupancy.

During the fourth quarter of 2012, Primaris leased 340,492 square feet comprised of 240,347 square feet to 112 smaller tenants and the remainder to three major and anchor tenants. Approximately 53.6% of the space leased during the current quarter of 2012 resulted from the renewal of existing tenants (53.5% if the major tenants are excluded). The weighted average new rent for renewals of existing tenants in the current quarter, on a cash basis, represented an 11.1% increase over the previous rent (9.3% if the major tenants are excluded).

During 2012, Primaris leased 1,828,283 square feet comprised of 895,460 square feet to 514 smaller tenants and the remainder to 17 major and anchor tenants. Approximately 67.8% of the space leased during the 2012 year resulted from the renewal of existing tenants (65.5% if the major tenants are excluded). The weighted average new rent for renewals of existing tenants in the year, on a cash basis, represented a 6.0% increase over the previous rent (7.8% if the major tenants are excluded).

At December 31, 2012, Primaris had a weighted average term to maturity of leases of 5.3 years.

With respect to the four remaining Zellers' leases in Primaris' portfolio, two now terminate on April 30, 2013, the third terminates on June 30, 2013 and the fourth expires naturally on March 31, 2013. Our leasing and development teams are already at work on plans to make the most of the opportunity to bring new brands to the properties.

Development Activity

During 2009 and 2011, Primaris completed phases one and two of a three phase redevelopment at Lambton Mall in Sarnia, Ontario.

Work is well underway on the third phase of the Lambton Mall redevelopment. The project involves the redevelopment of the vacant anchor space (approximately 92,000 square feet), formerly occupied by Canadian Tire. Part of the existing building was demolished and will be replaced with a new Galaxy Theatre building comprising approximately 32,000 square feet, a Sport Chek which will occupy approximately 31,000 square feet and 1,000 square feet of commercial retail space. The plan also creates a new mall entrance next to H&M. The project includes the acquisition of the existing 5.9 acre Cineplex property located at 1450 London Road, adjacent to Lambton Mall. With the opening of the new Galaxy Theatre at Lambton Mall, Cineplex will close its existing theatre. This phase will cost approximately $16,000, including the purchase of 1450 London Road. A spring 2013 opening of both the Galaxy Theatre and the Sport Chek is expected.

The second phase of a redevelopment at Grant Park comprises a 5,000 square foot expansion of the shopping centre, re-leasing and remerchandising of approximately 23,000 square feet of other retail area, renovation and expansion of washrooms, and upgrade of an additional 5,000 square feet of common area. Landlord pre-construction activities commenced in September 2012. Common area improvements and washroom renovations are expected to be completed by spring 2013, and the expansion is expected to open in July 2013. This second phase has a $5,400 budget.

A 12,000 square foot freestanding pad development at Tecumseh Mall, in Windsor, Ontario, was turned over to the LCBO for fixturing on October 31, 2012, on time and under budget. The LCBO plans to open in spring 2013. Primaris invested $3.3 million in this project.

Redevelopment projects will be funded through a combination of cash, draws on the operating line and mortgage refinancing.

Supplemental Information

Primaris' condensed interim consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the three months and year ended December 31, 2012 and 2011 are available on Primaris' website at www.primarisreit.com.

About Primaris

Primaris is a TSX listed real estate investment trust (TSX: PMZ.UN). Primaris owns 35 income-producing properties comprising approximately 14.7 million square feet located in Canada. As of February 28, 2013, Primaris had 100,743,915 units issued and outstanding (including 2,122,261 exchangeable units for which units have yet to be issued).

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;

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

(x)     the anticipated outcome of the Primaris Unitholder vote on the
        amended and restated Arrangement Agreement with H&R Real Estate
        Investment Trust and H&R Finance Trust and an asset purchase
        agreement with members of the KingSett Capital-led Consortium.

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 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.

PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Consolidated Statements of Financial Position
(In thousands of dollars)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                               December 31,     December 31,
                                                       2012             2011
----------------------------------------------------------------------------

Assets

Non-current assets:
 Investment properties                     $      4,145,400 $      3,557,900

Current assets:
 Rents receivable                                     6,245            7,387
 Other assets and receivables                        20,793           25,010
 Cash and cash equivalents                           45,622                -
 ---------------------------------------------------------------------------
                                                     72,660           32,397

----------------------------------------------------------------------------
                                           $      4,218,060 $      3,590,297
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and Equity

Non-current liabilities:
 Mortgages payable                         $      1,431,205 $      1,372,871
 Convertible debentures                             110,525          268,766
 Exchangeable units                                  57,088           45,079
 Accounts payable and other liabilities               7,214            1,205
 ---------------------------------------------------------------------------
                                                  1,606,032        1,687,921

Current liabilities:
 Current portion of mortgages payable               151,729           53,004
 Bank indebtedness                                   45,000            6,779
 Accounts payable and other liabilities              75,248           61,744
 Distribution payable                                10,000            8,251
 ---------------------------------------------------------------------------
                                                    281,977          129,778
----------------------------------------------------------------------------
                                                  1,888,009        1,817,699

