RioCan Annual Report - 2011

RIOCAN ANNUAL REPORT 2011

DISCIPLINEDGROWTH

RIOCAN REAL ESTATE INVESTMENT TRUST ANNUAL REPORT 2011

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With high occupancy rates in RioCan’s prime retail locations, and strongperformance under changing economic conditions, RioCan has a proventrack record of consistent and growing distribution to our unitholders.Since our inception over 18 years ago, RioCan’s strategy has proven effective, and yourREIT has enjoyed steady growth as a result. During this time, we have built and acquireda portfolio of prime shopping centres, focused in Canada’s six major markets. Over thelast few years, RioCan has strategically enhanced and diversified our portfolio in selectprosperous markets in the United States. Although RioCan has numerous partnershipopportunities in this market, your REIT rigorously analyzes all aspects of proposals beforeproceeding with a select few.

Management is sensitive to, and adjusts its strategy according to, economic conditionsand forecasts. Our model allows us to weather economic and financial downturns suchas was the case in 2008 and 2009. Moreover, with a healthy balance sheet, RioCan cananalyze, evaluate and proceed with select valuable opportunities that arise with economicfluctuations. Strong performance under changing economic conditions reflects the safety,security and reliability of your REIT.

RioCan’s consistent performance derives from our favourable balance sheet and ourdiversified portfolio, with established tenants and best-of-class retailers. With hightenant demand for our strategically located, high-traffic locations, and professionalmanagement and skilled marketing of our properties, the safety and stability of our incomestream is assured. RioCan’s sound operating principles are reflected in our distribution tounitholders. Indeed, throughout our history, our distribution to unitholders has never beencut, but has always grown, or remained the same. Consistency, reliability, and safety are thehallmarks of RioCan’s measured and disciplined approach.

To diversify risk, RioCan has a varied portfolio of tenants. With this strategy, risk exposure isminimized to any single tenant. At year-end, for example, no tenant comprised more than 4.7%of rental revenue for RioCan’s North American portfolio. In Canada, no single tenant exceeded5.1% of Canadian rental revenue. Moreover, RioCan’s stable revenue stream is supported byanchor and national tenants with a strong retail presence, which generate 86% of RioCan’sannualized rental revenue as of year-end. With leading tenants who benefit from our highdemand properties, the ongoing stability of the rental stream is assured.

In Canada and in our properties in the United States, RioCan maintains a strong relationshipwith its tenants and is often their largest landlord. In fact, we are already Target’s largestlandlord in Canada. With strong landlord tenant relationships on both sides of the border,RioCan enhances value for our unitholders. It is worth reiterating that RioCan’s primaryfocus has been, and always will be, in Canada.

| CEO’s Letter to Unitholders

SAFESTABLERELIABLEGROWTH

Highlights of growth in portfolioIn 2011, RioCan completed a significant number of acquisitions in the United States and Canada,exceeding $1 billion. With operations in key markets north and south of the border, a record$1 billion in rental revenue is anticipated this year.

New trends shaping the retail landscapeTo enhance our Canadian portfolio, RioCan is intensifying some of our key urban assets inCanada’s six major markets: Calgary, Edmonton, Montreal, Ottawa, Toronto and Vancouver.In dense urban environments, which often lack accessible supermarkets and departmentstores, intensification blends the latest trends in retailing with stylish and innovative residentialspaces. This further enhances the draw and the appeal of RioCan properties to customersand residents alike.

The future of RioCanThe prospects for your REIT are bright. From groceries, cosmetics, sporting goods,or home furnishings, a RioCan centre offers something for everyone.

The coming year looks promising. We are confident that RioCan’s portfolio of 331 retail centres,and our strategies for intensification and enhancements will be the cornerstone for safe, stable,and reliable growth.

In closing, I thank you, our unitholders, for your continued support in RioCan.

Edward Sonshine, O.Ont., Q.C.Chief Executive Officer,

RioCan Real Estate Investment Trust

Edward Sonshine, O.Ont., Q.C.Chief Executive Officer,RioCan Real Estate Investment Trust


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Canadian Operations

INTENSIFICATION: RioCan’s portfolioof urban properties presents a numberof opportunities to add value throughintensification and redevelopment.

