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Primaris Retail REIT Announces Strong Fourth Quarter Financial Results

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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 5,383Expenses 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) 4,611Fair 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) 89,959Fair value adjustment on convertible debentures 936 9,000 (8,064)Fair value adjustment on exchangeable units 5,348 240 5,108Fair value adjustment on unit-based compensation 2,873 108 2,765Distributions 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 $ 0.008Operating 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 12,975,758Weighted average units outstanding - diluted 97,963,800 93,987,252 3,976,548Units 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 $ 2,431Less 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 TRUSTConsolidated Statements of Financial Position(In thousands of dollars)-------------------------------------------------------------------------------------------------------------------------------------------------------- December 31, December 31, 2012 2011----------------------------------------------------------------------------AssetsNon-current assets: Investment properties $ 4,145,400 $ 3,557,900Current 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 EquityNon-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 1,687,921Current 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 1,817,699Equity 2,330,051 1,772,598---------------------------------------------------------------------------- $ 4,218,060 $ 3,590,297--------------------------------------------------------------------------------------------------------------------------------------------------------PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUSTConsolidated 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 --------------------------------------------------------------------------- 109,446 104,063 411,031 365,353Expenses: 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 55,360 203,224 191,914Finance income 22 72 90 168Finance 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) 61,109 156,437 266,356 231,799Other 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 TRUSTConsolidated 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 54,824Cash 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 TRUSTConsolidated 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 218,045 173,899Cash 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 221,784 410,610Cash 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 TRUSTReconciliation 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 $ 156,437Fair value adjustment on investment properties (43,997) (133,956)Fair value adjustment on convertible debentures 936 9,000Fair value adjustment on exchangeable units 5,348 240Fair value adjustment on unit-based compensation 2,873 108Distributions on exchangeable units 647 667Amortization 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 $ 104,063Reverse: Non-cash revenue 2,286 1,577Less: 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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