Equity                                            2,330,051        1,772,598

----------------------------------------------------------------------------
                                           $      4,218,060 $      3,590,297
----------------------------------------------------------------------------
----------------------------------------------------------------------------


PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Consolidated Statements of Income and Comprehensive Income
(In thousands of dollars, except per unit amounts)

----------------------------------------------------------------------------
                               Three months ended                Year ended
                                     December 31,              December 31,
                                2012         2011         2012         2011
                         (unaudited)  (unaudited)
----------------------------------------------------------------------------

Revenue:
 Minimum rent            $    64,345  $    61,833  $   242,516  $   219,113
 Recoveries from tenants      41,362       38,620      154,235      135,464
 Percentage rent               1,022          893        2,707        2,652
 Parking                       2,161        1,998        7,220        6,556
 Other income                    556          719        4,353        1,568
 ---------------------------------------------------------------------------
                             109,446      104,063      411,031      365,353

Expenses:
 Property operating           28,215       27,382      103,297       92,745
 Property taxes               19,285       18,597       76,467       68,569
 Ground rent                     359          332        1,353        1,246
 General and
  administrative              15,950        2,110       25,483        9,840
 Depreciation                    207          282        1,207        1,039
 ---------------------------------------------------------------------------
                              64,016       48,703      207,807      173,439
----------------------------------------------------------------------------

Income from operations        45,430       55,360      203,224      191,914

Finance income                    22           72           90          168
Finance costs                (28,340)     (32,951)    (115,648)    (109,396)
Fair value adjustment on
 investment properties        43,997      133,956      178,690      149,113
----------------------------------------------------------------------------

Net income (loss)             61,109      156,437      266,356      231,799

Other comprehensive
 income:
Deferred loss on cash
 flow hedge                      143            -         (190)           -
Amortization of deferred
 net loss on cash flow
 hedges                           56           57          226          230
----------------------------------------------------------------------------
Comprehensive income     $    61,308    $ 156,494  $   266,392  $   232,029
----------------------------------------------------------------------------
----------------------------------------------------------------------------

PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Consolidated Statements of Cash Flows
(In thousands of dollars)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                            Three months ended December 31,
                                                     2012              2011
                                              (unaudited)       (unaudited)
----------------------------------------------------------------------------
Cash flows from operating activities:
 Net income for the period               $         61,109 $         156,437
 Adjustments for:
  Amortization of tenant improvement
   allowances                                       2,809             2,176
  Amortization of tenant inducements                   55                70
  Amortization of straight-line rent                 (578)             (669)
  Value of units and options granted
   under unit-based compensation plan               3,246               364
  Depreciation of fixtures and equipment              207               282
  Net finance costs                                28,318            32,879
  Fair value adjustments on investment
   properties                                     (43,997)         (133,956)
  --------------------------------------------------------------------------
                                                   51,169            57,583
  Other non-cash operating working
   capital                                         20,242             4,969
  Leasing commissions                                (346)             (408)
  Tenant improvement allowances                    (3,044)           (7,377)
  Tenant inducements                                    -               (15)
 ---------------------------------------------------------------------------
 Cash generated from operating
  activities                                       68,021            54,752
 Interest received                                     22                72
 ---------------------------------------------------------------------------
 Net cash from operating activities                68,043            54,824

Cash flows from financing activities:
 Mortgage principal repayments                     (8,380)           (8,033)
 Proceeds of new mortgage financing               209,905                 -
 Proceeds of bridge financing                           -            57,500
 Repayment of financing                                 -           (62,894)
 Advance (repayment) of bank
  indebtedness                                     44,090              (221)
 Interest paid on financing                       (21,755)          (21,315)
 Capitalized debt placement costs                    (994)                7
 Issuance of units                                115,016                 -
 Unit issue costs                                  (5,278)              (50)
 Distributions to Unitholders                     (25,152)          (23,163)
 ---------------------------------------------------------------------------
 Net cash flow used in financing
  activities                                      307,452           (58,169)

Cash flows used in investing activities:
 Acquisitions of investment properties           (315,561)           (3,005)
 Additions to buildings and building
  improvements                                     (9,827)           (4,947)
 Additions to recoverable improvements             (4,471)           (7,821)
 Additions to fixtures and equipment                  (14)             (286)
 Proceeds of disposition                                -            18,266
 ---------------------------------------------------------------------------
 Net cash flow used in investing
  activities                                     (329,873)            2,207
----------------------------------------------------------------------------

Decrease in cash and cash equivalents              45,622            (1,138)

Cash and cash equivalents, beginning of
 period                                                 -             1,138

----------------------------------------------------------------------------
Cash and cash equivalents, end of period $         45,622 $               -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Supplemental disclosure of non-cash
 operating, financing and investing
 activities:
 Value of units issued from conversion
  of convertible debentures                         6,270             2,037
 Value of units issued under
  distribution reinvestment plan                    4,461             2,079
 Value of units issued upon conversion
  of exchangeable units                                 -                 -
 Value of units issued under unit-based
  compensation plan                                     -                 -
 Deferred loss on cash flow hedge                     143                 -