STABILITYTHROUGHEXCEPTIONALTENANTS

SHOPPES ON QUEENWEST: An acclaimed one acre site featuring 96 residentialunits and 91,000 square feet of retail space on three levels.

This recently completed site showcases Loblaws’ visionary approach to the grocery retail market.On the street level is the popular Joe Fresh which markets women's and men's apparel, activewear, accessories, cosmetics, jewellery and sleepwear. On the third floor is one of Toronto’snewest Winners locations, offering affordable home and apparel fashions.

During 2011, RioCan completed its urban development project at Queen Street and PortlandStreet, adjacent to the downtown core in one of Toronto’s fastest growing neighbourhoods.This development exemplifies the value creation in RioCan’s Urban Intensification developments.These projects capitalize on people’s desire to live, work, and shop in or near the city’s denselypopulated core. RioCan’s Urban Intensification developments typically include a residentialcomponent. For instance, Queen & Portland was developed with Tribute Communities, whichmarketed and sold the residential aspect of the development, while RioCan owns and managesthe retail component of the property.

Based on the success of this project and the recently completed 1717 Avenue Road development,also in Toronto, RioCan anticipates using this approach to maximize the value in RioCan’slocations in other prime urban markets across Canada.

Transforming Toronto retail at the StockyardsMuch excitement is focused on the Stockyards, a spacious 20 acre site at St. Clair Avenue andWeston Road. This project will be a major draw for the nearly half-a-million people who live in a5 km radius. The Stockyards is expected to ultimately feature 563,000 square feet of retail space.Using innovative planning, the project concept features a unique urban, two-storey retail prototypethat has been successfully implemented in the United States. The Stockyards is expected tobe anchored by key retailers such as Target, and will also include Marshalls, Best Buy,HomeSense and Old Navy.

SHOPPES ONQUEENWEST:One of RioCan’s

newesturban development properties

86%ofRioCan’srentalrevenue

isgenerated by anchor or

national tenants

Conservativelymanaged

balance sheet

WellmanagedTrust with

strong access to capital

Ahighly diversified

portfoliooftenants

CANADAAT AGLANCE

RioCan’s Canadian portfolio of 286 high qualityretail properties is focused in Canada’s sixlargest markets: Calgary, Edmonton, Montreal,Ottawa, Toronto and Vancouver.

Annualized rental revenueof the Canadian portfolioby geographic area atDecember 31, 2011

Annualized rentalrevenue of the Canadianportfolio by propertytype at December 31, 2011


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US Operations

RioCan’s strategic approach minimizes risk byteaming with leading local partners in selectstates to acquire premium shopping centres.

SAFETYTHROUGHKNOWLEDGEOF THE MARKETPLACE

RioCan’s business is based on disciplined growth through development,redevelopment, and acquisitions. With its financial strength and track-record,RioCan has assembled a high quality US retail portfolio focused in the Northeastand Texas.

Over the past two years, RioCan has partnered with leading US real estateowners and operators in its acquisitions of prime retail properties. With itsstrong financial position and ability to execute transactions, RioCan acquireddesirable retail properties at competitive valuations.

RioCan is one of the largest retail REITs in North America. The portfolio numberssome 331 shopping centres which are leased to North America’s leading retailers.

RioCan’s strategy is to develop strong relationships with local partners, who are experts in their regions andmarkets. In the past two years, RioCan has built a strong and stable platform in the United States, similar tothe one that made RioCan successful in Canada. This platform is based on attractive properties in prosperousmarkets, strong tenant relationships, and a diversified portfolio of properties and tenants. RioCan’s approachhas provided consistent returns over the long-term.

The national anchor tenants in RioCan’s American properties are “best-of-class” in their respective markets,assuring that RioCan’s properties appeal to other quality tenants, and provides a strong draw to customersalike. RioCan’s relationships with leading tenants in the United States also benefit RioCan in Canada. Nowthat leading US retailers are coming north of the border, they are drawn to RioCan’s Canadian properties.In turn, the strong interest of US retailers in RioCan’s Canadian portfolio allows it to realize full value inits properties.

