2300 Yonge Street, Suite 500 P.O. Box 2386, Toronto, Ontario M4P...

REALESTATEINVESTMENTTRUST

MEASUREDANDDISCIPLINED

RIOCANFINANCIALANNUALREPORT2010

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

CONSERVATIVE LEVERAGE RioCan takes ameasured approach to leverage and maintains astrong Balance Sheet with solid coverage metrics.

STAGGERING OF LEASE MATURITIES RioCan has staggeredits lease maturities to provide additional security from marketfluctuations and to reduce the risk that any single tenant or leaseexpiry will have a material impact on its business. In fact, RioCanhas no more than 10–12% of its leases expire in any given year.

DIVERSIFIED TENANT PROFILE To ensure thestability of the Trust, RioCan’s revenue sourcesare derived from more than 6,700 individual tenants.

GEOGRAPHIC DIVERSIFICATION RioCan is strategicallypositioned in Canada’s major population centres and owns agrowing portfolio in the US. In fact, two-thirds of the Trust’sCanadian income is derived from Canada’s six major markets,which include Calgary and Edmonton, Alberta, Vancouver,British Columbia, Toronto and the greater Ottawa region,Ontario, and Montreal, Quebec.

LADDERED MATURITIES To avoid the fluctuations ofdebt markets, RioCan has laddered its debt maturitieswith no more than 15–17% of its debt maturing in anygiven year.

STRENGTH IN MANAGEMENT From the beginning,RioCan has maintained a consistant vision andphilosophy. The management team is comprisedof well seasoned and experienced professionals,many of whom have been with RioCan since theTrust started in 1994.

STABLE PROPERTY TYPES AND TENANTSRioCan has focused on stable sectors, such asgrocery, that will withstand the highs and lowsof the marketplace. Furthermore, stability isprovided by a large proportion of anchor andnational tenants, which combined generateapproximately 86% of RioCan’s rental revenue.

1 Financial Highlights

2 Property Portfolio

11 Financial Review – Table of Contents

12 Management’s Discussion and Analysis

99 Audited Consolidated Financial Statements

126 Senior Management, Board of Trustees and Unitholder Information

CONTENTS

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Co r e P r i n c i p l e s


Financial Highl ights

(millions of dollars, except per unit amounts)

As at and for the year ended December 31, 2010 2009

Total revenue $ 887 $ 758

Net earnings * 303 114

Net earnings per Unit – basic and diluted 1.23 0.49

Total assets * 6,859 5,862

Debt (mortgages and debentures payable) 4,410 3,663

FFO ** 357 276

FFO per Unit 1.45 1.20

Distributions to unitholders 340 318

Distributions to unitholders per Unit 1.38 1.38

Units outstanding (thousands) 259,818 242,320

* Refer to RioCan's Management's Discussion and Analysis for a discussion and analysis relating to the two years ended December 31, 2010

and 2009

** A non-GAAP measurement for which a reconciliation to net earnings can be found in RioCan's discussion under "FFO".

Distributions(per unit)

National &

Anchor Tenants(as a % of annualized

rental revenue)

Total Portfolio

Occupancy

$% %

100

80

60

40

20

0

100

80

60

40

20

0

1.5

1.2

0.9

0.6

0.3

001 02 03 04 05 06 07 08 09 10 01 02 03 04 05 06 07 08 09 10 01 02 03 04 05 06 07 08 09 10

95

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95

.8

96

.3

96

.3

97

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97

.7

97

.6

96

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97

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97

.4

76

.4

78

.1

80

.1

80

.7

82

.4

82

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82

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83

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84

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85

.9

1.0

75

1.1

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1.1

4 1.2

27

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5

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5

1.3

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1.3

6

1.3

8

1.3

8

1RIOCAN REAL ESTATE INVESTMENT TRUST ANNUAL REPORT 2010

Property Portfolio

As at December 31, 2010CanadaProperty and Location

OwnershipInterest

(%)

RioCan’sInterest

NLA (sq. ft.)Total Site

NLA (sq. ft.) Major or Anchor Tenants

Alberta

17004 & 17008 107th Avenue NW,

Edmonton, AB

100% 11,963 11,963

5020 97th Street NW, Edmonton, AB 100% 11,943 11,943

Brentwood Village , Calgary, AB 50% 142,584 285,167 Safeway, London Drugs,Sears Whole Home

Edmonton Walmart Centre, Edmonton, AB 40% 125,734 365,944 Walmart, Golf Town, TotemBuilding Supplies*

Glenmore Landing , Calgary, AB 50% 73,617 147,234 Safeway

Jasper Gates Shopping Centre, Edmonton, AB 100% 94,460 149,460 London Drugs, Safeway*

Lethbridge Towne Centre, Lethbridge, AB 100% 79,396 79,396 London Drugs

Lethbridge Walmart Centre, Lethbridge, AB 100% 279,760 331,260 Walmart, Totem BuildingSupplies*

Lowe’s Sunridge Centre, Calgary, AB 100% 206,801 206,801 Lowe’s, Golf Town

Mayfield Common , Edmonton, AB 30% 133,279 444,263 HomeSense, Save-on-Foods,Value Village, JYSK

Mill Woods Town Centre , Edmonton, AB 40% 216,690 537,160 Safeway, Canadian Tire,Zellers

North Edmonton Cineplex Centre, Edmonton, AB 100% 75,836 75,836 Cineplex

Northgate Village Shopping Centre, Calgary, AB 100% 277,519 404,609 Safeway, JYSK, BusinessDepot, HomeSense, HomeDepot*

RioCan Beacon Hill , Calgary, AB 50% 263,967 786,934 Canadian Tire, WinnersHomeSense, Future Shop,Home Depot*, Costco*,

RioCan Centre Grand Prairie, Grande Prairie, AB 100% 235,731 335,731 Totem Building Supplies,London Drugs, Cineplex,Staples, Walmart*

RioCan Centre Grand Prairie II , Grande Prairie, AB 50% 31,707 63,413 Winners, Michaels, JYSK

RioCan Meadows , Edmonton, AB 50% 152,819 470,637 Best Buy, Winners, Staples,Home Depot, Loblaws*

RioCan Shawnessy , Calgary, AB 50% 153,005 627,010 Sport Chek, Future Shop,Home Depot*, Walmart*,Co-op*

RioCan Signal Hill Centre, Calgary, AB 100% 462,283 577,283 Zellers, Winners, Staples,Indigo, Loblaws*

Riverbend Square Shopping Centre, Edmonton, AB 100% 136,291 136,291 Safeway, Shoppers Drug Mart

Shoppes at Shawnessy , Calgary, AB 50% 81,494 212,633 Zellers, Canadian Tire*

South Edmonton Common , Edmonton, AB 50% 214,373 979,816 London Drugs, The Brick,Home Outfitters, Old Navy,Home Depot*, Walmart*,Loblaws*, Cineplex*,Staples*, Best Buy*

South Trail Crossing, Calgary, AB 100% 314,002 464,002 Co-op, Winners, Staples,Walmart*, Safeway*

Southland Crossing Shopping Centre, Calgary, AB 100% 132,072 132,072 Safeway

Summerwood Centre, Edmonton, AB 100% 83,911 83,911 Save-On Foods, ShoppersDrug Mart

The Market at Citadel, Edmonton, AB 100% 51,029 51,029 Shoppers Drug Mart

Timberlea Landing, Fort McMurray, AB 100% 105,467 105,467


Property Port fol io


OwnershipInterest

(%)

RioCan’sInterest



British Columbia

Abbotsford Power Centre , Abbotsford, BC 50% 109,886 459,772 Zellers, Winners, Costco*,Rona/Revy*

Cambie Street, Vancouver, BC 100% 148,215 148,215 Canadian Tire, Best Buy

Clearbrook Town Square , Abbotsford, BC 50% 94,132 188,264 Safeway, Staples

Dilworth Shopping Centre, Kelowna, BC 100% 197,432 197,432 Safeway, Staples

Grandview Corners, Surrey, BC 50% 255,770 596,540 Walmart, Future Shop, Indigo,Home Depot*

Impact Plaza, Surrey, BC 100% 134,241 134,241 TNT

Parkwood Place Shopping Centre , Prince George, BC 50% 186,363 372,725 The Bay, Overwaitea, LondonDrugs, Famous Players,Staples

Peninsula Village Shopping Centre , South Surrey, BC 50% 85,353 170,706 Safeway, London Drugs

RioCan Langley Centre , Langley, BC 50% 190,319 380,638 Sears Whole Home, Chapters,HomeSense, Future Shop

Strawberry Hill Shopping Centre , Surrey, BC 50% 168,966 337,932 Home Depot, Cineplex,Winners, Chapters, SportChek

The Junction , Mission, BC 50% 135,731 319,536 Save-on-Foods, FamousPlayers, London Drugs,Canadian Tire*

Tillicum Centre , Victoria, BC 50% 236,295 472,590 Zellers, Cineplex, Safeway,Winners, London Drugs

Vernon Square Shopping Centre, Vernon, BC 100% 98,110 151,110 London Drugs, Safeway*

Manitoba

Garden City Shopping Centre, Winnipeg, MB 30% 90,726 395,025 Canadian Tire, Winners,Sears*

Kildonan Crossing Shopping Centre, Winnipeg, MB 100% 178,877 178,877 Safeway

New Brunswick

Brookside Mall , Fredericton, NB 50% 138,165 276,330 Zellers, Sobeys, The Provinceof New Brunswick

Corbett Centre , Fredericton, NB 100% 107,896 202,896 Winners, Home Depot*

Madawaska Centre, St. Basile, NB 100% 271,924 271,924 Zellers, Staples

Northumberland Square, Miramichi, NB 100% 208,408 208,408 Zellers

Quispamsis Town Centre, Quispamsis, NB 100% 83,376 83,376 Shoppers Drug Mart

Wheeler Park Power Centre, Moncton, NB 100% 271,973 647,588 Business Depot, Sears, OldNavy, Empire Theatres,Winners, Costco*, KentBuilding*, Loblaws*

Newfoundland

Shoppers on Topsail, St. John’s, NL 100% 29,689 29,689 Shoppers Drug Mart

Trinity Conception Square, Carbonear, NL 100% 182,642 182,642 Walmart, Loblaws

Nova Scotia

Halifax Walmart Centre, Halifax, NS 50% 69,047 138,094 Walmart

Ontario

12 Vodden Street, Brampton, ON 100% 32,294 32,294

1208 & 1260 Dundas Street East, Whitby, ON 100% 7,697 7,697

1650-1660 Carling Avenue, Ottawa, ON 100% 142,188 142,188 Canadian Tire

1910 Bank Street, Ottawa, ON 100% 6,425 6,425




OwnershipInterest

(%)

RioCan’sInterest



2422 Fairview Street, Burlington, ON 100% 7,600 7,600

2955 Bloor Street West, Toronto, ON 100% 8,777 8,777

2990 Eglinton Avenue East, Scarborough, ON 100% 9,453 9,453

3736 Richmond Road, Nepean, ON 100% 2,938 2,938

404 Town Centre , Newmarket, ON 50% 122,190 244,379 Zellers, Metro

4055-4065 Carling Avenue , Kanata, ON 100% 22,509 22,509

410 King Street North, Waterloo, ON 100% 2,067 2,067

506 & 510 Hespeler Rd, Cambridge , ON 100% 10,790 10,790

6666 Lundy’s Lane, Niagara Falls, ON 100% 8,434 8,434

735 Queenston Road, Hamilton, ON 100% 8,818 8,818

740 Dupont Street, Toronto, ON 100% 25,000 25,000

Adelaide Centre , London, ON 100% 80,938 80,938 Metro

Albion Centre , Toronto, ON 50% 192,654 385,308 Canadian Tire, No Frills

Belleville Stream Centre, Belleville, ON 100% 89,237 89,237 Stream International

Belleville Walmart Centre, Belleville, ON 100% 275,489 275,489 Walmart

Bellfront Shopping Centre, Belleville, ON 100% 110,400 160,400 Bed, Bath & Beyond,Canadian Tire*

Brant Power Centre, Burlington, ON 50% 57,538 115,076 Best Buy, Home Outfitters

Cambrian Mall, Sault Ste. Marie, ON 100% 129,697 311,528 Winners, Shoppers DrugMart, Canadian Tire*,Loblaws*

Chapman Mills , Ottawa, ON 75% 323,873 546,831 Walmart, Winners, Galaxy,Indigo, Staples, Loblaws*

Cherry Hill Shopping Centre, Fergus, ON 100% 73,837 73,837 Zehrs

Churchill Plaza, Sault Ste. Marie, ON 100% 170,329 170,329 Metro

City View Plaza, Nepean, ON 100% 60,400 60,400 Pharma Plus

Clarkson Crossing , Mississauga, ON 50% 106,534 213,068 Canadian Tire, Metro,Shoppers Drug Mart

Clarkson Village Shopping Centre, Mississauga, ON 100% 50,034 50,034 HomeSense

Colborne Place, Brantford, ON 100% 70,397 70,397 No Frills

Coliseum Ottawa, Ottawa, ON 100% 109,260 109,260 Cineplex, Shoppers DrugMart

Collingwood Centre, Collingwood, ON 100% 248,009 248,009 Zellers, Sobeys, CanadianTire

Commissioners Court Plaza, London, ON 100% 94,140 94,140 Food Basics

Coulter’s Mill Marketplace, Thornhill, ON 100% 73,667 73,667 Staples

County Fair Mall , Smiths Falls, ON 100% 162,942 162,942 Zellers, Food Basics, Staples

Dougall Plaza, Windsor, ON 100% 126,903 126,903 Food Basics

Eastcourt Mall, Cornwall, ON 100% 179,861 179,861 Zellers, Shoppers Drug Mart

Elmvale Acres Shopping Centre , Ottawa, ON 100% 147,332 147,332 Loblaws

Empress Walk, Toronto, ON 100% 180,811 238,811 Empire Theatres, Sport Chek,Staples, Loblaws*

Fairlawn Centre, Ottawa, ON 100% 8,322 8,322

Fallingbrook Shopping Centre, Ottawa, ON 100% 97,109 97,109 Loeb, Shoppers Drug Mart

Five Points Shopping Centre, Oshawa, ON 100% 408,784 408,784 Zellers, Metro, Staples, ValueVillage, Sears

Flamborough Walmart Centre, Flamborough, ON 100% 267,256 267,256 Wal Mart, Rona

Frontenac Mall, Kingston, ON 30% 84,456 281,520 Food Basics, Value Village

Galaxy Centre, Owen Sound, ON 100% 91,563 91,563 No Frills, Galaxy Theatres

Garrard & Taunton, Whitby, ON 100% 141,717 141,717 Lowe’s

Gates of Fergus , Fergus, ON 50% 53,478 106,955 Zellers




OwnershipInterest

(%)

RioCan’sInterest



Goderich Walmart Centre, Goderich, ON 100% 96,930 204,786 Walmart, Canadian Tire*,Loblaws*

Grant Crossing, Kanata, ON 33% 25,820 206,181 Winners, HomeSense,Lowe’s*

Green Lane Centre , Newmarket, ON 33% 53,345 417,638 Bed, Bath & Beyond, Costco*,Loblaws*

Halton Hills Shopping Centre, Georgetown, ON 100% 75,366 75,366 Food Basics

Hamilton Highbury Plaza, London, ON 100% 5,269 5,269

Hamilton Walmart Centre, Hamilton, ON 100% 214,486 214,486 Walmart, Winners

Hartsland Market Square, Guelph, ON 100% 108,717 108,717 Zehrs

Hawkesbury Centre, Hawkesbury, ON 50% 36,891 73,782 Price Chopper, ShoppersDrug Mart

Heart Lake Town Centre , Brampton, ON 100% 126,745 126,745 Metro

Highbury Shopping Plaza, London, ON 100% 70,987 70,987

Hunt Club Centre , Ottawa, ON 100% 67,147 67,147 Metro

Huron Heights, London, ON 50% 45,106 90,212 Shoppers Drug Mart

Innes Road Centre , Ottawa, ON 100% 47,511 167,511 Petsmart, Costco*

Kanata Centrum Shopping Centre, Kanata, ON 100% 316,402 496,402 Walmart, Indigo, Loblaws,Canadian Tire*, AMCTheatres*

Kendalwood Park Plaza , Whitby, ON 50% 79,345 158,690 Price Chopper, Value Village,Shoppers Drug Mart

Kennedy Commons , Toronto, ON 50% 193,359 467,718 AMC Theatres, The Brick,Metro, Sears Whole Home,Chapters, Lansing Buildall*

Keswick Walmart Centre, Keswick, ON 75% 122,062 162,749 Walmart

King George Square , Belleville, ON 50% 35,965 71,930 Metro

Lawrence Square, Toronto, ON 100% 678,246 678,246 Zellers, Fortino’s, CanadianTire

Lincoln Fields Shopping Centre , Ottawa, ON 50% 143,634 287,267 Walmart, Loeb

London Plaza, London, ON 100% 122,183 122,183 Value Village

March Road, Ottawa, ON 50% 7,817 15,634 Pharma Plus

Markington Square , Scarborough, ON 100% 139,997 139,997 Metro, Value Village

Meadowlands Power Centre, Ancaster, ON 100% 145,573 589,177 HomeSense, Future Shop,Sport Chek, Costco*, HomeDepot*, Zellers*, Sobey’s*,Business Depot*

Merivale Market , Nepean, ON 75% 59,135 78,847 Food Basics, Shoppers DrugMart

Midtown Mall, Oshawa, ON 100% 137,542 177,542 A&P*

Millcroft Shopping Centre , Burlington, ON 50% 185,227 370,454 Zellers, Canadian Tire, Metro

Miracle Plaza, Hamilton, ON 100% 83,765 83,765 Ultra Mart

Mississauga Plaza, Mississauga, ON 100% 176,286 176,286 Price Chopper

New Liskeard Walmart Centre, New Liskeard, ON 100% 82,742 127,498 Walmart, Canadian Tire*

Niagara Falls Plaza, Niagara Falls, ON 100% 143,815 143,815 Zellers, Foodland

Niagara Square , Niagara Falls, ON 30% 114,687 382,291 Cineplex, Winners, FutureShop, JYSK, The Brick

Nortown Centre , Chatham, ON 50% 35,712 71,423 Food Basics

Norwest Plaza, Kingston, ON 100% 40,603 40,603

5RIOCAN REAL ESTATE INVESTMENT TRUST ANNUAL REPORT 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .



OwnershipInterest

(%)

RioCan’sInterest



Oakridge Centre, London, ON 100% 39,557 145,057 Pharma Plus, Loblaws*

Orillia Square Mall, Orillia, ON 100% 322,536 322,536 Zellers, Canadian Tire, NoFrills, Staples

Pine Plaza , Sault Ste. Marie, ON 100% 42,380 42,380 Metro

Port Elgin Shopping Centre, Port Elgin, ON 100% 47,076 82,076 Zehrs*, Canadian Tire*

Premier Plaza, St. Catharines, ON 100% 144,983 144,983

Queensway Cineplex, Toronto, ON 50% 11,611 23,222 Cineplex

RioCan Centre Barrie, Barrie, ON 100% 244,407 244,407 Lowe’s, Loblaws, MountainEquipment Co-op

RioCan Centre Belcourt , Kanata, ON 33% 19,595 201,380 Empire Theatres, Lowe’s*

RioCan Centre Burloak , Oakville, ON 50% 227,312 552,623 Cineplex, Longos, HomeOutfitters, Home Depot*

RioCan Centre Kingston , Kingston, ON 100% 631,169 752,214 Sears, Staples, Winners,Future Shop, Best BuyHomeSense, Old Navy,Cineplex, Home Depot*

RioCan Centre London North, London, ON 100% 105,040 165,040 Chapters, Petsmart,Loblaws*

RioCan Centre London South, London, ON 100% 139,600 139,600 Metro

RioCan Centre Merivale, Nepean, ON 100% 201,670 201,670 Your Independent Grocer,Winners, Home Outfitters

RioCan Centre Milton, Milton, ON 100% 169,838 254,838 Home Depot*, Galaxy

RioCan Centre Newmarket , Newmarket, ON 40% 26,688 66,720 Staples

RioCan Centre Sudbury , Sudbury, ON 50% 201,912 669,220 Famous Players, Staples, OldNavy, Chapters, Sears,Costco*, Home Depot*

RioCan Centre Thunder Bay, Thunder Bay , ON 100% 294,723 294,723 Walmart, Staples, FutureShop, Winners, Chapters

RioCan Centre Vaughan, Vaughan, ON 100% 260,708 260,708 Walmart

RioCan Centre Windsor, Windsor, ON 100% 239,321 349,321 Famous Players, Sears, TheBrick, Staples, Costco*

RioCan Colossus Centre , Vaughan, ON 60% 349,579 712,631 HomeSense, Marshalls, Rona,Cineplex, Costco*

RioCan Durham Centre, Ajax, ON 100% 944,731 1,325,731 Walmart, Canadian Tire,Cineplex, Winners, Chapters,Sport Check, HomeSense,Home Depot*, Loblaws*, BestBuy, Old Navy, Zellers,Costco*

RioCan Elgin Mills Crossing, Richmound Hill, ON 63% 200,203 441,325 Costco, Staples, Home Depot*

RioCan Fairgrounds , Orangeville, ON 100% 330,729 474,804 Walmart, Galaxy, FutureShop, Canadian Tire*, HomeDepot*

RioCan Grand Park , Mississauga, ON 50% 59,319 118,638 Winners, Staples, ShoppersDrug Mart

RioCan Gravenhurst , Gravenhurst, ON 100% 149,551 149,551 Canadian Tire, Sobeys

RioCan Hall , Toronto, ON 100% 247,420 247,420 Famous Players, Chapters

RioCan Leamington , Leamington, ON 100% 192,889 192,889 Walmart, Metro

RioCan Leaside Centre , Toronto, ON 50% 66,518 133,036 Canadian Tire, Future Shop

RioCan Marketplace Toronto , Toronto, ON 33% 56,972 413,511 Winners, Loblaws*, HomeDepot*

RioCan Niagara Falls , Niagara Falls, ON 100% 269,136 367,711 Walmart, Staples, Loblaws,Home Depot*

RioCan Orleans, Orleans, ON 100% 182,251 297,251 Loeb, Staples, JYSK, HomeDepot*

RioCan Renfrew Centre, Renfrew, ON 100% 53,098 127,098 Staples, Loblaws*




OwnershipInterest

(%)

RioCan’sInterest



RioCan Scarborough Centre, Toronto, ON 100% 299,304 299,304 Zellers, Staples

RioCan St. Laurent, Ottawa, ON 50% 150,672 301,343 Zellers, Loeb, Winners, FoodBasics

RioCan Thickson Ridge – Bed, Bath & beyond , Whitby,

ON

16% 4,374 28,222 Bed, Bath & Beyond

RioCan Thickson, Whitby, ON 50% 181,520 493,039 Home Outfitters, Winners,Sears Whole Home, Winners,HomeSense, Future Shop,Home Depot*

RioCan Warden , Toronto, ON 100% 245,368 245,368 Lowe’s, Marshalls, FutureShop

RioCan West Ridge Place, Orillia, ON 100% 240,303 370,303 Galaxy, Metro, Home Depot*

RioCan Yonge Eglinton Centre, Toronto, ON 100% 1,014,517 1,014,517 Famous Players, Chapters,Metro

RioCentre Brampton, Brampton, ON 100% 103,607 103,607 Food Basics

RioCentre Newmarket, Newmarket, ON 100% 92,679 92,679 Metro, Shoppers Drug Mart

RioCentre Oakville, Oakville, ON 100% 106,884 106,884 Metro, Shoppers Drug Mart

RioCentre Thornhill, Thornhill, ON 100% 140,345 140,345 No Frills, Winners,HomeSense

Sandalwood Square Shopping Centre, Mississauga, ON 100% 107,860 107,860 Value Village

Sherwood Forest Mall , London, ON 100% 218,347 218,347 Metro, Shoppers Drug Mart

Shoppers on Argyle, Caledonia, ON 100% 17,024 17,024 Shoppers Drug Mart

Shoppers World Brampton , Brampton, ON 100% 643,095 643,095 Zellers, Canadian Tire,Winners, Staples

Shoppers World Danforth , Toronto, ON 50% 164,099 328,198 Zellers, Metro, Staples

Silver City Gloucester, Gloucester, ON 60% 136,334 287,223 Famous Players, Chapters,Future Shop, Old Navy,Loblaws*

South Hamilton Square, Hamilton, ON 100% 304,433 304,433 Zellers, Fortino’s, ShoppersDrug Mart

Southgate Shopping Centre, Ottawa, ON 100% 72,669 72,669 Loeb, Shoppers Drug Mart

St.Clair Beach Shopping Centre, Windsor, ON 100% 76,001 126,001 Zehrs*

Stratford Centre , Stratford, ON 100% 158,758 158,758 Zellers, Food Basics

Sudbury Supermall, Sudbury , ON 100% 136,229 191,973 Zellers, Your IndependentGrocer*

Sunnybrook Plaza, Toronto, ON 100% 50,766 50,766 Pharma Plus

Timiskaming Square , New Liskeard, ON 100% 164,142 164,142 Zellers, Metro

Timmins Square , Timmins, ON 30% 117,424 391,413 Zellers, Sears, No Frills,Winners, Sport Chek

Trafalgar Ridge Shopping Centre, Oakville, ON 100% 131,223 131,223 HomeSense

Trenton Walmart Centre , Trenton, ON 100% 116,437 116,437 Walmart

Trinity Common Brampton , Brampton, ON 60% 397,530 877,550 Zellers, Famous Players,Metro, Winners, HomeSense,Future Shop, Indigo, Staples,Canadian Tire*, Home Depot*

Trinity Crossing , Ottawa, ON 50% 95,724 371,448 Winners, HomeSense, ValueVillage, Loblaws*

United Furniture Warehouse Plaza, Windsor, ON 100% 49,615 49,615 United Furniture Warehouse

Upper James Plaza, Hamilton, ON 100% 128,652 128,652 Canadian Tire, Miracle FoodMart

Viewmount Centre, Nepean, ON 50% 65,458 130,916 Loeb, Best Buy, HomeSense




OwnershipInterest

(%)

RioCan’sInterest



Walker Place , Burlington, ON 50% 34,929 69,858 Price Chopper

Walker Towne Centre, Windsor, ON 100% 39,476 39,476

West Side Place , Port Colborne, ON 100% 93,383 93,383 No Frills, Liquidation World,Business Depot

Westgate Shopping Centre, Ottawa, ON 100% 165,842 165,842 Shoppers Drug Mart

Westney & Taunton , Toronto, ON 20% 10,175 50,876 Sobeys

Wharncliffe Shopping Centre, London, ON 100% 60,711 60,711 No Frills

Whitby – 401 & Thickson , Whitby, ON 25% 24,645 98,580 Rona

Woodview Place, Burlington, ON 100% 147,849 147,849 Miracle Ultramart, Chapters,JYSK

Prince Edward Island

Charlottetown Mall , Charlottetown, PEI 50% 166,717 333,434 Zellers, Loblaws AtlanticSuperstore, Winners, SportChek

Quebec

2335 Boul Lapiniere, Brossard, QC 100% 2,259 2,259

541 Boul Saint Joseph, Gatineau, QC 100% 2,584 2,584

Carrefour Carnaval – St. Leonard, St. Leonard, QC 100% 171,312 171,312 Super C, Value Village

Carrefour Neufchatel, Neufchatel, QC 100% 127,397 127,397 Super C, L’Aubainerie

Centre Carnaval – Drummondville, Drummondville, QC 100% 144,501 144,501 Super C, Staples

Centre Carnaval – LaSalle, LaSalle, QC 100% 206,869 206,869 Super C, L’Aubainerie

Centre Carnaval – Montreal, Montreal, QC 100% 67,815 67,815 Super C

Centre Carnaval – Pierrefonds, Pierrefonds, QC 100% 129,589 129,589 Super C

Centre Carnaval – Trois Rivieres, Trois Rivieres, QC 100% 112,882 112,882 Super C, Rossy

Centre Commercial Forest, Montreal, QC 100% 120,986 120,986 Staples, Rossy

Centre de la Concorde, Laval, QC 100% 105,056 105,056 Super C

Centre Jacques Cartier , Longueuil, QC 50% 108,822 217,643 IGA, Guzzo Cinema, ValueVillage

Centre La Prairie, La Prairie , QC 50% 34,541 69,081 IGA

Centre Regional Chateauguay , Chateauguay, QC 50% 105,643 211,286 Super C, Hart

Centre Rene A. Robert , Ste. Therese, QC 50% 25,919 51,837 IGA

Centre RioCan Kirkland, Kirkland, QC 100% 320,030 320,030 Famous Players, Staples,Winners

Centre Sicard, Ste. Therese, QC 100% 106,948 106,948 IGA

Centre St. Jean , St. Jean Sur Richelieu, QC 100% 103,396 103,396 IGA

Centre St. Julie , Ste. Julie, QC 50% 30,097 60,193 IGA

Centre St. Martin , Laval, QC 100% 241,457 241,457 Provigo, Shoppers Drug Mart

Concorde Centre , Laval, QC 50% 31,649 63,298 IGA

Desserte Ouest , Laval, QC 50% 58,074 116,147 Zellers

Galeries Laurentides, St. Jerome, QC 100% 448,887 448,887 Zellers, Maxi

Galeries Mille Iles, Rosemere, QC 100% 249,717 249,717 Maxi, Leons

Gatineau Walmart Centre, Gatineau, QC 100% 287,765 287,765 Walmart, Winners, Golf Town

Granby, Granby, QC 100% 49,304 49,304

Lachute Walmart Centre, Lachute, QC 100% 75,681 110,681 Walmart, Loblaws*

Les Galeries Lachine , Lachine, QC 100% 167,447 167,447 Maxi, Rossy

Levis, Levis, QC 100% 19,081 19,081




OwnershipInterest

(%)

RioCan’sInterest



Mega Centre Beauport, Quebec City, QC 100% 180,937 341,937 Cineplex, Staples, FutureShop, Reno Depot*

Mega Centre Lebourgneuf, Quebec City, QC 100% 456,263 866,263 Costco*, Home Depot*,Canadian Tire*, Maxi*,Winners, Staples

Mega Centre Notre Dame, Sainte Dorothee, QC 100% 425,173 494,726 Super C*, Winners

Place Carnaval Laval, Lasalle, QC 100% 104,218 104,218 Super C*

Place Kennedy, Levis, QC 100% 105,640 155,640 Canadian Tire*, Staples

Place Newman , LaSalle, QC 100% 190,923 190,923 Maxi, Winners, Rossy

Quartier 10/30 , Brossard, QC 50% 564,067 1,408,134 Rona*, Walmart*, CanadianTire, Cineplex, Winners,HomeSense, Staples, FutureShop

RioCan Gatineau, Gatineau, QC 50% 143,254 286,507 Walmart, Canadian Tire,Metro

RioCan Greenfield , Greenfield Park, QC 50% 185,852 371,704 Maxi, Winners, Staples, GuzzoCinemas

RioCan Sainte Foy , Sainte Foy, QC 100% 527,648 706,229 Walmart, Staples, MetroRichelieu*, Home Depot*,Cineplex, Sears

Silver City Hull, Hull, QC 100% 84,590 469,590 Cineplex, Rona*, Walmart*,Maxi*, Business Depot*,Winners*

St. Hyacinthe Walmart Centre, Ste. Hyacinthe, QC 100% 166,813 254,313 Walmart, Staples, CanadianTire*

Vaudreuil Shopping Centre, Vaudreuil-Dorion, QC 100% 118,330 258,330 Canadian Tire*, Staples,Super C*

Saskatchewan

Parkland Mall, Yorkton, SA 100% 267,667 267,667 Zellers, IGA

Note: * Non-owned anchor.



USAProperty and Location

OwnershipInterest

(%)

RioCan’sInterest



Connecticut

Montville Commons, Montville, CT 80% 94,333 236,722 Stop & Shop, Home Depot*

Stop N Shop Plaza, Bridgeport, CT 80% 43,609 54,511 Stop & Shop

Massachusetts

Franklin Village Shopping Centre, Franklin, MA 80% 244,974 306,217 Stop & Shop, Marshalls

Shaw’s Plaza, Raynham, MA 80% 141,288 176,610 Shaws, Marshalls

Maryland

Marlboro Crossroads, Upper Marlboro, MD 80% 54,380 67,975 Giant Foods

New Jersey

Sunrise Plaza, Forked River, NJ 80% 203,168 253,960 Home Depot, Kohl’s

Pennsylvania

Blue Mountain Commons, Harrisburg, PA 80% 98,683 123,354 Giant Foods

Columbus Crossing Shopping Centre, Philadelphia, PA 80% 113,734 142,167 Super Fresh, Old Navy

Creekview, Warrington, PA 80% 108,869 425,002 Giant Foods, L.A. Fitness,Lowe’s*, Target*

Cross Keys Place, Turnersville, PA 80% 118,538 253,173 Sports Authority, Bed Bath &Beyond, Home Depot*

Exeter Commons, Exeter, PA 80% 287,257 491,941 Lowe’s, Giant Foods Target*

Gettysburg Marketplace, Gettysburg, PA 80% 66,227 82,784 Giant Foods

Loyal Plaza, Williamsport, PA 80% 235,060 293,825 Kmart, Giant Foods, Staples

Monroe Marketplace, Selinsgrove, PA 80% 272,814 467,860 Giant Foods, Kohl’s, Dick’sSporting Goods, Best Buy,Target*

Northland Centre, State College, PA 80% 86,608 108,260 Giant Foods, CVS Pharmacy

Pitney Road, Lancaster, PA 80% 36,732 183,848 Best Buy, Lowe’s*

Sunset Crossing, Dickson City, PA 80% 59,314 74,142 Giant Foods

Town Square Plaza, Reading, PA 80% 102,109 254,636 Giant Foods, Petsmart, ACMoore, Target*

York Marketplace, York, PA 80% 244,568 305,710 Giant Foods, Lowe’s

Texas

Bear Creek Shopping Centre, Houston, TX 80% 70,330 87,912 HEB

Coppell Town Centre, Coppell, TX 80% 73,086 91,357 Tom Thumb

Cypress Mill Plaza, Houston, TX 80% 93,125 420,573 Hobby Lobby, Walmart*,Home Depot*

Great Southwest Crossing, Grand Prairie, TX 80% 73,816 283,173 PetsMart, Sam’s Club*,Kroger*

Las Palmas Marketplace, El Paso, TX 32% 202,236 637,969 Lowe’s, Kohl’s, Bed Bath &Beyond, Ross Stores

New Forest Crossing, Houston, TX 80% 118,452 486,771 Big Lots, Ross Stores,Walmart*, Lowe’s*

Riverpark Shopping Centre I, II, Sugar Land, TX 80% 249,016 375,599 HEB, Walgreen’s, L.A.Fitness, Dollar Tree

Southpark Meadows, Austin, TX 80% 213,472 416,840 Walmart, Target*

Suntree Square, Southlake, TX 80% 77,112 96,390 Tom Thumb

Virginia

New River Valley, Christianburg, VA 80% 131,730 164,663 Best Buy, Ross Stores, BedBath & Beyond, Staples

Towne Crossing Shopping Centre, Richmond, VA 80% 83,134 103,917 Bed Bath & Beyond, Michaels

Note: * Non-owned anchor


Year End 2010Management’s Discussion and Analysis

Audited Consolidated Financial StatementsTable of Contents


12 Forward-Looking Statement Advisory

13 Operational and Financial Highlights

15 2010 Highlights

17 Outlook

20 About RioCan

Canada

United States

24 Top Fifty Tenants

25 Strategy and Objectives

26 Qualification Plan

27 Transition to International Financial Reporting

Standards

27 REIT Exception Monitoring

27 Management’s Objectives

27 Corporate Responsibility

28 Use of Non-GAAP Measures

28 Funds from Operations

29 Adjusted Funds from Operations

31 Asset Profile

31 Income Properties

31 Acquisitions

39 Development Activities in 2010

41 Urban Intensification

42 Leasing Activities

Tenant Vacancies

48 Capital Expenditures on Income Properties

48 Activities with Partners Included in Income Properties

51 Equity Investments in Income Properties

51 Properties Under Development

57 Properties Held for Resale

57 Mortgages and Loans Receivable

59 Related Party Transactions

59 Capital Strategy and Resources

60 Capital Structure

61 Ratios

62 Debt

62 Revolving Lines of Credit

63 Debentures Payable

64 Mortgage Payable

65 Hedging Activities

66 Aggregate Maturities

67 Trust Units

68 Preferred Equity Securities

69 Future Income Taxes

69 Guarantees

69 Liquidity

70 Distributions to Unitholders

72 Results of Operations

72 Net Operating Income

74 Other Revenue

74 Fees and Other Income

75 Interest Income

75 Gains on Properties Held for Resale

76 Other Expenses

76 Interest

General Administrative

77 Amortization

78 Selected Quarterly Consolidated Information

78 Review of Fourth Quarter Results

79 Net Operating Income

82 Other Revenue

82 Fees and Other Income

83 Interest Income

83 Gains on Properties Held for Resale

83 Other Expenses

83 Interest

83 General Administrative

84 Amortization

84 Significant Accounting Policies and Estimates

87 Future Changes in Significant Accounting Policies

87 International Financial Reporting Standards

94 Controls and Procedures

95 Risks and Uncertainties

95 Liquidity and General Market Conditions

95 Tenants Concentrations, Occupancy and Defaults

96 Access to Debt and Equity Capital

96 Interest Rates

96 Joint Venture/Partnerships

96 Relative Illiquidity of Real Property

96 Unexpected Costs or Liabilities Related to Acquisitions

96 Construction

96 Environmental Matters

97 Legal Risks

97 Human Resources and Key Personnel

97 Unitholder Liability

97 Income Taxes

97 United States Investment and Currency Risks

98 Transition to IFRS

98 Credit Ratings

Management’s Discussion and Analysis

The terms “RioCan” and the “Trust” in the following Management’s Discussion and Analysis (“MD&A”) refer to RioCan Real Estate

Investment Trust and its consolidated financial position and results of operations for the two years ended December 31, 2010 and 2009.

This MD&A is current as of February 25, 2011 unless otherwise stated, and should be read in conjunction with RioCan’s Audited

consolidated financial statements for the two years ended December 31, 2010 and 2009, copies of which have been filed electronically

with securities regulators in Canada through the System for Electronic Document Analysis and Retrieval (“SEDAR”) and may be accessed

through the SEDAR web site at www.sedar.com. Historical results and percentage relationships contained in the interim and annual

consolidated financial statements and MD&A related thereto, including trends which might appear, should not be taken as indicative of

future operations.

The role of RioCan’s Audit Committee and Board of Trustees (the “Board”) in respect of financial information included in this MD&A and

consolidated financial statements is set out in “Management’s Responsibility for Financial Reporting”. Additional information relating to

RioCan, including the Annual Information Form, is filed at www.sedar.com.

Unless otherwise indicated, all amounts are expressed in Canadian dollars.

Forward-Looking Statement Advisory

Certain information included in this MD&A contains forward-looking statements within the meaning of applicable securities laws. These

statements include, but are not limited to, statements made in “About RioCan”, “Asset Profile”, “Capital Structure”, “Outlook”, and other

statements concerning RioCan’s objectives, its strategies to achieve those objectives, as well as statements with respect to

management’s beliefs, 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 of forward-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-looking statements

reflect management’s current beliefs and are based on information currently available to management. All forward-looking statements in

this MD&A are qualified by these cautionary statements.

These forward-looking statements are not guarantees of future events or performance and, by their nature, are based on RioCan’s

current estimates and assumptions, which are subject to risks and uncertainties, including those described under “Risks and

Uncertainties” in this MD&A, which could cause actual events or results to differ materially from the forward-looking statements

contained in this MD&A. Those risks and uncertainties include, but are not limited to, those related to: liquidity in the global marketplace

associated with current economic conditions, tenant concentrations, occupancy levels, access to debt and equity capital, interest rates,

joint ventures/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, the investment in the United States of

America (“US”), US currency and RioCan’s qualification as a real estate investment trust for tax purposes. Material factors or

assumptions that 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 more robust retail environment compared to recent years; relatively stable interest costs; a continuing trend toward

land use intensification in high growth markets; access to equity and debt capital markets to fund, at acceptable costs, the future growth

program to enable the Trust to refinance debts as they mature; the availability of purchase opportunities for growth in Canada and the US;

and the impact of accounting principles to be adopted by the Trust effective January 1, 2011 under International Financial Reporting

Standards (“IFRS”) which includes application to the Trust’s 2010 comparative financial results. Although the forward-looking information

contained in this MD&A is based upon what management believes are reasonable assumptions, there can be no assurance that actual

results will be consistent with these forward-looking statements. Certain statements included in this MD&A may be considered “financial

outlook” for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this MD&A.

The Income Tax Act (Canada) (the “Act”) contains legislation affecting the tax treatment of publicly traded trusts (the “SIFT Legislation”).

The SIFT Legislation provides for a transition period until 2011 for publicly traded trusts, such as RioCan, which existed prior to

November 1, 2006. In addition, the SIFT Legislation will not impose tax on a trust which qualifies under such legislation as a real estate

investment trust (the “REIT Exception”). RioCan currently qualifies for the REIT Exception and intends to continue to qualify for future

years. Should this not occur, certain statements contained in this MD&A may need to be modified.

Except as required by applicable law, RioCan undertakes no obligation to publicly update or revise any forward-looking statement,

whether as a result of new information, future events or otherwise.



OPERATIONAL AND FINANCIAL HIGHLIGHTS

Operational Information

(thousands of square feet, except other data)

As at December 31, 2010 2009**

2008**US Canada Total US Canada Total

Number of properties:

Income properties 31 256 287 2 241 243 223

Under development (i) – 10 10 – 12 12 17

Portfolio occupancy 98.2% 97.3% 97.4% 95.8% 97.4% 97.4% 96.9%

Net leasable area (“NLA”) at 100%* 7,468 56,251 63,719 197 54,104 54,301

Net leasable area (“NLA”) at RioCan’s interest:

Total portfolio 3,997 36,849 40,846 158 34,945 35,103 32,807

Average in place rent $ 14.06 $ 14.82 $ 14.75 $ 16.56 $ 14.39 $14.40 $ 14.61

Completed greenfield development and land

use intensification activities during the year

ended – 261 261 – 929 929 462

Acquired during the year ended 3,840 1,819 5,659 158 1,622 1,780 857

Greenfield development pipeline upon completion:

Total project NLA – 8,090 8,090 – 8,480 8,480 9,622

RioCan’s interest of project NLA – 3,046 3,046 – 2,956 2,956 3,421

Percentage of portfolio rental revenue derived

from:

Six Canadian high growth markets

(annualized) (ii) n/a 65.2% 65.2% n/a 66.3% 66.3% 66.0%

US market (annualized) 8.2% n/a 8.2% n/a n/a n/a n/a

National and anchor tenants (annualized) 85.9% 84.5% 83.4%

Largest tenant (annualized) 21.3% 4.9% 4.6% 33.3% 5.0% 5.0% 5.4%

Number of employees (excluding seasonal) 598 592 646

(i) The number of properties under development excludes those properties with phased development where tenancies have already commenced

operations. These properties are included in the number of income properties.

(ii) See discussion in “About RioCan”.