----------------------------------------------------------------------------
----------------------------------------------------------------------------

PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Consolidated Statements of Cash Flows
(In thousands of dollars)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                    Year ended December 31,
                                                     2012              2011
----------------------------------------------------------------------------
Cash flows from operating activities:
 Net income for the period              $         266,356 $         231,799
 Adjustments for:
  Amortization of tenant improvement
   allowances                                       9,768             7,419
  Amortization of tenant inducements                  220               168
  Amortization of straight-line rent               (2,096)           (2,030)
  Value of units and options granted
   under unit-based compensation plan               7,552             1,957
  Depreciation of fixtures and equipment            1,207             1,039
  Net finance costs                               115,558           109,228
  Fair value adjustments on investment
   properties                                    (178,690)         (149,113)
  --------------------------------------------------------------------------
                                                  219,875           200,467
  Other non-cash operating working
   capital                                         16,535            (7,069)
  Leasing commissions                                (990)             (773)
  Tenant improvement allowances                   (17,440)          (18,879)
  Tenant inducements                                  (25)              (15)
 ---------------------------------------------------------------------------
 Cash generated from operating
  activities                                      217,955           173,731
 Interest received                                     90               168
 ---------------------------------------------------------------------------
 Net cash from operating activities               218,045           173,899

Cash flows from financing activities:
 Mortgage principal repayments                    (33,000)          (28,146)
 Proceeds of new mortgage financing               209,905           333,600
 Proceeds of bridge financing                           -            57,500
 Repayment of financing                           (21,227)          (99,933)
 Advance (repayment) of bank
  indebtedness                                     38,221            (3,221)
 Interest paid on financing                       (87,962)          (83,723)
 Capitalized debt placement costs                  (1,479)           (2,736)
 Cash received on exercise of options                 829               457
 Issuance of units                                230,074           260,590
 Unit issue costs                                 (10,491)          (11,144)
 Redemption of convertible debentures              (9,458)                -
 Issuance of convertible debentures                     -            75,000
 Convertible debenture issue costs                      -            (3,029)
 Distributions to Unitholders                     (93,628)          (84,016)
 Purchase of units under normal course
  issuer bid                                            -              (589)
 ---------------------------------------------------------------------------
 Net cash flow from (used in) financing
  activities                                      221,784           410,610

Cash flows used in investing activities:
 Acquisitions of investment properties           (365,897)         (585,388)
 Additions to buildings and building
  improvements                                    (17,225)          (12,977)
 Additions to recoverable improvements             (9,498)          (12,087)
 Additions to fixtures and equipment               (1,587)             (390)
 Proceeds of disposition                                -            19,833
 ---------------------------------------------------------------------------
 Net cash flow used in investing
  activities                                     (394,207)         (591,009)
----------------------------------------------------------------------------

Decrease in cash and cash equivalents              45,622            (6,500)
Cash and cash equivalents, beginning of
 period                                                 -             6,500

----------------------------------------------------------------------------
Cash and cash equivalents, end of period$          45,622 $               -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Supplemental disclosure of non-cash
 operating, financing and investing
 activities:
 Value of units issued from conversion
  of convertible debentures                       161,539            17,926
 Value of units issued under
  distribution reinvestment plan                   16,133             8,714
 Value of units issued upon conversion
  of exchangeable units                               481               478
 Value of units issued under unit-based
  compensation plan                                 1,409               597
 Deferred loss on cash flow hedge                    (190)                -

----------------------------------------------------------------------------
----------------------------------------------------------------------------

PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST

Reconciliation of Net Income to Funds from Operations
(In thousands of dollars)
(Unaudited)

----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                Three Months Ended       Three Months Ended
                                 December 31, 2012        December 31, 2011
----------------------------------------------------------------------------

Net income                             $    61,109              $   156,437
Fair value adjustment on
 investment properties                     (43,997)                (133,956)
Fair value adjustment on
 convertible debentures                        936                    9,000
Fair value adjustment on
 exchangeable units                          5,348                      240
Fair value adjustment on
 unit-based compensation                     2,873                      108
Distributions on
 exchangeable units                            647                      667
Amortization of tenant
 improvement allowances                      2,809                    2,176
----------------------------------------------------------------------------

Funds from operations(1)               $    29,725              $    34,672
----------------------------------------------------------------------------

(1) Funds from Operations, which is not a defined term within IFRS, has been
    calculated by management, using IFRS, 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)
(Unaudited)

----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                Three Months Ended       Three Months Ended
                                 December 31, 2012        December 31, 2011
----------------------------------------------------------------------------

Revenue                                $   109,446              $   104,063

Reverse: Non-cash revenue                    2,286                    1,577
Less: Property operating
       expenses                            (28,215)                 (27,382)
      Property tax expense                 (19,285)                 (18,597)
      Ground Rent                             (359)                    (332)
----------------------------------------------------------------------------

Net operating income(1)                $    63,873              $    59,329
----------------------------------------------------------------------------

(1) 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:
Primaris Retail REIT
John R. Morrison
President & Chief Executive Officer
(416) 642-7860

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

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