SOUTHPARKMEADOWS:Located in Austin, Texas

Selectiveand disciplined

investment in keyUSmarkets

RioCanhas developeda number of

strong partnershipswithlocal

market expertise

Strongtenantrelationships in

bothCanadaand theUS

USAAT AGLANCE

Since the fourth quarter of 2009, RioCan hasassembled a US portfolio of 45 shoppingcentres, or 6.9 million square feet with a fairvalue in excess of $1.4 billion.

Net leasable areaof the US portfolioat December 31, 2011

Annualized rentalrevenue of the USportfolio by stateat December 31, 2011


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From left to right

Raghunath DavloorEdward Sonshine, O.Ont., Q.C.Frederic A. Waks

From left to right

Oliver HarrisonJane PlettJohn BallantyneDanny KissoonJonathan Gitlin

From left to right

Maria RicoKenneth SiegelJeff RossJordan Robins

From left to right

Michael ConnollySuzanne MarineauMark Swalwell

From left to right

Naftali SturmHoward Rosen

RELIABILITYTHROUGHSENIOREXPERTISE

RioCan Board of Trustees and Management Team

Raymond M. Gelgoot

Edward Sonshine, O.Ont., Q.C.

Sharon Sallows

Charles M. Winograd

Dale H. Lastman

Frank W. King, O.C.

Clare R. Copeland

Paul Godfrey, C.M., O.Ont

Ronald W. Osborne

RioCan has a long-established Board, with accomplished individuals in theirrespective fields. The Board’s depth of talent includes expertise in a variety ofsectors: law, finance, retailing, real estate, banking, human resources, energyand investments. With a long tenure on the Board, each member has an in-depthunderstanding of RioCan’s strategy and operations. Moreover, members arepersonally committed to help your REIT flourish. They use their leadership intheir fields, and knowledge of RioCan to help ensure that optimal decisions aremade. That’s why the conversations at the Board are robust and challenging.The Board operates independently from the management of the company.

A STABLEAND EFFECTIVEBOARD


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CORPORATESOCIALRESPONSIBILITY

AT RIOCAN, three facets comprise corporate responsibility: environmentalresponsibility, corporate philanthropy and responsibility to employees.Your REIT strives for a high standard in all three areas.

Corporate Philanthropy: RioCan strengthens the communities in which it is active withits financial support of children’s charities, and vital medical initiatives. Further, RioCanprovides space to charitable organizations, and helps facilitate the active volunteerismof RioCan employees.

Responsibility to Employees: RioCan’s Code of Conduct helps provide a safe workingenvironment for its employees, free from discrimination and harassment. Other initiativesinclude anti-bribery measures and a Whistleblower hotline for anonymous reporting ofviolations of the Code of Conduct.

Environmental Responsibility: RioCan focuses on efficiency improvements in its properties.Sustainable building practices are used wherever possible. As well, RioCan works with itstenants to help reduce energy consumption, improve energy conservation, and lower emissions.At its head office, RioCan’s environmental sustainability has been recognized with BOMA BEStcertification. Water consumption has declined by more than half a million litres, andin 2011 more than 90% of waste has been diverted at the RioCan Yonge Eglinton Centre.

Unitholder Information

Unitholder InformationHead OfficeRioCan Real EstateInvestment TrustRioCan Yonge Eglinton Centre,2300 Yonge Street, Suite 500P.O. Box 2386, Toronto, Ontario M4P 1E4Tel: 416-866-3033 or 1-800-465-2733Fax: 416-866-3020Website: www.riocan.comEmail: [email protected]

Unitholder andInvestor ContactChristian GreenDirector, Investor RelationsTel: 416-864-6483Email: [email protected]

AuditorsErnst & Young LLP

Transfer Agentand Registrar

CIBC Mellon Trust CompanyP.O. Box 7010, Adelaide Street PostalStation, Toronto, Ontario M5C 2W9Answerline: 1-800-387-0825or 416-643-5500Fax: 416-643-5501Website: www.cibcmellon.comEmail: [email protected]

Unit ListingThe units are listed on the Toronto StockExchange under the symbol REI.UN.