* Includes retailer owned anchors

** US portfolio information is only applicable beginning in the fourth quarter of 2009.



Financial Information

As at and for the year ended December 31, 2010 2009 2008

Total revenue $ 887 $ 758 $ 764

Net earnings $ 303 $ 114 $ 145

Net earnings per Unit – basic $ 1.23 $ 0.49 $ 0.67

Net earnings per Unit – diluted $ 1.22 $ 0.49 $ 0.67

EBITDA (i) $ 576 $ 470 $ 493

FFO (ii) $ 357 $ 276 $ 324

FFO per Unit $ 1.45 $ 1.20 $ 1.48

Distributions to unitholders $ 340 $ 318 $ 297

Distributions to unitholders per Unit $ 1.38 $ 1.38 $ 1.36

Distributions to unitholders netof distribution reinvestment plan $ 281 $ 261 $ 228

Distributions to unitholders netof distribution reinvestment plan per Unit $ 1.14 $ 1.13 $ 1.04

Unit issue proceeds underdistribution reinvestment plan $ 59 $ 57 $ 69

Distribution reinvestment plan (“DRIP”)participation rate 17.2% 17.9% 23.4%

(millions of dollars, except other data) 2010 2009 2008

Total assets $ 6,859 $ 5,862 $ 5,338

Debt (mortgages and debentures payable) $ 4,410 $ 3,663 $ 3,260

Debt to Aggregate Assets (iii) 57.1% 55.6% 54.9%

Debt to total capitalization (iv) 43.6% 43.2% 51.8%

Interest coverage ratio (v) 2.5 2.2 2.6

Debt service coverage ratio (vi) 1.9 1.7 2.0

Fixed charge coverage ratio (vii) 1.0 0.9 1.0

Net debt to EBITDA (viii) 6.8 7.1 6.4

Unitholders’ equity $ 2,151 $ 1,857 $ 1,747

Units outstanding 259,818 242,320 222,042

Closing market price per unit $ 22.00 $ 19.85 $ 13.66

Market capitalization (ix) $ 5,716 $ 4,810 $ 3,033

Total capitalization (x) $ 10,126 $ 8,473 $ 6,293

(i) A non-GAAP measurement. EBITDA is defined as GAAP net earnings for a rolling twelve month period, before net interest expense, income

taxes and income property amortization (including provisions for impairment).

(ii) A non generally accepted accounting principle (“GAAP”) measurement for which a reconciliation to net earnings can be found in RioCan’s

discussion under “FFO”.

(iii) A non-GAAP measurement defined in RioCan’s Declaration (see “Capital Structure”).

(iv) A non-GAAP measurement. Calculated by the Trust as debt divided by total capitalization. RioCan’s method of calculating debt to total

capitalization may differ from other issuers’ methods and accordingly may not be comparable to such amounts reported by other issuers.

(v) A non-GAAP measurement. Interest coverage is defined as GAAP net earnings for a rolling twelve month period, before net interest expense,

income taxes and income property amortization (including provisions for impairment) divided by total interest expense (including interest that

has been capitalized).

(vi) A non-GAAP measurement. Debt service coverage is defined as GAAP net earnings for a rolling twelve month period, before net interest

expense, income taxes and income property amortization (including provisions for impairment) divided by total interest expense (including

interest that has been capitalized) and scheduled mortgage principal amortization.

(vii) A non-GAAP measurement. Fixed charge coverage ratio is defined as GAAP net earnings for a rolling twelve month period, before net interest

expense, income taxes and income property amortization (including provisions for impairment) divided by total interest expense (including

interest that has been capitalized) and distributions to unitholders.

(viii) A non-GAAP measurement. Net debt to EBITDA is defined as the average debt outstanding (net of cash) for the period divided by GAAP net

earnings before net interest expense, income taxes and income property amortization (including provisions for impairment).

(ix) A non-GAAP measurement. Calculated by the Trust as closing market price of the Units trading on the TSX on December 31, 2010 multiplied

by the number of Units outstanding. RioCan’s method of calculating market capitalization may differ from other issuers’ methods and

accordingly may not be comparable to such amounts reported by other issuers.

(x) A non-GAAP measurement. Calculated by the Trust as debt plus market capitalization. RioCan’s method of calculating total capitalization may

differ from other issuers’ methods and accordingly may not be comparable to such amounts reported by other issuers.



2010 HIGHLIGHTS

Throughout the year RioCan remained focused on its core portfolio and executed its growth strategy through acquisitions, which

included a significant expansion in selected regions of the United States and continued growth of the Trust’s Canadian asset base

which was propelled by RioCan’s strong access to capital.

During 2010, RioCan completed the acquisition of a total of 48 properties (19 in Canada and 29 in the US) at an aggregate purchase

price of $986 million, at RioCan’s interest, and in the fourth quarter of 2010, completed a total of 19 acquisitions (6 in Canada and

13 in the US) at an aggregate purchase price of $320 million, at RioCan’s interest. Subsequent to year end, RioCan has completed

1 acquisition in Canada at a purchase price of approximately $5 million. Conditions have also been waived on an additional

$105 million of property acquisitions, representing a further 9 properties (8 in Canada and 1 in the US).

In furtherance of its growth strategy and enhancement of its capital resources and structure, during the fourth quarter, RioCan

issued 6.4 million units resulting in gross proceeds of $139.7 million and announced the redemption of the $200 million principal

amount of Series F debentures that was due to mature in March 2011. During 2010, RioCan accessed both the equity and the debt

markets, among others, with the issuance of 13.6 million units (including the fourth quarter issuance) for gross proceeds of $289

million and the issuance of RioCan’s first US dollar denominated debenture issuance for US$100 million.

Subsequent to year end, RioCan issued its first series of Preferred Units, with the offering of 5 million Cumulative Rate Reset

Preferred Units, Series A for gross proceeds of $125 million. As well, RioCan raised an additional $225 million in proceeds through

its Series O senior 5 year unsecured debenture (bearing interest at 4.5%) offering in January 2011 the proceeds of which were

partially used to redeem the $180 million principal amount of Series L senior unsecured debentures (bearing interest at 8.3%) due

in 2014, which will result in substantial interest savings going forward.

RioCan’s continued access to capital allows the Trust to again be an active acquirer of properties both in Canada and the US as

opportunities arise. In addition, RioCan’s demonstrated financial flexibility and substantial liquidity allow for the continuance of the

greenfield development program where a substantial increase in activity is expected as a result of RioCan’s announcement in

January of its intent to form an exclusive joint venture arrangement with Tanger Factory Outlet Centers, Inc. (“Tanger”) (NYSE:

SKT) for the development of outlet shopping centres across Canada.

Operationally, RioCan continues to experience good demand for space by tenants. Occupancy for the entire portfolio was 97.4% at

December 31, 2010, and rental growth on renewing leases continues to be positive and is expected to continue to grow.

RioCan’s tax reorganization activities were completed in December 2010 to allow for the continued qualification as a real estate

investment trust pursuant to the Income Tax Act (Canada) as of January 1, 2011.

Net Earnings and Funds from Operations (“FFO”)

RioCan reported net earnings for the year ended December 31, 2010 of $303 million ($1.23 per Unit) compared to $114 million

($0.49 per Unit) for the same period in 2009, an increase of 166%. On a per unit basis, net earnings increased by 151%. FFO for the

year ended December 31, 2010 was $ 357 million ($1.45 per Unit) compared to $ 276 million ($1.20 per Unit) for the same period in

2009, an increase of 29%. The $81 million increase in FFO is primarily due to the following factors:

• increased net operating income from rental properties of $92 million which is due to acquisitions, same store growth of 2.4%,

the completion of greenfield developments, intensification of existing properties, and increased lease cancellation fees of

$13 million;

• increased transaction gains of $22 million;

• increased fees and other income of $1 million; offset by

• increased interest expense of $22 million; and

• higher general and administrative expense, including IFRS and SIFT implementation costs, of $5 million.

Net Operating Income (“NOI”)

RioCan continues to generate strong operating results as demonstrated by the Trust’s operating metrics. Same property NOI

increased by 3.1% during 2010 as compared to a 1.2% decrease in 2009. Same store NOI increased by 2.4% during 2010 as

compared to a 0.3% decrease in 2009.

For a more detailed discussion on NOI refer to the “Net Operating Income” section of this MD&A.

Leasing Activities

In the fourth quarter of 2010, 285,000 square feet became vacant, excluding lease buyouts (223,000 square feet at RioCan’s

interest) as compared to 70,000 square feet (59,000 square feet at RioCan’s interest) of vacancies during the same period of 2009.

These vacancies included 153,000 square feet of unanticipated vacancies (118,000 square feet at RioCan’s interest) which is up

from 31,000 square feet (27,000 square feet at RioCan’s interest) of unanticipated vacancies incurred in the fourth quarter of 2009.

In 2010, RioCan experienced vacancies of approximately 1,028,000 square feet, excluding lease buyouts, of which RioCan’s interest

was 843,000 square feet. These vacancies included 545,000 square feet of unanticipated vacancies (440,000 square feet at RioCan’s



interest) which is down from 945,000 square feet (692,000 square feet at RioCan’s interest) of unanticipated vacancies in 2009. To

date, approximately 505,000 square feet, or 49%, of vacated space has been re-leased to new tenants, of which RioCan’s interest

was 399,000 square feet, at higher average rental rates. As a result, 524,000 square feet remains unleased, of which RioCan’s

interest is 444,000 square feet, which represents approximately 1% of RioCan’s net leasable area (“NLA”) at December 31, 2010.

During 2010 tenant vacancies negatively impacted net operating income by approximately $9.1 million.

In 2010, tenant vacancies for which lease cancellation fees were received by RioCan totalled 484,000 square feet (459,000 square

feet at RioCan’s interest) at an average net rent of $12.59 per square foot ($12.33 per square foot at RioCan’s interest). To date

320,000 square feet (295,000 square feet at RioCan’s interest) have been re-leased at an average net rent of $16.01 per square foot

($15.58 per square foot at RioCan’s interest). With respect to the balance of the vacated space, RioCan is currently in discussions

with other tenants for the re-leasing of these sites.

RioCan’s committed occupancy rate increased to 97.4% at December 31, 2010 as compared to 97.1% at September 30, 2010 as a

result of leasing activities and acquisitions with high occupancy rates. Included in this occupancy rate is 407,000 square feet of NLA

that has been leased but is not yet paying rent, resulting in an economic occupancy rate of 96.4% which represents the occupied

NLA for which tenants are paying rent. The annualized rental impact once these tenants take occupancy and commence paying

rent is approximately $9.2 million.

RioCan has a diverse and strong portfolio of tenants with no single tenant representing more than 4.6% of rental revenue. National

and anchor tenants represent 86% of rental revenue and approximately 71% of RioCan’s properties by NLA are anchored or

shadow anchored by grocery stores.

During the three months ended December 31, 2010, RioCan retained 93.3% (2009 – 89.8%) of expiring tenants at an average

renewal rental rate increase of 4.5% or $0.57 per square foot (2009 – 9.1% and $1.23, respectively). For the year ended

December 31, 2010, RioCan retained 90.9% (2009 – 92.1%) of expiring tenants at an average renewal rental rate increase of 8.6% or

$1.21 per square foot (2009 – 7.2% and $1.04, respectively).

Greenfield Developments

RioCan currently has 10 properties under development that when completed are expected to add 8.1 million square feet

(3.0 million square feet at RioCan’s ownership) of space.

During 2010, there has been a continued increase in leasing and construction activity in certain greenfield development projects

including: Cimarron Shopping Centre, Okotoks, AB, Lowe’s Centre Orleans, Ottawa, ON, and Grant Crossing, Ottawa, ON. RioCan

expects to commence construction of the St. Clair Avenue and Weston Road project during 2011.

Additionally, RioCan recently announced that it has entered into a letter of intent to form an exclusive joint venture arrangement

with Tanger for the acquisition, development and leasing of sites across Canada that are suitable for development or

redevelopment as outlet shopping centres similar in concept and design to those within the existing Tanger US portfolio. It is the

intention of the joint venture to develop as many as 10 to 15 outlet centres in larger urban markets and tourist areas across

Canada, over a five to seven year period. Any projects developed will be co-owned on a 50/50 basis and will be branded as Tanger

Outlet Centres.

Tanger is a recognized leading developer and manager of outlet shopping centers in the US, each one known as a Tanger Outlet

Center. Tanger has been a publicly held real estate investment trust since May, 1993. Tanger Outlet Centers are characterized by a

tenant mix of leading designer and brand-name manufacturers. Each shopping center provides a unique opportunity for customers

to purchase a variety of brand-name products for the entire family directly from the manufacturer at substantial savings.

Acquisitions

During 2010, RioCan was able to execute its North American growth strategy, acquiring properties in selected strong markets

across the continent.

During the fourth quarter of 2010, RioCan acquired 6 properties in Canada and 13 properties in the US at an aggregate purchase

price of $320 million, at RioCan’s interest, and a weighted average capitalization rate of 7.6%. During the year ended December 31,

2010, RioCan acquired a total of 48 properties (19 in Canada and 29 in the US) at an aggregate purchase price of $986 million, at

RioCan’s interest, and a weighted average capitalization rate of 7.6%. These acquisitions are expected to produce favourable

results for the Trust immediately.

RioCan has completed 1 acquisition subsequent to year end (in Ontario) at a purchase price of approximately $5 million and a

capitalization rate of 7.3%.

RioCan also has other various acquisitions currently under contract. The aggregate purchase will be approximately $105 million,

and if acquired would add approximately 678,000 square feet to the Trust’s portfolio. The centres are located in Ontario, Quebec

and Massachusetts. The Trust has waived all material conditions with respect to these properties and expects to close these

transactions during the first quarter of 2011.

Capital Management

During 2010, RioCan accessed both the debt and equity markets on numerous occasions. In January 2011, RioCan, issued

preferred units, a first for a Canadian real estate investment trust, an offering which is indicative of the Trust moving closer to

achieving its objective of becoming “best in class” from a capital markets perspective.



At December 31, 2010, RioCan’s cash position was $92 million, with available undrawn operating facilities of $385 million.

In the fourth quarter of 2010, RioCan arranged secured financing totalling $366 million ($1.2 billion for the year ended

December 31, 2010) at a weighted average interest rate of 4.60% (4.75% for the year ended December 31, 2010) of which

$288 million represented RioCan’s share and $78 million represented RioCan’s partners’ share ($1 billion and $221 million,

respectively, for the year ended December 31, 2010). Net of cash, RioCan’s debt to Aggregate Assets at December 31, 2010 was

56.5%. As at December 31, 2010, RioCan’s indebtedness was 57.1% of Aggregate Assets.

As at December 31, 2010, the Trust’s debt strategy has resulted in approximately 16% of the properties being unencumbered by

debt on a NLA basis, providing RioCan with access to a pool of assets for obtaining additional secured debt.

As discussed under “Debt,” in this MD&A, during 2010 the Trust completed the following new borrowings (reflected at RioCan’s

ownership):

Three months endedDecember 31, 2010

Year endedDecember 31, 2010

(millions of dollars, except other data)

Weightedaverage

contractualinterest rate

Weightedaverage


Averageterm to

maturityin years

New borrowings:

Fixed rate term mortgages – Canada $ 193 4.38% $ 638 4.83% 5.74

Fixed rate term mortgages – US 92 5.08% 235 4.99% 6.49

Floating rate term mortgages – – 12 2.91% 4.00

Debentures – – 103 4.10% 4.70

Construction 3 4.15% 19 3.52% 0.70

$ 288 4.60% $ 1,007 4.75% 5.69

These financing transactions generated cash proceeds, net of maturing debt, of approximately $596 million for the year ended

December 31, 2010 ($270 million for the three months ended December 31, 2010).

Subsequent to quarter end, RioCan has participated in a CMBS funding pool and received mortgage financing on 12 previously

unencumbered properties, generating gross proceeds of $140 million, at RioCan’s share, at a rate of 5.48%. Also, RioCan received

funding from mortgage financing on two additional US properties generating gross proceeds of $15 million, at RioCan’s share.

RioCan is currently negotiating various financings that are expected to generate gross proceeds of approximately $147 million, of

which RioCan’s share would be approximately $177 million, broken down as follows: $162 million ($160 million at RioCan’s

interest) to be secured by 13 Canadian properties and $15 million ($12 million at RioCan’s interest) to be secured by one US

property. Only two of these properties are subject to existing debt. RioCan can provide no assurance that it will be successful in

closing these financings.

OUTLOOK

RioCan’s strong operating performance and access to capital coupled with its measured US initiative has facilitated its continued

growth and repositioning as a North American REIT with a retail focus. RioCan’s agility permits it to capitalize on opportunities and

finance its operations through a variety of financing options. For 2011 RioCan will continue to focus on US property acquisitions in

selected markets that meet the Trust’s investment criteria, and in Canada the Trust will continue to pursue development of new

properties in addition to property acquisitions. During 2010, RioCan completed a large number of acquisitions that have been

absorbed into the portfolio and are contributing to RioCan’s results. In addition to the FFO provided from acquisitions, RioCan’s

growth in 2011 is expected to continue to come from organic growth from within the portfolio, asset intensification and

development in Canada.

• The Trust expects to realize organic growth from within the portfolio by way of scheduled rental increases in existing leases,

additional rental income that can be achieved from positive rental spreads on lease renewals and expected positive absorption in

occupancy as the economy continues to recover.

• The Trust expects continued acquisition activity in 2011, both in Canada and the US.

• The significant amount of acquisitions that have been completed in 2010 will continue to contribute to growth in 2011, as a

significant number of them were completed in the fourth quarter of 2010.

• Completed developments during 2010 are expected to contribute to the growth in the year ahead. Additionally, RioCan’s recent

announcement of its letter of intent to form an exclusive joint venture partnership with Tanger for the development of outlet

shopping centres in Canada is expected to add to continued growth beyond 2011.

• Retail fundamentals in Canada are expected to improve in 2011 and 2012 as the Canadian retail market becomes more

competitive with the presence of new retailers from the US. The Canadian market benefits from fewer development spaces,



which should create a market in which RioCan will have more pricing power as a greater number of tenants compete for prime

locations.

• The trend of US retailers entering the Canadian market is likely to drive rent appreciation as they compete for space in desirable

locations. For instance, the acquisition of up to 220 Zellers stores by US retailer, Target Corporation (“Target”) (NYSE: TGT), is

expected to lead to enhancement of certain of RioCan’s properties. The replacement of Zellers stores with Target will serve as a

means to revitalize the respective centres in which such stores are located and ultimately increase occupancy, rents and value

through a lower cap rate. At December 31, 2010 RioCan has 33 properties in which Zellers is a tenant and RioCan management

is in discussions with Target to determine which of these locations will be converted to Target stores.

• Lastly, interest expense savings are anticipated as economic and capital market conditions have improved such that the need to

carry large amounts of cash on the balance sheet has decreased; as well, the interest rate on maturing debt remains above

current market rates providing additional interest savings on mortgage and debenture refinancings.

RioCan will actively seek acquisition opportunities in 2011 and, by utilizing its joint venture platforms, the Trust will have the

opportunity to acquire and develop high quality retail assets both in Canada and the US. In addition, RioCan is exploring

opportunities to grow with other partners and through direct investment, evaluating new regions within the United States and

expanding its Canadian presence to include outlet malls through its recent joint venture arrangement with Tanger.

While new avenues of growth have become available to RioCan, the Trust is committed to remaining focused on its portfolio in

order to preserve high occupancy levels through the active management and leasing of the portfolio to ensure it can maintain the

stable stream of cash flows from long term assets which increase in value. RioCan will continue to remain driven to enhance

returns to its unitholders by seeking new investment opportunities while actively managing RioCan’s portfolio of strong centres in

many of Canada’s strongest markets and maintaining stable occupancies aided by a diverse pool of large national tenants.

RioCan’s prudent management of its balance sheet throughout 2009 and 2010 has provided it with the ability to take advantage of

the growth that accompanies a recovering economic environment through same property rental income growth, acquisitions,

greenfield development and asset intensification. RioCan’s prudent fiscal management and strong reputation among capital

market participants have allowed RioCan to build a strong capital base, which recently included the issuance of preferred units.

Leasing Activities and Shopping Centre Portfolio

Looking forward to 2011 and beyond, RioCan believes that as the economy continues to improve the performance of its portfolio

will also continue to do so. RioCan expects to continue to see growth in NOI on a same store basis in 2011 as compared to 2010.

Acquisitions

The Trust has positioned itself, due to its strong liquidity position and access to capital, to take advantage of the economic

environment to grow its portfolio through opportunistic acquisitions. With the strengthening of the Canadian and US economies

and increased availability of capital, RioCan expects that there will be greater competition for acquisitions, and accordingly,

management will continue to maintain a disciplined approach to evaluating growth opportunities. Management believes that

RioCan will be able to take advantage of its strength to acquire real estate in both the Canadian and US markets notwithstanding

the increased competition for potential investment opportunities.

RioCan has made a diligent and measured entrance into the US, building a defensive portfolio with the potential to achieve greater

returns not only from organic rent growth but through the leasing of vacant space. The combination of assets in Canada’s fastest

growing markets with a stabilized portfolio of high quality retail assets in the US will give RioCan a greater presence as one of

North America’s leading retail landlords as well as providing an avenue for growth. RioCan’s joint venture arrangements in the US

permit RioCan to team up with strong, experienced and well established management platforms with access to transaction

opportunities and creates a vehicle that allows RioCan to tap into the US market and ensures that the properties within the joint

ventures will be well managed. RioCan has currently chosen two geographic areas of focus, being the Northeastern US and Texas,

which offer a complementary mix of tenants to RioCan’s Canadian portfolio of largely nationally branded tenants. As management

becomes more comfortable with the US markets and expands its relationships, it is likely that RioCan will look to expand into new

geographic areas within the US.

Greenfield Development

RioCan is committed to property development and redevelopment opportunities and is focused on completing the development

pipeline currently underway. These developments will be an important component to RioCan’s organic growth strategy.

Development activities increased during 2010 at certain of the projects, including one in Okotoks, Alberta and two in Ottawa,

Ontario and RioCan expects to be able to launch the development of its St. Clair and Weston Rd., Toronto, property during 2011.

RioCan’s joint venture agreement with Tanger Factory Outlet Centers, Inc., announced in January 2011, is also expected to provide

an excellent opportunity for meaningful growth in the Canadian market.

Capital Management

RioCan’s capital management framework limits the Trust’s maximum indebtedness to less than 60% of Aggregate Assets on a

book value basis. RioCan remains focused on preserving a strong balance sheet and to continue to maintain substantial liquidity.

Based on the fair market value of its portfolio, the leverage ratio is substantially lower than the specified limit. Furthermore,

RioCan believes it has sufficient unencumbered assets and assets with low loan-to-value ratios that can be financed and/or



refinanced to generate capital to meet its capital requirements and grow its asset base. RioCan’s ability to access such financing is

dependent on the availability of debt in the market.

During the fourth quarter RioCan announced the impact to the balance sheet as of January 1, 2010 as a result of the adoption of

the fair value method for recording the value for Investment Properties under IFRS. The Trust’s opening balance sheet will reflect

the revaluation of substantially all of RioCan’s income producing properties and properties under development to fair value as at

January 1, 2010. This will result in a carrying value of approximately $6.9 billion, which is approximately $1.6 billion greater than

the depreciated cost of $5.3 billion reported under existing Canadian GAAP. As a result of the expected $1.6 billion increase to the

carrying value of RioCan’s Investment Properties, the leverage calculation as of January 1, 2010, for the purposes of the borrowing

restriction under its Declaration of Trust, is expected to decrease to approximately 49% based on IFRS carrying values as

compared to RioCan’s stated leverage ratio of 55.6% based on GAAP historical cost as at January 1, 2010. The leverage ratio is

expected to continue to be below 50% at December 31, 2010 based on IFRS carrying values as a result of further capitalization rate

compression experienced during 2010 coupled with the enhancement of the property portfolio by RioCan management.

RioCan has developed other metrics regarding debt and leverage that it will track and disclose on a quarterly basis to help

facilitate financial statement users’ and stakeholders’ understanding of RioCan’s leverage and its ability to service such leverage.

These metrics include net debt to EBITDA ratio, debt coverage ratio, interest coverage ratio and fixed charge coverage ratio (See

the “Capital Strategy and Resources” section of this MD&A).

While having relatively low debt leverage exposure is important, the quality of the rental revenue available to service the Trust’s

debt and pay distributions to unitholders is equally important. The Trust strives to reduce its exposure to rental revenue risk in the

shopping centre portfolio through geographical diversification, staggered lease maturities, diversification of revenue sources

resulting from a large tenant base, avoiding dependence on any single tenant by ensuring no individual tenant contributes a

significant percentage of its gross revenue and ensuring a considerable portion of its rental revenue is earned from national and

anchor tenants (see “Risk Factors – Tenant Concentrations”). In addition, RioCan staggers its debt maturities to reduce its

exposure to potential volatility in availability of debt and interest rate movements. RioCan is able to access multiple sources of

capital including, but not limited to, secured and unsecured debt, preferred units and equity securities to provide the Trust with

greater flexibility in raising capital and to manage its overall cost of capital.

Preferred Units

During the first quarter of 2011, RioCan successfully completed the issuance of 5 million Cumulative Rate Reset Preferred Trust,

Series A Units at a price of $25 per unit for aggregate gross proceeds of $125 million.

The Series A Units will pay a distribution yield of 5.25% per annum, payable quarterly, as and when declared by the Board of

Trustees of RioCan, for the initial five-year period ending March 31, 2016. The distribution rate will be reset on March 31, 2016 and

every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield and 2.62%. The Series

A Units are redeemable by RioCan, at its option, on March 31, 2016 and on March 31 of every fifth year thereafter and can also be

reclassified by the holder as floating rate Series B Units on the same five year increments.

Gains on Property Held For Resale and Disposition-Dependent Performance Fees

RioCan anticipates decreased transaction-based gains and fees in the future as it looks to focus on growing its core portfolio

through acquisitions and developments. Gains in the future will be more focused on intensification opportunities on its existing

portfolio.

SIFT Legislation

During 2010, management of the Trust focused on the SIFT Legislation with the goal of enabling RioCan to meet the REIT Exception

through the implementation of a Qualification Plan prior to December 31, 2010. On December 6, 2010 RioCan announced that it had

completed the necessary tax restructuring to qualify commencing for the 2011 taxation year as a REIT under the Canadian income

tax legislation affecting the tax treatment of publicly traded investment trusts. A trust that qualifies as a REIT for a taxation year is

exempt from taxation as a specified investment flow through trust (or “SIFT”). Accordingly, RioCan will continue to be able to flow

income through to unitholders on a tax effective basis. For further discussion on this matter, please see “Qualification Plan” under

the “About RioCan” section of this MD&A.

Management’s Objectives

RioCan’s management objectives were established with a view to maintaining maximum flexibility for its business and to be able to

act upon acquisition opportunities as they become available. The Trust will continue to maintain and enhance the quality and

stability of its portfolio in order to maximize unitholder value. RioCan will continue to monitor both the economy and real estate

markets with a view to ensuring adequate access to capital, either by way of equity or debt, to meet its business requirements and

maximize opportunities that may become available to it. Overall, the Trust believes that its objectives for the coming year will have

to reflect the need to keep pace with changes in the retail environment and ongoing challenges presented by tepid economic

growth in the US and continued higher than normal unemployment. RioCan believes that it is well positioned to address the

challenges in the marketplace in 2011 and onward, due to the depth of its management team and its size, as well as its stable

portfolio, solid tenant base, capital structure flexibility, and conservative borrowing practices. Refer to “Management’s Objectives“

section of this MD&A.



ABOUT RIOCAN

RioCan is an unincorporated “closed-end” trust governed by the laws of the Province of Ontario and constituted pursuant to a

Declaration of Trust dated November 30, 1993, as most recently amended and restated on December 6, 2010 (the “Declaration”).

The Trust’s Units (the “Units”) are listed on the Toronto Stock Exchange (the “TSX”) under the symbol REI.UN. The Trust’s

Preferred Units, Series A are listed on the TSX under the symbol REI.PR.A.

RioCan is Canada’s largest real estate investment trust (“REIT”), with a total market capitalization of approximately $10.1 billion as

at December 31, 2010. It owns and manages Canada’s largest portfolio of shopping centres, with ownership interests in a portfolio

of 297 retail properties in Canada and the US combined, including 10 under development, containing an aggregate of over

70.7 million square feet as at December 31, 2010.

Included in RioCan’s portfolio, as of the end of 2010, are 31 grocery anchored and new format retail centres that are located in the

US through three joint venture arrangements. RioCan’s joint venture arrangements are with Cedar Shopping Centers, Inc.

(“Cedar”), Inland Western REIT (“Inland Western”), and Kimco Realty Corporation (“Kimco”) and Dunhill Partners, Inc (“Dunhill”).

In addition to RioCan’s property interests with Cedar, RioCan owns an approximate 14% equity interest in Cedar.

The Trust’s purpose is to deliver to its unitholders stable and reliable cash distributions that increase over the long term. The Trust

accomplishes this goal by following a strategy of focusing on owning, developing and operating retail real estate, mixed use and

office real estate. RioCan has grown its business by using prudent strategies, core competencies, conservative financial leverage,

long-term strategic partnerships and by adapting to trends in commercial real estate.

RioCan’s core investment strategy is to focus on stable, lower risk, predominantly retail properties in either stable or high growth

markets in order to create stable and, over time, growing cash flows from the property portfolio.

The specific retail assets in which RioCan currently invests are:

• New format retail centres

New format retail centres are large aggregations of dominant retailers grouped together at high traffic and easily accessible

locations. These unenclosed campus-style centres are generally anchored by supermarkets and/or junior department stores

and may include entertainment (movie theatres, large-format bookstores and restaurants) and fashion components.

• Neighbourhood convenience unenclosed centres

Neighbourhood convenience unenclosed centres are generally supermarket and/or junior department store anchored shopping

centres, typically comprising between 60,000 to 250,000 square feet of leasable area. Other tenants generally include drug

stores, restaurants, banks and other service providers

• Enclosed shopping centres

An enclosed shopping centre is generally a large retail complex containing stores, restaurants and other facilities with interior

common areas with access to all retail units.

• Urban retail properties

Urban retail properties are high-quality, innovative, multi-level format retail centres located in major urban markets. The

centres are situated in high-density locations and may sometimes be part of a multi-use complex, thereby including office space

as part of the property.

RioCan’s recently announced joint venture arrangement with Tanger will introduce a new type of retail asset to RioCan’s portfolio,

the outlet shopping centre which provides an opportunity for customers to purchase directly from the manufacturer at substantial

savings. The planned outlet centres will be similar in concept and design to those within Tanger’s exisiting US portfolio which are

characterized by a tenant mix of leading designer and brand-name manufacturers and have a typical size of approximately 350,000

square feet. The intended locations of the planned centres are to be within larger urban markets and tourist areas across Canada.

Canadian Portfolio

RioCan’s Canadian portfolio of properties is concentrated around Canada’s largest urban markets. Nearly 25 million people, or

more than four-fifths of the Canadian population, live in urban areas, with six metropolitan areas each having more than 1 million

people: Calgary and Edmonton, Alberta, Vancouver, British Columbia, Toronto and the greater Ottawa region in Ontario and

Montreal, Quebec. Together, these six cities have a total of 13.6 million residents, or 45% of Canada’s population based on

Statistics Canada 2006 Census reports.

These six high population growth markets (“high growth markets”) for RioCan’s purposes include the above cities and surrounding

areas. As growth in population promotes growth in retail sales, which in turn results in more demand for space and higher rents,

RioCan’s focus is to own properties primarily in these high growth markets. Shopping centres located in high growth markets also

offer more opportunities for extracting value, for example, by rezoning sites for even higher and better uses. RioCan also owns

properties in strong secondary markets, such as Kingston, Ontario and Quebec City, Quebec, where the Trust’s goal is to own the

dominant unenclosed centre(s) in those markets. RioCan also expands and redevelops components of existing shopping centres to

create and/or extract additional value.



As at December 31, 2010, the geographical diversification of RioCan’s property portfolio is as follows:

Ontario 53.1%

Quebec 16.9%

Western Canada 16.5%

Eastern Canada 3.7%

United States 9.8%

Annualized rental revenue by

geographic area at December 31, 2010

54.6% Ontario

16.1% Quebec

18.4% Western Canada

2.7% Eastern Canada

8.2% United States

NLA* at December 31, 2010

* Net leasable area

*Net leasable area

As at December 31, 2010, the diversification of RioCan’s property portfolio by property type is as follows:

NLA by property type at

December 31, 2010

Annualized rental revenue by property

type at December 31, 2010

Non-Grocery Anchored Centre 5.1%

Urban Retail 3.2%

Office 4.0%

Grocery Anchored Centre 22.0%

Enclosed Shopping Centre 15.9%

New Format Retail 49.8%

13.3% Enclosed Shopping Centre

21.1% Grocery Anchored Centre

51.2% New Format Retail

5.9% Urban Retail

4.6% Non-Grocery Anchored Centre

3.9% Office

The occupancy rate of the Canadian portfolio has remained relatively stable over the most recent eight fiscal quarters:

95.0%

100.0%

Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q3 2010Q2 2010 Q4 2010

97.5%97.1% 97.3% 97.4%

97.0% 97.0% 97.0% 97.3%

RioCan’s Canadian property portfolio remained steady with occupancy rates that were at or above 97% throughout 2009 and

continuing throughout 2010, as same property NOI continued to grow. During the year ended December 31, 2010 the tenant

retention rate was 90.9% and positive rent spreads on renewing leases of 8.6% were realized. The economic climate rebounded in

2010 from the difficult environment of 2009, and RioCan has seen increased interest from tenants and improved confidence, as

Canadian and US retailers look to expand. The healthier economic climate resulted in fewer tenant bankruptcies in 2010 as

compared to 2009. As the economy continues to recover in 2011, RioCan is well positioned to generate additional growth due to its

strong and diversified tenant base consisting primarily of national tenants and urban focus.

US Portfolio

The Trust’s goal in the US is to provide enhanced revenue growth by owning primarily grocery anchored centres in established and

well developed areas that RioCan believes provide defensive characteristics. RioCan believes that the US market is expected to

yield a greater number of attractive opportunities than will be available in Canada, at least in the near term, while providing a long

term source of stable cash flow and the opportunity for enhanced returns and growth.

RioCan is presently invested in two geographic areas of the US: the northeastern states and the State of Texas. RioCan’s joint

venture partners in the US are Cedar, Inland Western, Kimco and Dunhill. RioCan will continue to take a defensive approach in the

US and align itself with experienced partners. RioCan will also consider other geographic areas in the US.



As at December 31, 2010, the geographical diversification of RioCan’s US property portfolio is as follows:

NLA at

December 31, 2010

Annualized rental revenue by

State at December 31, 2010

Pennsylvania 45.8%

Texas 29.3%

Massachusetts 9.7%

New Jersey 5.1%

Connecticut 3.4%

Virginia 5.4%

Maryland 1.3%

4.4% Connecticut

12.7% Massachusetts

1.8% Maryland

3.3% New Jersey

22.2% Texas6.1% Virginia

49.5% Pennsylvania

The occupancy rate of the US portfolio has increased over the most recent five fiscal quarters:

95.0%

100.0%

Q4 2009 Q1 2010 Q2 2010 Q4 2010Q3 2010

95.8%95.1%

96.2%

98.1% 98.2%

Cedar

Cedar (NYSE:CDR) is a self-managed US based real estate investment trust focused on supermarket-anchored shopping centres

and drug store-anchored convenience centres located predominantly in the northeastern and mid-Atlantic states of the US. Cedar

presently has interests in and operates approximately 15.9 million square feet of gross leasable area at 133 shopping centre

properties.

Under the terms of its agreements with Cedar, RioCan has:

• Formed a joint venture for the acquisition of retail real estate in seven US states owned 80% by RioCan and 20% by Cedar, with

the first properties in the joint venture being seven grocery-anchored shopping centres in Massachusetts, Pennsylvania, and

Connecticut owned by Cedar (the “Initial Portfolio”); and

• Acquired, on a fully diluted basis, approximately 14% of Cedar, with the acquisition of 8.1 million shares (the “Equity

Investment”). It also acquired 1.4 million warrants which the Trust exercised in April 2010 acquiring 1.4 million common shares

of Cedar for US$10.0 million. During the first quarter of 2010, the Trust also acquired an additional 1.35 million shares in

connection with a public offering conducted by Cedar for a purchase price of US $8.9 million.

• As at December 31, 2010, the Trust holds 9.4 million (December 31, 2009: 6.7 million) common shares of Cedar.

To date, RioCan has completed the acquisition of all of the initial seven Cedar properties and has also completed the acquisition of

an additional 14 properties with Cedar from third party vendors aggregating $438 million, inclusive of the initial seven properties,

at RioCan’s interest.

Inland Western

Inland Western is a self-managed real estate investment trust that acquires, manages and develops a diversified portfolio of real

estate, primarily multi-tenant shopping centres across the United States totalling in excess of 46 million square feet, consisting of

294 consolidated operating properties. Inland Western also has interests in 11 unconsolidated operating properties and 8

properties under development. Inland Western’s net real estate investment totals US$6.0 billion.

Under the terms of its agreements with Inland Western, RioCan has acquired from Inland Western an 80% interest in nine new

format and grocery-anchored shopping centres (“Portfolio”) that total approximately 1.1 million square feet for a total purchase

price of US$123.3 million (US$154 million at 100%) and assumed US$68.2 million of property level debt (US$85 million at 100%).

Property debt assumed has an average interest rate of 5.6% and a weighted average term of 6 years. The properties are located in

three major markets within Texas: Dallas – Fort Worth, Houston, and Austin.

In aggregate, these three markets have a total population in excess of 14 million people, and together provide a diverse economic

base with exposure to energy, government services, and technology sectors, with a large concentration of corporate headquarters.

Austin is the state capital.

The Portfolio has strong anchor tenants and is well located in strong urban markets and is well occupied. Approximately 90% of

the gross rents from the Portfolio are generated by national or regional tenants and approximately 29% from grocery and

pharmacy tenants.



Kimco Realty Corporation

On October 8, 2010 RioCan announced the acquisition of Las Palmas Marketplace in El Paso, Texas through a joint venture

arrangement with Kimco and Dunhill. Kimco is a publicly-traded real estate investment trust and is the United States’ largest

owner and operator of neighbourhood and community shopping centres with interests in more than 1,465 retail properties

comprising 150 million square feet of leasable space across 45 states, Puerto Rico, Canada, Mexico and South America.

Las Palmas has been acquired on a joint venture basis with RioCan (31.7%), Kimco (31.7%), and Dunhill (36.6%). The property was

acquired for US$84.75 million (at 100%) at a cap rate of 7.5%, and coincident with the closing a 12 year, non-recourse first

mortgage financing of US$50.85 million was arranged carrying an interest rate of 5.4%. RioCan’s net equity investment in this

asset was US$7.8 million.

Las Palmas is a 638,000 square foot new format retail centre that was built in phases from 2002 to 2008 and is anchored by a

179,000 square foot Lowe’s Home Improvement Warehouse and an 86,800 square foot Kohl’s. The property is 98% leased and has

an average lease term of approximately 7 years at an average lease rate of approximately $10 per square foot.



Top Fifty Tenants – Canada and US

As at December 31, 2010, RioCan’s fifty largest tenants in Canada and the US combined have the following profile:

Rank Tenant name

Annualized

rental

revenue

Number of

locations

NLA

(in thousands)

Percentage of

total NLA

Weighted

average

remaining

lease term

(years)*

1 Walmart 4.6% 27 3,120 7.8% 13.7

2 Famous Players/Cineplex/Galaxy Cinemas 4.5% 28 1,263 3.2% 12.3

3 Metro/Super C/Loeb/Food Basics 4.4% 55 2,034 5.1% 8.3

4 Canadian Tire/PartSource/Mark’s Work Wearhouse 3.6% 59 1,461 3.7% 11.4

5 Zellers/The Bay/Home Outfitters 3.3% 42 2,728 6.8% 8.9

6 Winners/HomeSense 2.7% 57 1,226 3.1% 4.9

7 Loblaws/No Frills/Fortinos/Zehrs/Maxi 2.6% 25 1,112 2.8% 5.5

8 Staples/Business Depot 2.2% 47 948 2.4% 7.2

9 Reitmans/Penningtons/Smart Set/Addition-Elle/Thyme Maternity 1.8% 128 531 1.3% 5.0

10 Harvey’s/Swiss Chalet/Kelsey’s/Montana’s/Milestone’s (Cara) 1.7% 91 384 1.0% 8.8

11 Shoppers Drug Mart 1.6% 39 436 1.1% 10.2

12 Giant Food Stores/ Stop & Shop (Royal Ahold) 1.6% 17 774 1.9% 15.5

13 Future Shop/Best Buy 1.5% 24 490 1.2% 7.1

14 Sobeys/IGA/Price Chopper/Empire Theatres 1.5% 23 637 1.6% 10.6

15 Sport Mart/ Sport Chek/Sports Experts/National Sports/Atmosphere 1.3% 43 454 1.1% 5.5

16 Chapters/Indigo 1.2% 24 318 0.8% 3.8

17 Lowes 1.2% 7 844 2.1% 17.3

18 PetSmart 1.1% 30 391 1.0% 6.1

19 Dollarama 1.1% 54 459 1.2% 6.7

20 Safeway 1.0% 15 500 1.3% 9.4

21 TD Bank 1.0% 49 195 0.5% 8.2

22 The Brick 0.9% 17 327 0.8% 9.3

23 Blue Notes/Stitches/Suzy Shier/Urban Planet (YM Inc.) 0.8% 49 211 0.5% 5.6

24 Sears 0.8% 15 362 0.9% 3.1

25 Premier Fitness 0.7% 9 285 0.7% 7.4

26 Bank of Nova Scotia 0.7% 35 131 0.3% 6.9

27 Liquor Control Board of Ontario (LCBO) 0.6% 20 161 0.4% 10.2

28 Michael’s 0.6% 16 209 0.5% 5.8

29 Rona/Revy/Reno 0.5% 5 246 0.6% 15.0

30 Liz Claiborne/Mexx 0.5% 31 127 0.3% 6.0

31 London Drugs 0.5% 10 205 0.5% 7.3

32 CIBC 0.5% 25 95 0.2% 6.1

33 Jysk Linen 0.4% 11 187 0.5% 6.0

34 Bell/The Source 0.4% 70 97 0.2% 4.8

35 Golf Town 0.4% 12 142 0.4% 7.0

36 East Side Mario’s/Casey’s (Prime Restaurants) 0.4% 20 94 0.2% 6.4

37 Blockbuster Video 0.4% 26 114 0.3% 3.1

38 BouClair 0.4% 18 137 0.3% 6.2

39 Sleep Country Canada 0.4% 21 94 0.2% 5.5

40 Royal Bank of Canada 0.4% 21 85 0.2% 6.6

41 Rogers Video 0.4% 47 99 0.2% 3.2

42 The Shoe Company 0.4% 24 119 0.3% 5.1

43 Moores 0.4% 22 104 0.3% 4.9

44 Bank of Montreal 0.4% 22 80 0.2% 6.1

45 Subway 0.4% 77 81 0.2% 5.0

46 Old Navy 0.4% 10 133 0.3% 2.8

47 Pharma Plus 0.4% 13 75 0.2% 7.9

48 Ardene 0.4% 36 92 0.2% 6.3

49 La Senza 0.3% 21 83 0.2% 5.5

50 International Clothiers/Designer Depot/Labels/Randy River 0.3% 18 93 0.2% 7.6

59.6% 1,605 24,573 61.3% 8.6

* – Weighted average based on gross rental revenue.



Top Ten Tenants – Canada

As at December 31, 2010, RioCan’s ten largest tenants in Canada have the following profile:

Rank Tenant name

Annualized

rental

revenue

Number

of locations

NLA

(in thousands)

Percentage of

total NLA

Weighted

average

remaining

lease term

(years)*

1 Walmart 4.9% 26 2,955 8.2% 13.7

2 Famous Players/Cineplex/Galaxy Cinemas 4.8% 28 1,263 3.5% 12.3

3 Metro/Super C/Loeb/Food Basics 4.8% 55 2,034 5.7% 8.3

4 Canadian Tire/PartSource/Mark’s Work Wearhouse 3.9% 59 1,461 4.1% 11.4

5 Zellers/The Bay/Home Outfitters 3.5% 42 2,728 7.6% 8.9

6 Winners/HomeSense 2.9% 56 1,204 3.4% 4.9

7 Loblaws/No Frills/Fortinos/Zehrs/Maxi 2.8% 25 1,112 3.1% 5.5

8 Staples/Business Depot 2.3% 46 934 2.6% 7.1

9 Reitmans/Penningtons/Smart Set/Addition-Elle/Thyme Maternity 1.9% 128 531 1.5% 5.0

10 Harvey’s/Swiss Chalet/Kelsey’s/Montana’s/Milestone’s (Cara) 1.9% 91 384 1.1% 8.8

33.7% 556 14,606 40.8% 9.3

* – Weighted average based on gross rental revenue

Top Ten Tenants – US

As at December 31, 2010, RioCan’s Ten largest tenants in the US have the following profile:

Rank Tenant name

Annualized

rental

revenue

Number of

locations

NLA

(in thousands)

Percentage of

total NLA

Weighted

average

remaining

lease term

(years)*

1 Giant Food Stores/ Stop & Shop (Royal Ahold) 21.3% 17 774 19.6% 15.5

2 Lowes 3.7% 3 294 7.4% 16.6

3 HEB 3.3% 2 114 2.9% 10.2

4 Bed Bath & Beyond 3.1% 6 126 3.2% 9.2

5 Best Buy 2.7% 3 79 2.0% 8.4

6 Safeway 2.6% 2 101 2.6% 13.0

7 PetSmart 2.5% 6 92 2.3% 8.1

8 Kohl’s 1.9% 3 159 4.0% 17.5

9 L.A. Fitness 1.9% 2 61 1.5% 10.3

10 Home Depot 1.8% 1 104 2.6% 27.1

44.8% 45 1,904 48.1% 14.1

* – Weighted average based on gross rental revenue

Strategy and Objectives

In 2011, the Trust will continue to remain focused on its growth drivers:

Organic growth in the existing property portfolio

Organic growth is expected to come from rental growth on renewals and the re-leasing of existing space as tenant leases expire.

The Trust can generate growth from leasing such space and increasing its occupancy ratio. Furthermore, RioCan actively manages

its tenant portfolio to seek opportunities to maximize the rental revenue from its space. RioCan manages its underutilized space

through lease buyouts, and sees opportunities in the near term as demand for RioCan’s properties from US tenants coming into

Canada is realized.

Opportunistic acquisitions of properties

The Trust will continue to take advantage of the current environment to grow its portfolio through opportunistic acquisitions.

RioCan’s strong balance sheet, liquidity and access to capital will continue to make RioCan a strong partner in its acquisitions in

the US, and provide a strong base for RioCan’s Canadian acquisition platform.

The acquisition market is once again becoming more competitive as economic activity rebounds and the stricter lending

environment of the past two years continues to loosen. Capital is becoming more available for borrowers and potential buyers.

With the



acquisition market becoming more competitive the number of acquisition opportunities in 2011 may be fewer than in 2010.

However, RioCan’s liquidity position has enabled the Trust to be a strong bidder when properties have come to market. There

continues to be more availability of acquisition opportunities in the US, given the size of the market and higher level of trading

activity. The US lending environment remains somewhat constrained, however it has opened up considerably from 2009. RioCan

continues to have an advantage given its strong capital position as US property owners continue to feel the effects of the excesses

of the last economic expansion, which may prompt distress sales, the nature of which are rare in the Canadian market. As

competition returns to the acquisition environment, RioCan will continue to take a disciplined and measured approach to acquiring

properties in the US.

Intensification programs consisting of extracting more value from the land component of the existing property portfolio

The trend in the high growth markets towards increasing the density of existing urban locations is driven by, among other factors,

population growth through healthy immigration, the prohibitive costs of expanding infrastructure beyond urban boundaries,

environmental concerns and maximizing use of mass transit.

Land use intensification opportunities arise from the fact that retail centres are generally built with lot coverage of approximately

25% of the underlying land. Consequently, particularly in urban markets, RioCan endeavours to obtain additional density, retail or

otherwise, on the existing property portfolio. As the Trust already owns the underlying land, it is able to achieve relatively high

returns on new capital invested.

As a normal part of the business, RioCan expands and redevelops existing shopping centres to create and/or extract additional

value.

The ongoing greenfield development program

As at December 31, 2010, greenfield development projects comprise approximately 8.1 million square feet, of which RioCan’s

ownership interest is approximately 3.0 million square feet. Once complete, these developments should generate strong returns

and improve the overall quality of the portfolio. RioCan also has interests in greenfield development projects that are conditional,

which if acquired, would total 2.1 million square feet.

Joint Ventures

Joint venture platforms are important to RioCan, not only for their future potential, but also in carrying forward the strategy of

creating reliable, long-term third party fee income streams from long-lived income properties in which RioCan owns an interest.

RioCan generally provides property management, asset management, development and leasing services for properties that are

owned through co-ownership activities in Canada. RioCan continues to solidify and expand its relationships with established

partners including the Canada Pension Plan Investment Board (“CPPIB”), Kimco Realty Corporation (“Kimco”), Sun Life Financial

(“Sun Life”) and Trinity Development Group (“Trinity”). CPPIB is a partner in three of the Trust’s largest development projects,

which have a total expected development cost of approximately $655 million. RioCan and CPPIB grew their joint venture in late

2009 with the acquisition of Grandview Corners, Surrey. In connection with its US strategy, RioCan entered into a joint venture with

Cedar to establish a US platform in the northeastern US and has also entered into a new joint venture with Inland Western.

Through its joint venture arrangements in the US, Cedar and Inland Western will provide property management, development and

leasing services for all properties purchased through their respective joint ventures. RioCan is also pursuing potential acquisitions

in the US with other entities which may result in additional joint venture relationships, such as the more recent joint venture

agreement with Kimco and Dunhill. In addition, subsequent to year end, RioCan announced that it has entered into a letter of intent

to form an exclusive joint venture with Tanger for the acquisition, development and leasing of sites across Canada that are suitable

for development or redevelopment as outlet shopping centres. Any projects developed will be co-owned on a 50/50 basis and will

be branded as Tanger Outlet Centers. Tanger has agreed to provide leasing and marketing services to the venture and RioCan will

provide development and property management services.

Tenant Diversification

An important objective of RioCan is to maintain a diverse tenant base, such that revenues are neither concentrated nor dependent

upon the economic viability of any one retailer. As at December 31, 2010, no individual tenant accounted for more than 4.6% of the

portfolio’s annualized rental revenue, with the largest tenants being a junior department store with grocery component (Walmart).

Overall, RioCan’s tenant base is made up largely of tenants that are focused towards consumer essentials, such as grocery.

Approximately 71% of RioCan’s properties by NLA are anchored or shadow anchored by grocery stores, which is a defensive

category.

Qualification Plan

In order for RioCan to qualify as a REIT for tax purposes after 2010, the Trust was required to completed a tax restructuring (the

“Qualification Plan”).

In December 2010, the Trust announced that it had completed the necessary tax restructuring to qualify commencing for the 2011

taxation year as a REIT under the Canadian income tax legislation affecting the tax treatment of publicly traded investment trusts.

A trust that qualifies as a REIT for a taxation year is exempt from taxation as a SIFT. Accordingly, RioCan will continue flowing

income through to unitholders on a tax effective basis.



Generally, to qualify as a REIT, RioCan’s Canadian assets must be limited to income producing real property and substantially all of

RioCan’s Canadian source revenues must be derived from rental revenue, capital gains and fee income from properties in which

RioCan has an interest. RioCan’s assets and operating activities, including those in the United States, were largely unaffected by

the tax restructuring. All non-compliant assets were either disposed of or were restructured. As a result of the completion of its

restructuring, the non-cash future income tax liability of $144 million at September 30, 2010 that had arisen primarily as a result of

the introduction of the SIFT Legislation in 2007 was reversed. The reversal occurred in the fourth quarter of 2010 through the

consolidated statement of earnings as a one-time non-cash future income tax recovery.

On December 16, 2010 the Minister of Finance announced draft changes to the provisions of the Income Tax Act (Canada) governing

REITs (the “Draft Legislation”) which, if enacted, will be effective as of January 1, 2011. The Draft Legislation will have the effect of

creating a new 10% basket for the holding of non-qualifying assets, and will increase the non-qualifying revenue basket to 10%

from 5%. RioCan does not expect that the Draft Legislation will have any negative consequences on its continuing qualification as a

REIT and will allow RioCan more latitude to pursue intensification activities involving the sale of residential air rights and the

provision of mezzanine financing to development partners.

REIT Exception Monitoring

A key element of RioCan’s Qualification Plan was the design and implementation of a process to maintain the Trust’s compliance

with REIT Exception requirements. RioCan has completed the design and implementation of its REIT Exception monitoring process.

Additionally, training of accounting and operational staff in order to ensure continuing compliance with the requirements of the

REIT Exception has been completed. Further, the Trust will continue REIT Exception information sessions with members of the

Board of Trustees, Audit Committee and senior management, including but not limited to, reporting on REIT Exception monitoring

and implications of REIT Exception requirements to the business.

Transition to International Financial Reporting Standards (“IFRS”)

The Canadian Accounting Standards Board (“AcSB”) has adopted IFRS effective for the Trust in the first quarter of 2011. IFRS has

replaced Canada’s 2010 generally accepted accounting principles (“GAAP”). RioCan’s management is finalizing its assessment of

IFRS to ensure that RioCan can report under IFRS for the first quarter of 2011. See “Future Changes in Significant Accounting

Policies – IFRS” for a discussion of RioCan’s preparations for this pending change.

Management’s Objectives

Having regard to both its core investment strategy and the Qualification Plan, RioCan’s investment strategy is to focus on growing

rental and fee income from long-lived properties. This growth from rental and fee income will be achieved through:

• Targeting the acquisition of properties in Canada, with a focus on high growth markets;

• Selective acquisition of retail properties on an opportunistic basis in the US using a measured and defensive approach with a

focus on grocery anchored centres;

• Targeting the acquisition of properties that may not necessarily be of the same quality as RioCan’s existing income property

portfolio, but where management believes that RioCan can obtain substantial rental growth from the enhancement of these

properties;

• Maintaining and increasing land use intensification activities in RioCan’s existing portfolio;

• Selective acquisition of retail properties outside high population growth areas where national and anchor tenant profiles are

consistent with those in RioCan’s overall portfolio;

• Acquisitions and developments with long term strategic partners that will generate predictable and recurring fee income

streams and higher returns on the capital invested; and

• Maintaining and further increasing, the supply of greenfield development projects, including the expansion into outlet centres

through the joint venture with Tanger.

Corporate Responsibility

Corporate responsibility continues to be an area of focus for RioCan as it endeavours to maintain its role as one of Canada’s

corporate leaders. RioCan’s corporate responsibility philosophy is based on three cornerstones: Environmental Responsibility,

Corporate Philanthropy, and RioCan’s Responsibility to its employees.

Environmental Responsibility

RioCan strives to make efficiency improvements in its property portfolio, and works with its tenants to facilitate their energy

conservation needs which contribute to lowered emissions and reduced energy use. In addition, all new development projects are

viewed through the lens of sustainable building with these factors being incorporated wherever possible. RioCan has worked with

tenants as they customize their space to include geothermal heating and cooling, waste water collection and lower carbon

footprint initiatives. RioCan has also taken specific initiatives at its properties to reduce waste, such as the installation of recycling



receptacles to reduce the amount of waste generated at RioCan properties across Canada at an estimated cost of approximately

$2 million. At its head office location at the RioCan Yonge Eglinton Centre, RioCan has taken a number of initiatives since acquiring

the property to improve the efficiency and environmental footprint of the building. The property was BOMA BESt certified in 2009,

and RioCan continues to upgrade the property’s efficiency. Recent initiatives to reduce water consumption have reduced water

usage by more than a half million litres of water, and an aggressive recycling program has resulted in a waste diversion rate of

more than 90% at RioCan Yonge Eglinton Centre in 2010.

In addition to RioCan’s environmental responsibilities RioCan strives to make its shopping centres a safe and integral part of its

local community. Adequate lighting in parking lots, a clean environment and attentive staff all assist in providing a safe shopping

environment in RioCan’s centres. In 2011, RioCan will roll out an initiative to install automated external defibrillators (AEDs) in all

of RioCan’s enclosed shopping centres to provide emergency care in the event of a heart attack. An AED is a device that can

monitor heart rhythms, and if necessary deliver an electric shock to restore heart rhythm and potentially save lives.

Corporate Philanthropy

Corporate Philanthropy is a key facet of RioCan’s profile as a good corporate citizen and one that RioCan has always viewed as a

priority. RioCan has regularly sponsored a number of charitable organizations with a focus towards children’s and medical

charities. RioCan views its participation in the community where it does business to be of great importance, whether it is through

direct financial contributions, the donation of space for use by charitable organizations, or through the donation of the time taken

by its employees through volunteerism across Canada.

RioCan’s Responsibility to its Employees

RioCan strives to provide its employees with a safe work environment, free from discrimination or harassment. RioCan has a

number of employee-focused initiatives that are designed to improve workplace satisfaction. These initiatives include development

and education programs. RioCan also has a comprehensive Code of Conduct for all employees, which includes protections against

harassment and discrimination and provides guidelines for employee conduct including anti-bribery and fair dealing with RioCan’s

stakeholders. Furthermore RioCan provides a Whistleblower hotline to provide employees with the ability to anonymously report

violations with RioCan’s Code of Conduct.

USE OF NON-GAAP MEASURES

RioCan’s financial statements are prepared in accordance with GAAP. The following measures, as well as other measures

discussed elsewhere in this MD&A, do not have a standardized definition prescribed by GAAP and are, therefore, unlikely to be

comparable to similar measures presented by other reporting issuers. RioCan uses these measures to better assess the Trust’s

underlying performance and provides these additional measures so that investors may do the same.

Funds from Operations (“FFO”)

FFO is a supplemental non-GAAP financial measure of operating performance widely used by the real estate industry. The Real

Property Association of Canada (“REALpac”) defines FFO as: “Net income (computed in accordance with GAAP), excluding gains (or

impairment provisions and losses) from sales of depreciable real estate and extraordinary items, plus depreciation and

amortization, plus future income taxes and after adjustments for equity-accounted entities and non-controlling interests.

Adjustments for equity-accounted entities, joint ventures and non-controlling interests are calculated to reflect FFO on the same

basis as the consolidated properties.”

RioCan considers FFO to be a meaningful measure of operating performance as it primarily rejects the assumption that the value

of real estate investments diminishes predictably over time and it adjusts for items included in GAAP net earnings that may not

necessarily be the best determinants of the Trust’s operating performance, such as gains or losses on the sale of, and provisions

for impairment against, long-lived income properties.

FFO is a non-GAAP measure and should not be construed as an alternative to net earnings or cash flows provided by operating

activities determined in accordance with GAAP. RioCan’s method of calculating FFO is in accordance with REALpac’s

recommendations but may differ from other issuers’ methods and, accordingly, may not be comparable to FFO reported by other

issuers.

FFO is generally the same as GAAP net earnings other than excluding amortization expense and future income tax.



A reconciliation of GAAP net earnings to FFO is as follows:

(millions of dollars, except per Unit amounts)

Year ended December 31, 2010 2009 Increase

Net Earnings $ 303 $ 114 166%

Amortization 191 165 16%

Future income tax recovery (140) (3) nm

Impairment of real estate investments 8 – nm

Gain on disposition of long-lived assets (3) – nm

Non-controlling interest (2) – nm

FFO $ 357 $ 276 29%

Per Unit

FFO per weighted average number of Units outstanding $ 1.45 $ 1.20 21%

“nm” – not meaningful.

Adjusted Funds from Operations (“AFFO”)

AFFO is a supplemental non-GAAP financial measure of reporting operating performance widely used in the real estate industry.

Management views AFFO as an alternative measure of cash generated from operations that, in addition to FFO, is widely used in

the real estate industry. AFFO is calculated by adjusting FFO for straight-line and market rent adjustments, non-cash

compensation expenses, costs for capital expenditures and leasing costs for maintaining shopping centre infrastructure and

current lease revenues (“productive capacity maintenance”). In addition, non-recurring costs that impact operating cash flow may

be adjusted. There is no standard industry defined measure of AFFO. As such, RioCan’s method of calculating AFFO will differ from

other issuers’ methods and, accordingly, will not be comparable to such amounts reported by other issuers.

Productive capacity maintenance can vary widely from quarter to quarter due to the lease expiry profile, vacancies and capital

expenditure estimates due to the life cycle of the property resulting in volatility in AFFO. As well, the Trust reviews capital

maintenance spending levels based on the performance of the portfolio. For these reasons, normalized capital maintenance

expenditures have been estimated based on historical activity and management’s expectations on a normalized level of activity.

Productive capacity maintenance expenditures are further discussed in “Capital Expenditures on Income Properties” indicating the

Trust’s expectation of such annualized expenditures.



The following table provides the calculation of AFFO:


Year ended December 31, 2010 2009 (v)Increase

(decrease)

FFO $ 357 $ 276 29%

Add/(deduct):

Recognition of rents on a straight-line basis (8) (6) 33%

Amortization:

Amortization of differential between market and contractual rents on in-place

leases (4) (3) 33%

Non-cash Unit based compensation expense 2 2 0%

Normalized productive capacity maintenance cash expenditures (i):

Leasing commissions and tenant improvements (16) (25) (36%)

Maintenance capital expenditures recoverable from tenants (13) (5) 160%

Maintenance capital expenditures not recoverable from tenants (3) (3) 0%

Other adjustments:

Restructuring costs (ii) – 1 nm

IFRS and SIFT transition costs (iii) 5 2 150%

Lease cancellation fee on development property (iv) – 12 nm

AFFO $ 320 $ 251 28%

AFFO per weighted average Unit $ 1.30 $ 1.09 19%

Cash distributions per Unit $ 1.38 $ 1.38 0%

Cash distributions net of distribution reinvestment plan per Unit $ 1.14 $ 1.13 0%

Distributions as a percent of AFFO 106% 127% (20%)

Distributions net of distribution reinvestment plan as a percent of AFFO 88% 104% (18%)

Weighted average Units 246,608 230,367 7%


(i) Refer to the discussion on “Capital Expenditures on Income Properties” for the Trust’s expectation of such normalized expenditures.

(ii) Restructuring costs includes costs related to severance which the Trust views as one-time costs.

(iii) IFRS and SIFT transition costs includes costs related to professional fees associated with IFRS and SIFT legislation which the Trust views as

one-time costs.

(iv) Lease cancellation fees are amounts paid by tenants to terminate their lease prior to the maturity of the contracted expiry date. GAAP

requires such amount to be included in net earnings except when the asset is under development. At the Queen and Portland development, a

tenant paid the Trust $11.5 million to terminate its tenancy prior to commencement of construction. As a result, GAAP requires RioCan to

offset this revenue against cost of the property under development. RioCan views the payment as an incremental cash flow as it does not

impact the development project and has therefore included the termination payment in AFFO.

(v) Actual results.



ASSET PROFILE

As at December 31, 2010, RioCan had ownership interests in a portfolio of 287 shopping centres comprising 63.7 million square

feet (RioCan’s share being 40.8 million square feet), compared to 243 shopping centres comprised of 54.5 million square feet

(RioCan’s share being 35.3 million square feet) at December 31, 2009. In addition, RioCan had ownership interests in 10 greenfield

development projects at December 31, 2010 that will, upon completion, comprise approximately 8.1 million square feet, of which

RioCan’s ownership interest will be approximately 3.0 million square feet.

The committed occupancy rate at December 31, 2010 was 97.4% compared to 97.1% at September 30, 2010 and 97.4% at

December 31, 2009. The increase in RioCan’s occupancy rate at December 31, 2010 compared to September 30, 2010 is primarily

due to leasing activities and the acquisition of approximately 2 million square feet during the fourth quarter of 2010 with a weighted

average occupancy rate of approximately 98% offset by vacancies.

Income Properties

(millions of dollars)

Year ended December 31, 2010 2009

Balance, beginning of period $ 5,042 $ 4,641

Acquisitions – Canada (i) 429 309

Acquisitions – US – Cedar (ii) 501 44

Acquisitions – US – Inland (iii) 130 –

Acquisitions – US – Kimco/Dunhill (iii) 27 –

Dispositions, net of impairment provisions (6) –

Contingent proceeds paid to vendors (iv) 25 –

Completion of properties under development 51 158

Tenant installation costs 35 27

Transfers to properties under development (53) (17)

Transfers from properties held for resale – 35

Other 16 10

Amortization expense (191) (165)

Balance, end of period $ 6,006 $ 5,042

(i) Comprised of the purchase price including closing costs and other acquisition related costs.

(ii) The joint venture with Cedar is controlled by the Trust therefore these properties are 100% consolidated within the Trust’s financial

statements. Hence, amounts shown in the above table are comprised of 100% of the purchase price including closing costs and other

acquisition related costs.

(iii) Properties owned through the Inland and Kimco/Dunhill joint ventures are proportionately consolidated (at the Trust’s respective ownership)

within the Trust’s financial statements. Hence, amounts shown in the above table are comprised of the Trust’s share of the purchase price

including closing costs and other acquisition related costs.

(iv) Certain prior acquisitions were subject to an earn-out mechanism whereby additional proceeds are paid to the vendor upon completion and

lease-up of the added density or vacant space at the previously acquired property.

At the end of the fourth quarter of 2010 and 2009, the NLA of RioCan’s income properties is as follows:

(square feet in thousands)

As at and for the year ended December 31, 2010 2009

NLA, beginning of year 35,103 32,807

Acquisitions of income properties – Canada 1,819 1,622

Acquisitions of income properties – US 3,840 158

Completed greenfield development and land use intensification 261 929

Other (177) (413)

NLA, end of year 40,846 35,103

Acquisitions During 2010

During the three months ended December 31, 2010, RioCan completed total acquisitions of $320 million, representing RioCan’s

share of the purchase price comprised of approximately 2.0 million additional square feet.



During the year ended December 31, 2010, RioCan completed total acquisitions of $986 million, representing RioCan’s share of the

purchase price comprised of approximately 5.7 million additional square feet.

Property name and locationCapitalization

rate

RioCan’spurchase

price (i)(millions)

NLA (insqft) at

RioCan’sinterest

Assetclass (ii)

YearBuilt

%Leased

WeightedAverageRemainingLeaseTerm(years) (iii)

Largesttenant(s)and NLA

RioCan’sownership

interest

CANADA

Brant Power Centre,Burlington, ON

7.7% $ 15 57,538 NFR 2004 100% 7 Home Outfitters (32,000),Best Buy (31,000)

50%

Keswick Walmart, Keswick, ON 7.0% 18 122,062 NFR 2010 100% 20 Walmart (151,000) 75%

March Road, Ottawa, ON (iv) n/a 10 7,817 NFR 2010/2011

100% n/a Sobeys (50,836), PharmaPlus (11,953)

50%

Millwoods Town Centre,Edmonton, AB

7.6% 35 216,690 ESC 1975 98.9% 4 Zellers (123,000),Canadian Tire (88,000),Safeway (49,000)

40.3%

Queensway, Toronto, ON 6.0% 16 11,611 NFR 2000 100% 10 Cineplex (87,510) (v) 50%

740 Dupont, Toronto, ON 7.7% 11 25,000 UR 2008 100% 5 Grand TouringAutomobiles (25,000)

100%

Total Canada 7.2% $105 440,718

UNITED STATES

Inland Western Portfolio Acquisitions:

Coppell Town Center,Dallas-Fort Worth, TX

7.7% 10 73,086 GA 2000 94.5% 11.5 Tom Thumb (63,150),Starbucks (2,050), UPSStore (1,500)

80%

Great Southwest Crossing,Dallas-Fort Worth, TX

7.7% 12 73,816 NFR 1997/2002

92.6% 5 Office Depot (20,515),PetSmart (18,875),Kroger*, Dollar Tree(6,850), Sprint (2,361)

80%

Suntree SquareDallas-Fort Worth, TX

7.7% 10 77,112 GA 1993/2001

97.2% 7.3 Tom Thumb (63,556),Starbucks (1,960), Subway(1,200), T-mobile (2,000)

80%

Riverpark ShoppingCenter I Houston, TX

7.7% 33 149,125 GA 2004 100% 10 HEB Supermarket(80,460), Walgreen’s(14,490), Bank of America(5,170)

80%

Riverpark ShoppingCenter II Houston, TX

7.7% 9 99,891 NGA 2006 100% 9 Dollar Tree (15,000) 80%

Southpark Meadows I Austin,TX

7.7% 18 213,472 NFR 2005 100% 12 Walmart Supercenter(205,736), PetSmart(22,303), Subway (1,500),Starbucks (1,700)

80%

7.7% 92 686,502



Property name andlocation

Capitalizationrate

RioCan’spurchase

price (i)(millions)

NLA (insqft) at

RioCan’sinterest

Assetclass (ii)

YearBuilt

%Leased



RioCan’sownership

interest

Cedar

Cross Keys Place,Turnersville, NJ

8.2% 22 118,538 NFR 2007 100% 8 Home Depot*, SportsAuthority (42,000), BedBath & Beyond (35,005),AC Moore (21,305), OldNavy (19,234)

80%

Gettysburg Marketplace,Gettysburg, PA

7.8% 16 66,227 GA 1998 98.9% 7 Giant Food (66,674),Blockbuster (5,010),Hallmark (4,500)

80%

Marlboro Crossing,Upper Marlboro, MD

7.8% 10 54,380 GA 1993 100% 11 Giant Food (60,951) 80%

Northland Center, StateCollege, PA

7.8% 8 86,608 GA 1988 94.5% 4 Giant Food (65,075), CVS(10,920)

80%

Towne Crossing,Richmond, VA

7.8% 16 83,134 NGA 1980 92.1% 3 Bed Bath & Beyond(40,000), Michael’s(20,000)

80%

York Marketplace, York,PA

7.8% 24 244,568 GA 1955/2004

97% 5 Lowe’s Home (125,353),Giant Food (74,600), OfficeMax (23,500), Super Shoes(20,000)

80%

7.9% 96 653,455

Kimco/Dunhill

Las Palmas Marketplace,El Paso, TX

7.5% 27 202,236 NFR 2002/2008

97.9% 7 Lowe’s (179,421), Kohl’s(86,800), Ross Dress forLess (33,419), Babies R’Us(30,570), Bed Bath &Beyond (30,172), OfficeDepot (29,491), Michael’s(23,694)

31.7%

Total US 7.8% 215 1,542,193

Fourth Quarter2010 Acquisitions

7.6% $320 1,982,911

CANADA

Gatineau WalmartCentre, Gatineau, QC

6.7% $ 51 287,765 NFR 2006 98.5% 12 Walmart (158,801), GolfTown (18,761)

100%

Hamilton WalmartCentre, Hamilton, ON

6.7% 49 214,486 NFR 2008/2009

99.3% 11 Walmart (133,555), DollarGiant (10,118)

100%

Niagara Square, NiagaraFalls, ON

(Additional 15% interest)

8.4% 7 57,343 ESC 1977/1987/2008

86.1% 13 Cineplex (45,853),Winners (31,967), SportChek (20,160), FutureShop (20,027)

30%

RioCan CentreGravenhurst,Gravenhurst, ON(Additional 66.67%interest)

7.5% 20 99,395 NFR 2008/2009 100% 18 Canadian Tire (76,403),Sobeys (41,360)

100%




rate

RioCan’spurchase

price (i)(millions)

NLA (insqft) at

RioCan’sinterest

Assetclass (ii)

YearBuilt

%Leased



RioCan’sownership

interest

Vaudreuil Shopping Centre,Vaudreuil-Dorion, QC

7.6% 25 118,330 NFR 2006/2007

100% 9 Super C*, Canadian Tire*,Bureau en Gros (20,000),Golf Town (15,000)

100%

Wharncliffe Centre, London, ON 7.0% 13 60,711 GA 1991 100% 7 No Frills (40,140) 100%

Total Canada 7.0% 165 838,030

UNITED STATES

Inland Western Portfolio Acquisitions:

Bear Creek Shopping Center,Houston, TX

7.7% 13 70,330 GA 2001 100% 5 HEB Supermarket(61,805), GNC (1,300),Papa John’s (1,500)

80%

Cypress Mill Plaza, Houston, TX 7.7% 12 93,125 NFR 2005 100% 7 Walmart*, Home Depot*,Hobby Lobby (59,898),Palais Royale (24,000),Dollar Tree (9,998)

80%

New Forest Crossing, Houston,TX

7.7% 14 118,452 NFR 2005 100% 4 Lowe’s*, Walmart*, BigLots (34,076), Ross Dressfor Less (30,047),Petsmart (18,975)

80%

7.7% 39 281,907

Cedar

Creekview Center, Warrington,PA

7.6% 22 108,869 NFR 2001 100% 7 Target*, Lowe’s*,Genuardi’s Supermarket(Safeway) (48,966), LAFitness (38,000). Bed,Bath & Beyond (25,000)

80%

Monroe Marketplace,Sellinsgrove, PA

7.6% 35 272,814 NFR 2008 100% 12 Target*, Giant FoodsSupermarket (127,000),Kohl’s (68,430), Dick’sSporting Goods (51,119),Best Buy (22,504),Michael’s (20,649),PetSmart (18,156),Staples (14,730)

80%

New River Valley Centre,Christiansburg, VA

7.6% 23 131,730 NFR 2007 100% 7 Best Buy (30,041), RossDress for Less (30,037),Bed Bath & Beyond(24,152), Staples (20,443),PetSmart (17,878), OldNavy (15,413)

80%

Pitney Road Plaza, Lancaster,PA

7.6% 9 36,732 NFR 2009 100% 9 Costco*, Lowe’s*, BestBuy (45,915)

80%

Sunrise Plaza, Forked River, NJ 7.6% 22 203,168 NFR 2007 97.3% 22 Home Depot (130,601),Kohl’s (96,171), Staples(20,388)

80%

Montville Commons ShoppingCenter, Montville, CT

7.7% 16 94,333 GA 2007 100% 10 Home Depot*, Stop &Shop (63,000)

80%




rate

RioCan’spurchase

price (i)(millions)

NLA (insqft) at

RioCan’sinterest

Assetclass (ii)

YearBuilt

%Leased



RioCan’sownership

interest

Exeter Commons, Reading, PA 7.8% 43 287,257 NFR 2009 100% 15 Target*, Lowe’s (171,069),Giant Foods Supermarket(81,715), Staples (18,008)

80%

7.7% 170 1,134,904

Total US 7.7% 209 1,416,811

Third Quarter2010 Acquisitions

7.4% $374 2,254,841

CANADA

Halton HillsGeorgetown, ON

7.2% 10 75,366 GA 1979 100% 9 Food Basics (36,002),Dollarama (10,970), TDBank (10,000), Bulk Barn(5,000)

100%

Clappison CrossingFlamborough, ON (Additional

50% interest)

7.3% 21 133,628 NFR 2007 100% 18 Walmart (151,448), Rona(98,546), LCBO (11,882),Bank of Nova Scotia(5,380)

100%

Corbett CentreFredericton, NB (Additional

37.5% interest)

7.3% 9 36,515 NFR 2008 100% 9 Home Depot*, Costco*,Michael’s (17,438),Winners (29,948),Dollarama (10,301),PetSmart (9,589)

100%

Total Canada 7.2% 40 245,509

UNITED STATES

Cedar “Initial Portfolio” Acquisitions:

Loyal PlazaWilliamsport, PA

8.5% 23 235,060 GA 1969/2000

100% 22 Giant Food Supermarkets(66,935), K-Mart (102,558),Staples (20,555), EckerdDrugs (10,908)

80%

Stop & Shop PlazaBridgeport, CT

8.5% 7 43,609 GA 2006 100% 20 Stop & Shop (54,510) 80%

Shaw’s PlazaRaynham, MA

8.5% 17 141,288 GA 1984 93.7% 22 Shaw’s Supermarkets(60,748), Marshalls(25,752), CVS (10,125)

80%

Total US 8.5% 47 419,957

Second Quarter2010 Acquisitions

7.9% $ 87 665,466

CANADA

Portfolio Acquisition:

Market at Citadel Village St.Albert, AB

7.5% 17 51,029 NGA 2007/2008

97.4% 10 Shoppers Drug Mart(17,020)

100%

Summerwood CentreSherwood Park, AB

7.5% 30 83,911 GA 2008/2009

100% 16 Save-On-Foods (41,265),Shoppers Drug Mart(16,911)

100%

Timberlea Landing FortMcMurray, AB

8.2% 63 105,467 MIX 2008 100% 13 ATB, RegionalMunicipality of WoodBuffalo

100%

7.9% 110 240,407




rate

RioCan’spurchase

price (i)(millions)

NLA (insqft) at

RioCan’sinterest

Assetclass (ii)

YearBuilt

%Leased



RioCan’sownership

interest

Chapman Mills MarketplaceOttawa, ON (Additional12.5% interest)

6.8% 12 53,979 NFR 100% 8 Walmart (130,000), GalaxyCinemas (26,905),Winners (26,240), Staples(25,890), Loblaws*(115,000)

75%

Total Canada 7.8% 122 294,386

UNITED STATES

Cedar “Initial Portfolio” Acquisitions:

Franklin Village PlazaFranklin, MA

8.5% 46 244,974 GA/Office

1987/2005

87.2% 14 Stop & Shop (75,000),Marshalls (26,890), Bath& Body Works (2,500),Bank of America (2,550)

80%

Columbus CrossingPhiladelphia, PA

8.5% 21 113,734 GA 2001 100% 14 Super Fresh (61,506), OldNavy (25,000), AC Moore(22,000)

80%

8.5% 67 358,708

Town Square Plaza Reading,PA

8.3% 16 102,109 NFR 2008 100% 16 Giant Food Supermarkets(73,727), AC Moore(21,600)

80%

Total US 8.5% 83 460,817

First Quarter 2010Acquisitions

8.1% $205 755,203

2010 Acquisitions:

Canada 7.3% $432 1,818,643

US

Inland Western 7.7% 131 968,409

Cedar 8.0% 396 2,669,133

Kimco 7.5% 27 202,236

7.9% 554 3,839,778

2010 Acquisitions 7.6% $986 5,658,421

(i) Excludes closing costs and other acquisition related costs.

(ii) “ESC” – Enclosed Shopping Centre; “GA” – Grocery Anchored Centre; “MIX” – Mixed Use; “NGA” – Non Grocery Anchored Centre; “NFR” –

New Format Retail

(iii) Weighted avergage based on gross rental revenue

(iv) March Road is a development property that will be substantially complete in 2011; the NLA shown above is for RioCan’s share of the

completed portion of the site only. For the projected NLA upon completion of the site and other pertinent data, please refer to the

Development Properties Summary section of this MD&A.

(v) Cineplex holds a ground lease at this site.

* – Shadow Anchor



The following table provides details of debt assumed in conjunction with the acquisitions completed during the year ended

December 31, 2010.

Property name

RioCan’sownership

interest

RioCan’sshare of

debtassumed(millions)

Type ofFinancing

InterestRate Maturity

CANADABrant Power Centre 50% $ 10 First Mortgage 5.40% Jun 2015Queensway 50% 7 First Mortgage 7.13% Dec 2013

Total Canada 17 6.11%

UNITED STATES

Coppell Town Center 80% 8 First Mortgage 5.54% May 2012Suntree Square 80% 7 First Mortgage 5.54% May 2012

Total US 15 5.54%

Fourth Quarter 2010 Acquisition Related Financing $ 32 5.84%

CANADA

RioCan Gravenhurst(Additional 66.7% interest) 100% $ 11 First Mortgage 5.71% May 2015

Vaudreuil Shopping Centre 100% 11 First Mortgage 3.11% Sep 2010

Vaudreuil Shopping Centre 100% 6 First Mortgage 5.77% Sep 2022


UNITED STATES

Inland Western Portfolio:

Bear Creek Shopping Center 80% 8 First Mortgage 6.46% Apr 2017

Cypress Mill Plaza 80% 8 First Mortgage 4.83% Mar 2011New Forest Crossing 80% 8 First Mortgage 6.39% Apr 2015

Total US 24 5.89%

Third Quarter 2010 Acquisition Related Financing $ 52 5.25%

UNITED STATES

Cedar “Initial Portfolio”:

Loyal Plaza 80% $ 10 First Mortgage 7.20% Jun 2011Stop & Shop Plaza 80% 6 First Mortgage 6.17% Apr 2017

Shaw’s Plaza 80% 11 First Mortgage 5.58% Feb 2014

Second Quarter 2010 Acquisition Related Financing $ 27 6.31%

CANADA


Chapman Mills Marketplace(Additional 12.5% interest) 75% 7 First Mortgage 6.10% Jun 2014


UNITED STATES

Cedar “Initial Portfolio”:

Franklin Village Plaza 80% 37 First Mortgage 4.81% Nov 2011Columbus Crossing 80% 14 First Mortgage 6.75% Jun 2014

Total US 51 5.34%

First Quarter 2010 Acquisition Related Financing $ 58 5.43%

YTD 2010 Acquisition Related Financing:

Canada $ 52 5.35%

United States 117 5.70%

YTD 2010 Acquisition Related Financing $ 169 5.59%

RioCan has completed 1 acquisition subsequent to year end for a purchase price of approximately $5 million, adding approximately

17 thousand square feet to the Trust’s portfolio. The centre is located in Pembroke, Ontario.



Acquisitions During 2009


rate

RioCan’spurchase price(i) (millions)

NLA(in sqft)

atRioCan’sinterest

Assetclass (ii)


RioCan’sownership

interest


Lowe’s Sunridge CentreCalgary, AB

7.3% $ 20 83,603 NFR Golf Town (18,618) 100%

Edmonton WalmartEdmonton, AB

7.3% 15 118,512 NFR Walmart (208,443),Golf Town (18,009),Super Pet (10,098)

40%

Grandview CornersSurrey, BC

6.9% 91 252,889 NFR Walmart (217,278),Future Shop (25,688),The Brick (22,068),Indigo (17,912)

50%

Lethbridge WalmartLethbridge, AB

7.3% 41 279,760 NFR Walmart (213,309),Shoppers Drug Mart (17,170)

100%

7.1% 166 734,764

Cedar “Initial Portfolio” Acquisition:

Blue Mountain CommonsHarrisburg PA

8.5% 32 98,683 GA Giant Food Stores (97,707),Target* (127,279)

80%

Sunset CrossingScranton PA

8.5% 10 59,314 GA Giant Food Stores (54,333) 80%

8.5% 42 157,997

Frontenac MallKingston, ON (Additional 15% interest)

10.0% 6 84,456 GA Food Basics (39,953) 30%

Garden City Shopping CentreWinnipeg, MB

8.7% 12 90,726 ESC Canadian Tire (85,043),Winners (26,837),Cineplex (10,745),Sears* (92,604)

30%

4055-4065 Carlingview Avenue(March Road)Ottawa, ON

8.5% 5 22,509 NGA Chez Cora (3,537),Wendy’s (3,270)

100%

RioCentre BramptonBrampton, ON

7.4% 26 103,607 GA Food Basics (54,191) 100%

Fourth Quarter 2009 Acquisitions 7.5% $257 1,194,059

RioCan Beacon HillCalgary, AB (Additional 10% interest)

6.5% 16 52,793 NFR Canadian Tire (95,422),Winners/HomeSense (51,402),The Brick (39,696),Future Shop (30,398),Shoppers Drug Mart (16,722),Home Depot*/Costco* (259,000)

50%

RioCan Centre Vaughan Phase IVaughan, ON (Additional 68.75% interest)

7.5% 22 178,196 NFR Walmart (213,343) 100%

Third Quarter 2009 Acquisitions 7.1% $ 38 230,989


(ii) “ESC” – Enclosed Shopping Centre; “GA” – Grocery Anchored; “NGA” – Non Grocery Anchored; “NFR” – New Format Retail;

* – Shadow Anchor




rate

RioCan’spurchase price(i) (millions)

NLA(in sqft)

atRioCan’sinterest

Assetclass (ii)


RioCan’sownership

interest

Portfolio acquisition:

Concorde CentreLaval, QC

$ 5 31,649 GA IGA (37,396),Desjardins (12,860),Pharmacy Jean Coutu (10,000)

50%

La Prairie CentreLa Prairie, QC

6 34,541 GA IGA (47,654) 50%

Rene A Robert CentreSte Therese, QC

4 25,919 GA IGA (42,496) 50%

Sicard CentreSte Therese, QC

16 106,948 GA IGA (46,703), Pharmacy JeanCoutu (10,000)

100%

St. Jean CentreMontreal, QC

11 103,396 GA IGA (39,765) 100%

Ste Julie CentreSte Julie, QC

5 30,097 GA IGA (48,203) 50%

9.1% 47 332,550

Portfolio acquisition:

506/510 Hespeler RoadCambridge, ON

2 10,790 NGA Swiss Chalet and Harvey’s 100%

17004/17008 107thAvenue

Edmonton, AB

3 11,963 NGA Swiss Chalet and Harvey’s 100%

8.5% 5 22,753

First Quarter 2009 Acquisitions 9.0% $ 53 355,303

2009 Acquisitions 7.7% $348 1,780,351


(ii) “GA” – Grocery Anchored; “NGA” – Non Grocery Anchored;

Currently, RioCan has various acquisitions under contract. The aggregate purchase price would be approximately $46 million and

if completed, would add approximately 318,000 square feet to the Trust’s portfolio. The centres are located in Ontario, Quebec and

Massachusetts. The Trust has waived all material conditions with respect to these properties and expects to close these


Additionally, the Trust has acquisitions under contract to increase its ownership interest in 5 properties owned with Trinity. The

aggregate purchase price for the additional interest in these properties would be approximately $59 million and if acquired, would

add 360,000 square feet to the Trust’s portfolio. These centres are located in Ontario.

RioCan previously indicated its intention to purchase two properties (Red Rose Commons and Whitehall Mall); that were part of the

initial portfolio of a larger portfolio being acquired along with Cedar, however, due to a change in circumstances, management has

determined that they will no longer be pursuing these acquisitions.

Development Activities in 2010

During the three months ended December 31, 2010, RioCan completed 237,000 square feet (three months ended December 31,

2009 – 39,000 square feet) of redevelopment and development activities of which 60,000 square feet pertain to the completion of

greenfield development projects in 2010 and 178,000 square feet pertain to additional NLA added at existing properties.

During the year ended December 31, 2010, RioCan completed 262,000 square feet (year ended December 31, 2009 – 929,000

square feet) of redevelopment and development activities of which 80,000 square feet pertain to the completion of greenfield

development projects in 2010 and 181,000 square feet pertain to additional NLA added at existing properties.

In addition to its greenfield development projects, RioCan continues its urban intensification activities, primarily in the Toronto,

Ontario market.



A summary of RioCan’s 2010 transfers to Income Properties from greenfield development projects and land use intensification

activity is as follows:

NLA (in square feet) at RioCan’s InterestNLA at

100%2010

Property location

RioCan’sownership

interest TotalFourth

quarterThird

quarterSecondquarter

Firstquarter

Corbett Centre, Fredericton, NB (i) 62.5% 2,580 – – – 2,580 4,128

Corbett Centre, Fredericton, NB (i) 100% 10,527 7,826 2,701 – – 10,527

Grant Crossing, Ottawa, ON 33.3% 25,820 25,820 – – – 77,538

Lowe’s Centre Orleans, Ottawa, ON 33.3% 1,473 550 – – 923 4,423

RioCan Gravenhurst, Gravenhurst, ON (ii) 33.3% 2,630 – – 749 1,881 7,898

RioCan Gravenhurst, Gravenhurst, ON (ii) 100% 1,200 – 1,200 – – 1,200

RioCan Centre Barrie, Barrie, ON 100% 24,500 24,500 – – – 24,500

RioCan Centre Vaughan, Ph 1, Vaughan, ON 100% 1,513 – 1,513 – – 1,513

Westney Road & Taunton Road, Ajax, ON 20% 10,175 975 – 9,200 – 50,875

80,418 59,671 5,414 9,949 5,384 182,602

Land use intensification 50% – 100% 181,495 177,551 3,944 – – 180,838

261,913 237,222 9,358 9,949 5,384 363,439

(i) RioCan’s ownership interest increased from 62.5% to 100% in the second quarter of 2010.

(ii) RioCan’s ownership interest increased from 33.3% to 100% in the third quarter of 2010.