Annual MeetingThe 2012 Annual Meeting of RioCan REITwill be held on Monday, June 11, 2012 at10:00 a.m. at SilverCity Theatres located atRioCan Yonge Eglinton Centre, 2300 YongeStreet, Toronto, Ontario. All unitholdersare invited and encouraged to attend inperson or via webcast at www.riocan.com.

On peut obtenir une version françaisedu présent rapport annuel sur le siteweb de RioCan: www.riocan.com.A French language version of this annualreport is available on RioCan’s website:www.riocan.com.

Forward-Looking Statement Advisory

The terms “RioCan” and the “Trust” in this document refer to RioCan Real Estate Investment Trust and should be read inconjunction with RioCan’s audited consolidated financial statements and Management’s Discussion and Analysis for thetwo years ended December 31, 2011 and 2010. Certain information included in this document contains forward-lookingstatements within the meaning of applicable securities laws. These statements include, but are not limited to, statementsmade in “Safe Stable and Reliable Growth”, “Canadian Operations”, “Canada at a Glance”, “USA Operations”, “USA at aGlance”, “RioCan Board of Directors and Management Team”, and “Corporate Social Responsibility”, and other statementsconcerning RioCan’s objectives, its strategies to achieve those objectives, as well as statements with respect to management’sbeliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances,performance or expectations that are not historical facts. Forward-looking statements generally can be identified by the use offorward-looking terminology such as “outlook”, “objective”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”,“believe”, “should”, “plan”, “continue”, or similar expressions suggesting future outcomes or events. Such forward-lookingstatements reflect management’s current beliefs and are based on information currently available to management. Allforward-looking statements in this Annual Report are qualified by these cautionary statements.

These forward-looking statements are not guarantees of future events or performance and, by their nature, are based onRioCan’s current estimates and assumptions, which are subject to risks and uncertainties, including those described under“Risks and Uncertainties” in RioCan’s MD&A dated as at February 13, 2012, which could cause actual events or results todiffer materially from the forward-looking statements contained in this Annual Report.

Those risks and uncertainties include, but are not limited to, those related to: liquidity in the global marketplace associatedwith economic conditions, tenant concentrations, occupancy levels, access to debt and equity capital, interest rates, jointventures/partnerships, the relative illiquidity of real property, unexpected costs or liabilities related to acquisitions,construction, environmental matters, legal matters, reliance on key personnel, unitholder liability, income taxes, theinvestment in the United States of America (“USA”), fluctuations in the currency exchange rate between the Canadian andUS dollar, and RioCan’s qualification as a real estate investment trust for tax purposes. Material factors or assumptionsthat were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include,but are not limited to: a stable retail environment; relatively low and stable interest costs; a continuing trend toward landuse intensification in high growth markets; access to equity and debt capital markets to fund, at acceptable costs, the futuregrowth program and to enable the Trust to refinance debts as they mature; the availability of purchase opportunities forgrowth in Canada and the US; and the impact of accounting principles adopted by the Trust effective January 1, 2011 underInternational Financial Reporting Standards (“IFRS”). Although the forward-looking information contained in this AnnualReport is based upon what management believes are reasonable assumptions, there can be no assurance that actualresults will be consistent with these forward-looking statements. Certain statements included in this Annual Reportmay be considered “financial outlook” for purposes of applicable securities laws, and such financial outlook may notbe appropriate for purposes other than this Annual Report.

The Income Tax Act (Canada) contains provisions which potentially impose tax on publicly traded trusts (the “SIFT Provisions”).However, the SIFT Provisions do not impose tax on a publicly traded trust which qualifies as a REIT. RioCan currently qualifiesas a REIT and intends to continue to qualify for future years. Should this not occur, certain statements contained in thisAnnual Report may need to be modified.

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

RIOCAN YONGE EGLINTON CENTRE2300 YONGE STREET, SUITE 500P.O. BOX 2386, TORONTO, ONTARIO M4P IE4T 416 866 3033 OR 1 800 465 2733F 416 866 3020W WWW.RIOCAN.COM

RioCan Annual Report - 2011

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