A summary of RioCan’s 2009 transfers to Income Properties from greenfield development projects and land use intensification

activity is as follows:

NLA (in square feet) at RioCan’s InterestNLA at

100%2009

Property location

RioCan’sownership

interest TotalFourth

quarterThird


Firstquarter

RioCan Centre Barrie, Barrie, ON 100% 147,423 – 5,085 – 142,338 147,423

Clappison’s Crossing, Flamborough, ON 50% 83,466 5,941 77,525 – – 166,932

Eglinton & Warden, Toronto, ON 100% 120,685 – 120,685 – – 120,685

RioCan Gravenhurst, Gravenhurst, ON 33.3% 46,052 1,311 – 18,852 25,889 138,170

Lowe’s Centre Orleans, Ottawa, ON 33.3% 18,128 18,128 – – – 54,438

RioCan Beacon Hill, Calgary, AB (i) 50% 14,960 – – – 14,960 29,920

RioCan Elgin Mills Crossing, Richmond Hill, ON 62.5% 5,115 – – 1,710 3,405 8,184

RioCan Meadows, Edmonton, AB 50% 20,066 – – – 20,066 40,132

RioCan Centre Milton, Milton, ON 100% 9,002 – 3,338 – 5,664 9,002

RioCan Centre Vaughan, Ph 1, Vaughan, ON (ii) 100% 80,999 – 5,960 6,812 68,227 259,197

Corbett Centre, Fredericton, NB 62.5% 8,091 – 3,904 4,187 – 12,946

Garrard Road & Taunton Road, Whitby, ON 100% 141,717 – – – 141,717 141,717

695,704 25,380 216,497 31,561 422,266 1,128,746

Land use intensification 15.5% to 100% 232,889 13,363 13,984 141,209 64,333 253,967

928,593 38,743 230,481 172,770 486,599 1,382,713

(i) RioCan’s ownership interest increased from 40% to 50% in the third quarter of 2009; NLA in the above table reflects transfers that occurred

prior to the acquisition of the additional 10%.

(ii) RioCan’s ownership interest increased from 31.25% to 100% in the third quarter of 2009; NLA in the above table reflects transfers that

occurred prior to the acquisition of the additional 68.75%.



Urban Intensification

Land use intensification opportunities arise from the fact that retail centres are generally built with lot coverage of approximately

25% of the underlying land. Therefore, particularly in urban markets, RioCan can obtain additional density, retail or otherwise, on

its existing property portfolio and, as the Trust already owns the underlying land, it is able to achieve relatively high returns on the

sale of non-retail use density. Significant projects underway include:

Avenue Road, Toronto, Ontario

Construction is nearing completion on RioCan’s development located at the northeast corner of Avenue Road and Fairlawn Avenue,

one of the busiest nodes in the City of Toronto. Comprising over 1.5 acres, the former retail facility has been demolished and is

being redeveloped to accommodate a mixed-use building featuring a 5.5 storey residential component, along with 21,000 square

feet of single storey retail street-front space, of which approximately 90% has been leased to-date. Tenants are expected to

commence paying rent in the second quarter of 2011. The residential component, which is owned, developed and marketed by

Tribute Communities, has a total of 81 units, of which 73 units (90%) have been sold. During the second quarter of 2010, RioCan

sold its 50% profit participation right in connection with sale of the units for proceeds of $6.3 million. RioCan will own and manage

all aspects of the retail component of the development. RioCan has arranged a $52 million construction facility of which RioCan’s

share of the balance outstanding is $11.7 million.

Queen Street and Portland Street, Toronto, Ontario

Construction is well underway on a one acre site in downtown Toronto, located in an area bound by Richmond Street to the south,

Portland Street to the east, and Queen Street to the north. This site is being developed into a mixed-use building featuring a four-

storey residential component as well as approximately 92,000 square feet of retail space on three storeys, of which 100% has been

leased to-date. The site is being developed in partnership with Tribute Communities, which owns, develops and markets the

residential component. A total of 96 residential units are available, of which 88 units (92%) have been sold. RioCan owns and will

manage the retail component of the development, which is expected to be substantially complete by the third quarter of 2011.

During the second quarter of 2010 RioCan sold its 40% profit participation right in connection with sale of the units for proceeds of

$0.9 million. In January 2009, RioCan agreed to terminate its lease with Home Depot of Canada Inc. in connection with the

proposed store at Queen and Portland for cash consideration of $11.5 million. RioCan has altered the retail portion of the

development to reflect a new retail footprint and has new leases for a 29,000 square foot Winners, a 45,000 square foot Loblaws

and an 8,000 square foot Joe Fresh. RioCan has arranged a $52 million construction loan facility of which RioCan’s share of the

balance outstanding is approximately $28 million.

Brentwood Village Shopping Centre, Calgary, Alberta

In December 2008, RioCan completed the sale of air rights and residential density associated with a 3.6 acre parcel of land

situated at the northernmost portion of the Brentwood Village Shopping Centre in Calgary, Alberta. The sale price was

$25.6 million. Brentwood Village Shopping Centre is owned in a joint venture between RioCan and Kimco. RioCan has successfully

obtained the required land use approval to permit a mixed-use development, which was a prerequisite of the sale. RioCan

recognized a gain of approximately $10 million on its interest sold. The purchaser will redevelop the site, which will involve

approximately 50,000 square feet of the existing retail being demolished and replaced with a number of mixed-used buildings, with

approximately 40,000 square feet of retail space. The RioCan and Kimco joint venture (“RioKim”) retained the ownership of the

retail component of the site.

RioCan Yonge Eglinton Centre

RioCan has launched a thorough revitalization and expansion plan at RioCan Yonge Eglinton Centre in Toronto, Ontario that will

capitalize on the area’s residential intensification, including 46,000 square feet of new retail space, a connection to the office

towers and ingress/egress to the food court and subway, improvements to parking, as well as a combined 12-storey, 210,000

square foot expansion of the office towers. In April 2010, RioCan received approval for its rezoning application for this expansion. In

August 2010, RioCan submitted plans for site plan approval, and subject to receipt of all approvals, it is expected that construction

of the new retail space can begin in 2011.



LEASING ACTIVITIES

All leasing activities have been reported for the Canadian portfolio only, unless otherwise indicated.

At December 31, 2010, RioCan’s committed occupancy rate of the total portfolio is 97.4%. Included in this rate is 407,000 square

feet of NLA that has been leased but is not paying rent, resulting in an economic occupancy rate of 96.4% which represents the

occupied NLA for which tenants are paying rent. A rent commencement timeline for the NLA which has been leased but is not

currently open is as follows:

(in thousands, except percentage amounts) Total Q1 2011 Q2 2011 Q3 2011 Q4 2011

Square feet:

NLA commencing 407 117 230 27 33

Cumulative NLA commencing 117 347 374 407

% of NLA commencing 29% 57% 7% 8%

Cumulative % total 29% 85% 92% 100%

Average net rent:

Monthly rent commencing $767 $ 237 $ 426 $ 40 $ 64

Cumulative monthly rent commencing $ 237 $ 663 $ 703 $ 767

% of rent for NLA commencing 31% 56% 5% 8%

Cumulative % total rent commencing 31% 86% 92% 100%

The annualized rental impact once these tenants take occupancy and commence paying rent is approximately $9.2 million.

RioCan has maintained consistently high occupancy rates of between 96.9% and 97.5% over the most recent eight fiscal quarters.

The historical occupancy rate broken down by property type is as follows:

2010 2009

(in percentages)Fourth

QuarterThird


Firstquarter

Fourthquarter

Thirdquarter

Secondquarter

Firstquarter

Canada

New format retail 98.7 98.2 98.7 99.2 99.4 99.1 98.9 99.1

Grocery anchored centre 97.7 97.9 97.8 96.8 96.9 97.3 97.4 97.5

Enclosed shopping centre 94.2 93.2 92.7 92.3 92.4 92.9 92.4 93.8

Non-grocery anchored centre 97.1 97.4 97.8 97.1 97.4 96.8 96.2 96.3

Urban retail 99.6 99.7 95.1 95.1 99.3 99.3 99.4 99.3

Office 91.5 92.2 93.0 95.6 95.8 96.3 95.3 96.7

Total Canada 97.3 97.0 97.0 97.0 97.4 97.3 97.1 97.5

United States

New format retail 99.0 99.6 100.0 100.0 n/a n/a n/a n/a

Grocery anchored centre 97.4 96.9 96.4 95.1 95.8 n/a n/a n/a

Non-grocery anchored centre 96.4 – – – –

Office 87.5 85.5 85.5 85.5 – n/a n/a n/a

Total United States 98.2 98.1 96.2 95.1 95.8 n/a n/a n/a

Total Portfolio 97.4 97.1 97.0 97.0 97.4 97.3 97.1 97.5

New Leasing

Approximately 502,000 square feet of vacant space was leased during the three months ended December 31, 2010 at an average

net rent of $ 16.00 per square foot compared to approximately 249,000 square feet of vacant space that was leased at an average

net rent of $ 18.10 per square foot during the three months ended December 31, 2009.

Approximately 1.7 million square feet of vacant space was leased during the year ended December 31, 2010 at an average net rent

of $ 15.89 per square foot compared to approximately 1.5 million square feet of vacant space that was also leased at an average

net rent of $ 15.89 per square foot during the year ended December 31, 2009.



A summary of RioCan’s 2010 and 2009 new leasing on the existing portfolio by property type is as follows:

Canadian Portfolio

New Leasing

2010 2010 2010 2010 2010 2009

(in thousands, except per sqft amounts)

Year todate

Fourthquarter

Thirdquarter

Secondquarter

Firstquarter

Year todate

Square feet leased:

New format retail 693 220 108 260 105 723

Grocery anchored centre 411 84 99 133 95 281

Enclosed shopping centre 387 160 89 86 52 362

Non-grocery anchored centre 26 9 15 2 – 70

Urban retail 79 27 30 13 9 23

Office 75 2 1 13 59 64

Total 1,671 502 342 507 320 1,523

Average net rent per square foot:

New format retail $ 18.36 $ 18.42 $ 18.05 $ 17.14 $ 21.56 $ 16.92

Grocery anchored centre 14.48 14.77 13.32 14.64 15.24 15.22

Enclosed shopping centre 13.09 12.37 15.51 11.63 13.56 14.06

Non-grocery anchored centre 12.51 13.33 11.22 18.57 – 14.11

Urban retail 21.09 22.81 17.01 19.71 27.08 27.18

Office 11.59 12.50 12.50 12.28 11.39 15.64

Total $ 15.89 $ 16.00 $ 15.61 $ 15.50 $ 16.66 $ 15.89

United States Portfolio

New Leasing

2010 2010 2010 2010 2010 2009


Year todate

Fourthquarter

Thirdquarter

Secondquarter

Firstquarter

Year todate

Square feet leased:

New format retail 19 17 2 – n/a n/a

Grocery anchored centre 26 9 10 7 n/a n/a

Office 1 – – 1 n/a n/a

Total 46 26 12 8 n/a n/a

Average net rent per square foot (US dollars):

New format retail $ 22.74 23.09 $ 19.91 $ – n/a n/a

Grocery anchored centre 18.69 18.00 19.41 18.48 n/a n/a

Office 22.91 – – 22.91 n/a n/a

Total $ 20.48 21.31 $ 19.50 $ 19.23 n/a n/a

Renewal Leasing

Approximately 950,000 square feet was renewed during the three months ended December 31, 2010 at an average rent increase of

$ 0.57 per square foot, representing an increase of 4.5%, compared to approximately 672,000 square feet at an average rent

increase of $ 1.23 per square foot in the three months ended December 31, 2009, representing an increase of 9.1%. Of the

approximately 950,000 square feet that was renewed during the three months ended December 31, 2010, approximately 379,000

square feet (40%) was renewed at fixed rates. The average rent increase for these leases was $0.20 per square foot, representing

an increase of 2.1%. Approximately 571,000 square feet (60%) was renewed at market rents. The average rent increase for these

leases was $0.82 per square foot including 217,000 square feet that renewed at the expiring rents and 78,000 square feet that were

renewed at lower rents. Of these leases, 191,000 square feet are located in secondary markets. Also, 104,000 square feet

represents an office tenant at Lawrence Square, Toronto, which renewed at expiring rents. For the three months ended



December 31, 2010, RioCan retained approximately 93.3% of the expiring leases compared to the fourth quarter of 2009, which had

a renewal retention rate of approximately 89.8%.

Approximately 3.8 million square feet was renewed during the year ended December 31, 2010 at an average rent increase of

$1.21 per square foot, representing an increase of 8.6%, compared to approximately 2.7 million square feet at an average rent

increase of $1.04 per square foot in the year ended December 31, 2009, representing an increase of 7.2%. For the year ended

December 31, 2010, RioCan retained approximately 90.9% of the expiring leases compared to the year ended December 31, 2009,

which had a renewal retention rate of approximately 92.1%.

A summary of RioCan’s 2010 and 2009 renewals by property type is as follows:

Canadian Portfolio

Renewals

2010 2010 2010 2010 2010 2009


Year todate

Fourthquarter

Thirdquarter

Secondquarter

Firstquarter

Year todate

Square feet renewed:

New format retail 1,465 391 310 361 403 893

Grocery anchored centre 842 184 234 140 284 756

Enclosed shopping centre 1,129 254 319 344 212 630

Non-grocery anchored centre 132 1 66 45 20 119

Urban retail 63 8 11 24 20 48

Office 134 112 1 10 11 209

Total 3,765 950 941 924 950 2,655

Average net rent per square foot:




Non-grocery anchored centre 16.27 14.00 17.02 16.58 13.17 13.65

Urban retail 35.28 27.40 43.58 45.08 22.55 27.69

Office 12.64 12.67 19.50 14.69 10.06 10.07

Total $ 15.35 $ 13.16 $ 15.91 $ 15.88 $ 16.49 $ 15.51

United States Portfolio

Renewals

2010 2010 2010 2010 2010 2009


Year todate

Fourthquarter

Thirdquarter

Secondquarter

Firstquarter

Year todate

Square feet renewed*:

Grocery anchored centre 140 21 104 2 13 n/a

Office 2 – – – 2 n/a

Total 142 21 104 2 15 n/a

Average net rent per square foot (US dollars):

Grocery anchored centre $ 6.42 $ 18.38 $ 2.95 $ 16.88 $ 12.20 n/a

Office 23.94 – – – 23.94 n/a

Total $ 6.72 $ 18.38 $ 2.95 $ 16.88 $ 15.32 n/a

Average net increase rent per square foot (US dollars) $ 0.30 $ 0.88 $ 0.02 $ 2.50 $ 1.15 n/a

Percentage increase in average net rent per sqft 4.7% 5.0% 0.7% 17.4% 8.1% n/a

* All renewals were made at market rates.



Including anchor tenants, the components of renewal activity for the Canadian portfolio for the three months ended December 31,

2010 by property type are as follows:

(in thousands, except per sqft amounts) Total

Newformat

retail

Groceryanchored

centre

Enclosedshopping

centre

Non-grocery

anchoredcentre

Urbanretail Office

Renewals at market rental rates:

Square feet renewed 571 169 53 228 1 8 112

Average net rent per sqft $ 15.27 $19.12 $ 17.83 $ 12.63 $ 14.00 $ 27.40 $ 12.67

Increase in average net rent per sqft $ 0.82 $ 1.86 $ 1.84 $ (0.12) $ 2.00 $ 5.72 $ 0.31

Fixed rental rate options in favour of our tenants:

Square feet renewed 379 222 130 27 – – –

Average net rent per sqft $ 9.98 $ 9.94 $ 8.80 $ 16.06 $ – $ – $ –

Increase in average net rent per sqft $ 0.20 $ 0.27 $ – $ 0.65 $ – $ – $ –

Total:

Square feet renewed 950 391 183 255 1 8 112


Increase in average net rent per sqft $ 0.57 $ 0.96 $ 0.53 $ (0.04) $ 2.00 $ 5.72 $ 0.31

Percentage increase in average net rent per sqft 4.5% 7.4% 4.9% (0.3)% 16.7% 26.4% 2.5%

Including anchor tenants, the components of renewal activity for the Canadian portfolio for the year ended December 31, 2010 by

property type are as follows:


Newformat

retail

Groceryanchored

centre

Enclosedshopping

centre

Non-grocery

anchoredcentre

Urbanretail Office

Renewals at market rental rates:

Square feet renewed 2,226 845 427 645 119 56 134


Increase in average net rent per sqft $ 1.79 $ 2.19 $ 1.76 $ 1.07 $ 2.05 $ 6.83 $ 0.51

Fixed rental rate options in favour of our tenants:

Square feet renewed 1,539 620 415 484 13 7 –

Average net rent per sqft $ 10.18 $13.79 $ 9.18 $ 6.00 $ 15.12 $ 29.70 $ –

Increase in average net rent per sqft $ 0.37 $ 0.59 $ 0.21 $ 0.22 $ 1.00 $ 0.09 $ –

Total:

Square feet renewed 3,765 1,465 842 1,129 132 63 134


Increase in average net rent per sqft $ 1.21 $ 1.51 $ 1.00 $ 0.71 $ 1.95 $ 6.06 $ 0.51

Percentage increase in average net rent per sqft 8.6% 8.9% 7.1% 7.2% 13.6% 20.7% 4.2%



Lease Expiries

RioCan’s lease expiries for the Canadian portfolio by property type as at December 31, 2010 are as follows:

Lease expiries

(in thousands, except per sqft and percentage amounts)

PortfolioNLA 2011 2012 2013 2014 2015

Square feet:

New format retail 17,963 1,035 1,240 1,447 1,499 2,011

Grocery anchored centre 7,591 919 1,022 591 1,267 1,062

Enclosed shopping centre 6,490 697 654 670 741 858

Non-grocery anchored centre 1,901 93 119 201 143 310

Urban retail 1,320 52 141 155 287 27

Office 1,583 223 109 172 164 100

Total 36,848 3,019 3,285 3,236 4,101 4,368

Square feet expiring/Portfolio NLA 8.2% 8.9% 8.8% 11.1% 11.9%

Average net rent per occupied square foot:





Urban retail 20.74 23.08 29.21 15.73 17.89 34.20

Office 12.40 12.41 11.31 11.13 13.19 12.82

Total average net rent per sqft $ 14.82 $ 15.58 $ 15.63 $ 16.26 $ 15.54 $ 14.41

RioCan’s lease expiries for the US portfolio, at RioCan’s interest, as at December 31, 2010 are as follows:

Lease expiries

(in thousands, except per sqft and percentage amounts)

PortfolioNLA (i) 2011 2012 2013 2014 2015

Square feet:

New format retail 2,356 31 70 130 189 176

Grocery anchored centre 1,407 90 95 52 178 25

Non-grocery anchored centre 183 9 8 19 32 10

Office 52 16 4 10 4 –

Total 3,998 146 177 211 403 211

Square feet expiring/Portfolio NLA 3.7% 4.4% 5.3% 10.1% 5.3%

Average net rent per occupied square foot (US$):




Office 23.02 29.45 26.20 31.52 23.76 –

Total average net rent per square foot $ 14.06 $ 20.31 $ 16.72 $ 17.25 $ 12.55 $ 11.14

(i) Represents 80% ownership share.



The components of RioCan’s Canadian and US lease expiries for 2011 by property type are as follows:


Newformat

retail

Groceryanchored

centre

Enclosedshopping

centre

Non-grocery

anchoredcentre

Urbanretail Office

2011 expiries at market rental rates:

Square feet expiring 2,074 696 581 490 90 23 194

Average net rent per sqft $ 17.78 $ 19.91 $ 17.98 $ 15.44 $ 17.57 $ 31.96 $ 13.87

2011 expiries with fixed rental rate options

in favour of our tenants:

Square feet expiring 1,091 370 428 207 12 29 45

Average in-place net rent per sqft $ 12.02 $ 15.80 $ 12.24 $ 4.22 $ 12.54 $ 15.95 $ 12.10

Average renewal net rent per sqft $ 12.57 $ 16.86 $ 12.39 $ 4.60 $ 13.51 $ 17.55 $ 12.10

Increase in average net rent per sqft $ 0.55 $ 1.06 $ 0.15 $ 0.38 $ 0.97 $ 1.60 $ –

Total

Square feet expiring 3,165 1,066 1,009 697 102 52 239

Average net rent per sqft $ 15.79 $ 18.48 $ 15.54 $ 12.11 $ 16.98 $ 23.08 $ 13.54

Contractual Rent Increases

Certain of RioCan’s leases allow for periodic increases in rates during the term of the leases. Contractual rent increases in each

year for the next five years are as follows:

For the years ending

(in millions) 2011 2012 2013 2014 2015

Net increase in contractual rent receipts $ 4 $ 3 $ 3 $ 3 $ 3

Tenant Vacancies

RioCan endeavours to diversify its tenant base by location, by property type, by anchor type and by minimizing the degree of

reliance on any single tenant. In the regular course of business, RioCan will, however, encounter tenants that are subject to

restructuring, insolvency or bankruptcy activities. In most cases, rental revenue continues to be paid to RioCan by, or on behalf of,

the tenant. RioCan actively monitors such situations and, in those cases where vacancies result, RioCan endeavours to replace

tenants as quickly as possible at economically similar or better lease terms.

In 2010, RioCan experienced vacancies of approximately 1,028,000 square feet, excluding lease buyouts, of which RioCan’s interest

was 843,000 square feet. The average gross rent on its ownership interest was $26.65 per square foot. Of this space, as at

December 31, 2010, approximately 505,000 square feet has been re-leased to new tenants, of which RioCan’s interest was 399,000

square feet, at an average gross rent of $27.79 per square foot. As a result, 524,000 square feet remains unleased, of which

RioCan’s interest is 444,000 square feet which represents approximately 1% of RioCan’s NLA at December 31, 2010. RioCan

continues to market the balance of the space, with the expectation that the majority of the space will be re-leased in 2011.

RioCan’s vacancies in 2010 included 545,000 square feet of unanticipated vacancies (440,000 square feet at RioCan’s interest)

which is down from 945,000 square feet (692,000 square feet at RioCan’s interest) of unanticipated vacancies incurred in 2009.

Tenant vacancies for which lease cancellation fees of $12.7 million were received by RioCan totalled 484,000 square feet of vacated

NLA (459,000 square feet at RioCan’s interest) at an average net rent of $12.59 per square foot ($12.33 per square foot at RioCan’s

interest) for the year ended December 31,2010. Included in the NLA of 484,000 square feet are the following:

• 125,000 square foot space which was vacated on June 30, 2010 for which RioCan received a $5.0 million lease cancellation fee at

its RioCan Scarborough Shopping Centre. The 125,000 square foot space has been re-leased to two new tenants, a 45,000 square

foot LA Fitness and a 65,000 square foot supermarket operating under the name of “Oriental Grocery Store”, at higher rental

rates.

• 106,000 square foot space which was vacated on September 30, 2010 for which RioCan received a $ 3.7 million lease cancellation

fee at its RioCan West Ridge Shopping Centre. 23,000 square feet has been re-leased to Value Village at higher rental rates.

RioCan is in discussions with other tenants for the balance of the space.

To date, 320,000 square feet (295,000 square feet at RioCan’s interest) have been re-leased at an average net rent of $16.01 per

square foot ($15.58 per square foot at RioCan’s interest).



Capital Expenditures on Income Properties

Capital spending for new property acquisitions, greenfield developments and the redevelopment of RioCan’s existing properties to

create and/or extract additional value are expected to improve the overall earnings capacity of the property portfolio. RioCan

considers such amounts to be investing activities. As a result, RioCan does not expect such expenditures to be funded from cash

flows from operating activities and does not consider such amounts as a key determinant in setting the amount that is distributed

to its unitholders.

Productive capacity maintenance capital expenditures refer to capital expenditures that are necessary to maintain the existing

earnings capacity of the Trust’s property portfolio and are dependent upon many factors, including, but not limited to the age and

location of the income properties. As at December 31, 2010, the estimated weighted average age of the income property portfolio is

14.9 and 11.3 years for the Canadian and US portfolios respectively (December 31, 2009 – 14.6 years for the Canadian portfolios).

Productive capacity maintenance capital expenditures are considered in determining the amount that is distributed to unitholders

and primarily consist of:

• Tenant installation costs

RioCan’s portfolio requires ongoing investments of capital for tenant installation costs related to new and renewal tenant leases.

Tenant installation costs consist of tenant improvements and other leasing costs, including certain costs associated with

RioCan’s internal leasing professionals, primarily compensation costs.

Investments of capital for tenant installation costs for RioCan’s income properties are dependent upon many factors, including,

but not limited to, the lease maturity profile, unforeseen tenant bankruptcies and the location of the income properties. Current

year expenditures include the payment of amounts concerning lease deals completed in 2009 for unanticipated tenant

bankruptcies or store closures, which are more expensive on a per square foot basis than normal tenant rollovers.

• Recoverable and non-recoverable maintenance capital expenditures

RioCan also invests capital on a continuous basis to physically maintain the income properties. Typical costs incurred are for

roof replacement programs and the resurfacing of parking lots. Tenant leases generally provide for the ability to recover a

significant portion of such costs from tenants over time as property operating costs. RioCan expenses or capitalizes these

amounts to income properties, as appropriate.

As the majority of the portfolio is located in Canada and the northeastern US, the majority of such activities occur when weather

conditions are favourable. As a result, these expenditures are not consistent throughout the year.

Expenditures for tenant installation costs and recoverable and non-recoverable maintenance capital included in income properties

are as follows:



Normalizedexpenditures

for 2010

Estimatedexpenditures

for 2011

Tenant installation costs $ 31 $ 25 $16 to $20 $20 to $24

Maintenance capital expenditures:

Recoverable from tenants 10 5 $12 to $14 $14 to $16

Non-recoverable 7 3 $3 to $4 $4 to $5

$ 48 $ 33 $31 to $38 $38 to $45

Tenant installation costs incurred in 2010 include approximately $11.2 million of leasing costs that relate to 2009 lease deals, of

which approximately $5.2 million was for space vacated by Petcetera and Linens ‘N Things.

Activities with Partners Included in Income Properties

Co-ownership activities represent real estate investments in which RioCan owns an undivided interest and where it has joint

control with its partners. RioCan records its proportionate share of assets, liabilities, revenue and expenses of all co-ownerships in

which it participates. RioCan consolidates 100% of the accounts of the properties it acquired with Cedar. Where there is a party

with a minority investment in a property that the Trust controls, that minority interest is reflected as “Non-controlling interest” in

the consolidated financial statements.

The Trust’s co-ownership arrangements are governed by co-ownership agreements with its various partners. RioCan’s standard

co-ownership agreement provides exit and transfer provisions, including, but not limited to, buy/sell and/or right of first offers that

allow for the unwinding of these co-ownership arrangements should the circumstances necessitate.

Generally, the Trust is only liable for its proportionate share of the obligations of the co-ownerships in which it participates, except

in limited circumstances. Credit risk arises in the event that co-owners default on the payment of their proportionate share of such

debts. Co-ownership agreements will typically provide for an option on the part of a non-defaulting co-owner to advance a default



loan on behalf of the defaulting co-owner. These credit risks are mitigated as the Trust has recourse against the asset under its

co-ownership agreements in the event of default by its co-owners, in which case the Trust’s claim would be against both the

underlying real estate investments and the co-owners that are in default.

RioCan’s proportionately consolidated co-ownerships and consolidated joint ventures are as follows:

Summary of Joint Venture Information

(thousands of square feet, except other data)As at December 31, 2010

RioCan’sownership

interest

Numberof income

propertiesassets (i)

NLA ofincome

propertiesassets at

100%

Numberof PUD

projects (i)

NLA uponcompletion

of PUDprojects at

100%

Kimco Realty Corporation (“Kimco”) 15.5% – 50% 45 9,247 – –

Trinity Development Group (“Trinity”) 25% – 75% 7 2,495 7 1,527

Canada Pension Plan Investment Board (“CPPIB”) 50% 4 1,800 – –

CPPIB/Trinity 25% – 37.5% – – 3 2,870

Devimco Group Inc. (“Devimco”) 50% 1 1,128 – –

Sun Life Financial (“Sun Life”) 20% – 40% 2 759 1 173

Kimco/Dunhill Partners, Inc (“Dunhill”) 31.7% 1 638 – –

Inland Western REIT (“Inland Western”) 80% 9 1,211 – –

Other 30% – 50% 16 3,621 1 1,061

85 20,899 12 5,631

Cedar Shopping Centers, Inc. (ii) 80% 21 3,534 – –

106 24,433 12 5,631

(i) The number of properties under development (“PUD”) includes those properties with phased development where tenancies have already

commenced operations, as per the “Development Properties Summary”.

(ii) Consolidated for financial reporting purposes.

Total Assets by Joint-Venture – proportionate share*

As at December 31, 2010

December 31,2009(millions of dollars)

Incomeproperties

Propertiesunder

development

Propertiesheld for

resale Other (i) Total

Kimco $ 577 $ 10 $ – $ 14 $ 601 $ 610

Trinity 288 80 – 8 376 385

CPPIB 229 4 – 4 237 240

CPPIB/Trinity – 25 – 2 27 26

Devimco 134 – – 6 140 146

Sun Life 41 4 – 1 46 43

Kimco/Dunhill 26 – – 2 28 –

Inland Western 126 – – 5 131 –

Other 229 14 – 5 248 149

Total Co-ownership 1,650 137 – 47 1,834 1,599

Cedar 531 – – 19 550 45

Total Joint-Venture $ 2,181 $ 137 $ – $ 66 $ 2,384 $ 1,644

* Excluding Cedar which is shown at 100%.

(i) Primarily includes cash, rents receivable and other operating related expenditures receivable from tenants.



Total Liabilities by Joint-Venture - proportionate share*


As atDecember 31,

2010December 31,

2009

Kimco $ 487 $ 475

Trinity 223 217

CPPIB 63 2

Devimco 100 97

Sun Life 16 3

Kimco/Dunhill 16 –

Inland Western 83 –

Other 165 113

1,153 907

Cedar 325 2

$ 1,478 $ 909


Net Operating Income by Joint Venture – proportionate share*



Kimco $ 66 $ 63

Trinity 29 25

CPPIB 19 11

Devimco 10 10

Sun Life 3 2

Kimco/Dunhill 1 –

Inland Western 2 –

Other 15 12

145 123

Cedar 24 –

$ 169 $ 123


Kimco Realty Corporation

Kimco Realty Corporation, a publicly traded real estate investment trust, owns and operates North America’s largest portfolio of

neighbourhood and community shopping centers. The company has specialized in shopping center acquisitions, development and

management for 50 years. For more information about Kimco please visit its website at www.kimcorealty.com.

Trinity

Founded by John Ruddy, Trinity has played a prominent role in the development of new format regional retail centres across

Canada. The company also continues to construct and lease high quality food-anchored neighbourhood and convenience centres in

several Canadian markets. For more information about Trinity please visit its website at www.trinity-group.com.

CPPIB

CPPIB is a professional investment management organization based in Toronto whose purpose is to invest the assets of the

Canada Pension Plan (“CPP”) in a way that maximizes returns without undue risk of loss. For more information about CPPIB

please visit its website at www.cppib.ca.

Devimco Group Inc. (“Devimco”)

Devimco is a commercial developer based in the province of Quebec, Canada. The Trust’s 50% joint investment in the Quartier

DIX30 centre located in Brossard, Quebec, located south of Montreal with Devimco, Hydro Quebec, and its Quebec based pension

fund partners, comprises approximately 2 million square feet.

Cedar

Cedar is a self-managed real estate investment trust focused on grocery-anchored shopping centres and drug store-anchored

convenience centres located predominantly in the North-eastern and Mid-Atlantic states of the US. For more information about

Cedar please visit its website at www.cedarshoppingcenters.com.



Sun Life

Sun Life is a leading international financial services organization providing a diverse range of protection and wealth accumulation

products and services to individuals and corporate customers. Chartered in 1865, Sun Life and its partners today have operations

in key markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan,

Indonesia, India, China and Bermuda. For more information about Sun Life please visit its website at www.sunlife.ca.

Inland Western

Inland Western Retail Real Estate Trust Inc. is a self-administered, publicly registered, non-listed real estate investment trust.

Inland Western is focused on the acquisition, development and management of retail properties, including lifestyle, power,

neighbourhood and community centers, in addition to single-user net lease properties, in national locations demonstrating strong

demographics. For more information about Inland Western please visit its website at www.inland-western.com.

Dunhill

Dunhill is a commercial real estate brokerage and investment firm that currently owns and manages more than 4 million square

feet of retail properties. Dunhill specializes in the acquisition, sale, leasing and management of commercial property. For more

information about Dunhill please visit its website at www.dunhillpartners.com.

Other joint investments

RioCan also has a variety of partners in addition to those noted above such as, Canada Mortgage and Housing Corporation Pension

Fund, First Gulf Corporation, Bayfield Realty Advisors, and Quebec Retail Properties Inc.

Equity Investments in Income Properties

Equity investments are comprised of real estate investments where RioCan exercises significant influence, but not control or joint

control, over the investment. These investments are accounted for using the equity method, whereby the original cost of the

investment is adjusted for RioCan’s share of net earnings, capital advances and distributions receivable or received. Equity

accounted for investments are $4.5 million at December 31, 2010 and $7.8 million at December 31, 2009.

RioCan has a 15% equity interest ($0.3 million at December 31, 2010 and $4.0 million at December 31, 2009) in RioCan Retail Value

Limited Partnership (“RRVLP”). The residual interest represents the Trust’s interest in RRVLP’s remaining working capital.

RRVLP was formed in 2003 with 60% participation by the Teachers Insurance and Annuity Association-College Retirement Equities

Fund and 25% participation by the Ontario Municipal Employees Retirement System. By December 31, 2005, the partners had

committed the full capital resources of RRVLP, which capital was invested in 12 centres aggregating approximately 3.4 million

square feet.

On September 23, 2010, RRVLP sold Niagara Square, Niagara Falls, Ontario, for $47 million to a joint venture in which RioCan

holds a 30% interest. In consideration for arranging the transaction, RioCan was paid a fee of $0.7 million by the purchaser. RioCan

will continue to manage the asset. As at December 31, 2010, all of the 12 properties held by RRVLP have been sold, which gains

were reported as properties held for resale.

Properties Under Development

RioCan has a greenfield development program primarily focused on new format and urban retail centres. The provisions of the

Trust’s Declaration have the effect of limiting direct and indirect investments, net of related mortgage debt, in non-income

producing properties to no more than 15% of the Adjusted Unitholders’ Equity of the Trust. “Adjusted Unitholders’ Equity” is a

non-GAAP measure defined in RioCan’s Declaration as the amount of unitholders’ equity plus the amount of accumulated

amortization of income properties recorded by the Trust, calculated in accordance with GAAP. At December 31, 2010, RioCan was

in compliance with this restriction. RioCan undertakes such developments on its own, or on a co-ownership basis, with established

developers to whom the Trust generally provides mezzanine financing. With some exceptions for land in the high growth markets,

generally RioCan will not acquire or fund significant expenditures for undeveloped land unless it is zoned and an acceptable level

of space has been pre-leased or pre-sold. An advantage of unenclosed, new format retail is that it lends itself to phased

construction keyed to leasing levels, which avoids the creation of meaningful amounts of vacant space. As a normal part of

operations, RioCan also expands and redevelops components of existing shopping centres to create and/or extract additional

value.

The costs related to these redevelopment and development activities are comprised of acquisition costs, third party and internal

costs directly related to the development and initial leasing of the properties, including applicable salaries and other direct costs,

property taxes, interest on both specific and general debt, and all property revenues and expenses during the development period.



The change in the net carrying amount is as follows:



Properties under development:

Balance, beginning of year $ 263 $ 315

Acquisitions 40 1

Development expenditures (i) 80 78

Completion of properties under development (51) (158)

Transfers from income properties 53 17

Transfers from properties held for resale – 12

Dispositions and other (14) (2)

Properties under development, end of year $ 371 $ 263

Properties held for resale:


Development expenditures and other 7 7

Transfers to income properties – (47)

Dispositions (8) (4)

Properties held for resale, end of year $ 8 $ 9

(i) Development expenditures for the year ended December 31, 2009 were reduced by the $11.5 million lease termination payment on the Queen

and Portland property.

Properties under development and properties held for resale include:

As at December 31, 2010 As at December 31, 2009

Propertiesunder

development

Propertiesheld for

resale Total

Propertiesunder

development

Propertiesheld for

resale Total

Greenfield properties less than 90% complete (i) $ 183 $ 7 $ 190 $ 145 $ – $ 145

Greenfield properties more than 90% complete 9 – 9 7 – 7

Redevelopment of income properties and land use

intensification 179 – 179 112 – 112

Income properties and urban intensification – 1 1 – 9 9

$ 371 $ 8 $ 379 $ 264 $ 9 $ 273

(i) Included in ‘Development Properties Summary’ table.



Development Properties Summary

As at December 31, 2010, RioCan had ownership interests in 10 greenfield development projects that will, upon completion,

comprise approximately 8.1 million square feet, of which RioCan’s ownership interest will be approximately 3.0 million square feet.

The change in RioCan’s owned interest in its greenfield development pipeline is as follows:

(thousands of square feet)


Properties under development:

Balance, beginning of year 2,956 2,811

Acquisitions 589 –

Substantial completion of greenfield development projects (261) (250)

Transfer from (to) properties held for resale (25) 431

Disposition of properties under development (75) –

Other (163) (36)

Properties under development, end of year 3,021 2,956

Properties held for resale:

Balance, beginning of year – 610

Substantial development of greenfield development projects – (147)

Dispositions – (32)

Transfer from (to) properties under development 25 (431)

Other – –

Properties held for resale, end of year 25 –

Balance, end of year 3,046 2,956

On an individual development basis, the majority of the projects are estimated to generate yields of approximately 7% to 11%. On

an aggregate basis, RioCan expects these development projects to generate a weighted average net operating income yield of 8.5%

to 9.5%. Capital expenditures for greenfield development projects for 2011 are estimated to be approximately $25 million before

construction financing, or approximately $15 million, net of current construction financing arranged. For 2011, RioCan expects to

fund approximately $15 million of certain partners’ costs under the Trust’s mezzanine lending program, primarily with Trinity.

During 2010, total costs incurred and mezzanine loans advanced were approximately $100 million.

RioCan is committed to property development and redevelopment opportunities and is focused on completing the construction of

the development pipeline underway, on time and on budget, and continuing to make progress on leasing. Commencement of

construction for several of the development projects have been deferred until economic conditions warrant. Potential anchor

tenants are currently more cautious in committing to new developments, which will impact the timing of several developments, as

RioCan will not commence construction until it has secured the requisite leasing commitments and appropriate risk-adjusted

returns.

RioCan’s estimated development project square footage and development costs are subject to change, which changes may be

material to the Trust, as assumptions regarding, among other items, anchor tenants, land sales to shadow anchors, tenant rents,

building sizes, project completion timelines, availability and cost of construction financing, and project costs, are updated

periodically based on revised site plans, the cost tendering process and continuing tenant negotiations.

During 2010, there has been increased activity in certain greenfield development projects including: Cimarron Shopping Centre,

Okotoks, AB, Lowe’s Centre Orleans, Ottawa, ON, and Grant Crossing, Ottawa, ON. RioCan expects to launch the St. Clair Avenue

and Weston Road project in 2011.

Development activity is also expected to increase over the next 2 to 5 year period as a result of RioCan’s recent announcement to

form an exclusive joint venture with Tanger for the acquisition, development and leasing of sites across Canada which are suitable

for development or redevelopment as outlet shopping centres.

Avenue RoadToronto, Ontario

Construction is nearing completion on RioCan’s development located at the northeast corner of Avenue Road and Fairlawn Avenue

in one of the busiest nodes in the City of Toronto. The former retail facility has been demolished and is being redeveloped to

accommodate a mixed-use building featuring a 5.5 storey residential component, along with 21,000 square feet of single storey

retail street-front space. The project is co-developed by RioCan and Tribute Communities.



Cimarron Shopping CentreOkotoks, Alberta

This site is currently being developed into a 433,000 square foot new format retail centre as a joint venture with Trinity and Tristar.

The site is anchored by a 93,000 square foot Home Depot which owns its own store and operates as part of the overall site. A

151,000 square foot Costco, which also owns its own store, commenced operations in the third quarter of 2010. RioCan’s ownership

interest in the property is 50%.

Flamborough Walmart CentreHamilton, Ontario

This 31-acre site is currently being developed into a 317,000 square foot new format retail centre. The site is anchored by a 99,000

square foot Rona, which commenced operations in the fourth quarter of 2007 and a 151,000 square foot Wal-Mart which

commenced operations in the third quarter of 2009. An additional 50,000 square feet of retail space will be developed at the

property. RioCan purchased Trinity’s interest in the property in the second quarter of 2010.

Corbett CentreFredericton, New Brunswick

This 26 acre site, acquired by way of a 66-year long-term lease, is currently being developed into a 474,000 square foot new format

retail centre. The site is anchored by Home Depot, which owns its own store and operates as part of the overall site. A Costco,

which also owns its own store, will commence operations in 2011. RioCan purchased Trinity’s interest in the property in the second

quarter of 2010.

East HillsCalgary, Alberta

This 148 acre site is currently being developed into a 1.6 million square foot regional new format retail centre. The East Hills

development is planned in three phases. Phases I and III comprise approximately 111 acres and the ownership structure is CPPIB

37.5%, RioCan 37.5%, Trinity 12.5% and Lansdowne 12.5%. Phase II, comprises approximately 37 acres, and the ownership

structure is CPPIB 37.5%, Tristar 25%, RioCan 16.7%, Trinity 8.3% and Lansdowne 12.5%. Phases I, II and III will ultimately form an

integrated site.

Eglinton Avenue and Warden AvenueToronto, Ontario

Located at the northeast corner of Eglinton Avenue East and Warden Avenue, the site is currently being developed into a 170,000

square foot new format retail centre anchored by a 116,000 square foot Zellers which commenced operations in the third quarter

of 2009. A 23,000 square foot Petsmart and a 5,000 square foot TD Bank commenced operations in the fourth quarter of 2010. An

additional 26,000 square feet of retail space will be developed at the property.

Grant CrossingOttawa, Ontario

This 33 acre site is currently being developed into a 401,000 square foot new format retail centre as a joint venture with Trinity and

Shenkman Corporation. The site will be anchored by Lowe’s, which will own its own store and operate as part of the overall site.

Lowe’s will commence operations in early-2011. A 31,000 square foot Winners, a 26,000 square foot Homesense and a 22,000

square foot Michael’s commenced operations in the fourth quarter of 2010. RioCan’s ownership interest in the property is 33.3% as

at December 31, 2010 however, RioCan will purchase an additional 13.3% interest in the property from each of Trinity and

Shenkman Corporation in the first quarter of 2011.

Highway 401 and Thickson RoadWhitby, Ontario

This site is currently being developed into a 205,000 square foot new format retail centre as a joint venture with Trinity and The

Wynn Group. The property is well located with easy access off Highway 401. The site is anchored by a 99,000 square foot Rona

store, which commenced operations in the fourth quarter of 2007. A portion of the site totalling 27 acres was sold to Metrolinx in

the fourth quarter of 2010. RioCan’s ownership interest in the property is 25% as at December 31, 2010.

JacksonportCalgary, Alberta

Jacksonport, located at 36th Street NE and Country Hills Boulevard NE in Calgary, is a 105 acre development that will consist

predominately of new format retail. Upon completion, the development is expected to feature approximately 1.1 million square feet

of retail space. A 50% interest in this property was sold to the CPPIB in June 2008 and a 25% interest has been retained by each of

Trinity and RioCan.



March RoadOttawa, Ontario

This 11 acre site is currently being developed into a 109,000 square foot new format retail centre as a joint venture with the Trinity.

The property currently consists entirely of a 15,000 square foot Pharma Plus. The property will be anchored by a 51,000 square foot

Sobeys that will be developed in 2011. RioCan’s ownership interest in the property is 50%.

Queen Street and Portland StreetToronto, Ontario

Construction is well underway on a one acre site in downtown Toronto, located in an area bound by Richmond Street to the south,

Portland Street to the east, and Queen Street to the north. This site is being developed into a mixed-use building featuring a four-

storey residential component as well as approximately 91,000 square feet of retail space on three storeys. Loblaws and Winners

will anchor the site. The site is being developed with Tribute Communities, which owns the residential component.

Lowe’s Centre OrleansOttawa, Ontario

This 39 acre site is currently being developed into a 397,000 square foot new format retail centre as a joint venture with Trinity and

Shenkman Corporation. The site is anchored by a 142,000 square foot Lowe’s that commenced operations in the fourth quarter of

2009. Lowe’s own its own store which operates as part of the overall site. In addition, a 41,000 square foot Empire Theatres

commenced operations in December 2009. RioCan’s ownership interest in the property is 33.3% as at December 31, 2010 however,

RioCan will purchase an additional 13.3% interest in the property from each of Trinity and Shenkman Corporation in the first

quarter of 2011.

RioCan Centre VaughanVaughan, Ontario

This 54 acre site is currently being developed into a 561,000 square foot new format retail centre that is anchored by a 213,000

square foot Wal-Mart Supercentre that opened in the first quarter of 2009. The site is being developed with our partners, Trinity

and Strathallen Capital Corporation. RioCan purchased Trinity and Strathallen Capital Corporation’s interests in phase one of the

property in September 2009. Phase one of the project features approximately 261,000 square feet and is substantially complete.

RioCan’s ownership interest in phase two of the property is 31.25%.

RioCan GravenhurstTalisman Drive and Edward Street, Gravenhurst, Ontario

This 29 acre site is currently being developed into a 301,000 square foot new format retail centre. The site is anchored by a 76,000

square foot Canadian Tire and a 41,000 square foot Sobeys. RioCan purchased Trinity’s and The Otis Group of Companies’ interests

in the third quarter of 2010.

RioCan RenfrewO’Brien Road and Gillan Street, Renfrew, Ontario

This 14 acre site is currently being developed into a 210,000 square foot retail strip plaza. The site is anchored by a 74,000 square

foot Loblaws (which owns its own lands) and is expected to be accompanied by 136,000 square feet of ancillary retail space.

Tenants totalling approximately 53,000 square feet commenced operations as at December 2010.

St. Clair Avenue and Weston RoadToronto, Ontario

The St. Clair and Weston development benefits from a well-established urban node at the intersection of St. Clair Avenue and

Weston Road. The 20 acre site is expected to ultimately feature approximately 484,000 square feet of space. The project concept

features a unique urban, two-storey retail prototype that has been successfully utilized in the United States. A 50% interest in this

property was sold to the CPPIB in June 2008 and a 25% interest has been retained by each of Trinity and RioCan.

StouffvilleStouffville, Ontario

This 24 acre site was originally a joint venture between RioCan, Trinity and Rice/Fryberg. RioCan purchased Rice/Fryberg’s interest

in the site in the first quarter of 2010 which increased RioCan’s ownership interest in the property to 83.5%. In the fourth quarter of

2010, a 50% interest in the site was sold to Minto Communities, with a 41.75% interest being retained by RioCan and an 8.25%

interest being retained by Trinity. Five acres of the site will be developed into a 60,000 square foot retail centre.

Westney Road and Taunton RoadAjax, Ontario

This site is currently being developed into a 173,000 square foot new format retail centre as a joint venture with the Sun Life

Assurance Company of Canada. A 46,000 square foot Sobeys will anchor the property. RioCan’s ownership interest in the property

is 20%.



Windfield FarmsOshawa, Ontario

This 160 acre site is currently being developed into a 1.2 million square foot regional new format retail centre. RioCan’s ownership

interest in the property is 33.3%. The site is being developed with two partners.

Highlights of RioCan’s development pipeline as at December 31, 2010, are as follows:


Estimated square feet upon completionof the development project

Acquisition anddevelopment expenditures

incurred to dateAnticipated date of

development completion

(thousands of square feet,millions of dollars)

RioCan’s%

ownership

Totalestimated

development

Retailerowned

anchors(iii)

RioCan’sand

partners’interests

EstimatedProject Cost

(100%) (iv)RioCan’sinterest

Partners’interest

%Leased

(v)Current

development

Potentialfuture

developments

RioCan owned:

Avenue Road, Toronto, ON 100% 21 – 21 $ 25 $ 23 $ – 90% Q2 2011 –

Flamborough Walmart Centre,Hamilton, ON (i) 100% 317 – 317 54 43 – 93% Q3 2012 2012-2013

Corbett Centre,Fredericton, NB (i) 100% 474 242 232 45 23 – 46% Q3 2011 2012-2014

Eglinton Avenue & WardenAvenue, Toronto, ON 100% 170 – 170 45 39 – 85% – 2012

RioCan Gravenhurst, ON (ii) 100% 301 – 301 61 40 – 50% – 2012-2013

Queen Street & Portland Street,Toronto, ON 100% 91 – 91 39 30 – 100% Q3 2011 –

RioCan Renfrew Centre, Renfrew,ON 100% 210 74 136 29 15 – 39% – 2012-2013

1,584 316 1,268 298 213 – 68%

Co-ownerships:

Trinity

Grant Crossing, Ottawa, ON 33.3% 401 128 273 69 13 26 58% Q4 2011 2012

Highway 401 & Thickson Road –Phase I, Whitby, ON 25% 205 – 205 40 5 16 48% – 2012-2013

Lowes Centre Orleans, Ottawa,ON 33.3% 397 142 255 59 13 25 73% Q4 2011 2012

Cimarron Shopping Centre,Okotoks, AB 50% 433 244 189 46 11 11 35% Q3 2011 2012

RioCan Centre Vaughan, Vaughan,ON Ph 2 & 3 31.25% 300 – 300 61 7 21 0% – 2012-2014

March Road, Kanata, ON 50% 109 – 109 33 11 11 90% Q3 2011 2012

Stouffville, ON 41.75% 60 – 60 25 7 10 0% – 2012-2013

1,905 514 1,391 333 67 120 44%

CPPIB/Trinity

East Hills, Calgary, AB 37.5% 1,586 – 1,586 340 22 37 0% – 2013 (vii)

Jacksonport, Calgary, AB 25% 1,141 427 (vi) 714 183 13 39 0% – 2013 (vii)

St. Clair Avenue & Weston Road,Toronto, ON 25% 484 – 484 132 8 25 0% –

2012 -2013 (vii)

3,211 427 2,784 655 43 101 0%

Other

Westney Road & Taunton Road,Ajax, ON 20% 173 – 173 50 5 21 38% – 2012-2013

Windfield Farms, Oshawa, ON 33.3% 1,217 156 1,061 192 11 22 0% – 2014 (vii)

1,390 156 1,234 242 16 43 38%

Total 8,090 1,413 6,677 $ 1,528 $ 339 $ 264 23%

(i) RioCan acquired Trinity’s interests in both these properties during the second quarter of 2010.

(ii) RioCan acquired Trinity’s interest in this property during the third quarter of 2010.

(iii) Retailer owned anchors include both completed and sale transactions under contract.

(iv) Proceeds from sale to shadow anchors reduce projected cost.

(v) % Leased includes leasing that is conditional on receiving municipal approvals and meeting construction deadlines.

(vi) Retailer owned anchor contemplated in the site plan for projection purposes only.

(vii) The first phases are expected to be substantially complete by the dates indicated.



Highlights of RioCan’s expansion and redevelopment projects are as follows:


Estimated projectcost including land

Developmentexpenditures

to date atRioCan’sinterest

Estimated remainingdevelopment

activity atRioCan’s interest(thousands of square feet, RioCan’s % Project RioCan’s Partners’

millions of dollars) ownership Tenant(s) NLA interest interest Total 2010 2011

RioCan owned:

Shoppers World

Brampton,

Brampton, ON 100%

Bad Boy, Imperial

Buffet, Designer Depot,

Bulk Barn 77 $ 28 $ – $ 28 $ 14 $ 13 $ –

Co-ownerships:

404 Town Centre,

Newmarket, ON 50% Shoppers Drug Mart 24 2 2 4 – 2 –

101 $ 30 $ 2 $ 32 $ 14 $ 15 $ –

RioCan’s expansion and redevelopment project costs for 2011 are currently expected to be approximately $15 million. The yields on

these activities are expected to be approximately 7% to 11%. During the three months ended December 31, 2010, costs of $1

million have been incurred ($3.5 million for the year ended December 31, 2010). Included in the costs incurred to date are costs

relating to a project at RioCan’s Centre de la Concord in Laval, Quebec which was completed during the third quarter and for which

the tenant has commenced paying rent.

Properties Held for Resale

As discussed previously in this MD&A under “About RioCan”, under the Qualification Plan, the Trust has determined that property

trading activities produces non-qualifying income under the SIFT legislation and as such will be significantly reduced to comply

with the limitations set out in the SIFT legislation. In anticipation of complying with the REIT Exception, during the fourth quarter of

2009 the Trust recategorized $46.9 million of properties held for resale, which properties RioCan no longer looks to dispose of but

rather to hold as core portfolio holdings. As at December 31, 2010, the Trust has $7.5 million of properties held for resale.

Properties held for resale are properties acquired or developed for which RioCan generally intends to sell rather than hold on a

long term basis, or are those for which RioCan plans to reduce its ownership interest through the sale to a partner. RioCan’s plan

is to dispose of all or part of such properties in the ordinary course of business. It is expected that the Trust will earn a return on

these assets through a combination of property operating income earned during the relatively short holding period, which will be

included in net earnings, and sales proceeds. No amortization is recorded on properties held for resale. The changes in the net

carrying amount and the related changes in the development NLA are discussed above under “Properties Under Development”.

Properties held for resale are primarily comprised of land use intensification activities. As discussed earlier in this MD&A under

“Urban Intensification”, land use intensification opportunities arise from the fact that retail centres are generally built with lot

coverage of approximately 25% of the underlying land; therefore, particularly in urban markets, RioCan can obtain additional

density, retail or otherwise, on its existing property portfolio and, as the Trust already owns the underlying land, it is able to

achieve relatively high returns on the sale of non-retail use density.

RioCan has several other urban intensification projects in the various stages of rezoning for residential density. The most

prominent of these urban intensification projects is Tillicum Shopping Centre, Victoria, British Columbia.

Mortgages and Loans Receivable

RioCan’s Declaration contains provisions that have the effect of limiting the aggregate value of the investment by the Trust in

mortgages, other than mortgages taken back on the sale of RioCan’s properties, to a maximum of 30% of Adjusted Unitholders’

Equity. Additionally, RioCan is limited to the amount of capital that can be invested in non-income producing properties to no more

than 15% of the Adjusted Unitholders’ Equity, which limitation applies to both greenfield development projects and mortgages

receivable to fund the co-owners’ share of such developments, referred to in this MD&A as “mezzanine financing”. At

December 31, 2010, RioCan was in compliance with these restrictions.



Contractual mortgages and loans receivable as at December 31, 2010 and December 31, 2009 are comprised of the following:


As at December 31, 2010 2009

Mezzanine financing to co-owners $ 151 $ 163

Vendor-take-back and other 39 75

$ 190 $ 238

Mortgages and loans receivable for mezzanine financing to co-owners bear interest at contractual rates ranging between 7% and

10% per annum with a weighted average rate at quarter end of 7.4% per annum. These mortgages and loans receivable from

co-owners mature between 2011 and 2015. Prior to maturity, payments on these mortgages and loans receivable from co-owners

will be made from the cash flows generated from operating and capital transactions relating to the underlying properties. As

discussed previously in this MD&A under “About RioCan”, under the Qualification Plan, the Trust had determined that, based on

the previous lending structures, certain of the mezzanine financing activities were a non-qualifying assets under the SIFT

Legislation, and hence have been restructured to be compliant with the REIT Exception.

The decrease in mezzanine financing to co-owners since December 31, 2009 is primarily due to advances made to co-owners on

development projects, including Grant Crossing, Ottawa, Ontario, and Lowe’s Centre Orleans, Ottawa, Ontario offset by principal

repayments as well as the repayment of mortgages receivable with respect to the Stouffville, Clappison’s Crossing and Corbett

Centre development properties.

Vendor-take-back and other loans receivable bear interest at contractual rates varying from 0% to 7% per annum with a weighted

average rate at year end of 0.9% per annum.

The decrease in vendor-take-back and other mortgages receivable since December 31, 2009 primarily arose as a result of the

repayment of amounts due with respect to the RioCan Beacon Hill property and the Avenue Road, March Road, and Westney Road

and Taunton Road development properties.

As at December 31, 2010, mortgages and loans receivable bear interest at contractual rates ranging between 0% and 10% per

annum with a weighted average quarter end rate of 6.1% per annum, and mature between 2011 and 2015. Future repayments are

as follows:


Mezzaninefinancing

to co-owners

Vendor-take-backand other Total

Year ending December 31: Due on demand $ 8 $ 2 $ 10

2011 36 9 45

2012 35 23 58

2013 13 – 13

2014 53 5 58

2015 6 – 6

Contractual mortgages and loans receivable 151 39 190

Unamortized differential between contractual and market

interest rates on mortgages and loans receivable – (2) (2)

$ 151 $ 37 $ 188



The changes in the carrying amount of mortgages and loans receivable are as follows:




Principal advances (i) 68 64

Mortgages acquired (ii) – 8

Mortgages and loans taken back on property dispositions 4 4

Principal repayments (i) (124) (54)

Interest receivable 4 2

Contractual mortgages and loans receivable 190 238

Unamortized differential between contractual and market interest rates on mortgages and loans

receivable (2) (2)

Balance, end of year $ 188 $ 236

(i) Advances and repayments related to properties held for resale are included in cash flows from operating activities (see “Distributions to

Unitholders” below). All other such amounts are included in cash flows used in investing activities.

(ii) Refer to “Related Party Transactions” below.

RELATED PARTY TRANSACTIONS

RioCan may have transactions in the normal course of business with entities whose directors or trustees are also its trustees and/

or management. Any such transactions are in the normal course of operations and are measured at market based exchange

amounts. Unless otherwise noted, these transactions are not considered related party transactions for financial statement

purposes.

Transactions subsequent to the formation of a co-ownership that are not contemplated by the co-ownership agreement are

considered to be related party transactions for financial statement purposes.

During the third quarter of 2010, RRVLP, a limited partnership in which RioCan has a 15% interest, sold Niagara Square for $47

million to a joint venture in which RioCan holds a 30% interest. In consideration for arranging the transaction, RioCan earned a fee

of $0.7 million from the purchaser.

During the first quarter of 2010, the Trust increased its ownership interest in Chapman Mills Marketplace to 75% from 62.5%, by

purchasing an additional 12.5% interest from Trinity, an existing joint venture partner on the project. The purchase price was

approximately $11.9 million.

During the first quarter of 2009, the Trust purchased from Kimco, for approximately $8.1 million, a 50% interest in a $20.2 million

mortgage receivable granted on the sale of an asset by a co-ownership. This purchase increased the Trust’s ownership interest in

this mortgage from 50% to 100%. The mortgage receivable requires semi-annual installments of $100,000 and is non-interest

bearing until December 23, 2012, and thereafter is interest bearing at a contractual rate of 6% per annum with blended monthly

installments on account of principal and interest until maturity on December 23, 2015. Based on the purchase price of $8.1 million,

the effective rate of interest on the mortgage receivable is 6.09%.

CAPITAL STRATEGY AND RESOURCES

RioCan strives for an optimal financial structure to drive appropriate risk adjusted total returns. The principal objectives under the

capital strategy are to:

• Optimize the risk-adjusted cost of capital through an appropriate mix of debt and equity;

• raise debt from a variety of sources and maintain a well staggered maturity schedule with longer-term financing and committed

income under long term tenant leases;

• maintain significant committed undrawn loan facilities to support current and future business requirements; and

• actively manage financial risks, including interest rate, foreign exchange, liquidity and counterparty risks.

Management believes that the quality of RioCan’s assets and strong balance sheet are attractive to lenders’ and equity investors’

and should enable RioCan to continue to access multiple sources of capital. In addition, management believes that overleveraged

real estate assets and existing property owners with insufficient capital resources will eventually provide opportunities for RioCan

– a well capitalized, highly experienced and growing company – to acquire high-quality assets at attractive levels. Opportunities to

acquire properties may come through outright property acquisitions or joint venture arrangements. RioCan will maintain a

disciplined investment strategy, which focuses on high-quality assets in its targeted markets, emphasizing long-term value

creation.



Capital Strategy Supporting Continued Growth

To support growth, RioCan employs a three-fold capital strategy:

• provide the capital necessary to fund growth;

• maintain sufficient flexibility to access capital in many forms, both public and private; and

• manage the overall financial structure in a fashion that preserves investment grade credit ratings.

RioCan plans to further strengthen its balance sheet by reducing its overall debt leverage over time, thereby strengthening various

earnings and cash flow coverage ratios. It is management’s intention that the Trust continually have access to the capital

resources necessary to expand and develop its business. Accordingly, the Trust may, from time-to-time, seek to obtain funds

through additional common and preferred equity offerings, unsecured debt financings and/or mortgage/construction loan

financings and other capital alternatives in a manner consistent with its intention to operate with a conservative debt structure.

Liquidity and Cash Management

RioCan maintains undrawn committed revolving bank facilities to provide financial liquidity. These can be drawn/repaid at short

notice, reducing the need to hold liquid resources in cash and deposits. This minimizes costs arising from the difference between

borrowing and deposit rates, while reducing credit exposure. Bank deposits are placed with Schedule 1 financial institutions as

required by RioCan’s Declaration of Trust.

Capital Management Framework

RioCan defines capital as the aggregate of unitholders’ equity and debt. The Trust’s capital management framework is designed to

maintain a level of capital that:

• complies with investment and debt restrictions pursuant to the Trust’s Declaration;

• complies with debt covenants;

• enables RioCan to achieve target credit ratings;

• funds the Trust’s business strategies; and

• builds long-term Unitholder value.

The key elements of RioCan’s capital management framework are approved by the unitholders, as related to the Trust’s

Declaration, and by the Trust’s Board, through the Board’s annual review of the strategic plan and budget, supplemented by

periodic Board and Board committee meetings. Capital adequacy is monitored by management of the Trust by assessing

performance against the approved annual plan throughout the year, which is updated accordingly, and by monitoring adherence to

investment and debt restrictions contained in the Declaration and debt covenants (see Note 21 to RioCan’s audited consolidated

financial statements as at December 31, 2010).

In selecting appropriate funding choices, RioCan’s objective is to manage its capital structure in such a way so as to diversify its

funding sources while minimizing its funding costs and risks. For 2011, RioCan expects to be able to satisfy all of its financing

requirements through the use of cash on hand, cash generated by operations, refinancing of maturing debt, financing of certain

assets currently unencumbered by debt and available credit facilities and through public offerings of unsecured debentures,

preferred units and common equity.

Capital Structure

As at December 31, 2010 and December 31, 2009, RioCan’s capital structure was as follows:

(millions of dollars, except percentage amounts)

December 31,2010

December 31,2009

Increase(decrease)

Capital:

Mortgages payable $ 3,316 $ 2,669 $ 647

Debentures payable 1,094 994 100

Unitholders’ equity 2,151 1,857 294

Total capital $ 6,561 $ 5,520 $ 1,041

Debt to Aggregate Assets ratio 57.1% 55.6% 1.5%

“Aggregate Assets” is a non-GAAP measure used by RioCan for the computation of the maximum permitted borrowing threshold of

the Trust and calculated as the aggregate amount of the total assets of the Trust, plus the amount of accumulated amortization of

income properties recorded by the Trust, as calculated in accordance with GAAP.

RioCan’s Declaration provides that the Trust shall not assume or incur any indebtedness unless, at the date of the proposed

assumption or incurring of the debt, the aggregate of the total indebtedness of the Trust and the amount of additional

indebtedness proposed to be assumed does not exceed 60% of the Aggregate Assets of the Trust (“Debt to Aggregate Assets”).



The Trust’s leverage ratio of 57.1% at December 31, 2010, based on historical book values, would decrease to 51.2% upon

restatement for the January 1, 2010 IFRS fair value increase. This restated leverage ratio would further decrease to below 50%

using fair values as at December 31, 2010.

Interest Coverage, Debt Service Coverage, Fixed Charge Coverage and Net Debt to EBITDA Ratios

As Adjusted*December 31, 2010

December 31,2010

September 30,2010

December 31,2009

Interest coverage ratio (i) 2.49 2.47 2.42 2.24

Debt service coverage ratio (ii) 1.93 1.91 1.87 1.72

Fixed charge coverage ratio (iii) 1.01 1.00 0.99 0.89

Net debt to EBITDA ratio (iv) 6.74 6.80 7.16 7.12

(i) Interest coverage defined as: GAAP net earnings for a rolling twelve month period, before net interest expense, income taxes and income

property amortization (including provisions for impairment) divided by total interest expense (including interest that has been capitalized).

(ii) Debt service coverage defined as: GAAP net earnings for a rolling twelve month period, before net interest expense, income taxes and income

property amortization (including provisions for impairment) divided by total interest expense and scheduled mortgage principal amortization

(including interest that has been capitalized).

(iii) Fixed charge coverage is defined as: GAAP net earnings for a rolling twelve month period, before net interest expense, income taxes and

income property amortization (including provisions for impairment) divided by total interest expense (including interest that has been

capitalized) and distributions to unitholders.

(iv) Net debt to EBITDA is defined as: the average debt outstanding (net of cash) for the period divided by GAAP net earnings before net interest

expense, income taxes and income property amortization (including provisions for impairment).

* As adjusted for one-time charges such as the IFRS and SIFT restructuring costs.

Interest and debt coverage ratios improved in 2010 as compared to 2009, based on rolling twelve month results. The increase

arose primarily as a result of the deployment of large cash balances held throughout the latter half of 2009 for the acquisition of

income properties throughout 2010, a $92 million increase in NOI for 2010 and a $22 million in increased transaction gains in 2010;

offset by increased aggregate indebtedness during 2010, the proceeds of which were partially used to fund the Trust’s ongoing

development pipeline which is not yet income producing.

Interest and debt coverage ratios increased in the fourth quarter of 2010 as compared to the third quarter of 2010, based on rolling

twelve month results. The increase arose primarily as a result of a $5 million increase in transaction gains for the rolling twelve

month period ended December, 31, 2010; offset by increased aggregate indebtedness during the 12 month period, the proceeds of

which were partially used to fund the Trust’s ongoing development pipeline which is not yet income producing and larger cash

balances throughout the latter half of 2009 and continuing into 2010.

As part of its capital management strategy, it is RioCan’s objective to further improve its leverage and coverage ratios. It is the

Trust’s objective to achieve the following targeted ratios over time:

RatioTargeted

RatiosAs Adjusted*

December 31, 2010

Interest coverage ratio > 2.5 x 2.49

Debt service coverage ratio > 2.0 x 1.93

Fixed charge coverage ratio > 1.1 x 1.01

Net debt (average) to adjusted EBITDA ratio < 6.5 x 6.74

* As adjusted for one-time charges such as the IFRS and SIFT restructuring costs.



EBITDA and adjusted EBITDA are calculated as follows:

(thousands of dollars)Year ended December 31,

Adjusted*2010 2010 2009 2008

Net Earnings $ 302,967 $ 302,967 $ 113,867 $ 145,088

Future income tax (recovery) expense (139,825) (139,825) (3,475) (700)

Gain on disposition of long-lived assets (3,269) (3,269) – –

Interest expense 214,723 214,723 192,465 167,541

Impairment of real estate investments 7,863 7,863 – 24,272

Amortization of income properties 190,726 190,726 165,357 154,919

Amortization of capital assets included in general and administrative expense 1,536 1,536 1,429 2,137

Non-controlling interest 1,266 1,266 31 –

IFRS and SIFT implementation costs 5,496 n/a n/a n/a

EBITDA $ 581,483 $ 575,987 $ 469,674 $ 493,257

* Adjusted for one-time charges relating to the IFRS and SIFT restructuring.

Net debt is calculated as follows:

(thousands of dollars)Year ended December 31, 2010 2009 2008

Average debt outstanding $ 4,005,732 $ 3,481,479 $ 3,222,336

Less: average cash on hand (88,577) (135,189) (47,328)

Net debt $ 3,917,155 $ 3,346,290 $ 3,175,008

Debt

RioCan intends to maintain strong debt service coverage and fixed charge coverage ratios as part of its commitment to maintaining

its investment-grade debt ratings from Standard and Poors (“S&P”) and from Dominion Bond Rating Services Limited (“DBRS”).

A credit rating generally provides an indication of the risk that the borrower will not fulfill its obligations in a timely manner with

respect to both interest and principal commitments. Rating categories range from highest credit quality (generally AAA) to default

payment (generally D).

As at December 31, 2009, S&P provided RioCan with an entity credit rating of BBB and a credit rating of BBB- relating to RioCan’s

senior unsecured debentures payable (“Debentures”). On March 23, 2010, S&P revised its outlook to Negative from Stable, and

affirmed its BBB entity credit rating as well as its BBB- rating relating to the Debentures. An obligor with a credit rating of BBB by

S&P exhibits adequate capacity to meet its financial obligations. However, adverse economic conditions or changing circumstances

are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. A credit rating of

BBB- or higher is an investment grade rating.

As at December 31, 2010, DBRS provided RioCan with a credit rating of BBB (high) relating to RioCan’s Debentures. A credit rating

of BBB by DBRS is generally an indication of adequate credit quality, the capacity for the payment of financial obligations is

considered acceptable but the entity may be vulnerable to future events.

Revolving Lines of Credit

As at December 31, 2010, RioCan had five revolving lines of credit in place with three Canadian chartered banks, having an

aggregate capacity of $421.5 million (December 31, 2009 – three revolving lines of credit aggregating $293.5 million with two

Canadian chartered banks).



The following table summarizes the details of the lines of credit as at December 31, 2010:

(in millions of dollars)

Amounts drawn

Facility Amount

Cash

advances

Letters of

Credit

Cash

available to

be drawn Interest rates Maturity

1 $ 200 $ – $ 19 $ 181 Prime rate advances – prime rate plus 1.25% per annum or Bankers’

Acceptance rate or LIBOR (US$ advances) plus 2.25%;

Letters of Credit fees – 2.25% per annum;

Overdraft – prime rate plus 2.25%

2013

2 100 – 16 84 Prime rate advances – prime plus 1.25% per annum or Bankers’

Acceptance or LIBOR (US$ advances) plus 2.25% per annum;

Letters of Credit fees – 2.25% per annum

2013

3 78 – – 78 Prime rate advances – prime or LIBOR (US$ advances) plus 1.5% per

annum or Bankers’ Acceptance or LIBOR (US$ advances) plus 2.25% per

annum

2012 (plus one year

extension subject

to Bank approval)

4 40 – – 40 US$ Advances - LIBOR plus 3% per annum; Unused balance fee - 50 basis

points

2011 (plus one year

extension subject

to Bank approval)

5 4 n/a 2 2 Letters of Credit fees - 2.25% Upon demand for

unused amounts

$ 422 $ – $ 37 $ 385

The first facility, with a maximum loan amount of $200 million, is secured by a charge against certain income properties. Should

the aggregate agreed values for lending purposes of such properties fall to a level which would not support a borrowing of

$200 million, through reappraisal or sale of the property providing the security, RioCan has the option to provide substitute income

properties as additional security. Amounts may also be drawn against this facility in US dollars.

The second secured revolving term operating line of credit with another Canadian chartered bank has a maximum loan amount of

$100 million. Amounts may also be drawn against this credit facility in US dollar currency.

Aside from the requirement to not exceed the 60% leverage limit required by RioCan’s Declaration, the above facilities are subject

to customary terms and conditions which RioCan’s management believe would not limit the distributions currently expected to be

distributed to unitholders in the foreseeable future.

The third secured revolving term operating line of credit with another Canadian chartered bank has a maximum loan amount of

$78 million. Amounts may also be drawn against this credit facility in US dollar currency.

In addition, during the fourth quarter of 2010, the Cedar (20%) / RioCan (80%) joint venture has entered into a US$50 million senior

secured revolving credit facility.

RioCan also has a 50% interest in a RioKim Letter of Credit facility, which provides for a maximum aggregate amount of $7 million,

or $3.5 million at RioCan’s interest.

Debentures Payable

As at December 31, 2010, RioCan had eight series of Debentures outstanding totalling $1.1 billion (December 31, 2009 – seven

series totalling $1.0 billion).

The Debentures have covenants relating to RioCan’s 60% leverage limit to Aggregate Assets as set out in RioCan’s Declaration, the

maintenance of a $1.0 billion Adjusted Book Equity, defined as unitholders’ equity plus accumulated building amortization

calculated in accordance with GAAP, and maintenance of an interest coverage ratio of 1.65 times or better. There are no

requirements under the unsecured Debenture covenants to require RioCan to maintain unencumbered assets. The Series I

debentures, which are due in 2026 and aggregate $100 million, have an additional provision to provide that RioCan has the right, at

any time, to convert these debentures to mortgage debt, subject to the acceptability of the security given to the debenture holders.

In such an event, the covenants relating to the 60% leverage limit, minimum book equity and interest coverage ratio would be

eliminated for this debenture.

On September 21, 2010 the Trust issued US$100 million principal amount of Series N senior unsecured debentures bearing

contractual interest at 4.1% and which mature on September 21, 2015. The debenture covenants are consistent with covenants on

the existing Debentures outstanding, with the exception of Series I which has an additional provision as discussed above.

On January 20, 2011, the Trust redeemed all of the currently outstanding $200 million Series F debentures which were due on

March 8, 2011. The debentures were redeemed in accordance with their terms, at a total redemption price of $1,004.89 plus

accrued and unpaid interest of $18.02575, both per $1,000 principal amount.



On February 24, 2011, the Trust redeemed all of the currently outstanding $180 million Series L debentures which were due on

April 3, 2014. The debentures were redeemed in accordance with their terms, at a total redemption price of $1,131.85 plus accrued

and unpaid interest of $32.86356, both per $1,000 principal amount. This early extinguishment of the Series L debentures payable

resulted in RioCan having to pay a prepayment penalty in the amount of $23.7 million in aggregate or $131.85 per $1,000 principal

amount.

On January 21, 2011, the Trust issued $225 million principal amount of Series O senior unsecured debentures bearing contractual

interest at 4.499% and which mature on January 17, 2016. The debenture covenants are consistent with covenants on the existing

Debentures outstanding, with the exception of Series I which has an additional provision as discussed above.

Changes in the carrying amount of the debentures payable resulted primarily from the following:



Balance, beginning of year $ 1,000 $ 849

Issuances 103 330

Repayments – (179)

Foreign currency translation (4) –

Contractual obligations 1,099 1,000

Unamortized debt financing costs (5) (6)

Balance, end of year $ 1,094 $ 994

Issuances 225 –

Repayments (380) –

Balance, February 24, 2011 $ 939 $ 994

Mortgages Payable

During the year ended December 31, 2010, RioCan had new mortgage borrowings as follows:

Three months endedDecember 31, 2010

Year endedDecember 31, 2010

(millions of dollars, except other data)

Weightedaverage


Weightedaverage


Averageterm to

maturityin years

New borrowings:

Fixed rate term mortgages – Canada $ 193 4.38% $ 638 4.83% 5.74

Fixed rate term mortgages – US 92 5.08% 235 4.99% 6.49

Floating rate term mortgages – – 12 2.91% 4.00

Construction 3 4.15% 19 3.52% 0.70

$ 288 4.60% $ 904 4.82% 5.81

As at December 31, 2010, RioCan had mortgages payable of $3.3 billion as compared to $2.7 billion as at December 31, 2009. The

vast majority of the Trust’s mortgage indebtedness provides recourse to the assets of the Trust, as opposed to only having

recourse to the specific property charged. RioCan follows this policy as it generally results in lower interest costs than would

otherwise be obtained.



As at December 31, 2010, the contractual interest rates on the mortgages payable ranged from 2.68% to 8.45% per annum with the

weighted average interest rate of 5.54% per annum. Changes in the carrying amount of the mortgages payable resulted primarily

from the following:



Balance, beginning of period $ 2,670 $ 2,412

New Borrowings (i):

Fixed rate term mortgages – Canada 638 401

Fixed rate term mortgages – US 235 –

Floating rate term mortgages 12 119

Construction 19 21

Net advances on operating line of credit 75 17

Assumed/granted on the acquisition of properties 218 26

Principal repayments (i):

Scheduled amortization (68) (64)

Operating line of credit (153) (17)

At maturity: Fixed rate term mortgages (292) (218)

Construction (16) (26)

Foreign currency translation (14) –

Contractual obligations 3,324 2,671

Unamortized differential between contractual and market interest rateson liabilities assumed at the acquisition of properties 6 7

Unamortized debt financing costs (14) (8)

Balance, end of period $ 3,316 $ 2,670

(i) Borrowings and repayments relating to properties held for resale are included in cash flows from operating activities (see “Distributions to

Unitholders” below). All other such amounts are included in cash flows from financing activities.

At December 31, 2010, $75.4 million of the mortgage debt was at floating interest rates. Of this amount, $27.9 million relates to

construction financing. The percentage of RioCan’s aggregate debt at floating rates is 1.7%.

At the outset of 2010, RioCan had $267 million of mortgage principal maturities at a weighted average contractual interest rate of

7.1%. During 2010, RioCan had new term borrowings of $885 million at a weighted average interest rate of 4.80% resulting in

additional proceeds of $525 million after considering the effect of the maturity of fixed rate term mortgages and scheduled

amortization.

Hedging Activities

The effectiveness of the hedging relationships is reviewed on a quarterly basis. At December 31, 2010 the Trust has assessed that

there is no ineffectiveness in the hedge of its interest rate exposure or its net investment hedge.



Aggregate Maturities

On a combined basis, RioCan’s mortgages and debentures payable bear a weighted average contractual interest rate of 5.6% with

a weighted average term to maturity of 4.5 years. RioCan’s debt maturity profile and future repayments are as outlined below:

Contractual

Principal maturities

(millions of dollars, exceptpercentage amounts)


Scheduledprincipal

amortizationMortgages

payable

Weightedaverageinterest

rateDebentures

payable


rate Total


rate

Year ending December 31:

2011 $ 78 $ 154 5.76% $ 200(i) 4.91% $ 432 5.28%

2012 78 252 6.03% 220 5.25% 550 5.67%

2013 73 372 5.86% 150 5.23% 595 5.38%

2014 63 424 5.75% 180(ii) 8.33% 667 6.47%

2015 52 662 5.02% 249 5.03% 963 5.02%

2016 38 277 5.27% – 0.00% 315 5.27%

Thereafter 75 726 5.63% 100 5.95% 901 5.66%

$ 457 $ 2,867 $ 1,099 $ 4,423

(i) In January 2011, the Trust redeemed the $200 million outstanding on its Series F debentures which were due on March 8, 2011.

(ii) In February 2011, the Trust redeemed the $180 million outstanding on its Series L debentures which were due on April 3, 2014.

The principal maturities by lender by year of maturity are as follows:

Contractual

Principal maturities by type of lender



Scheduledprincipal

amortization

Lifeinsurance

industryMortgage

conduit BanksPension

funds OtherUnsecureddebentures Total

Year ending December 31:

2011 $ 78 $ 9 $ 48 $ 29 $ 5 $ 63 $ 200 $ 432

2012 78 60 107 70 – 15 220 550

2013 73 110 114 112 – 36 150 595

2014 63 116 7 262 6 33 180 667

2015 52 133 109 249 55 116 249 963

2016 38 98 96 83 – – – 315

Thereafter 75 334 50 145 92 105 100 901

$ 457 $ 860 $ 531 $ 950 $ 158 $ 368 $ 1,099 $ 4,423



The table below presents assets, and the related income derived from such assets, that are available to RioCan to finance and/or

refinance its debt maturities for 2011 and 2012:

Principalbalance of

debt maturing

(in thousands)

Number ofProperties

NBV ofIncome

Properties atDecember 31,

2010

2010Annualized

NOI (i) 2011 2012

Collateral – Income Properties:

Encumbered assets with debt maturing in 2011 14 $ 304 $ 26 $ 126 $ –

Encumbered assets with debt maturing in 2012 31 428 49 – 252

Unencumbered assets at December 31, 2010 72 686 58 – –

Construction financing on properties under development (ii) 2 – – 28 –

VTB on properties under development – – – – –

Unsecured debt maturity – – – 200 220

Total 119 $ 1,418 $ 133 $ 354 $ 472

(i) Excluding impact of straight-line rents and the differential between contractual and market rents.

(ii) Projects include components that are income producing at December 31, 2010. NBV shown represents amounts in IPP only.

Subsequent to quarter end, RioCan has participated in a CMBS funding pool and received mortgage financing on 12 previously

unencumbered properties, generating gross proceeds of $140 million, at RioCan’s share, at a rate of 5.48%. Also, RioCan received

funding from mortgage financing on two additional US properties generating gross proceeds of $15 million, at RioCan’s share.

During the fourth quarter of 2010, RioCan obtained approximately $285 million of mortgage financing at an average interest rate of

approximately 4.6%. In 2010, RioCan has obtained approximately $882 million of mortgage financing at an average interest rate of

approximately 4.8% and an average term of 5.5 years.

RioCan has the continued flexibility to generate additional funds in 2010 through financing maturing loan balances as well as repay

additional balloon balances to increase the size of RioCan’s pool of unencumbered assets. As at December 31, 2010 RioCan had

72 properties that are unencumbered with a book value of approximately $686 million.

RioCan is currently negotiating various financings that are expected to generate gross proceeds of approximately $147 million, of

which RioCan’s share would be approximately $177 million, broken down as follows: $162 million ($160 million at RioCan’s

interest) to be secured by 13 Canadian properties and $15 million ($12 million at RioCan’s interest) to be secured by one US

property. Only two of these properties are subject to existing debt. RioCan can provide no assurance that it will be successful in

closing these financings.

Considering RioCan’s current levels of cash, undrawn credit facilities, relatively low leverage and demonstrated historical access

to debt capital markets, the Trust expects that all maturities will be refinanced or repaid in the normal course of business, and as

such, RioCan does not currently anticipate that it will be required to sell assets and/or issue equity to meet its maturing debt

obligations for 2011.

Trust Units

As at February 25, 2011, there are 265.4 million Units issued and outstanding and 8.3 million options outstanding under the Trust’s

incentive unit option plan (the “Plan”). All Units outstanding have equal rights and privileges and entitle the holder thereof to one

vote for each Unit at all meetings of unitholders. During the years ended December 31, 2010 and 2009, the Trust issued Units as

follows:(number of Units in thousands)


Units outstanding, beginning of year (i) 242,320 222,042

Units issued:

Exchangeable limited partnership units (ii) 277 –

Public offerings 13,625 16,395

Distribution reinvestment plan 2,976 3,866

Direct purchase plan 53 92

Unit option plan 567 215

Normal course issuer bid – (290)

Units outstanding, end of year (i), (ii) 259,818 242,320

(i) Included in Units outstanding are 829,000 exchangeable limited partnership units of a limited partnership that is a subsidiary of the Trust (the

“LP units”) which were issued to a vendor, as partial consideration for an income property acquired by RioCan in 2007. RioCan is the general



partner of the limited partnership. The LP Units are entitled to distributions equivalent to distributions on RioCan Units and are exchangeable

at any time, at the option of the holder, on a one-for-one basis for RioCan Units. No LP units have been exchanged by the vendors for RioCan

Units.

(ii) On September 13, 2010, a subsidiary of the Trust issued 277,000 exchangeable limited partnership units to the vendor, as partial

consideration for an income property acquired in Q3 2010. RioCan is the general partner of the limited partnership. The LP units are entitled

to distributions equivalent to distributions on RioCan units, must be exchanged for RioCan units on a one-for-one basis and are exchangeable

at any time at the option of the holder. No LP units have been exchanged by the vendors for RioCan units.

In September 2010, RioCan completed the issuance of 7.2 million trust units on a bought-deal basis for $20.75 per unit resulting in

gross proceeds of $149.4 million.

In December 2010, RioCan completed the issuance of 6.4 million trust units in a bought deal basis for $21.75 per unit resulting in

gross proceeds of $139.7 million.

During 2010, 1.7 million options were granted under the Plan compared to 1.6 million during 2009. Additionally, RioCan has a

Restricted Equity Unit (“REU”) plan which provides for an allotment of REUs to each non-employee trustee. The value of the REUs

allotted appreciate and depreciate with increases or decreases in the market price of the Trust’s Unit. During 2010 and 2009,

40,000 REUs were granted.

During 2010, 3.0 million Units were issued pursuant to the Trust’s distribution reinvestment plan compared to 3.9 million during

2009. Participation in the distribution reinvestment plan was 17.2% for the year ended December 31, 2010 compared to 17.9% for

the year ended December 31, 2009. See also “Distributions to Unitholders” later in this MD&A.

In February 2009, RioCan repurchased 289,500 Units for a net cost of approximately $3.4 million at an average cost per Unit of

$11.83, under the normal course issuer bid (the “NCIB”) approved by the TSX on November 4, 2008. On November 5, 2009, the TSX

approved the Trust’s notice of intention to renew its NCIB thus permitting RioCan to purchase a total of 11.7 million Units for

cancellation over the next twelve months. Purchases will be funded from available cash. The Trust believes that, from time to time,

the market prices of the Units may not reflect their underlying value and that the purchase of Units may represent an appropriate

and desirable use of funds.

The Trust provides long-term incentives to certain employees by granting options through the Plan. The objective of granting unit-

based compensation is to encourage Plan members to acquire an ownership interest in RioCan over time and acts as a financial

incentive for such persons to act in the long term interests of RioCan and its unitholders. The exercise price for each option is

equal to the volume weighted average trading price of the units on the Toronto Stock Exchange for the five trading days

immediately preceding the date of grant except for those options granted prior to May 27, 2009 which have an exercise price equal

to the closing price of the Trust’s Units on the date prior to the day the option was granted. At the 2010 annual and special meeting

of unitholders, unitholders approved an increase to the number of options that can be granted under the Plan of 10 million Units.

At December 31, 2010, 10 million Units (December 31, 2009 – 1.7 million Units) remain available for grant under the Plan. During

2010, 0.6 million Units were issued pursuant to exercises of the incentive Unit options compared to 0.2 million Units for 2009 as a

result of exercising.

REU members are also entitled to be credited with REUs for distributions paid in respect of Units of the Trust based on an Average

Market Price of the Units as defined by the plan. The REUs vest and are settled three years from the date of issuance by a cash

payment equal to the number of vested REUs credited to the member multiplied by the Average Market Price of the Trust’s Units at

the settlement date, less applicable withholdings. The REU plan liability at December 31, 2010 is $1.3 million ($0.7 million at

December 31, 2009).

Preferred Equity Securities

At the June 4, 2010 annual and special meeting of unitholders, unitholders approved a resolution to amend RioCan’s Declaration to

authorize RioCan to create and issue a new class of preferred equity securities (“Preferred Units”). RioCan believes that Preferred

Units will provide the Trust with further enhanced ability to more actively pursue value enhancing opportunities and acquisitions by

providing the Trust with greater flexibility in raising capital. In addition, the Preferred Units potentially provide the Trust with an

opportunity to reduce its cost of capital.

On December 6, 2010, the Trust’s declaration of trust was amended and restated to permit the future authorization and issuance of

Preferred Units, and to make certain administrative and non-substantive changes and other changes resulting from the Trust’s

ongoing growth.

In the first quarter of 2011, the Trust issued 5 million Cumulative Rate Reset Preferred Trust Units, Series A (the “Series A Units”)

at a price of $25 per unit for aggregate gross proceeds of $125 million. The Series A Units will pay a distribution yield 5.25% per

annum, payable quarterly, as and when declared by the board of trustees of RioCan, for the initial five-year period ending March

31, 2016. The distribution rate will be reset on March 31, 2016 and every five years thereafter at a rate equal to the sum of the then

five-year Government of Canada bond yield and 2.62%. The Series A Units are redeemable by RioCan, at its option, on March 31,

2016 and on March 31 of every fifth year thereafter and can also be reclassified by the holder as Series B Units on the same five

year increments.



S&P and DBRS provided credit ratings for the Preferred Units, Series A of the Trust. The Series A Units have been assigned a

rating of “Pfd-3 (high)” by DBRS and a rating of “P-3 (high)” by S&P. DBRS has five categories of preferred shares for which it will

assign a rating. The ‘‘Pfd-3’’ rating is the third highest category available from DBRS for preferred securities and is considered to

be of adequate credit quality. According to DBRS, preferred securities rated ‘‘Pfd-3’’are of adequate credit quality and while

protection of distributions and principal is still considered acceptable, the issuing entity is more susceptible to adverse changes in

financial and economic conditions, and there may be other adverse conditions present which detract from debt protection. Pfd-3

ratings generally correspond with companies whose senior bonds are rated in the higher end of the BBB category. A “P-3 (High)”

rating by S&P is the third of the three sub-categories within the second highest rating of the eight standard categories of ratings

utilized by S&P for preferred units. “High” and “low” grades may be used to indicate a relative standing of a credit within a

particular rating category.

Future Income Taxes

The Trust currently qualifies as a mutual fund trust and a REIT for income tax purposes. The Trust expects to distribute all of

its taxable income to unitholders and is entitled to deduct such distributions for income tax purposes. Accordingly, no provision for

current income taxes payable is required.

Where an entity does not qualify for the REIT Exception, certain distributions will not be deductible by that entity in computing its

income for tax purposes. As a result, the entity will be subject to tax at a rate substantially equivalent to the general corporate

income tax rate. Distributions paid in excess of taxable income will continue to be treated as a return of capital to unitholders.

Future income taxes are accounted for using the liability method. This method requires the Trust to: (i) determine its temporary

differences; (ii) determine the periods over which those temporary differences are expected to reverse; and (iii) apply the tax rates

enacted at the balance sheet date that will apply in the periods those temporary differences are expected to reverse.

Prior to qualifying for the REIT Exception, GAAP required RioCan to recognize future income taxes based on temporary differences

expected to reverse after January 1, 2011, and on the basis of its structure at the current balance sheet date. GAAP did not permit

the Trust to consider future changes to its structure that it may make to enable it to qualify for the REIT Exception. The impact

(including the reversal of the Trust’s future income taxes set out below) of any such changes undertaken by the Trust to qualify for

the REIT Exception could not be recognized in the consolidated financial statements until such time as it so qualified.

The non-cash future income tax liability of $144 million at September 30, 2010 that arose primarily as a result of the introduction of

the SIFT Legislation in 2007 was reversed in the fourth quarter of 2010 through the consolidated statement of earnings as a

one-time non-cash future income tax recovery as the requirements of the REIT Exception have been met.

Guarantees

RioCan provides guarantees on behalf of third parties, including co-owners and partners, for which the Trust generally is paid a

fee, as, among other reasons, it generally results in lower interest costs and higher loan-to-value ratios than would otherwise be

obtained. Also, RioCan’s guarantees remain in place for debts assumed by purchasers in connection with certain property

dispositions and will remain until such debts are extinguished or lenders agree to release RioCan’s covenants. Credit risks arise in

the event that these parties default on repayment of their debt since they are guaranteed by RioCan. These credit risks are

mitigated as RioCan has recourse under these guarantees in the event of a default by the borrowers, in which case the Trust’s

claim has security against the underlying real estate investments. As at December 31, 2010, the estimated amount of debt subject

to such guarantees and, therefore, the maximum exposure to credit risk is approximately $400 million with expiries between 2011

and 2034. As at December 31, 2010, there have been no defaults by the primary obligors for debts on which RioCan has provided

guarantees, and as a result, no contingent loss on these guarantees has been recognized in the Trust’s financial statements.

At December 31, 2010, the parties on behalf of which RioCan had outstanding guarantees are as follows:



Partners and co-owners

Kimco $ 194 $ 213

Trinity 35 55

Other 78 51

Assumption of mortgages by purchasers on property dispositions

Retrocom Mid-Market REIT (“Retrocom”) 51 52

Other 42 73

$ 400 $ 444

Liquidity

Liquidity refers to the Trust having and/or generating sufficient amounts of cash and equivalents to fund the ongoing operational

commitments, distributions to unitholders and planned growth in the business.

RioCan retains a portion of its annual operating cash flows to help fund ongoing maintenance capital expenditures, tenant

installation costs and long term unfunded contractual obligations, among other items.



Cash on hand, borrowings under the revolving credit facilities, the equity and debt capital markets and the potential sale of assets

also provide the necessary liquidity to fund ongoing and future capital expenditures and obligations. At December 31, 2010, RioCan

has:

• $92 million of cash and short term investments;

• $385 million of cash available under undrawn bank lines of credit with initial fixed terms of 3 years on its two largest facilities;

and

• Indebtedness is 57.1% of Aggregate Assets based on historical carrying values.

Unitholder distributions reinvested through the distribution reinvestment and direct purchase plans result in the issuance of Units,

as opposed to a cash outlay, thereby providing an additional source of capital to fund RioCan’s activities (see “Distributions to

Unitholders” on the following page).

RioCan’s liquidity profile at December 31, 2010 is as follows:


As atDecember 31, 2010

Cash and short term investments $ 92

Undrawn lines of credit 385

Liquidity $ 477

Contractual debt:

Unsecured debentures payable $ 1,099

Mortgages payable 3,324

Total contractual debt $ 4,423

Liquidity as a percentage of total contractual debt 10.8%

Percentage unsecured 24.8%

Percentage secured 75.2%

RioCan’s contractual commitments and development expenditures for active projects at December 31, 2010 are as follows:

Contractual Debt Commitments and Development Expenditures

(in millions) 2011 2012 2013 2014 2015 2016 Thereafter Total

Mortgages $ 232 $ 330 $ 445 $ 487 $ 714 $ 315 $ 801 $ 3,324

Debentures 200 220 150 180 249 – 100 1,099

Developments 38 11 3 – – – – 52

Total $ 470 $ 561 $ 598 $ 667 $ 963 $ 315 $ 901 $ 4,475

Distributions to Unitholders

The Trust expects to distribute to its unitholders in each year an amount not less than the Trust’s income for the year, as

calculated in accordance with the Act after all permitted deductions under the Act have been taken.

The unitholders approved an amendment to RioCan’s Declaration at its Annual and Special meeting of the unitholders on May 27,

2009 to remove the requirement to distribute its taxable income and to provide Trustees with the discretion to make further

amendments to accommodate the impact of IFRS.

RioCan’s monthly distribution to unitholders is currently $0.115 per Unit, representing, on an annualized basis, $1.38 per Unit.

Distributions to unitholders are as follows:



Distributions to unitholders $ 340 $ 318

Distributions reinvested through the distribution reinvestment plan (59) (57)

$ 281 $ 261

Distributions reinvested through the distribution reinvestment plan as

a percentage of distributions to unitholders 17.2% 17.9%



S&P and DBRS provide stability ratings for REITs and income trusts. A stability rating is intended to provide an indication of both

the stability and sustainability of distributions to unitholders. S&P’s rating categories ranged from highest level of distributable

cash flow generation stability relative to other income funds in the Canadian market place (SR-1) to a very low level of distributable

cash flow generation stability relative to other income funds in the Canadian market place (SR-7). RioCan’s stability rating at both

June 30, 2010 and December 31, 2009 was SR-2. According to S&P, this rating category reflected a very high level of distributable

cash flow generation stability relative to other income funds in the Canadian market place. On June 30, 2010, S&P announced that

they were discontinuing stability ratings for REITs and income trusts, citing the SIFT legislation impact of reducing the number of

income trusts in the Canadian markets.

DBRS’s rating categories range from the highest stability and sustainability of distributions per Unit (STA-1) to poor stability and

sustainability of distributions per Unit (STA-7). As at both December 31, 2010 and December 31, 2009, RioCan had a DBRS stability

rating of STA-2 (low). According to DBRS, this rating category reflects very good stability and sustainability of distributions per Unit.

(a) Difference between cash flows provided by operating activities and distributions to unitholders

RioCan relies upon forward-looking cash flow information including forecasts and budgets to establish the level of its annual cash

distributions to unitholders, which are paid monthly.

A comparison of distributions to unitholders with cash flows provided by operating activities and net distributions is as follows:


Cash Flows Provided By (Used In) Year ended December 31,Year ended December 31, 2010 2009 2008 (i)

Cash flows provided by operating activities $ 368 $ 273 $ 339

Adjust for:

Changes in non-cash operating items and other (17) (9) 17

Properties held for resale (3) (6) (95)

Acquisition and development of properties held for resale 3 13 58

Adjusted cash flow $ 351 $ 271 $ 319


Distributions reinvested through the distribution reinvestment plan (59) (57) (69)

Net distributions $ 281 $ 261 $ 228

Excess of adjusted cash flow over net distributions $ 70 $ 10 $ 91

(i) Refer to Note 1(i) of the audited consolidated financial statements for the two years ended December 31, 2009 and 2008.

In determining the annual level of distributions to unitholders, the Trust looks at forward-looking cash flow information including

forecasts and budgets and the future business prospects of the Trust. Furthermore, RioCan does not consider periodic cash flow

fluctuations resulting from items such as the timing of property operating costs and tax installments, and semi-annual debenture

and mortgages payable interest payments in determining the level of distributions to unitholders in any particular quarter.

Additionally, in establishing the level of cash distributions to unitholders the Trust considers the impact of, among other items, the

future growth in the income producing portfolio, completion of properties under development, impact of future acquisitions and

capital expenditures and leasing related to the income producing portfolio. Annual distributions to unitholders are expected to

continue to be funded by cash flows generated from RioCan’s real estate investments and fee generating activities.

(b) Difference between net earnings and distributions to unitholders

A comparison of distributions to unitholders with cash flows provided by operating activities and net earnings is as follows:


Year ended December 31, 2010 2009 2008 (i)

Cash flows provided by operating activities $ 368 $ 273 $ 339

Net earnings $ 303 $ 114 $ 145


Difference between cash flows provided by operating activities and distributions to unitholders (a) $ 28 $ (45) $ 41

Difference between net earnings and distributions to unitholders (b) $ (37) $ (204) $ (152)

(i) Refer to Note 1(i) of the audited consolidated financial statements for the two years ended December 31, 2009 and 2008.



The Trust does not use net earnings in accordance with GAAP as the basis to establish the level of unitholders’ distributions as net

earnings include, among other items, non-cash expenses for amortization related to its income property portfolio and future

income taxes. Management of the Trust believes, among other items, that it is appropriate for the Trust to ignore property related

amortization primarily on the basis that the value of the Trust’s real estate investments generally does not diminish over time and

because consideration is given by RioCan to maintenance capital expenditures for the property portfolio in establishing the level of

annual distributions to unitholders.

RESULTS OF OPERATIONS

The components of RioCan’s consolidated net earnings for each respective period are as follows:

(thousands of dollars, except per Unit amounts)


Rental revenue $ 833,780 $ 726,031 15%

Property operating costs 276,375 260,429 6%

Net operating income 557,405 465,602 20%

Fees and other income 16,301 15,265 7%

Interest income 15,423 17,892 (14%)

Gains (losses) on properties held for resale 21,243 (1,157) nm

610,372 497,602

Interest expense 214,723 192,465 12%

General and administrative expense 30,425 26,104 17%

IFRS and SIFT implementation costs 5,496 1,601 nm

Restructuring costs – 1,652 nm

Non-controlling interest 2,952 31 nm

FFO (i) 356,776 275,749 29%

Amortization expense (190,726) (165,357) 15%

Impairment of real estate investments (7,863) – nm

Future income tax recovery 139,825 3,475 nm

Gain on disposition of long-lived assets 3,269 – nm

Non-controlling interest – amortization expense 1,686 – nm

Net earnings $ 302,967 $ 113,867 166%

Net earnings per Unit – basic $ 1.23 $ 0.49 151%

Net earnings per Unit – diluted $ 1.22 $ 0.49 149%

FFO per Unit (i) $ 1.45 $ 1.20 21%

“nm” – not meaningful

(i) Refer to the discussion under FFO.

Net Operating Income

Net operating income (“NOI”) is a non-GAAP measure and is defined by RioCan as rental revenue from income properties less

property operating costs. RioCan’s method of calculating NOI may differ from other issuers’ methods and, accordingly, may not be

comparable to NOI reported by other issuers.

Rental revenue includes all amounts earned from tenants related to lease agreements, including property tax and operating cost

recoveries, to the extent recoverable under tenant leases. Amounts payable by tenants to terminate their lease prior to the

contractual expiry date (“lease cancellation fees”) are included in rental revenue.



Consolidated NOI for the years ended December 31, 2010 and 2009 is as follows:

(thousands of dollars)

Year ended December 31, 2010 2009Increase

(decrease)

Base rent $ 545,865 $ 473,209 15%

Percentage rent 3,253 3,082 6%

Rents subject to tenants’ sales thresholds 5,317 4,074 31%

Property taxes and operating cost recoveries 265,404 244,582 9%

819,839 724,947 13%

Lease cancellation fees 13,941 1,085 nm

Rental revenue 833,780 726,032 15%

Recoverable property taxes and operating costs 269,630 247,068 9%

Non-recoverable property operating and site administration costs 6,745 13,362 (50%)


NOI $ 557,405 $ 465,602 20%

NOI as a percentage of rental revenue (excluding the impact of lease cancellation fees) 66% 64% 2%


The amount of property taxes and operating costs that can be recovered from tenants is impacted by property vacancy and fixed

cost recovery tenancies.

The increase in NOI margin in 2010 to 66% from 64% in 2009 is primarily as a result of decreased bad debt expense and a higher

NOI margin for the US properties.

RioCan’s proportionate interest in NOI is as follows:



Canadian Portfolio $ 530,910 $ 465,393 14.1%

US Portfolio 21,646 169 nm

RioCan’s proportionate interest in NOI 552,556 465,562 18.7%


NOI $ 557,404 $ 465,602 19.7%




Canadian Portfolio

The changes in NOI for the years ended December 31, 2010 and 2009 for RioCan’s Canadian portfolio are as follows:



(decrease)

Same store (i) $ 445,190 $ 434,706 2.4%

Land use intensification 7,532 4,478 nm

Same properties (ii) 452,722 439,184 3.1%

2010 and 2009 acquisitions 35,396 742 nm

Greenfield development 20,143 15,880 26.8%

NOI before adjustments 508,261 455,806 11.5%

Lease cancellation fees 12,941 1,084 nm

Straight-lining of rents 6,595 5,557 18.7%

Differential between contractual and market rents 3,113 3,155 (1.3%)

NOI $ 530,910 $ 465,602 14.0%


(i) Same store refers to those income properties that were owned by RioCan and had consistent leasable area in both periods.

(ii) Same properties refer to those income properties that were owned by RioCan throughout both periods.

Same store NOI increased by 2.4% during the year ended December 31, 2010 as compared to the year ended December 31, 2009

primarily due to the following:

• new and renewal leasing and fixed rent steps which positively impacted NOI by $8 million; and

• reduced bad debt expense in 2010 of $3.5 million; and

• reduced provisions of approximately $1.0 million in connection with tenants’ rents subject to sales thresholds (“GROC tenants”)

and other positive property operating adjustments; offset by

• reduced NOI in 2010 due to vacancies of $9.1 million.

$4.2 million of reduced NOI is due to tenant vacancies for which lease cancellation fees of $12.7 million were received by RioCan

for 484,000 square feet of vacated NLA (459,000 square feet at RioCan’s interest) at an average net rent of $12.59 per square foot

($12.33 per square foot at RioCan’s interest). Included in the NLA of 459,000 square feet are the following:

• 125,000 square foot space which was vacated on June 30, 2010 for which RioCan received a $5.0 million lease cancellation fee at

its RioCan Scarborough Shopping Centre. The 125,000 square foot space has been re-leased to two new tenants, a 45,000 square

foot LA Fitness and a 65,000 square foot supermarket operating under the name of “Oriental Grocery Store”, at higher rental

rates.

• 106,000 square foot space which was vacated on September 30, 2010 for which RioCan received a $3.7 million lease cancellation

fee at its RioCan West Ridge Shopping Centre. 23,000 square feet has been re-leased to Value Village at higher rental rates.

RioCan is in discussions with other tenants for the balance repositioning of the space.

To date, 320,000 square feet (295,000 square feet at RioCan’s interest) have been re-leased at an average net rent of $16.01 per

square foot ($15.58 per square foot at RioCan’s interest).

Same property NOI increased by 3.1% during the year ended December 31, 2010 as compared to the same period in 2009 due to the

same explanations noted above for the increase in same store NOI, and the $3 million increase in NOI with respect to land use

intensification activities.

During the year ended December 31, 2010, 262,000 square feet of greenfield developments, including land use intensification, were

completed compared to 929,000 square feet during the year ended December 31, 2009.

Other Revenue

Fees and Other Income

RioCan holds certain of its interests in various real estate investments through co-ownerships and investments accounted for by

the equity method. Generally, RioCan provides asset and property management services for these investments for which the Trust

earns market based fees.



The significant sources of fees and other income are as follows:



(decrease)

Property and asset management fees earned from co-ownerships, partners and other $ 11,771 $ 12,981 (9%)

Disposition-dependent performance fees and other 1,898 979 94%

Dividends earned on Cedar shares 2,632 630 318%

Mark-to-market adjustment recorded on Cedar warrants – 675 nm

$ 16,301 $ 15,265 7%


In 2010 property and asset management fees earned from co-owners and partners and other decreased from 2009 due to a decline

in transaction related fees. In 2009, the Trust, among other fees, earned a $2.25 million repositioning fee from Kimco with respect

to the Brentwood Village Shopping Centre, Calgary, Alberta property. In 2010, there has been no such fee.

The $1.9 million disposition-dependent performance fees and other in 2010 primarily consists of a gain from a partnership in

which the Trust has an interest. During the same period in 2009 the Trust recorded a $2.1 million gain on the disposition of public

company equity positions however this was slightly offset by a $1.2 million downward adjustment to the portfolio out-performance

incentive fee from RRVLP that was recorded in 2009 as a result of non-cash impairment charges on two assets in RRVLP.

The Cedar dividends are common share dividends from the Trust’s Cedar common shares, with the initial investment acquired in

the fourth quarter of 2009.

Interest Income

Interest income decreased during the year ended December 31, 2010 as compared to year ended December 31, 2009, which is

consistent with lower average mortgage receivable balances throughout 2010 than the Trust had throughout 2009.

Gains on Properties Held for Resale

The components of gains (loss) on properties held for resale are as follows:



(decrease)

Properties acquired or redeveloped and developed for resale without partners and

co-owners $ 10,810 $ (786) nm

Properties acquired or redeveloped and developed for resale with partners and co-owners 10,433 (371) nm

$ 21,243 $(1,157)


Gains on wholly-owned properties held for resale

The $10.8 million gain on properties held for resale for wholly-owned properties during the year ended December 31, 2010 was

primarily a result of:

• $6.9 million gain recorded in the second quarter from the sale of the Trust’s profit participation rights in connection with the

sale of units at its Avenue Road and Queen Street and Portland Street development properties; and

• $4.2 million gain recorded in the fourth quarter for the sale of land located in Whitby, Ontario;

During 2009, the $ 0.8 million net loss arose primarily as a result of recording a $0.7 million non-cash mark to market adjustment

of an underlying vendor-take-back mortgage during the second quarter and a $0.1 million impairment charge in the first quarter

for a property located in a tertiary market, slightly offset by a $0.2 million gain on a forward sale to CPPIB for RioCan Meadows.

Gains on jointly owned properties held for resale

The $10.4 million gain on properties held for resale for the year ended December 31, 2010 with partners and co-owners is

primarily comprised of:

• $3.5 million gain recorded upon the sale of an interest in Phase II land at the East Hills development property to CPPIB; and

• $7.3 million proceeds recorded upon the completion of the rezoning at the St.Clair and Weston Road and East Hills development

properties.

During the comparative period of 2009, the $ 0.4 million net loss was primarily comprised of a $2 million gain on a property sold to

Trinity in the first quarter, offset by RioCan’s $2.1 million share of impairment charges recognized on two properties in RRVLP.



Gains on disposition of long-lived assets

During 2010, the Trust sold its Langstaff Place shopping centre to one of its national grocery tenants. The transaction was

completed for gross proceeds of $10 million resulting in a gain of $3 million.

The Trust also sold its share of the Stouffville development property for gross proceeds of $3 million but for which no gain or loss

was recorded.

Impairment of real estate investments

During 2010, the Trust recorded an $8 million impairment charge on its share of the Stouffville development property. A 50%

interest in the property was subsequently sold to a third party. No gain or loss was recorded with respect to the sale.

Other Expenses

Interest

The components of interest expense are as follows:



(decrease)

Interest $ 233,547 $ 209,213 12%

Capitalized to real estate investments (18,824) (16,748) 12%

Net interest expense $ 214,723 $ 192,465 12%

Percentage capitalized to real estate investments 8% 8%

The increase in total interest expense during the year ended December 31, 2010, compared to 2009, resulted primarily from higher

aggregate debt levels during 2010 partly due to increased acquisition activity and the issuance of the Series L Debenture of

$180 million on April 3, 2009, the Series M Debenture of $150 million on November 3, 2009 and the Series N Debenture of

US$100 million on September 21, 2010 (see “Debt” elsewhere in this MD&A).

The amounts capitalized to real estate investments are consistent with RioCan’s greenfield developments and land use

intensification activities during the periods. The amounts capitalized increased slightly as a result of increased development

activities to date in 2010 as compared to the same period in 2009.

The components of general and administrative expense are as follows:



(decrease)

General and administrative expense:

Non-recoverable salaries and benefits $ 21,745 $ 17,438 25%

Directly capitalized to properties under development and tenant installations costs (i) (7,387) (6,827) 8%

14,358 10,611 35%

Public company and other 12,607 12,165 4%

Unit based compensation expense 2,225 2,059 8%

Indirectly recoverable regional office costs 1,235 1,268 (3%)

General and administrative expense $ 30,425 $ 26,103 17%

Restructuring costs – 1,652 nm

IFRS and SIFT transition costs 5,496 1,601 nm

Transition Costs $ 5,496 $ 3,253


As a percentage of rental revenue 3.6% 3.6% 0.1%

As a percentage of total assets 0.4% 0.4% nm


(i) Amounts capitalized to properties under development and tenant installation costs are primarily comprised of salaries and benefits directly

related to development and leasing activities at the properties.



Non-recoverable salaries and benefits for 2010 increased primarily due to the management bonus compared with 2009. During

2009, the financial results were below budget and thus a reduced bonus was paid to management. During 2010, financial results

were within budget and, accordingly, management was paid the full bonus under the budgeted plan of approximately $4.5 million.

The increase in public company and other costs for 2010, when compared to the same period in the prior year, is primarily due to

increased information technology costs, which facilitate overall growth of the business and heightened regulatory requirements;

and increased REU costs for the Board of Trustees, the result of a higher RioCan Unit price.

The increase in unit based compensation expense is due to a higher unit price, which results in a higher valuation of unit option

grants.

During the second quarter of 2009, RioCan undertook a restructuring plan, resulting in a charge of $ 1.7 million. No such activity

occurred in 2010. The 2009 restructuring costs are severance related expenses.

During the later part of 2009 and 2010, the Trust was undertaking a conversion to IFRS and reorganizing its activities to comply

with the SIFT Legislation. The costs to date in 2010 are $5.5 million and are composed largely of professional fees.

Additionally, RioCan expects to continue to experience overall increases in general and administrative costs due to the growth of

the asset base, enhanced regulatory requirements, US expansion, and costs related to RioCan’s transition to IFRS and compliance

with the SIFT Legislation.

Amortization

The components of amortization expense are as follows:



(decrease)

Buildings $ 122,058 $ 109,027 12%

Leasing costs 45,163 39,010 16%

Intangible assets 23,505 17,320 36%

Amortization expense $ 190,726 $ 165,357 15%

For the year ended December 31, 2010, the $13 million increase in building amortization expense is consistent with the increase in

new acquisitions and completed developments and redevelopments of income properties, when compared to the amortization

expense in 2009.

For the year ended December 31, 2010, compared to the same period in 2009, amortization of leasing costs increased $6.2 million

as a result of recent acquisition activity and leasing activity during the period, offset by decreased write-offs due to tenant

bankruptcies in the first quarter of 2009.

For the year ended December 31, 2010, when compared to 2009, amortization of intangible assets increased by $4.2 million

primarily as a result of recent acquisition activity.



SELECTED QUARTERLY CONSOLIDATED INFORMATION


2010 2009

As at and for the quarter ended Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

Total revenue $ 235 $ 217 $ 221 $ 215 $ 191 $ 189 $ 187 $ 191

Net earnings* 180 39 47 37 28 28 27 31

Net earnings per Unit*

– basic 0.72 0.16 0.20 0.15 0.11 0.12 0.12 0.14

– diluted 0.72 0.16 0.20 0.15 0.11 0.12 0.12 0.14

FFO 89 89 93 86 66 72 68 71

FFO per unit 0.35 0.36 0.38 0.36 0.28 0.30 0.30 0.32

Total assets 6,859 6,501 6,109 6,066 5,862 5,650 5,722 5,399

Total mortgages and debentures payable 4,410 4,189 3,936 3,881 3,663 3,533 3,567 3,364

Total distributions to unitholders 88 85 84 84 82 81 78 77

Total distributions to unitholders per

Unit 0.3450 0.3450 0.3450 0.3450 0.3450 0.3450 0.3450 0.3450

Net book value per Unit** 8.28 7.58 7.38 7.54 7.66 7.58 7.77 7.68

Market price per Unit

– high 23.40 23.12 20.00 20.07 20.05 18.94 15.74 15.69

– low 21.12 18.80 17.25 17.45 17.15 14.00 12.20 11.23

– close 22.00 22.92 19.04 18.48 19.85 18.00 15.28 12.55

* Refer to RioCan’s annual and interim MD&As issued for the three months ended March 31, 2009 and 2008, the six months ended June 30, 2009

and 2008, the nine months ended September 30, 2009 and 2008 and for the two years ended December 31, 2009 and 2008 for a discussion and

analysis relating to those periods.

During the four quarters of 2010, RioCan recorded non-cash charges (recoveries) for future income taxes to net earnings of $3 million, $2.1

million, $4.9 million, and ($149.8) million, respectively. During the four quarters of 2009, RioCan recorded non-cash charges (recoveries) for

future income taxes to net earnings of $Nil, ($1.2) million, $1.9 million, and ($4.2) million respectively. These charges relate to its future income

tax liabilities recorded as a result of the SIFT Legislation. These non-cash charges relate to temporary differences between the accounting and

tax basis of its assets and liabilities, primarily relating to the Trust’s real estate investments. These charges have no current impact on its cash

flows or distributions (see “Future Income Taxes” above).

** A non-GAAP measurement. Calculated by RioCan as unitholders’ equity divided by Units outstanding at the end of the period. RioCan’s method

of calculating net book value per Unit may differ from other issuers’ methods and accordingly may not be comparable to net book value per unit

reported by other issuers.

REVIEW OF FOURTH QUARTER RESULTS

RioCan reported net earnings for the three months ended December 31, 2010 of $180 million ($0.72 per Unit) compared to

$28 million ($0.12 per Unit) for the same period in 2009. The primary difference between net earnings and funds from operations

(“FFO”) is amortization expense and future income tax. FFO for the quarter ended December 31, 2010 is $ 89 million ($0.35 per

Unit) compared to $ 66 million ($0.28 per Unit) for the same period in 2009. The $23 million increase in FFO is primarily due to the

following items:

• increased net operating income from rental properties of $31 million which is due to acquisitions, same store growth of 3.8%,

the completion of greenfield developments, intensification of existing properties, and increased lease cancellation fees of

$0.5 million;

• increased transaction gains of $5 million; offset by

• increased interest expense of $6 million;

• increased general and administration expenses of $3 million; and

• increased IFRS and SIFT implementation costs of $2 million.



The specific components of RioCan’s net earnings for each respective period are as follows:

(thousands of dollars, except per Unit amounts)

Three months ended December 31, 2010 2009Increase

(decrease)

Rental revenue $ 222,825 $ 183,110 22%


Net operating income 148,882 118,242 26%

Fees and other income 3,679 4,042 (9%)

Interest income 3,820 4,655 (18%)

Gains (loss) on properties held for resale 4,179 (1,224) (441%)

160,560 125,715

Interest expense 56,355 50,335 12%

General and administrative expense 11,142 8,008 39%

IFRS and SIFT implementation costs 3,279 1,372 nm

Restructuring costs – 294 nm


FFO (i) 88,404 65,675 35%

Amortization expense (55,181) (42,303) 30%

Impairment of real estate investments (7,863) – nm

Future income tax recovery 149,819 4,175 3488%

Gain on disposition of long-lived assets 3,269 – nm

Non-controlling interest – amortization expense 966 – nm

Net earnings $ 179,414 $ 27,547 551%

Net earnings per Unit – basic and diluted $ 0.72 $ 0.11 555%

FFO per Unit (i) $ 0.35 $ 0.28 30%

(i) Refer to the discussion above under FFO.

Net Operating Income

RioCan’s consolidated NOI for the three months ended December 31, 2010 and 2009 are as follows:



(decrease)

Base rent $ 147,991 $ 121,335 22%

Percentage rent 1,025 861 19%

Rents subject to tenants’ sales thresholds 1,329 844 57%

Property taxes and operating cost recoveries 70,917 60,031 18%

221,262 183,071

Lease cancellation fees 1,563 39 3908%

Rental revenue 222,825 183,110 22%

Recoverable property taxes and operating costs 71,509 61,141 17%

Non-recoverable property operating and site administration costs 2,434 3,727 (35%)


NOI $ 148,882 $ 118,242 26%

NOI as a percentage of rental revenue (excluding the impact of lease cancellation fees) 67% 65% 2%



RioCan’s proportionate interest in NOI is as follows:


Three months ended December 31, 2010 2009 Increase

Canadian Portfolio $ 134,703 $ 118,033 14.1%

US Portfolio 11,771 169 nm

RioCan’s proportionate interest in NOI 146,474 118,202 23.9%


NOI $ 148,882 $ 118,242 25.9%


Canadian Portfolio

The changes in NOI for the years ended December 31, 2010 and 2009 for our Canadian portfolio are as follows:


Three months ended December 31, 2010 2009 Increase

Same store (i) $ 114,535 $ 110,369 3.8%

Land use intensification 1,435 1,442 nm


2010 and 2009 acquisitions 11,115 743 nm



Lease cancellation fees 563 39 nm

Straight-lining of rents 1,404 1,486 (5.5%)

Differential between contractual and market rents 765 812 (5.8%)

NOI $ 134,703 $ 118,242 13.9%




Same store NOI increased by 3.8% during the three months ended December 31, 2010 as compared to the three months ended

December 31, 2009 primarily due to the following:

• new and renewal leasing and fixed rent steps which positively impacted NOI by $0.8 million; and

• reduced bad debt expense in 2010 of $1.1 million; and

• reduced provisions of approximately $1.6 million in connection with tenants’ rents subject to sales thresholds (“GROC tenants”)

and other positive property operating adjustments; offset by


Same property NOI increased by 3.7% during the three months ended December 31, 2010 as compared to the same period in 2009

due to the same explanations noted above for the increase in same store NOI.

During the three months ended December 31, 2010, 237,000 square feet of greenfield developments, including land use

intensification, were completed compared to 39,000 square feet during the three months ended December 31, 2009.



The change in NOI for the Canadian portfolio on a consecutive quarter-over-quarter basis is as follows:


Three months endedDecember 31,

2010September 30,

2010Increase

(decrease)

Same store (i) $ 123,339 $ 121,390 1.6%

Land use intensification 1,435 1,480 (3.0%)


Acquisitions 3,264 380 nm



Lease cancellation fees 563 4,704 nm

Straight-lining of rents 1,404 1,306 7.5%

Differential between contractual and market rents 765 751 1.9%

NOI $ 134,703 $ 133,542 0.9%




Same store NOI increased by 1.6% during the fourth quarter of 2010 as compared to the third quarter of 2010, primarily due to the

following:

• new and renewal leasing and fixed rent steps which positively impacted NOI by $0.4 million; and

• reduced provisions of approximately $0.8 million in connection with tenants’ rents subject to sales thresholds (“GROC tenants”);

offset by


Same property NOI increased by 1.5% during the fourth quarter of 2010 as compared to the third quarter of 2010 due to the same

explanations noted above for the increase in same store NOI.

During the three months ended December 31, 2010, 237,000 square feet of greenfield developments and land use intensification

were completed as compared to 9,000 square feet during the third quarter of 2010.

US Portfolio

The change in NOI for the US portfolio on a consecutive quarter-over-quarter basis is as follows (at RioCan’s interest):


Three months endedDecember 31,

2010September 30,

2010Increase

(decrease)

Base rent – US$ $ 3,671 $ 3,607 2%

Property tax and operating cost recoveries – US$ 745 817 (9%)

Other – US$ 41 76 nm

Rental revenue – US$ 4,457 4,500 (1%)

Property operating costs – US$ 1,145 1,048 9%

Same store and same properties (i) (ii) – US$ $ 3,312 $ 3,452 (4%)

Foreign currency translation 83 140 nm

Same store and same properties (i) (ii) – CDN$ 3,395 3,592 (5%)

Acquisitions 6,825 636 nm

NOI before adjustments 10,220 4,228 142%

Lease cancellation fees 800 – nm

Straight-lining of rents 431 188 nm

Differential between contractual and market rents 320 313 2%

NOI $ 11,771 $ 4,729 149%






For the US portfolio, same store and same properties NOI decreased during the fourth quarter of 2010 as compared to the third

quarter of 2010 due to the timing of the recognition of realty tax recoveries during the year.

The following table provides the calculation of AFFO:


Three months ended December 31, 2010 2009 (iii)Increase

(decrease)

FFO $ 89 $ 66 35%

Add/(deduct):

Recognition of rents on a straight-line basis (2) (2) 0%

Amortization:

Amortization of differential between market and contractual rents on in-place leases (1) (1) 0%

Normalized productive capacity maintenance cash expenditures (i):

Leasing commissions and tenant improvements (4) (7) (43%)

Maintenance capital expenditures recoverable from tenants (3) (3) 0%

Maintenance capital expenditures not recoverable from tenants (1) (1) 0%

Other adjustments:

IFRS and SIFT transition costs (ii) 4 2 100%

AFFO $ 82 $ 54 52%

AFFO per weighted average Unit $ 0.32 $ 0.23 39%

Cash distributions per Unit $ 0.345 $ 0.345 0%

Cash distributions net of distribution reinvestment plan per Unit $ 0.29 $ 0.29 2%

Distributions as a percent of AFFO 107% 152% (45%)

Distributions net of distribution reinvestment plan as a percent of AFFO 90% 126% (36%)

Weighted average Units 253,610 237,880 7%


(i) Refer to the discussion on “Capital Expenditures on Income Properties” for the Trust’s expectation of such normalized expenditures.

(ii) IFRS and SIFT transition costs includes costs related to professional fees associated with IFRS and SIFT legislation which the Trust views as

one-time costs.

(iii) Actual results.

Other Revenue

Fees and Other Income

RioCan holds certain of its interests in various real estate investments through co-ownerships and investments accounted for by

the equity method. Generally, RioCan provides asset and property management services for the Canadian investments for which

the Trust earns market based fees.

The significant sources of fees and other income are as follows:



(decrease)

Property and asset management fees earned from co-ownerships, partners and other $ 2,810 $ 2,737 3%

Dividends earned on Cedar shares 869 630 38%

Mark-to-market recorded on Cedar warrants – 675 nm

$ 3,679 $ 4,042 (9%)


For the fourth quarter of 2010, property and asset management fees earned from co-owners, partners and other was consistent

with the same period in 2009.



Dividends earned on Cedar shares increased due to the purchase of an additional 1.35 million shares in the first quarter of 2010 in

connection with a public offering conducted by Cedar and the acquisition of an additional 1.4 million shares during the second

quarter of 2010 through the exercise of 1.4 million warrants.

Interest Income

Interest income decreased during the three months ended December 31, 2010 as compared to three months ended December 31,

2009, which is consistent with lower average mortgage receivable balances throughout the fourth quarter of 2010 than the Trust

had throughout the fourth quarter of 2009.

Gains on properties held for resale

The $4.2 million gain on properties held for resale for the three months ended December 31, 2010 for wholly-owned properties is

primarily comprised of a gain recorded upon the sale of land located in Whitby, Ontario.

There were no gains on jointly owned properties held for resale recorded in the fourth quarter of 2009. During the fourth quarter of

2009 a $1 million impairment charge was recorded on a property in RRVLP, which was subsequently sold.

Other Expenses

Interest

The components of interest expense are as follows:



(decrease)

Interest $ 62,053 $ 54,153 15%

Capitalized to real estate investments (5,698) (3,818) 49%

Net interest expense $ 56,355 $ 50,335 12%

Percentage capitalized to real estate investments 9% 7%

The increase in total interest expense during the three months ended December 31, 2010 compared to the same period in 2009,

resulted primarily from higher aggregate debt levels during the fourth quarter of 2010 which is due in part to increased acquisition

activity as well as to the issuance of the Series M Debentures of $150 million on November 3, 2009 and the Series N Debenture of

US$100 million on September 21, 2010 (see “Debt” elsewhere in this MD&A).

The amounts capitalized to real estate investments are consistent with RioCan’s Greenfield Developments and land use

intensification activities during the periods. The amounts capitalized increased slightly as a result of increased development

activities in the fourth quarter of 2010 as compared to the same period in 2009.

General and Administrative

Certain staffing and related costs for property management activities are directly recoverable from tenants under lease

agreements and such costs are included in property operating costs. Other regional office costs and head office costs are included

in general and administrative expense.

The components of general and administrative expense are as follows:



(decrease)


Non-recoverable salaries and benefits $ 8,539 $ 5,058 69%

Directly capitalized to properties under development and tenant installation costs (i) (2,115) (1,724) 23%

6,424 3,334 93%

Public company and other 3,334 3,901 (15%)

Unit based compensation expense 633 493 28%

Indirectly recoverable regional office costs 751 280 168%

General and administrative expense $ 11,142 $ 8,008 39%

Restructuring costs – 294 nm

IFRS and SIFT transition costs 3,279 220 nm

Transition Costs $ 3,279 $ 514


As a percentage of rental revenue 5.0% 4.4% 0.6%

As a percentage of total assets 0.2% 0.1% nm




(i) Amounts capitalized to properties under development and tenant installation costs are primarily comprised of salaries and benefits directly

related to development and leasing activities at the properties.

Non-recoverable salaries and benefits for the fourth quarter of 2010 increased due to the management bonus compared with the

respective periods in 2009. During 2009, the financial results were below budget and thus a reduced bonus was paid to

management. During 2010, financial results were within budget and, accordingly, management was paid the full bonus under the

budgeted plan ($4.5 million), the majority of which was accrued in the fourth quarter of 2010.

The decrease in public company and other costs for the fourth quarter of 2010, when compared to the same period in the prior

year, is primarily due to lower administrative costs.

The increase in unit based compensation expense is due to a higher unit price, which results in a higher valuation of unit option

grants.

During the fourth quarter of 2009, RioCan completed its 2009 restructuring plan, resulting in a charge of $0.3 million in the

quarter. No such activity occurred in 2010. The 2009 restructuring costs are severance related expenses.

During the later part of 2009 and 2010, the Trust was undertaking a conversion to IFRS and reorganizing its activities to comply

with the SIFT legislation governing income trusts. The fourth quarter 2010 costs were $3 million, an increase of $3 million over the

same period in 2009, due to a higher level of activity. The costs are composed largely of professional fees.

Additionally, RioCan expects to continue to experience overall increases in general and administrative costs due to the growth of

the business, US expansion, enhanced regulatory requirements and costs related to RioCan’s transition to IFRS and monitoring of

compliance under the SIFT Legislation.

Amortization

The components of amortization expense are as follows:

Three months endedDecember 31, Increase

(decrease)(thousands of dollars) 2010 2009

Buildings $ 32,796 $ 28,471 15%

Leasing costs 13,440 9,692 39%

Intangible assets 8,945 4,140 116%

Amortization expense $ 55,181 $ 42,303 30%

For the three months ended December 31, 2010, the increase in building amortization expense is consistent with the increase in

acquisitions and completed developments and redevelopments of income properties, when compared to the amortization expense

in the same period in 2009.

For the three months ended December 31, 2010, the increase in amortization of leasing costs is consistent with the increase in

acquisitions in 2010 and the increase in new and renewal leasing when compared to the same period in the prior year.

For the three months ended December 31, 2010, when compared to the same periods in 2009, amortization of intangible assets

increased primarily as a result of an increase in acquisitions throughout 2010.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of RioCan’s financial position and results of operations are based upon the Trust’s consolidated

financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements requires

management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of

contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during

the reporting period. Actual results may differ from those estimates under different assumptions and conditions.

RioCan believes that the following significant accounting policies are most affected by judgments and estimates used in the

preparation of its consolidated financial statements. For a detailed description of these and other accounting policies refer to Note

1 to RioCan’s annual consolidated financial statements.

Building amortization

A significant portion of the acquisition cost of each property is allocated to building (please see “Fair Value” discussion below).

RioCan assesses the useful lives of its long-lived income properties for purposes of determining the amount of building

amortization to record. The determination of the allocation of acquisition costs to buildings, and the estimated useful lives thereof,

could vary under differing circumstances and result in a significantly different calculation of building amortization. The amount of

building amortization has a direct impact on current and future period net earnings.



Impairment of real estate investments

GAAP requires RioCan to evaluate the recoverability of the net carrying amount of its income properties and properties under

development. This assessment is done on an asset by asset basis. RioCan recognizes an impairment of an asset when the carrying

value of the asset exceeds the total undiscounted future cash flows expected from the use and eventual disposal of the asset. The

impairment recognized is measured as the amount by which the carrying value of the asset exceeds its fair value. In making this

evaluation, RioCan’s estimates of future cash flow which, among other things, involves assumptions of estimated occupancy, rental

rates and residual value, and the effects of other factors, including general and local economic conditions, the credit worthiness of

tenants and changing tenant formats, could vary and result in a significantly different assessment of impairment.

Properties held for resale are stated at the lesser of cost and net realizable value. In assessing net realizable value, RioCan’s

estimates of future cash flow, capitalization rates and the effects of other factors could vary and result in a significantly different

assessment of impairment.

Additionally, RioCan evaluates its mortgages receivable for impairment. Impairment is recognized when the carrying value of

mortgages receivable may not be recovered due to the inability of the underlying assets’ performance to support a fair value that

would exceed the net investment in these assets, with consideration given to third party guarantees. In making this determination,

RioCan’s estimates of future cash flow and the effects of other factors could vary and result in a significantly different assessment

of impairment.

Guarantees

GAAP requires RioCan to assess whether there are contingent losses relating to guarantees that the Trust provided on behalf of

third parties, including co-owners and partners. In addition, RioCan’s guarantees remain in place for debts assumed by purchasers

in connection with certain property dispositions, and will remain until such debts are extinguished or the lenders agree to release

its covenants. Credit risk arises in the event that these parties default on repayment of their debt since they are guaranteed by

RioCan. These credit risks are mitigated as RioCan has recourse under these guarantees in the event of a default by the

borrowers, in which case the Trust would also have a claim against the underlying real estate investments. A contingent loss is

recorded by RioCan when the carrying values of the related real estate investments are not recovered either as a result of the

inability of the underlying assets’ performance to meet the contractual debt service terms of the underlying debt and the fair value

of the collateral assets are insufficient to cover the obligations and encumbrances in a sale between unrelated parties in the

normal course of business. RioCan’s estimates of future cash flow which, among other things, involve assumptions of estimated

occupancy, rental rates and residual value, and the effects of other factors, including general and local economic conditions and

changing tenant formats, could vary and result in a significantly different assessment of such contingent loss. As at December 31,

2010, there have been no defaults by the primary obligors for debts on which the Trust has provided its guarantees and as a result,

no contingent loss on these guarantees has been recognized in the Trust’s financial statements.

Future income taxes

Prior to compliance by the Trust with the REIT Exception, GAAP required RioCan to recognize future income tax assets and

liabilities based on temporary differences expected to reverse after January 1, 2011. As a result of the completion of its tax

restructuring, the non-cash future income tax liability of $144 million at September 30, 2010 that arose primarily as a result of the

introduction of the SIFT Legislation in 2007 reversed in the fourth quarter of 2010 through the consolidated statement of earnings

as a one-time non-cash future income tax recovery.

Fair value

Fair value is the amount at which an item could be bought or sold in a current transaction between independent, knowledgeable

willing parties, as opposed to a forced or liquidation sale, in an arm’s length transaction under no compulsion to act. The fair value

of a disposal group is the amount at which the group as a whole could be bought or sold in a current single transaction between

independent, knowledgeable willing parties, and would not necessarily be equal to the sum of the fair values of the individual

assets and liabilities of the group.

Quoted market prices in active markets are the best evidence of fair value and are used as the basis for fair value measurement,

when available. When quoted market prices are not available, estimates of fair value are based on the best information available,

including prices for similar items and the results of other valuation techniques. Valuation techniques used would be consistent

with the objective of measuring fair value.

The techniques used to estimate future cash flows will vary from one situation to another depending on the circumstances

surrounding the asset or liability in question. RioCan assesses fair value based on estimated discounted cash flow projections and

available market information. Cash flow estimates incorporate assumptions that marketplace participants would use in their

estimates, including the historical operating results and anticipated trends, local markets and economic conditions, and RioCan’s

own assumptions giving consideration to: (i) the potential use for the asset, other than that intended, by other market participants;

(ii) the Trust’s ability to accept levels of risk for a liability and manage it internally, rather than transferring that liability to another

enterprise; (iii) the Trust’s possession of certain capabilities not possessed by others; (iv) RioCan’s possession of information or

processes that would allow the Trust to realize, or avoid paying, as the case may be, cash flows that differ from other market

participants; and (v) the Trust’s ability to realize economies of scale not necessarily available to other market participants.

Potential transaction costs have also not been considered in estimating fair value.



As a result, in determining fair value, RioCan will select among several acceptable valuation techniques and make assumptions;

consequently, RioCan’s determination of fair value could vary under differing circumstances and result in significantly different

calculations of fair value.

The Trust’s financial statements are affected by the fair value based method of accounting, the most significant areas of which are

as follows:

• Upon acquisition of income properties, RioCan estimates the fair value of acquired tangible assets, such as land, building and

leasing costs, and identifiable intangible assets and liabilities (for example, above and below-market leases representing the

value of the differential between contractual and market rents, in-place leases and tenant relationships, if any) and the value of

the differential between stated and market interest rates on long term liabilities assumed at acquisition.

The fair value of acquired leasing costs generally considers estimated market leasing costs, rentable area and terms for each

lease, and the costs of executing similar leases.

Above- and below-market rents represent the value of the differential between contractual and market rents. RioCan’s

estimates of market rents for acquired leases are measured over a period equal to the remaining terms of acquired leases for

above-market leases and the initial terms plus the terms of any fixed rate renewal options for below-market leases.

The fair value of acquired in-place leases represents the present value of property net operating income foregone during a

theoretical estimated lease-up period required to replace the existing leases in-place at the acquisition date. Such assumptions

generally give consideration to local market conditions, estimated expected lease-up periods and property operating costs

incurred by RioCan during such periods.

The fair value of tenant relationships represents the estimated present value of future benefits to be realized by the Trust arising

from relationships with certain tenants.

At December 31, 2010, RioCan’s original building cost of its income properties is approximately $4.6 billion and generally

buildings have an estimated useful lives between 29 and 40 years. If RioCan’s estimate of useful life had a differential of one

year, our annual building amortization, and thereby net earnings, would be impacted by approximately $3 million annually.

Further, a differential of 1% in the allocation of cumulative acquisition costs between land and buildings, using the same building

useful life, would impact the calculation of annual building amortization, and thereby earnings, by approximately $1 million

annually.

• Included in rental revenue is the adjustment for the differential between contractual and market rents on the tenant leases in

place at the acquisition of RioCan’s income properties. Additionally, for arrangements involving multiple elements, RioCan

allocates the consideration to each element based on relative fair value where there is objective and reliable evidence of fair

value of each element. RioCan analyzes accounts receivable and historical bad debt levels, customer creditworthiness and

current economic trends when evaluating the adequacy of its allowances for doubtful accounts. In addition, tenants in

bankruptcy are analyzed and estimates are made in connection with the expected recovery of pre-petition and post-petition

claims.

• As discussed above with respect to RioCan’s policy about impairment of real estate investments, an impairment loss is

recognized when the carrying amount of an asset is not recoverable and exceeds its fair value.

• Unit based compensation expense is measured at fair value and expensed over the options’ vesting periods, calculated using the

Black-Scholes Model for option valuation.

For the year ended December 31, 2010, RioCan recorded Unit based compensation expense of approximately $2 million

($2 million for the comparative period of 2009).

• The Canadian Institute of Chartered Accountants (“CICA”) accounting standard Section 3855, “Financial Instruments –

Recognition and Measurement” establishes the standard for recognizing and measuring financial assets, financial liabilities and

non-financial derivatives (please see Note 1 to RioCan’s annual consolidated financial statements). All financial instruments are

required to be measured at fair value on initial recognition, except for certain related party transactions. Measurement in

subsequent periods depends on whether the financial instrument has been classified as held-for-trading, available-for-sale,

held-to-maturity, loans and receivables or other liabilities.

For the year ended December 31, 2010, the consideration for real estate acquired during 2010 included $221 million relating to

the assumption of mortgages payable and the granting of vendor-take-back mortgages by the vendors. These financial liabilities

were measured at fair value on initial recognition. If the interest rate used in the assessment of fair value has a differential of

100 basis points, RioCan’s operations would be impacted by approximately $2 million annually.

• At least annually, RioCan reports in its financial statements the fair value of its mortgages and debentures payable, which

amounts are based upon discounted future cash flows using discount rates that reflect current market conditions for

instruments with similar terms and risks. Such fair value estimates are not necessarily indicative of the amounts that RioCan

might pay or receive in actual market transactions. Potential transaction costs have also not been considered in estimating fair

value.



The carrying cost of RioCan’s mortgages and debentures payable at December 31, 2010 is $4.41 billion. The Trust reported a

$4.62 billion fair value relating to these mortgages and debentures payable in the notes to the annual consolidated financial

statements. If the interest rate used in the assessment of fair value has a differential of 100 basis points, RioCan’s reported fair

value relating to mortgages and debentures payable would be impacted by approximately $4.4 million.

FUTURE CHANGES IN SIGNIFICANT ACCOUNTING POLICIES

RioCan monitors the CICA’s recently issued accounting pronouncements to assess the applicability and impact, if any, of these

pronouncements on its consolidated financial statements and note disclosures.

IFRS

IFRS Overview

The Canadian Accounting Standards Board (“AcSB”) has mandated the adoption of IFRS effective for interim and annual periods

beginning on or after January 1, 2011 for Canadian publicly accountable profit-oriented enterprises. IFRS will replace Canada’s

current GAAP for these enterprises. Comparative IFRS information for the 2010 fiscal year will also have to be reported. These new

standards will be effective for the Trust during the first quarter of 2011.

RioCan is in the process of finalizing the impact of IFRS to the consolidated financial statements. RioCan’s consolidated financial

performance and financial position as disclosed in the current GAAP financial statements will be significantly different when

presented in accordance with IFRS. The transition to IFRS will also impact disclosure controls and procedures, and information

and technology systems and processes. While IFRS may also affect internal controls over financial reporting, management does

not currently expect such changes to be significant, and the Trust is in the process of finalizing such changes.



IFRS Conversion Plan

RioCan has established a formal project governance structure with oversight by its IFRS Steering Committee, consisting of senior

management from accounting and finance, information technology, and business operations. Several sub-committees support the

IFRS Steering Committee and include: (i) Real Estate Valuations; (ii) Financial Reporting and Information Technology

Implementation; and (iii) Business Change and Risk Management Review. Issue-specific working groups, including

communications, report into the sub-committees. The IFRS Steering Committee provides periodic updates of the status and

effectiveness of the IFRS conversion plan to the Trust’s senior executives, Audit Committee and Board of Trustees.

An update of the key elements of the Trust’s IFRS conversion plan include, but are not limited to:

Impact Assessment Selected Key Activities Milestones Progress to Date

Financial statement

presentation

Identification of IFRS versusCanadian GAAP differences

Design and implementsolutions

Assessment and quantificationof the significant effects of theconversion is expected to besubstantially complete by thefirst quarter of 2011

Completed the identification ofsignificant IFRS differences

Changes to processes requiredto record significant IFRSdifferences have beenimplemented in Q4 2010

Evaluate and select one-timeand ongoing accounting policyalternatives

Quantify the effects of theconversion to IFRS

Final selection of accountingpolicy alternatives by thetransition date

Accumulation of data toestablish opening balancesheet adjustments

Selection of one-timetransition choices is complete

Evaluation and selection ofaccounting policies iscomplete. Quantification ofsignificant effects on theopening balance sheet hasbeen completed

Prepare financial statementsand related note disclosuresto comply with IFRS

Engage advisors to assist withconversion

Completed preparation ofannual skeleton financialstatements

Advisors have completed thevalidation of the Trust’stechnical accounting analysisand impacts

Commence audit of openingbalance sheet

Audit procedures on theopening balance sheet are wellunderway

IFRS impacts on its business

groups and functions

Identify project risks

Identify and assign necessaryresources with the requisiteexpertise for technicalanalysis and implementation

Monitor project risks andevaluate the impact on theTrust’s risk managementpractices

Procure and assign projectresources

The Trust continues to monitorproject risks, with periodicreporting to the AuditCommittee and Board ofTrustees

Project management hassubstantially completed theidentification of critical pathtasks and resourcing matters

Development of a real estatevaluation strategy

Identify impact on contractualagreements, includingfinancial covenants andemployee compensationplans

Finalized the real estatevaluation as at January 1, 2010by the third quarter of 2010

Changes to agreements to besubstantially completed by thethird quarter of 2010

RioCan has finalized thevaluation of its real estateportfolio as of January 1, 2010

The Trust has identifiedsignificant IFRS differenceswith potential impacts onvarious agreements, including,but not limited to, financialcovenants, its Declaration ofTrust, co-ownershipagreements, leaseagreements, and employeecompensation plans. Requisitechanges have been made, orare in the process of beingmade, to such agreements asrequired.



Impact Assessment Selected Key Activities Milestones Progress to Date

Training and communication Provide training to affectedemployees, management andBoard of Trustees, includingthe Audit Committee

Timely training provided toalign with work undertransition – training to besubstantially completed byfourth quarter of 2010

Training is substantiallycomplete

Communication of progressof conversion plan to internaland external stakeholders

Communicate effects of thetransition during the course of2010 and 2011

Ongoing communication toexternal stakeholders thoughMD&A disclosure

Periodic project status updatesare presented to seniormanagement, the Board ofTrustees and Audit Committee

Information technology anddata systems

Identify and addresses IFRSdifferences that requirechanges to financial systemsand additional data capturerequirements

Changes to systems and datacapture requirements to becomplete by the fourth quarterof 2010

Implementation of systemchanges and data capturerequirements is substantiallycomplete

Evaluate and select methodsto address the need for dualrecord keeping during 2010(IFRS and Canadian GAAP),for 2010 IFRS comparatives,and 2011 budget and planningpurposes

Method to address dual recordkeeping to be identified duringfirst quarter of 2010

IT implementation of dualrecord-keeping is substantiallycomplete

Implementation of changes todata capture requirements forIFRS differences on the budgetprocess is substantiallycomplete

Internal control over financialreporting and disclosurecontrols and procedures

Design and implement realestate valuations process

Complete design andcommence implementationduring 2009 and first quarter of2010

RioCan has finalized thevaluation process of its realestate portfolio

Revise existing controlprocesses and procedures toaddress significant changesto existing accounting policiesand requirement for dualrecord keeping during 2010

Assess effectiveness

Design and implement processchanges throughout 2010

Update CEO/CFO officerinterim certification processfor the first quarter of 2011

Update CEO/CFO officer annualcertification process by thethird quarter of 2011

Implementation of significantprocess changes issubstantially complete

Impact of Adoption of IFRS

Adoption of IFRS initially requires retrospective application as of the transition date, on the basis that an entity has prepared its

financial statements in accordance with IFRS since its formation. Certain adoptive relief mechanisms are available under IFRS to

assist with difficulties associated with reformulating historical accounting information. The general relief mechanism is to allow

for prospective, rather than retrospective treatment, under certain conditions as prescribed by IFRS 1, First-time Adoption of

International Financial Reporting Standards. The standard specifies that adjustments arising on the conversion of IFRS from

Canadian GAAP should be recognized in opening retained earnings.

IFRS 1: First-time Adoption of International Financial Reporting Standards (“IFRS 1”)

The adoption of IFRS requires application of IFRS 1, which provides guidance for an entity’s initial adoption of IFRS. IFRS 1

generally requires an entity to apply all IFRSs effective at the end of its first IFRS reporting period retrospectively. However, IFRS 1

provides certain mandatory exceptions and permits limited optional exemptions in specified areas of certain standards from this

general requirement. Certain relevant first time adoption options are discussed below.

Business Combinations (refer to discussion below under IFRS Accounting Standards)

IFRS 1 states that a first-time adopter may elect not to apply IFRS 3, Business Combinations, retrospectively to business

combinations that occurred before the date of transition to IFRS. RioCan intends to make this election in order to only apply IFRS 3

to business combinations prospectively (i.e. to those that occur on or after January 1, 2010).



Employee Benefits

Under IFRS where an entity has defined benefit arrangements, it may elect to recognize all cumulative unrecognized actuarial

gains/losses at the transition date through retained earnings. Although not expected to be significant, RioCan expects to elect to

apply this first time adoption option and is in the process of finalizing the impact.

Decommissioning Liabilities Asset Retirement Obligations (“AROs”)

When changes in AROs have occurred prior to the transition date, (as an example environmental or asset decommissioning

obligations), an entity measures the liability in accordance with IFRS at the transition date, and may elect to estimate the amount

that would have been included in the cost of the related asset when the liability first arose by discounting the liability back to that

date and calculate the accumulated depreciation at the transition date using the current estimated useful life. Although not

expected to be significant, RioCan expects to elect to apply this first time adoption option and is in the process of finalizing the

impact.

Cumulative Translation Differences (included in Other Comprehensive Income)

IAS 21, The Effects of Changes in Foreign Exchange Rates, requires an entity to determine the translation differences in

accordance with IFRS from the date on which a subsidiary was formed or acquired. IFRS allows cumulative translation differences

for all foreign operations to be deemed zero at the date of transition to IFRS, with future gains or losses on subsequent disposal of

any foreign operations to exclude translation differences arising from the periods prior to the date of transition to IFRS. The Trust

expects to deem all cumulative translation differences to be zero on transition to IFRS by adjusting the cumulative amounts

through opening retained earnings.

Share-based payments

Generally an entity may elect prospective application for options granted on or after November 7, 2002, or for grants after

November 7, 2002 that vested before the date of transition to IFRSs. Although not expected to be significant, RioCan expects to

elect to apply this first time adoption option and is in the process of finalizing the impact.

IFRS Accounting Standards

IFRS is premised on a conceptual framework similar to Canadian GAAP; however, significant differences exist in certain areas of

recognition, measurement and disclosure. The following paragraphs outline the significant accounting policies, which are

required, or are currently expected to be applied by the Trust, on its adoption of IFRS that will be significantly different than its

Canadian GAAP accounting policies. The Trust expects that adoption of IFRS accounting standards will adversely impact property

operating income by approximately $4 million for the year ended December 31, 2010, due to straight-lining of rents of

approximately $1 million, and amortization of the differential between contractual and market rents of approximately $3 million.

Net earnings and the Trust’s Debt to Aggregate Assets ratio are expected to be beneficially impacted, while interest and debt

coverage ratios are not expected to be materially impacted.

This discussion has been prepared using the standards and interpretations currently issued and expected to be effective for

RioCan’s first annual reporting period under IFRS for the year ended December 31, 2011. Certain accounting policies currently

expected to be adopted under IFRS, and the application of such policies to certain transactions or circumstances may be modified

and, as a result, the impact may be different than the Trust’s current expectations. Further, the IASB is currently in the process of

amending, or expects to amend, numerous accounting standards that will be applicable to the Trust. As these IFRS standards are

amended, and as the Trust continues to evaluate the impact of adoption on its processes and accounting policies, RioCan will

provide updated disclosure where appropriate.

Investment Property

IFRS defines an investment property as a property held to earn rentals or for capital appreciation or both. A key characteristic of an

investment property is that it generates cash flows largely independently of the other assets held by an entity. Substantially all of

RioCan’s income properties and properties under development will qualify as investment property.

Like Canadian GAAP investment property is initially measured at cost, however subsequent to initial recognition, IFRS requires

that an entity choose either the cost or fair value model to account for its investment property. RioCan has elected to use the fair

value model for the valuation of its income properties and properties under development as provided under IFRS. After continued

analysis of the alternatives under IFRS, RioCan has determined that the fair value method is more relevant to the Trust as

compared to the cost model and fair value as deemed cost at adoption of IFRS, which was the anticipated treatment as at

December 31, 2009 as disclosed in RioCan’s 2009 Financial Annual Report.

The fair value model requires an entity to record a gain or loss in net earnings arising from a change in the fair value of investment

property in the period of change. The determination of fair value is based upon, among other things, rental revenue from current

leases and reasonable and supportable assumptions that represent what knowledgeable, willing parties would assume about

rental revenue from future leases in the light of current conditions, less future cash outflows in respect of tenant installation costs

and the investment property operations. No depreciation related to investment property is recognized under the fair value model.

The election to use the fair value model will not change the previously announced impact to RioCan’s carrying value of investment

properties as at January 1, 2010, as disclosed in RioCan’s 2010 Third Quarter Report. As previously disclosed, the transition to IFRS



is expected to increase the carrying value of RioCan’s Investment Properties, as at January 1, 2010, by approximately $1.6 billion,

to $6.9 billion. This $6.9 billion value compares to the historical cost amount under current Canadian GAAP of $5.3 billion as at

January 1, 2010. Total assets are expected to increase to $7.5 billion from $5.9 billion at January 1, 2010.

Under the fair value model, RioCan will recognize gains or losses arising from changes in the fair value of investment properties

during the period of change in net earnings. Net income during any given period may be greater or less than as determined under

Canadian GAAP depending on whether an increase or decrease in fair value occurs during the period of measurement.

Depreciation of income properties will not be recorded under the fair value model. Additionally, the transition to IFRS in

conjunction with the use of the fair value model will result in historic intangible assets, which had been established under

Canadian GAAP in respect of acquisitions and capitalized to income properties, to no longer be separately recognized and

accordingly not amortized under IFRS. The impact of no longer recording depreciation expense on the Trust’s income properties

along with no longer amortizing historic intangible assets that had been capitalized to income properties is expected to result in an

increase in net income. During the year ended December 31, 2010 amortization on income properties was $191 million.

The Trust determined the fair value of each income property based upon the direct capitalization income approach method of

valuation. The fair value was determined by applying a capitalization rate to stabilized NOI, which incorporates allowances for

vacancy, management fees and structural reserves for capital expenditures for the property. The resulting capitalized value was

further adjusted, where appropriate, for extraordinary costs to stabilize the income and non recoverable capital expenditures.

RioCan valued properties under development on a land value per acre basis. Where a site was partially developed, the direct

capitalization method was used to capitalize the pro forma income, from which the costs to complete the development were

deducted.

As a result of the expected $1.6 billion increase to the carrying value of RioCan’s Investment Properties, the leverage calculation

as of January 1, 2010, for the purposes of the borrowing restriction under its Declaration of Trust, is expected to decrease to

approximately 49% based on IFRS carrying values as compared to RioCan’s stated leverage ratio of 55.6% based on GAAP

historical cost as at January 1, 2010.

Valuation Process

RioCan’s management conducted an internal valuation of its investment property assets to determine the fair value of its property

portfolio. The Trust included a sample of external appraisals, which were used as a data source. Individual properties were valued

using capitalization rates in the range of 6.0% to 9.0% applied based on property type and market characteristics, which resulted in

an overall weighted average capitalization rate for the portfolio of approximately 7.1%.

RioCan’s properties were grouped by retail class (Enclosed Shopping Centre, Mixed Use, Grocery Anchored Centre, Non-Grocery

Anchored Centre, New Format Retail, and Urban Retail) as well as by geographic location (Primary and Secondary markets).

RioCan’s primary markets were defined as Canada’s six major markets (Toronto, ON, Ottawa, ON, Montreal, QC, Calgary, AB,

Edmonton, AB and Vancouver, BC) those being markets with a population base in excess of 1 million people and those in which

RioCan’s portfolio is concentrated.



The table below provides further details of the average capitalization rates, (weighted based on stabilized NOI), and ranges for each

retail class and market category as at January 1, 2010:

As at January 1, 2010 Overall Portfolio Primary Market Secondary Market

Retail Class

WeightedAverage

Cap.Rate* Range

WeightedAverage

Cap.Rate* Range

WeightedAverage

Cap.Rate* Range

Enclosed Shopping Centre 8.0% 7.0% – 9.0% 7.8% 7.5% – 8.8% 8.1% 7.0% – 9.0%

Mixed Use 7.2% 6.0% – 8.8% 7.0% 6.0% – 7.9% 8.3% 7.8% – 8.8%

Grocery Anchored Shopping Centre 7.3% 6.5% – 9.0% 7.2% 6.5% – 8.5% 7.5% 6.8% – 9.0%

Non-Grocery Anchored Centre 7.3% 6.0% – 9.0% 6.9% 6.0% – 7.5% 7.7% 7.0% – 9.0%

New Format Retail 6.8% 6.3% – 8.5% 6.7% 6.3% – 7.3% 7.2% 6.4% – 8.5%

Urban Retail 6.7% 6.0% – 7.3% 6.7% 6.0% – 7.3% n/a n/a

Total Weighted Average 7.1% 6.0% – 9.0% 6.9% 6.0% – 8.8% 7.5% 6.4% – 9.0%

* at RioCan’s interest

RioCan’s management is also in the process of finalizing the valuation of its real estate portfolio at December 31, 2010 and

estimates that the average capitalization rates have compressed during 2010 by approximately 25 to 75 basis points, depending on

the retail class and location. For each 25 basis point movement in capitalization rates, the value of investment properties would

change by approximately $270 million to $290 million.

Other IFRS Impacts on Properties Under Development

IFRS only allows for the capitalization of carrying costs, including interest, when properties are in active development, which is

generally considered to occur when an entity conducts activities that change the condition of the asset. IFRS also prohibits the

capitalization of incidental operating income and losses before or during development. Both Canadian GAAP and IFRS require the

cessation of capitalization when a property is completed for its intended use. IFRS considers a property ready for its intended use

when it is available for tenant possession, as compared to Canadian GAAP, which provides for completion after the lease-up

period. The Trust expects that these differences will result in a reduction of capitalized costs of approximately $3 million for the

year ended December 31, 2010. In addition the Trust expects a further reduction of net earnings of approximately $7 million for the

year ended December 31, 2010, due to reductions in capitalized interest.

Business Combinations

Both IFRS and current Canadian GAAP require the acquisition method of accounting for all business combinations, however

significant differences exist between the two frameworks in other areas. The most significant differences are that under IFRS

transaction costs are expensed immediately whereas under Canadian GAAP such amounts are included in the cost of the asset.

Further, IFRS requires the purchaser to measure any non-controlling interest in the acquiree at either fair value or at the non-

controlling interest’s proportionate share of the fair value of the acquiree’s identifiable net assets, whereas Canadian GAAP

requires minority interest to be measured at the non-controlling interest’s proportionate share of the historic carrying value of the

acquiree’s identifiable net assets. Additionally, contingent consideration under IFRS is recognized at fair value on the date of

acquisition, with subsequent changes generally recognized in net earnings. Under Canadian GAAP contingent consideration is

recognized initially to the extent such amounts are assured beyond a reasonable doubt, and any change is recognized in the

carrying cost of the asset.

In circumstances where an investment property acquisition meets the definition of a business, this will result in measurement of

the investment property components at the acquisition date fair value, expensing of acquisition transaction costs and recognition of

any contingent consideration. Theoretically, as the investment property components are measured at the acquisition date fair

value, this could also result in the recognition of goodwill where the total purchase price exceeds its net asset value or a gain from

a bargain purchase where the total purchase price is less than net asset value. Further, IFRS prohibits recognition where deferred

income taxes arise from the initial recognition of an asset in a transaction that is not a business combination.

The IFRS definition of a business is broader than the current Canadian GAAP definition and may capture single asset acquisitions.

By definition investment property includes all ancillary processes that may not be significant to the overall operation of the

investment property. In circumstances where only some minor ancillary processes are acquired with an investment property, this

may lead to an assessment that such investment property acquisitions are the acquisition of an asset, rather than the acquisition

of a business. Under Canadian GAAP, the Trust accounts for its property acquisitions as asset acquisitions, rather than a business

combination. During 2010, certain US acquisitions, which had been accounted for as asset acquisitions under Canadian GAAP, will

be accounted for as business combinations under IFRS. Accordingly, adoption of IFRS will negatively impact net earnings by

approximately $4 million for the year ended December 31, 2010 as RioCan will be required to expense certain acquisition costs

related to acquisitions in the US throughout the course of 2010.



Leases

Both Canadian GAAP and IFRS require tenant incentives to be recorded as a reduction of rental revenue. However, the IFRS

definition of tenant incentives differs from what the Trust currently applies under Canadian GAAP, which may result in more tenant

installation costs being amortized against revenue. Consequently, management expects a reduction in the rental revenue as a

result of this change under IFRS and is in the process of finalizing the impact.

Differences between the determination of what is a tenant incentive versus a lessor owned improvement may result in the lease

commencement date being earlier under IFRS (i.e. at tenant possession under IFRS versus the tenant opening date under

Canadian GAAP), which would likely result in earlier recognition of income.

IFRS requires rental revenue to be determined on a straight-line basis considering all rentals from the inception of the lease,

whereas Canadian GAAP only required rental revenue to be recognized on a straight-line basis prospectively commencing on

January 1, 2004. As a result, the Trust expects that this difference, applied retrospectively, will result in a reduction of straight-line

rental revenue of approximately $1 million for the year ended December 31, 2010 under IFRS. The straight-line rent receivable

balance reflected in receivables and other assets under Canadian GAAP is expected to be included in the carrying amount of

income properties in the Trust’s balance sheet under IFRS.

Under IFRS there are no bright-line finance lease criteria as compared to Canadian GAAP, which may cause certain leases to

tenants to be classified as finance leases rather than operating leases, as is generally the Trust’s current treatment under

Canadian GAAP. Unlike Canadian GAAP, IFRS also provides, in certain circumstances, for land leases to be treated as finance

leases.

Other Components of Revenue Recognition

Like Canadian GAAP, under IFRS revenue from rendering services is recognized as the service or contract activity is performed

using the percentage completion method. Under the percentage completion method, where services are provided over a specific

period of time, revenue is recognized on a straight-line basis unless there is evidence that some other method would better reflect

the pattern of performance. Unlike Canadian GAAP, IFRS prohibits the recognition of revenue on the completed contract basis.

Where the contract outcome cannot be measured reliably, revenue under IFRS is recognized only to the extent that the expenses

incurred are eligible to be recovered. Additionally, IFRS requires that when a specific act is more significant than any other acts,

the recognition of revenue is postponed until the significant act is executed. This may affect the timing of the recognition of certain

fees (e.g. leasing and financing fees) that are earned in connection with management services provided to joint venture partners.

Management expects that any adjustments to fee revenue will not be material and is in the process of finalizing the impact, if any.

Basis of Consolidation

Under Canadian GAAP, an entity determines whether it should consolidate an entity by first determining whether control is

determined by the variable interest entity (“VIE”) model, and if not applicable, then control is assessed using the voting control

model. Under IFRS, the requirement to consolidate is determined based on control defined as the power to govern the financial

and operating policies of an entity to obtain a benefit from its activities, with additional consideration for special purposes entities

that operate on “auto pilot”. Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more

than one half of an entity’s voting power, potential voting rights that are currently exercisable and sufficient to obtain control, but

also exists when the parent owns half, or less, of the voting power but has legal or contractual rights to control or de facto control.

The IASB is in the process of amending certain IFRSs which will, if implemented in their current form, prohibit proportionate

consolidation of joint ventures that are held through a legal entity, or where the venturers do not have rights to individual assets or

obligations of the venture, because joint venturers in these circumstances do not have a direct ownership of the underlying net

assets of the joint venture. IFRS currently allows joint ventures in these circumstances to be either proportionately consolidated or

equity accounted.

Where the Trust’s joint venture activities are jointly controlled assets, wherein the Trust has an undivided interest in the net assets,

it is currently expected that RioCan will continue to proportionately consolidate these activities. Where the Trust controls an entity,

like Canadian GAAP, it will continue to consolidate that entity under IFRS. The Trust is in the process of assessing the implication

of these proposed amendments to certain IFRSs on its co-ownership activities.

Deferred Income Taxes

All changes to the Trust’s opening balance sheet as of January 1, 2010 arising from its transition to IFRS will require a

corresponding tax asset or liability to be established based on the resultant differences between the carried value of assets and

liabilities and their associated tax bases. It is currently expected that the change to the deferred income tax liability at transition to

IFRS will be significant, as the Trust will carry out a revaluation of substantially all of its investment property to fair value and

management is in the process of finalizing the expected impact.

Like Canadian GAAP, deferred income taxes under IFRS are determined using the liability method for temporary differences at the

balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, and

by generally applying tax rates applicable to the Trust to such temporary differences. Deferred income taxes relating to temporary

differences that are in equity are recognized in equity and under IFRS subsequent adjustments thereto are backward traced to

equity.



The Trust has qualified for the REIT Exception before December 31, 2010 and accordingly, it is expected that the Trust will not

account for current or deferred taxes after the date of qualification for the REIT exemption.

Internal Control over Financial Reporting (“ICFR”) and Disclosure Controls (“DC”)

ICFR and DC are a key element of the Trust’s changeover plan given that the conversion from Canadian GAAP to IFRS will require

the implementation of a new set of accounting standards that are currently expected to have significant impacts on key

performance indicators as discussed below. The Trust has identified areas that may impact its ICFR and DC as it relates to its

initial reporting of IFRS financial statements, including related note disclosures, as well as on-going financial reporting.

As discussed above, RioCan has finalized the valuation of its real estate portfolio as of January 1, 2010. Implementation of other

IFRS differences with significant process changes are well underway and are being finalized to ensure that RioCan can report

under IFRS for Q1 2011. The most significant initiatives relate to the determination of active development for properties under

development and the categorization of tenant installation costs between tenant incentives and investment property components.

Implementation of IFRS differences with significant information technology system impacts are substantially complete. These

initiatives relate to establishing a dual record keeping system, modifications to its fixed asset, leasing and fee modules, and

modification to existing internal reports.

An assessment of the impact of IFRS accounting standards on key performance metrics is underway and the Trust continues to

monitor, and to periodically report to the Audit Committee and Board of Trustees on, IFRS project risks.

Evaluation and selection of accounting policy alternatives is substantially complete, but will continue to be assessed, including the

impact on key performance indicators.

RioCan continues to monitor resource requirements to establish appropriate IFRS financial reporting expertise at all levels of the

Trust’s operations. IFRS training to affected employees, management and Board of Trustees, including the Audit Committee, is

substantially complete. Additionally, the Trust will continue IFRS information sessions with members of the Board of Trustees,

Audit Committee and senior management, reporting on project status and monitoring of the implementation timeline, the

implications of IFRS standards to the business and an overview of the impact to the financial statements.

CONTROLS AND PROCEDURES

RioCan maintains appropriate information systems, procedures and controls to ensure that information disclosed externally is

complete, reliable and timely. RioCan’s Chief Executive Officer and Chief Financial Officer evaluated, or caused an evaluation under

their direct supervision of, the design and operating effectiveness of the Trust’s disclosure controls and procedures (as defined in

National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings) as at December 31, 2010 and have

concluded that such disclosure controls and procedures were appropriately designed and were operating effectively.

RioCan has also established adequate internal controls over financial reporting to provide reasonable assurance regarding the

reliability of the Trust’s financial reporting and the preparation of the financial statements for external purposes in accordance with

GAAP. RioCan’s Chief Executive Officer and the Chief Financial Officer assessed, or caused an assessment under their direct

supervision of, the design and operating effectiveness of the Trust’s internal controls over financial reporting (as defined in National

Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings) as at December 31, 2010 using the Committee of

Sponsoring Organizations Internal Control – Integrated Framework. Based on that assessment, it was determined that RioCan’s

internal controls over financial reporting were appropriately designed and were operating effectively.

RioCan did not make any changes to the design of the Trust’s internal controls over financial reporting during the year ended

December 31, 2010 that would have materially affected or would be reasonably likely to materially affect the Trust’s internal

controls over financial reporting.

It should be noted that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute,

assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no

evaluation of controls can provide absolute assurance that all control issues, including instances of fraud, if any, have been

detected. These inherent limitations include, among other items: (i) that management’s assumptions and judgments could

ultimately prove to be incorrect under varying conditions and circumstances; (ii) the impact of any undetected errors; and (iii)

controls may be circumvented by the unauthorized acts of individuals, by collusion of two or more people, or by management

override.



The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there

can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Management continues to review existing control processes and procedures for the impact of IFRS implementation and SIFT

Legislation on internal controls over financial reporting and disclosure controls and procedures.

RISKS AND UNCERTAINTIES

The achievement of RioCan’s objectives is, in part, dependent on the successful mitigation of business risks identified. Real estate

investments are subject to a degree of risk. They are affected by various factors including changes in general economic and local

market conditions, equity and credit markets, fluctuations in interest costs, the attractiveness of the properties to tenants,

competition from other available space, the stability and credit-worthiness of tenants, and various other factors.

Liquidity and General Market Conditions

RioCan faces the risk associated with general market conditions and their potential consequent effects. Current general market

conditions may include, among other things, the insolvency of market participants, tightening lending standards and decreased

availability of cash, and changes in unemployment levels, retail sales levels, and real estate values. These market conditions may

affect occupancy levels and RioCan’s ability to obtain credit on favourable terms or to conduct financings through the public

market.

Tenant Concentrations, Occupancy Levels and Defaults

The value of RioCan’s real estate and any improvements thereto, may depend on the credit and financial stability of tenants. The

Trust’s financial position would be adversely affected if a significant number of tenants were to become unable to meet their

obligations to RioCan or if RioCan were unable to lease a significant amount of available space in the properties on economically

favourable lease terms.

With respect to tenant concentration risk, in the event a given tenant, or group of tenants, experience financial difficulty and be

unable to fulfill its lease commitments, or a given geographical area suffers an economic decline, the Trust could experience a

decline in revenue.

In order to reduce RioCan’s exposure to the risks relating to credit and the financial stability of tenants, the Trust’s Declaration

restricts the amount of space which can be leased to any person and that person’s affiliates, other than in respect of leases with or

guaranteed by the Government of Canada, a province of Canada, a municipality in Canada or any agency thereof and certain

corporations, the securities of which meet stated investment criteria, to a maximum premises or space having an aggregate gross

leasable area of 20% of the aggregate gross leasable area of all real property held by RioCan. At December 31, 2010, RioCan was in

compliance with this restriction.

RioCan’s operating results may be adversely impacted by a decline in revenues if the Trust is unable to maintain the existing

occupancy levels of its properties, if existing tenants experience financial difficulty and become unable to fulfill their lease

commitments, if RioCan becomes unable to attract new tenants at rental rates similar to those paid by existing tenants, or if

existing tenants do not renew at the expiry of the lease term and such space cannot be re-leased. As well, certain significant

expenditures involved in real property investments, such as property taxes, maintenance costs and mortgage payments, represent

obligations that must be met regardless of whether the property is producing sufficient, or any, revenue.

At December 31, 2010, RioCan has NLA, at its interest, of 40.8 million square feet and a portfolio occupancy rate of 97.4%. Based

on the Trust’s current annualized rental revenue on a weighted average portfolio basis of approximately $23 per square foot, for

every fluctuation in occupancy by a differential of 1%, the Trust’s operations would be impacted by approximately $9 million

annually.

RioCan’s aggregate lease renewals over the next five years represent annual lease payments of approximately $278 million based

on current contractual rental rates. Should such tenancies be renewed upon maturity at an aggregate rental rate differential of

100 basis points, the Trust’s operations would be impacted by approximately $3 million annually.

Lease expiries (Canadian Portfolio)

(in thousands) Portfolio NLA 2011 2012 2013 2014 2015

Square feet 36,848 3,019 3,285 3,236 4,101 4,368

Square feet expiring portfolio NLA 48.9% 8.2% 8.9% 8.8% 11.1% 11.9%

Total net rent $ 277,601 $ 47,024 $ 51,345 $ 52,621 $ 63,708 $ 62,903

RioCan strives to manage tenant concentration risk through geographical diversification (See “Asset Profile”) and diversification of

revenue sources in order to avoid dependence on any single tenant. RioCan’s objective is that no individual tenant contributes a

significant percentage of its gross revenue and that a considerable portion of the Trust’s revenue is earned from national and

anchor tenants (see “Overview and Highlights”). RioCan attempts to lease to creditworthy tenants and will generally conduct credit



assessments for new tenants. RioCan attempts to reduce its risks associated with occupancy levels and lease renewal risk by

having staggered lease maturities, negotiating leases with base terms between five and ten years, and by negotiating longer term

leases with built-in minimum rent escalations where deemed appropriate.

Access to Debt and Equity Capital

A risk to the Trust’s growth program and the refinancing of its debt upon maturity is that of not having sufficient debt and equity

capital available to RioCan. Given the relatively small size of the Canadian marketplace, there are a limited number of lenders from

which RioCan can borrow. RioCan’s financial condition and results of operations would be adversely affected if it were unable to

obtain financing or cost-effective financing.

At December 31, 2010, RioCan’s total indebtedness had a 4.5 year weighted average term to maturity bearing a weighted average

contractual interest rate of 5.6% per annum.

Interest Rates

RioCan’s operations are impacted by interest rates, as interest expense represents a significant cost in the ownership of real

estate investments. At December 31, 2010, RioCan had aggregate contractual debt comprised of mortgages and debentures

payable having principal maturities through to December 31, 2013 of $1.4 billion (31% of the aggregated debt) with a weighted

average contractual interest rate of 5.58%. Should such amounts be refinanced upon maturity at an aggregate interest rate

differential of 100 basis points, RioCan’s operations would be impacted by approximately $13.9 million annually.

RioCan seeks to reduce its interest rate risk by staggering the maturities of long term debt and limiting the use of floating rate

debt so as to minimize exposure to interest rate fluctuations. At December 31, 2010, 1.7% of the Trust’s aggregate debt was at

floating interest rates.

From time to time, the Trust may enter into interest rate swap transactions to modify the interest rate profile of its current or

future variable rate debts without an exchange of the underlying principal amount.

Joint Ventures/Partnerships

RioCan has entered into partnerships and joint ventures with a number of different entities. If these partnerships or joint ventures

do not perform as expected, default on financial obligations or default on development obligations, RioCan has an associated risk.

RioCan reduces this risk by seeking to: (a) negotiate contractual rights upon default of a partner; (b) enter into agreements with

financially stable partners; and/or (c) working with partners who have a historical record of successful completion of development

projects.

Relative Illiquidity of Real Property

Real estate investments are relatively illiquid. This will tend to limit the Trust’s ability to sell components of the portfolio promptly

in response to changing economic or investment conditions. If RioCan were required to quickly liquidate its assets, there is a risk

that the Trust would realize sale proceeds of less than the current book value of its real estate investments.

Unexpected Costs or Liabilities Related to Acquisitions

A risk associated with real property acquisition is that there may be an undisclosed or unknown liability concerning the acquired

properties, and RioCan may not be indemnified for some or all of these liabilities. Following an acquisition, RioCan may discover

that it has acquired undisclosed liabilities, which may be material.

RioCan conducts what it believes to be an appropriate level of investigation in connection with its acquisition of properties and

seeks through contract to ensure that risks lie with the appropriate party.

Construction

RioCan’s construction commitments are subject to those risks usually attributable to construction projects, which include:

(i) construction or other unforeseen delays including municipal approvals; (ii) cost overruns; and (iii) the failure of tenants to

occupy and pay rent in accordance with existing lease agreements, some of which are conditional. Construction risks are

minimized through the provisions of the Trust’s Declaration, which have the effect of limiting direct and indirect investments, net of

related mortgage debt, in non-income producing properties to no more than 15% of the Adjusted Book Value of RioCan’s

unitholders’ equity. RioCan also seeks to undertake such developments with established developers. With some exceptions for

land in the high growth markets, RioCan will generally not acquire or fund significant expenditures for undeveloped land unless it

is zoned and an acceptable level of space has been pre-leased or pre-sold. An advantage of unenclosed, new format retail is that it

lends itself to phased construction keyed to leasing levels, which reduces the creation of significant amounts of vacant but

developed space.

Environmental Matters

Environmental and ecological related policies have become increasingly important in recent years. Under various federal,

provincial and municipal laws, RioCan, as an owner or operator of real property, could become liable for the costs of removal or

remediation of certain hazardous or toxic substances released on or in its properties or disposed of at other locations. The failure

to remove or remediate such substances, or address such matters through alternative measures prescribed by the governing

authority, may adversely affect RioCan’s ability to sell such real estate or to borrow using such real estate as collateral, and could,

potentially, also result in claims against the Trust. RioCan is not currently aware of any material non-compliance, liability or other



claim in connection with any of its properties, nor is RioCan aware of any environmental condition with respect to any properties

that it believes would involve material expenditures by the Trust.

It is the Trust’s policy to obtain a Phase I environmental audit conducted by a qualified environmental consultant prior to acquiring

any additional property. In addition, where appropriate, tenant leases generally specify that the tenant will conduct its business in

accordance with environmental regulations and be responsible for any liabilities arising out of infractions to such regulations. It is

RioCan’s practice to regularly inspect tenant premises that may be subject to environmental risk. The Trust maintains insurance to

cover a sudden and/or accidental environmental mishap.

Legal Risks

RioCan’s operations are subject to a wide variety of laws and regulations across all of its operating jurisdictions and RioCan faces

risks associated with legal and regulatory changes and litigation. RioCan retains external legal consultants to assist it in remaining

current and compliant with legal and regulatory changes and to respond to litigation.

Human Resources and Key Personnel

RioCan faces certain human resource risks, including the risk that it will not have the necessary human resources to perform

successfully. RioCan relies on the services of certain key personnel on its executive team, including its President and Chief

Executive Officer, Edward Sonshine, its Executive Vice President and Chief Operating Officer, Frederic Waks, and its Senior Vice

President and Chief Financial Officer, Raghunath Davloor, and the loss of their services could have an adverse effect on RioCan.

RioCan mitigates key personnel risks through succession planning.

Unitholder Liability

There is a risk that RioCan’s unitholders could become subject to liability. The Trust’s Declaration provides that no unitholder or

annuitant under a plan of which a unitholder acts as trustee or carrier will be held to have any personal liability as such, and that

no resort shall be had to the private property of any unitholder or annuitant for satisfaction of any obligation or claim arising out of

or in connection with any contract or obligation of RioCan. Only RioCan’s assets are intended to be subject to levy or execution. The

Declaration further provides that, whenever possible, certain written instruments signed by RioCan must contain a provision to the

effect that such obligation will not be binding upon unitholders personally or upon any annuitant under a plan of which a unitholder

acts as trustee or carrier. In conducting its affairs, RioCan has acquired and may acquire real property investments subject to

existing contractual obligations, including obligations under mortgages and leases that do not include such provisions. RioCan will

use its best efforts to ensure that provisions disclaiming personal liability are included in contractual obligations related to

properties acquired, and leases entered into, in the future.

Certain provinces have legislation relating to unitholder liability protection, including British Columbia, Alberta, Saskatchewan,

Manitoba, Ontario and Quebec. To RioCan’s knowledge, certain of these statutes have not yet been judicially considered and it is

possible that reliance on such statute by a unitholder could be successfully challenged on jurisdictional or other grounds.

Income Taxes

RioCan currently qualifies as a mutual fund trust and real estate investment trust for income tax purposes. RioCan expects to

distribute all of the Trust’s taxable income to unitholders and is, therefore, generally not subject to tax on such amounts. In order

to maintain RioCan’s current mutual fund trust status, the Trust is required to comply with specific restrictions regarding its

activities and the investments held by the Trust. If the Trust were to cease to qualify as a mutual fund trust, the consequences

could be material and adverse.

In the fourth quarter of 2010, RioCan completed its Qualification Plan (refer to “Qualification Plan” earlier in this MD&A for a

discussion of the relevant transactions) in order to enable RioCan to qualify for the REIT Exception commencing in 2011.

Based on a review of its assets and revenues, together with the completed Qualification Plan, the Trust expects that it will be able

to satisfy the tests to qualify for the REIT Exception throughout 2011 and currently intends to qualify for the REIT Exception at all

future times. On December 16, 2010, the Department of Finance announced proposed amendments to the REIT Exception,

proposed to be effective as of January 1, 2011 if enacted. RioCan expects to be able to qualify for the REIT Exception under both

these proposed rules and current rules; however, there can be no assurance that subsequent investments or activities undertaken

by the Trust will not result in the Trust failing to qualify for the REIT Exception and being subject to the SIFT Rules.

Specified distributions payable by a SIFT, which does not qualify for the REIT Exception, will not be deductible in computing the

SIFT’s taxable income and the SIFT will be subject to tax on such distributions at a rate that is substantially equivalent to the general

tax rate applicable to Canadian corporations. Distributions paid by a SIFT as returns of capital will not be subject to this tax.

In addition to the foregoing, no assurance can be given that Canadian federal income tax law respecting the taxation of income

trusts and other flow-through entities will not be further changed in a manner that adversely affects the Trust and its unitholders.

United States Investment and Currency Risk

In 2010, RioCan completed its purchases of the initial portfolio in connection with the Cedar transaction. RioCan has also made

additional acquisitions in the United States through joint venture platforms with Inland Western and Kimco and Dunhill. RioCan

intends to continue to make acquisitions from time to time in the U.S. as determined to be appropriate or desirable. It is possible

that such additional acquisitions may not be completed. Further there may be a lack of availability of acquisition opportunities for



the joint venture and exposure to economic, real estate and capital market conditions in the US as well as fluctuations in the

trading price of the Cedar securities, as it pertains to such joint venture.

Cedar represented the Trust’s first investment outside of Canada and has been followed with additional investments made with

Kimco and Inland Western. The US real estate market differs from the Canadian environment in many ways and the Trust’s

expertise and experience in Canada may not prove beneficial in a foreign jurisdiction. The Trust is mitigating the risks relating to

its entry into and exposure to the US by aligning itself with experienced US operating companies and making investments of

moderate scale. There can be no certainty, however, that RioCan’s US investments will be successful.

Additionally, it is possible that the Trust’s US investments will expose the Trust to foreign exchange fluctuations. The Trust will in

part mitigate this risk through the use of US denominated debt.

Transition to IFRS

In February 2008, the Canadian Accounting Standards Board confirmed that all publicly accountable enterprises would be required

to report under IFRS for fiscal years beginning on or after January 1, 2011. The financial information accompanying this MD&A or

incorporated by reference herein are based on financial results from fiscal periods ending prior to January 1, 2011 and have been

prepared under Canadian Generally Accepted Accounting Principles, prior to the adoption of IFRS. As new standards and

recommendations are issued by the International Accounting Standards Board and the Canadian Accounting Standards Board,

RioCan will continue to assess the effect of IFRS on the Trust’s financial reporting and disclosure requirements, which may be

material.

Credit Ratings

Real or anticipated changes in credit ratings on RioCan’s debentures or preferred units may affect the market value thereof. In

addition, real or anticipated change in credit ratings can affect the cost at which RioCan can access the debenture or preferred unit

market, as applicable.


RIOCAN REAL ESTATE INVESTMENT TRUST(A TRUST GOVERNED BY THE LAWS OF ONTARIO)

AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009


RIOCAN REAL ESTATE INVESTMENT TRUSTAUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

for the years ended December 31, 2010 and 2009

INDEX Page

Audited Annual Consolidated Financial Statements

Balance Sheets 103

Statements of Unitholders' Equity 104

Statements of Earnings 105

Statements of Comprehensive Income 105

Statements of Cash Flows 106

Notes to Consolidated Financial Statements 107 – 125


Management’s Responsibil i ty for Financial Reporting

The management of RioCan Real Estate Investment Trust (“RioCan”) is responsible for the preparation and fair presentation of the

accompanying annual consolidated financial statements and Management’s Discussion and Analysis (“MD&A”). The consolidated

financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).

The consolidated financial statements and information in the MD&A necessarily include amounts based on best estimates and

judgments by management of the expected effects of current events and transactions with the appropriate consideration to

materiality. In addition, in preparing this financial information we must make determinations as to the relevancy of information to

be included, and estimates and assumptions that affect the reported information. The MD&A also includes information regarding

the impact of current transactions and events, sources of liquidity and capital resources, operating trends, risks and uncertainties.

Actual results in the future may differ materially from our present assessment of this information because future events and

circumstances may not occur as expected.

In meeting our responsibility for the integrity and fairness of the annual consolidated financial statements and MD&A and for the

accounting systems from which they derive, management has established the necessary internal controls designed to ensure that

our financial records are reliable for preparing financial statements and other financial information, transactions are properly

authorized and recorded, and assets are safeguarded against unauthorized use or disposition.

As at December 31, 2010 our Chief Executive Officer and Chief Financial Officer evaluated, or caused an evaluation under their

direct supervision of, the design and operation of our internal controls over financial reporting (as defined in National Instrument

52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings) and, based on that assessment, determined that our internal

controls over financial reporting were appropriately designed and operating effectively.

The Board of Trustees oversees management’s responsibility for financial reporting through an Audit Committee, which is

composed entirely of independent trustees. This committee reviews RioCan’s annual consolidated financial statements and MD&A

with both management and the independent auditors before such statements are approved by the Board of Trustees. Other key

responsibilities of the Audit Committee include selecting the Trust’s auditors, approving our interim unaudited consolidated

financial statements and MD&A, and monitoring RioCan’s existing systems of internal controls.

Ernst & Young LLP, independent auditors appointed by the unitholders of RioCan upon the recommendation of the Board of

Trustees, have examined our 2010 and 2009 annual consolidated financial statements and have expressed their opinion upon the

completion of such examination in the following report to the unitholders. The auditors have full and free access to, and meet at

least quarterly with, the Audit Committee to discuss their audit and related matters.

“Edward Sonshine, O.Ont., Q.C.” “Raghunath Davloor, C.A.”

Edward Sonshine, O.Ont., Q.C. Raghunath Davloor, C.A.

President and Chief Executive Officer Senior Vice President and Chief Financial Officer

Toronto, Canada

February 25, 2011


Independent Auditors’ Report

To the Unitholders of

RioCan Real Estate Investment Trust

We have audited the accompanying consolidated financial statements of RioCan Real Estate Investment Trust, which comprise the

consolidated balance sheets as at 31 December 2010 and 2009 and the consolidated statements of unitholders’ equity, earnings

and comprehensive income, and cash flows for the years then ended, and a summary of significant accounting policies and other

explanatory information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with

Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to

enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or

error.

Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our

audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical

requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements

are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial

statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material

misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the

auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements

in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on

the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the

consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit

opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of RioCan Real

Estate Investment Trust as at 31 December 2010 and 2009 and the results of its operations and its cash flows for the years then

ended in accordance with Canadian generally accepted accounting principles.

“Ernst & Young LLP”

Ernst & Young LLP

Chartered Accountants

Licensed Public Accountants

Toronto, Canada

February 25, 2011


Consolidated Balance Sheets

(Audited – in millions)


ASSETS

Real estate investments

Income properties (Note 2) $ 6,006 $ 5,042

Properties under development (Note 3) 379 272

Investments (Note 5) 59 50

Mortgages and loans receivable (Note 8) 188 236

6,632 5,600

Receivables and other assets (Note 9) 135 115

Cash and equivalents 92 147

$ 6,859 $ 5,862

LIABILITIES

Mortgages payable and lines of credit (Note 10) $ 3,316 $ 2,669

Debentures payable (Note 11) 1,094 994

Accounts payable and other liabilities (Note 12) 252 193

Future income taxes (Note 18) – 140

4,662 3,996

NON-CONTROLLING INTEREST 46 9

UNITHOLDERS’ EQUITY

Unitholders’ equity 2,151 1,857

$ 6,859 $ 5,862

The accompanying notes are an integral part of the consolidated financial statements

Approved by the Board of Trustees

“Paul Godfrey, C.M.” “Edward Sonshine, O.Ont., Q.C.”

Paul Godfrey, C.M. Edward Sonshine, O.Ont., Q.C.

Chairman of the Board of Trustees Trustee


Consolidated Statements of Unitholders’ Equity


For the year ended December 31, 2010 2009

Trust units (Note 13)

Balance, beginning of year $ 2,771 $ 2,461

Unit issue proceeds, net 349 311

Normal course issuer bid – (3)

Future income taxes (Note 18) (3) 2

Balance, end of period 3,117 2,771

Value associated with unit option grants

Balance, beginning of year 11 9

Value associated with compensation expense for unit options granted (Note 14(i)) 2 2

Balance, end of period 13 11

Cumulative earnings

Balance, beginning of year 1,592 1,478

Net earnings 303 114

Balance, end of period 1,895 1,592

Accumulated other comprehensive income (loss)

Balance, beginning of year 3 –

Other comprehensive income (loss) (17) 3

Balance, end of period (14) 3

Cumulative distributions to unitholders

Balance, beginning of year (2,520) (2,202)

Distributions to unitholders (340) (318)

Balance, end of period (2,860) (2,520)

Total unitholders’ equity $ 2,151 $ 1,857

Units issued and outstanding (Note 13) 259,818 242,320



Consolidated Statements of Earnings

(Audited – in millions, except per unit amounts)


Revenue

Rentals $ 834 $ 726

Fees and other income (Note 6) 16 15

Interest 16 18

Gain (loss) on properties held for resale 21 (1)

Total revenue 887 758

Expenses

Property operating costs 276 261

Interest (Note 7) 215 192

General and administrative 31 26

Transition costs 5 3

Amortization (Note 4) 191 165

Impairment of income property 8 –

Total expenses 726 647

Earnings before income taxes, non-controlling interest and gain on long-lived assets 161 111

Gain on disposition of long-lived assets 3 –

Future income tax recovery (Note 18) 140 3

Non-controlling interest (Note 19) (1) –

Net earnings $ 303 $ 114

Net earnings per unit – basic $ 1.23 $ 0.49

Net earnings per unit – diluted $ 1.22 $ 0.49

Weighted average number of units outstanding – basic 246,608 230,367

Consolidated Statements of Comprehensive Income




Other comprehensive income (loss), net of tax (Note 18)

Unrealized (loss) gain on interest rate swap agreements (Note 23) (3) –

Unrealized loss on translation of self-sustaining foreign operations (14) (2)

Unrealized gain (loss) on available-for-sale securities (5) 5

Net gain on debt designated as net investment hedge 5 –

Other comprehensive (loss) income (17) 3

Comprehensive income $ 286 $ 117



Consolidated Statements of Cash Flows

(Audited – in millions, except per unit amounts)


CASH FLOWS PROVIDED BY (USED IN):Operating activities


Items not affecting cash

Amortization 192 167

Impairment of real estate investments 8 –

Recognition of rents on a straight-line basis (8) (6)

Unit based compensation expense 2 2

Amortization of the differential between contractual and market rents on in-place leases (4) (3)

Future income tax recovery (140) (3)

Gain on properties held for sale (3) –

Properties held for resale 3 6

Acquisition and development of properties held for resale (3) (13)

Changes in non-cash operating items and other (Note 17) 17 9

Non-controlling interest 1 –

Cash flows provided by operating activities 368 273

Investing activities

Acquisition of income properties and properties under development (835) (318)

Capital expenditures on income properties (4) (2)

Capital expenditures on properties under development (90) (91)

Maintenance capital expenditures recoverable from tenants (10) (5)

Maintenance capital expenditures not recoverable from tenants (7) (3)

Tenant installation costs (31) (25)

Proceeds on disposition of long-lived assets 13 –

Mortgages and loans receivable

Advances (61) (67)

Repayments 92 51

Investment in available-for-sale securities (20) (43)

Cash flows used in investing activities (953) (503)

Financing activities

Mortgages payable

Borrowings 897 534

Repayments (376) (308)

Repayments of line of credit (78) –

Issue of debentures payable 102 327

Repayment of debentures payable – (179)

Distributions paid (339) (316)

Mortgage borrowings paid to non controlling interest (20) –

Units issued under distribution reinvestment plan 59 58

Units repurchased under normal course issuer bid (Note 13)– (3)

Issue of units 285 253

Cash flows provided by (used in) financing activities 530 366

Increase (decrease) in cash and equivalents during the period (55) 136

Cash and equivalents, beginning of period 147 11

Cash and equivalents, end of period $ 92 $ 147

Supplemental cash flow information

Acquisition of real estate investments through assumption of liabilities and mortgages given by vendors $ 221 $ 26

Acquisition of real estate in settlement of mortgage receivable 27 –

Mortgages taken back on property dispositions (4) (4)

Interest paid 229 206

Cash equivalents, end of period 40 113

Distributions to unitholders per unit 1.38 1.38


106RIOCAN REAL ESTATE INVESTMENT TRUST THIRD QUARTER REPORT 2010

Notes to Consol idated Financial Statements

(Audited – tabular amounts in millions, except per unit amounts and other data)As at December 31, 2010

1. Significant accounting policies

(a) Organization

RioCan Real Estate Investment Trust (the “Trust” or “RioCan”) is an unincorporated “closed-end” trust governed by the laws of the

Province of Ontario and constituted pursuant to a Declaration of Trust (the “Declaration”) dated November 30, 1993, as most

recently amended and restated on December 6, 2010. The Trust’s Units are listed on the Toronto Stock Exchange (the “Exchange”)

under the symbol REI.UN. Preferred Units, Series A of the Trust which were issued in the first quarter of 2011, are listed on the

Exchange under the symbol REI.PR.A.

(b) Basis of accounting

The Trust’s accounting policies and its standards of financial disclosure are in accordance with Canadian generally accepted

accounting principles (“GAAP”).

The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date

of these consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual

results may differ from those estimates.

Certain comparative figures have been reclassified to conform to the current year’s financial statement presentation.

(c) Principles of consolidation

The consolidated financial statements include the accounts of the Trust and its wholly-owned subsidiaries, as well as entities over

which it exercises control. Where there is a party with a minority interest in a property that the Trust controls, that minority

interest is reflected as “Non-controlling interest” in the consolidated financial statements.

The Trust carries out certain of its activities through co-ownerships and records its proportionate share of assets, liabilities,

revenue and expenses of all co-ownerships in which it participates.

Investments where the Trust exercises significant influence are accounted for using the equity method. This method adjusts the

original cost of an investment for the Trust’s share of net earnings, capital advances and distributions receivable or received.

The Canadian Institute of Chartered Accountants (“CICA”) Accounting Guideline 15, Consolidation of Variable Interest Entities

(“VIE”), considers a VIE to be an entity which does not have sufficient equity at risk to finance its activities without additional

subordinated financial support or where the holders of the equity at risk lack the characteristics of a controlling financial interest.

Once a VIE has been identified, the standard requires the primary beneficiary of the VIE to consolidate the entity in its financial

statements. The primary beneficiary of a VIE, as defined by the standard, is generally the party that is exposed to a majority of the

VIE’s expected losses or entitled to a majority of the VIE’s residual returns, or both. Consolidated VIEs are not material to the

Trust’s financial position or results of operations. Interests in VIEs where the Trust has not been identified as the primary

beneficiary are not required to be consolidated, and are not material to the Trust’s financial position or results of operations.

(d) Real estate investments

(i) Income properties

Income properties are carried at cost less accumulated amortization (see (iv) below). Upon acquisition of income properties,

the Trust estimates the fair value of acquired tangible assets (land, buildings and leasing costs) and identifiable intangible

assets and liabilities (above- and below-market leases, in-place leases and tenant relationships, if any) and the value of the

differential between contractual and market interest rates on long term liabilities assumed at acquisition.

Fair value is the amount at which an item could be bought or sold in a current transaction between independent,

knowledgeable and willing parties (that is, other than in a forced or liquidation sale) in an arm’s length transaction under no

compulsion to act. The fair value of a disposal group is the amount at which the group as a whole could be bought or sold in a

current single transaction between independent, knowledgeable and willing parties, and would not necessarily be equal to the

sum of the fair values of the individual assets and liabilities of the group.

The Trust assesses fair value based on estimated discounted cash flow projections and available market information. Cash

flow estimates incorporate assumptions that marketplace participants would use in their estimates (including the historical

operating results and anticipated trends, local markets and economic conditions) and the Trust’s own assumptions.

The fair value of acquired leasing costs generally considers estimated market leasing costs, rentable area and terms for each

lease, and the costs of executing similar leases.

Above- and below-market rents represent the value of the differential between contractual and market rents. The Trust’s

estimates of market rents for acquired leases are measured over a period equal to the remaining terms of acquired leases for

above-market leases and the initial terms plus the terms of any fixed rate renewal options for below-market leases.



The fair value of acquired in-place leases represents the present value of property net operating income foregone during a

theoretical estimated lease-up period required to replace the existing leases in-place at the acquisition date. Such

assumptions generally give consideration to local market conditions, estimated expected lease-up periods and property

operating costs incurred by the Trust during such periods.

The fair value of tenant relationships represents the estimated present value of future benefits to be realized by the Trust

arising from relationships with certain tenants.

The Trust amortizes the cost of its buildings using the straight-line method over their estimated useful lives of between 29 and

40 years.

Identifiable intangible assets are amortized on a straight-line basis over the estimated remaining terms of the respective

leases, except for the value of tenant relationships, which are amortized over the estimated expected term of the relationship.

Leasing costs presented as a component of income properties are amortized on a straight-line basis over the terms of the

respective leases and are comprised of:

(i) ongoing tenanting costs for income properties and applicable internal leasing costs. Amounts expended for tenanting

costs are characterized as either: (a) tenant installation costs which are income property improvements owned by the

Trust; or (b) tenant inducements which are not income property improvements and are not owned by the Trust.

Inducements are recognized as a reduction to rental revenue over the term of the lease on a straight-line basis; and

(ii) leasing and tenanting costs identified as a component of income properties on initial acquisition or while under

development.

(ii) Dispositions of long-lived income properties

For income property dispositions in which the Trust has no ongoing involvement in, or no significant continuing cash flows

from, the properties to be disposed of would result in a reclassification to discontinued operations.

For income property dispositions in which the Trust has an ongoing involvement in, or significant continuing cash flows from,

the properties to be disposed of would result in a reclassification to income properties held for sale and are presented in

continuing operations.

(iii) Properties under development

Properties under development are stated at cost (see (iv) below). Cost is comprised of acquisition costs, third party and internal

development and initial leasing costs, property taxes, interest on both specific and general debt, and all net property revenue

and expenses during the development period. Properties under development may include properties held for resale until

separately identifiable (see (v) below).

Capitalization of costs to properties continues until the property achieves a satisfactory occupancy level within a

predetermined time limit.

(iv) Impairment of long-lived assets

The impairment of an asset is recognized when the carrying amount of the asset exceeds the total undiscounted future cash

flows expected from the use and eventual disposal of the asset. The impairment recognized is measured as the amount by

which the carrying amount of the asset exceeds its fair value.

(v) Properties held for resale

Properties held for resale are properties acquired or developed by the Trust for which it has no intention of their being used on

a long term basis and plans to dispose in the ordinary course of business. The Trust expects to earn a return on such assets

through a combination of property operating income earned during the relatively short term holding period and sales

proceeds. Properties held for resale are stated at the lesser of cost and net realizable value. No amortization is recorded on

these assets.

(e) Revenue recognition

(i) Rentals

The Trust has not transferred substantially all of the benefits and risks of ownership of its income properties and therefore

accounts for leases with its tenants as operating leases. Rental revenue includes all amounts earned from tenants related to

lease agreements, including property tax and operating cost recoveries. For arrangements involving multiple elements, the

Trust allocates the consideration to each element based on relative fair value where there is objective and reliable evidence of

fair value for each element. Rental revenue also includes the Trust’s share of income from equity accounted for investments.

The Trust reports minimum rental revenue on a straight-line basis, whereby the total amount of cash to be received under a

lease is recognized into income in equal periodic amounts over the term of the lease.



(ii) Fee income

The Trust has interests in various real estate investments through co-ownerships and investments accounted for by the equity

method. Generally, in Canada, the Trust provides asset and property management services for these investments for which it

earns market based fees.

Fees are recognized as the service or contract activity is performed using either the percentage completion or the completed

contract method. Under the percentage completion method where services are provided over a specific period of time,

revenue is recognized on a straight-line basis unless there is evidence that some other method would better reflect the

pattern of performance. The completed contract method is applied when performance consists of a single act.

(iii) Gains on properties held for resale

Gains on properties held for resale (as well as on long-lived income properties) are recognized when the Trust has transferred

to the purchaser the significant risks and rewards of ownership of the property, the purchaser has made a substantial

commitment demonstrating its intent to honour its obligation, which would generally be equivalent to a fair value of not less

than 15% of the purchase price and collection of any additional consideration is reasonably assured. For arrangements

involving multiple elements, the Trust allocates the consideration to each element based on relative fair value where there is

objective and reliable evidence of fair value for each element.

(iv) Dividend income

Where the Trust has invested in shares that yield dividends, such dividends are recorded as dividend income in net earnings on

the income statement when the dividends are declared. Currently the Trust’s investment in the common shares of Cedar

Shopping Centers Inc. (“Cedar”) provide the Trust with dividend income.

(f) Unit based compensation plans

The Trust accounts for its equity awards under unit based compensation plan using the fair value method, under which

compensation expense is measured at the grant date and recognized over the vesting period.

(g) Financial instruments

(i) Financial instruments – recognition and measurement

Section 3855 of the CICA Handbook establishes standards for recognizing and measuring financial assets, financial liabilities

and non-financial derivatives. All financial instruments are required to be measured at fair value on initial recognition, except

for certain related party transactions. Measurement in subsequent periods depends on whether the financial instrument has

been classified as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other liabilities.

Financial assets and financial liabilities classified as held-for-trading are required to be measured at fair value with gains and

losses recognized in net earnings. Transaction costs are expensed as incurred for a financial instrument classified as

held-for-trading. The Trust’s cash and equivalents are classified, per the CICA Handbook’s requirements, as held-for-trading.

Financial assets classified as held-to-maturity, loans and receivables and financial liabilities (other than those

held-for-trading) are required to be measured at amortized cost using the effective interest method of amortization. For such

financial instruments, transaction costs are capitalized on initial recognition. The principal categories of the Trust’s financial

assets and liabilities measured at amortized cost using the effective interest method include: (i) amounts receivable and

payable; (ii) mortgages and loans receivable and mortgages payable; and (iii) debentures payable.

Available-for-sale financial assets are required to be measured at fair value with unrealized gains and losses recognized in

Other Comprehensive Income (“OCI”). Investments in equity instruments classified as available-for-sale that do not have a

quoted market price in an active market should be measured at cost. The Trust’s investment in common shares of Cedar is

classified as available-for-sale.

Derivative instruments are recorded on the consolidated balance sheets at fair value including those derivatives that are

embedded in a financial instrument or other contract but are not closely related to the host financial instrument or contract.

Changes in the fair values of derivative instruments are required to be recognized in net earnings, except for derivatives that

are designated as a cash flow hedge, in which case the fair value change for the effective portion of such hedging relationship

is required to be recognized in OCI. The Trust has also entered into interest rate swaps on certain of its mortgages

payable. These swaps are designated as hedges and the change in their value is recorded as a component of OCI.

The standard permits the Trust to designate any financial instrument whose fair value can be reliably measured as

held-for-trading even if that instrument would not otherwise satisfy the definition of held-for-trading as set out in

Section 3855. The Trust has made no such designations.

The standard specifically excludes Section 3065, Leases, from the definition of financial instruments, except for derivatives

that are embedded in a lease contract.



(ii) Hedges

Section 3865 of the CICA Handbook specifies the criteria under which hedge accounting can be applied and how hedge

accounting should be executed for each of the permitted hedging strategies: fair value hedges, cash flow hedges and hedges

of a foreign currency exposure of a net investment in a self-sustaining foreign operation.

From time to time, the Trust may enter into interest rate swap (option) transactions to modify the interest rate profile of its

current or future debts without an exchange of the underlying principal amount. In such cash flow hedging relationships, the

effective portion of the change in the fair value of the hedging derivative is recognized in OCI. The ineffective portion as defined

by the standard is recognized in net earnings. The Trust has entered into interest rate swaps on certain of its mortgages

payable.

During the third quarter of 2010, the Trust entered into a net investment hedge on its US self sustaining operation utilizing

US dollar denominated debt. Foreign exchange gains and losses on that portion of the hedge which is considered effective for

accounting purposes are recognized in OCI, net of tax. The portion of the hedge which is considered ineffective for accounting

purposes is recognized in the consolidated statements of earnings.

(iii) Comprehensive income

Under Section 1530 of the CICA Handbook, comprehensive income is comprised of net earnings and OCI, which represents

changes in unitholders’ equity during a period arising from transactions and other events with non-owner sources. OCI

generally would include unrealized gains and losses on financial assets classified as available-for-sale, unrealized foreign

currency translation adjustments net of hedging arising from self-sustaining foreign operations, and changes in the fair value

of the effective portion of cash flow hedging instruments. The Trust reports a consolidated statement of comprehensive

income comprising net earnings and OCI for the period. Accumulated OCI has been added to the consolidated statements of

unitholders’ equity.

(iv) Fair value

The fair value of a financial instrument is the amount of consideration that could be agreed upon in an arm’s-length

transaction between knowledgeable, willing parties who are under no compulsion to act. In certain circumstances, however,

the initial fair value may be based on other observable current market transactions in the same instrument, without

modification or on a valuation technique using market based inputs. The Trust’s financial assets include cash and cash

equivalents, accounts receivable, investments in common shares, and mortgages and loans receivable. The Trust’s financial

liabilities include accounts payable and other liabilities, mortgages payable and lines of credit and debentures payable. Except

as noted below, the carrying value of the Trust’s financial assets and financial liabilities approximate their fair values because

of the short period until receipt or payment of cash. The fair values of mortgages and loans receivable are based on the

current market conditions for mortgage financing loans with similar terms and risks. The fair values of term mortgages,

debentures and designated hedging derivative instruments included in receivables and other assets and accounts payable and

other liabilities are estimated based on discounted future cash flows using discount rates that reflect current market

conditions for instruments with similar terms and risks.

Fair value measurements recognized in the consolidated balance sheets are categorized using a fair value hierarchy that

reflects the significance of inputs used in determining the fair values:

(i) Level 1 Inputs – quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has

the ability to access at the measurement date;

(ii) Level 2 Inputs – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either

directly (i.e. as prices) or indirectly (i.e. derived from prices); and

(iii) Level 3 Inputs – inputs for the asset or liability that are not based on observable market data (unobservable inputs). These

unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in

pricing the asset or liability, and are developed based on the best information available in the circumstances (which might

include the reporting entity’s own data).

Each type of fair value is categorized based on the lowest level input that is significant to the fair value measurement in its entirety.

(h) Income taxes

The Trust currently qualifies as a mutual fund trust and a real estate investment trust for income tax purposes. The Trust expects

to distribute all of its taxable income to unitholders and is entitled to deduct such distributions for income tax purposes.

Accordingly, no provision for current income taxes payable is required.

Future income taxes, where applicable, are accounted for using the liability method. This method requires the Trust to:

(i) determine its temporary differences; (ii) determine the periods over which those temporary differences are expected to reverse;

and (iii) apply the tax rates enacted at the consolidated balance sheet dates that will apply in the periods those temporary

differences are expected to reverse.



(i) Cash and equivalents

Cash and equivalents are comprised of cash and short term investments with original maturities of three months or less.

(j) Future accounting policy changes

International Financial Reporting Standards (“IFRS”)

The Trust will convert to IFRS for its 2011 year. The Trust’s consolidated financial performance and financial position as disclosed

in the Trust’s current GAAP financial statements will be significantly different when presented in accordance with IFRS.

There are no other Canadian GAAP accounting pronouncements effective on or before January 1, 2011 that are expected to have a

significant impact on the Trust.

2. Income properties

2010 CostAccumulatedamortization

Netcarryingamount

Land $ 1,573 $ – $ 1,573

Buildings 4,623 (697) 3,926

Leasing costs 403 (121) 282

Intangible assets 287 (66) 221

Equity investments in properties 4 – 4

$ 6,890 $ (884) $ 6,006

2009 CostAccumulatedamortization

Netcarryingamount

Land $ 1,273 $ – $ 1,273

Buildings 3,989 (588) 3,401

Leasing costs 329 (100) 229

Intangible assets 186 (55) 131

Equity investments in properties 8 – 8

$ 5,785 $ (743) $ 5,042

(i) Income properties under capital leases

Included in income properties are capital leases for which the Trust has exercised all its options to purchase these properties

in 2013, 2034 and 2037. At December 31, 2010, the cost components are as follows: land – $8.8 million, buildings –

$23.0 million, intangible assets – $6.2 million, accumulated amortization – $4.8 million, and included in mortgages payable is

an obligation under capital lease of $9.6 million, maturing in 2013, encompassing minimum lease payments of $0.9 million per

annum. The obligation is at an imputed interest rate of 6.54% per annum.

3. Properties Under Development

As at December 31, 2010, properties under development included properties held for resale of $7.5 million (December 31,

2009 - $8.7 million).

4. Amortization


Buildings $ 122 $ 109

Leasing costs 45 39

Intangible assets 24 17

$ 191 $ 165



5. Investments

During the first quarter of 2010, 1.35 million additional Cedar shares were acquired at a price of $6.60 per share in connection with

a public offering conducted by Cedar. On April 27, 2010, the Trust exercised its warrant to purchase 1,428,570 common shares of

Cedar at an exercise price of $7.00 per share. As at December 31, 2010, the Trust’s investments consist of its ownership of

9.4 million (December 31, 2009: 6.7 million) common shares of Cedar.

6. Fees and other income


Property and asset management fees earned from co-ownerships, partners and other $ 13 $ 14

Dividends earned on Cedar shares 3 1

$ 16 $ 15

7. Interest expense


Gross interest expense $ 234 $ 209

Capitalized to real estate investments (19) (17)

$ 215 $ 192

8. Mortgages and loans receivable

At December 31, 2010, mortgages and loans receivable bear interest at effective rates between 4.5% and 10% (contractual rates

between 0% and 10%) per annum with a weighted average effective rate of 7.1% (contractual rate of 6.1%) per annum, and mature

between 2011 and 2015. Future repayments are as follows:

For the year ending December 31: Due on demand $ 10

2011 45

2012 58

2013 13

2014 58

2015 6

Contractual mortgages and loans receivable 190

Unamortized differential between contractual and market interest rates on

mortgages and loans receivable (2)

$ 188

9. Receivables and other assets

2010 2009

Straight-line rental revenue in excess of base rents currently due in accordance with lease agreements $ 55 $ 46

Contractual rents receivable 31 26

Other 49 43

$ 135 $ 115



10. Mortgages payable and lines of credit

At December 31, 2010, mortgages payable bear interest at effective rates between 2.68% and 8.73% (contractual rates between

2.68% and 8.45%) per annum with a weighted average effective rate of 5.63% (contractual rate of 5.54%) per annum and mature

between 2011 and 2034. Future repayments are as follows:

Scheduledprincipal

amortizationPrincipal

maturitiesTotal

repayments

Weightedaverage


For the year ending December 31: 2011 $ 78 $ 154 $ 232 5.76%

2012 78 252 330 6.03%

2013 73 372 445 5.86%

2014 63 424 487 5.75%

2015 52 662 714 5.02%

Thereafter 113 1,003 1,116 5.53%

Contractual obligations $ 457 $ 2,867 $ 3,324

Unamortized differential between contractual and market interest

rates on liabilities assumed at the acquisition of properties 6

Unamortized debt financing costs (14)

$ 3,316

As at December 31, 2010, US dollar denominated debt amounted to US$387.3 million (December 31, 2009 – $nil).

At December 31, 2010, the Trust had five secured revolving lines of credit available totalling $421.5 million (December 31, 2009 –

$293.5 million) with three Canadian Schedule 1 financial institutions against which $36.5 million (December 31, 2009 –

$54.7 million) of letters of credit and $nil (December 31, 2009 – $nil) in cash advances were drawn. The Trust therefore has

undrawn lines of credit of $385 million at December 31, 2010 (December 31, 2009 – $238.8 million).

The terms of the five facilities are outlined below.

A facility for $200 million has a committed fixed term of three years, maturing in 2013. The facility bears interest at the bank’s

prime rate plus 1.25% per annum, or at the Trust’s option, the bankers’ acceptance rate plus 2.25% per annum. Amounts may also

be drawn against this facility in US dollars. US dollar advances bear interest at the bank’s US prime rate plus 1.25% per annum, or,

at the Trust’s option, LIBOR plus 2.25% per annum.

The second facility is a committed revolving term and letter of credit facility for $100 million. This facility bears interest at the

bank’s prime rate plus 1.25% per annum, or, at the Trust’s option, the bankers’ acceptance rate plus 2.25% per annum and also

matures in 2013. Amounts may also be drawn against this facility in US dollars. US dollar advances bear interest at the bank’s US

prime rate plus 1.25% per annum, or, at the Trust’s option, LIBOR plus 2.25% per annum.

In July 2010, the Trust converted certain term financing into a $78 million line of credit arrangement with a Canadian Bank. The

line of credit bears interest at prime plus 1.5% per annum, or, at the Trust’s option, the banker’s acceptance rate plus 2.25% per

annum. The facility is for a term of two years and is subject to a one year extension, subject to Bank approval. Amounts may also be

drawn against this facility in US dollars. US dollar advances bear interest at the bank’s US prime rate plus 1.25% per annum, or, at

the Trust’s option, LIBOR plus 2.25% per annum.

The Trust also has a 50% interest in a Riokim Letter of Credit facility which provides for a maximum amount of $7 million, or

$3.5 million at RioCan’s interest, and is subject to repayment not later than one year from the date of issuance of a letter of credit.

In addition, the RioCan (80%) / Cedar (20%) joint venture has entered into a US$50 million senior secured revolving credit facility.

The credit facility has a one-year term with a one-year extension option. Interest under the facility is at LIBOR plus 3%. The facility,

which carries an unused balance fee of 50 basis points, is intended to be used for acquisitions by the joint venture as and when

appropriate.



11. Debentures payable

The Trust has the following series of senior unsecured debentures outstanding at December 31, 2010:

Series Principal amount Maturity date Coupon rateInterest payment

frequency

F $ 200 March 8, 2011 4.910% Semi-annual

H 100 June 15, 2012 4.700% Semi-annual

K 120 September 11, 2012 5.700% Semi-annual

G 150 March 11, 2013 5.230% Semi-annual

L 180 April 3, 2014 8.330% Semi-annual

M 150 March 31, 2015 5.650% Semi-annual

N 99 September 21, 2015 4.100% Semi-annual

I 100 February 6, 2026 5.953% Semi-annual

$ 1,099

The debentures have covenants relating to RioCan’s 60% leverage limit to gross assets as set out in the Trust’s Declaration, the

maintenance of a $1.0 billion Adjusted Book Equity, defined in the Indenture Agreement as unitholders’ equity plus accumulated

building amortization calculated in accordance with GAAP, and maintenance of an interest coverage ratio of 1.65 times or greater.

There are no requirements under the unsecured debenture covenants that require RioCan to maintain unencumbered assets. The

Series I debentures have an additional provision to provide that RioCan has the right, at any time, to convert these debentures to

mortgage debt, subject to the acceptability of the security given to the debenture holders. In such an event, the covenants relating

to the 60% leverage limit, minimum book equity and interest coverage ratio would be eliminated for this debenture.

On September 21, 2010, the Trust issued US$100 million of Series N debentures which are subject to the same covenants as the

other above noted outstanding debentures, with the exception of Series I which has an additional provision as discussed above.

Debenture issuance costs were approximately $0.9 million.

At December 31, 2010, debentures payable bear interest at a weighted average effective rate of 5.96% (contractual rate of

5.70%) per annum. Future repayments are as follows:

Principalmaturities

Weightedaverage


For the year ending December 31: 2011 $ 200 4.91%

2012 220 5.25%

2013 150 5.23%

2014 180 8.33%

2015 249 5.03%

Thereafter 100 5.95%

Contractual obligations 1,099

Unamortized debt financing costs (5)

$ 1,094

The Series F debentures were redeemed on January 20, 2011, in accordance with their terms, at a total redemption price of

$1,004.89 plus accrued and unpaid interest of $18.02575, both per $1,000 principal amount.

The Series L debentures due on April 3, 2011 were redeemed on February 24, 2011 at a total redemption price of $1,131.85 plus

accrued and unpaid interest of $32.86356, both per $1,000 principal amount. This early extinguishment of the Series L debentures

payable resulted in RioCan having to pay a prepayment penalty in the amount of $23.7 million in aggregate or $131.85 per $1,000

principal amount.



12. Accounts payable and other liabilities

2010 2009

Property operating costs $ 55 $ 38

Unamortized differential between contractual and below-market rents

for in-place leases at acquisition of income properties 48 27

Interest on mortgages and debentures payable 32 28

Development costs and other capital expenditures 32 33

Distributions to unitholders 30 28

Property taxes 17 14

Other 38 25

$ 252 $ 193

13. Trust units


Units $ Units $

Units outstanding, beginning of period (i) 242,320 2,771 222,042 2,461

Units issued:

Exchangeable limited partnership units (ii) 277 5 – –

Public offerings 13,625 289 16,395 261

Distribution reinvestment plan 2,976 59 3,866 57

Direct purchase plan 53 1 92 1

Unit option plan 567 7 215 3

Normal course issuer bid (iii) – – (290) (3)

Unit issue costs – (12) – (11)

Future income taxes (Note 18) – (3) – 2

Units outstanding, end of period (i), (ii) 259,818 3,117 242,320 2,771

(i) Included in units outstanding are 829,000 exchangeable limited partnership units of a limited partnership that is a subsidiary of the Trust (the

“LP units”) which were issued to the vendor, as partial consideration for an income property acquired by RioCan in 2007. RioCan is the general

partner of the limited partnership. The LP units are entitled to distributions equivalent to distributions on RioCan units, must be exchanged for

RioCan units on a one-for-one basis and are exchangeable at any time at the option of the holder. No LP units have been exchanged by the

vendors for RioCan units.

(ii) On September 13, 2010, a subsidiary of the Trust issued 277,000 exchangeable limited partnership units to the vendor, as partial consideration

for an income property acquired in September 2010. RioCan is the general partner of the limited partnership. The LP units are entitled to

distributions equivalent to distributions on RioCan units, may be exchanged for RioCan units on a one-for-one basis and are exchangeable at

any time at the option of the holder. No LP units have been exchanged by the vendors for RioCan units.

(iii) On November 5, 2009, the Toronto Stock Exchange (“Exchange”) approved the Trust’s notice of intention to renew its normal course issuer bid

(“NCIB”). Pursuant to the notice, the Trust had the ability to purchase for cancellation, up to a maximum of 11,732,772 units, representing 5%

of the Trust’s outstanding units of 234,655,457 at that time, over the 12 month term of the NCIB. Purchases are made at market prices through

the facilities of the Exchange. During the year ended December 31, 2010, the Trust acquired no units pursuant to its NCIB. During the first

quarter of 2009, the Trust acquired and cancelled 289,500 units at market prices aggregating $3.4 million.

(iv) On December 6, 2010, the Trust’s Declaration of Trust was amended and restated to permit the future authorization and issuance of Preferred

Units, and to make certain administrative and non-substantive changes and other changes resulting from the Trust’s ongoing growth. These

amendments were previously approved by Unitholders at the Trust’s Annual General meeting. On January 26, and February 17, 2011, the Trust

issued a total of 5 million Cumulative Rate Reset Preferred Trust Units, Series A (See note 26).



14. Unit based compensation plans

(i) Incentive unit option plan

At December 31, 2010, the Trust’s incentive unit option plan (the “plan”) provides for option grants to a maximum of 29,200,000

units. At December 31, 2010, 10,949,500 unit options have been granted and have been exercised, 8,269,500 unit options have

been granted and remain outstanding and 9,981,000 unit options remain available for grant. Each option has an exercise price

equal to the closing price of the Trust’s units on the date prior to the day the option is granted except for those options that

were granted on or after May 27, 2009, which have an exercise price calculated based on the exercise price for each option

granted equal to the volume weighted average trading price of the units on the Exchange for the five trading days immediately

preceding the date of grant. An option’s maximum term is 10 years. All options granted through December 31, 2003 vest at

20% per annum commencing on the grant date, becoming fully vested after four years. All options granted after December 31,

2003 vest at 25% per annum commencing on the first anniversary of the grant, becoming fully vested after four years.

A summary of unit options granted under the plan is as follows:


Options Units

Weightedaverageexercise

price Units

Weightedaverageexercise

price

Outstanding, beginning of period 7,157 $ 19.28 5,847 $ 20.66

Granted 1,680 18.78 1,550 13.47

Exercised (567) 13.69 (215) 14.86

Forfeited – – (25) 21.20

Outstanding, end of period 8,270 $ 19.56 7,157 $ 19.28

Options exercisable at end of period 4,356 $ 20.78 3,574 $ 19.91

Weighted average fair value per unit of options granted during the period $ 1.89 $ 0.68

The Trust accounts for its unit based compensation plan using the fair value method, under which compensation expense is

measured at the grant date and recognized over the vesting period. Unit based compensation expense and assumptions

utilized in the calculation thereof using the Black-Scholes Model for option valuation are as follows:


Unit based compensation expense $ 2 $ 2

Unit options granted 1,680 1,550

Unit option holding period (years) 7 7

Volatility rate 25.6% 24.4%

Distribution yield 7.4% 10.3%

Risk free interest rate 2.9% 2.4%

Ranges of Prices Options Outstanding Options Exercisable Weighted –Average Options

ExercisableRemaining

Contractual Life(years)Low High

Shares(in thousands)

Weighted-AverageExercise

PriceShares

(in thousands)

Weighted-AverageExercise

Price

$10.45 $ 14.99 1,555 $ 13.47 392 $ 13.46 5.16

15.00 19.99 2,860 18.57 1,180 18.28 4.12

20.00 24.99 2,695 21.43 1,914 21.53 6.06

25.00 26.35 1,160 25.80 870 25.80 6.22

8,270 $ 19.56 4,356 $ 20.78 5.48



(ii) Trustees’ restricted equity unit plan

The trustees’ restricted equity unit plan provides for an allotment of restricted equity units (“REUs”) to each non-employee

trustee (“member”). The value of REUs allotted appreciate or depreciate with increases or decreases in the market price of

the Trust’s units. Members are also entitled to be credited with REUs for distributions paid in respect of units of the Trust

based on an Average Market Price of the units as defined by the plan. REUs vest and are settled three years from the date of

issue by a cash payment equal to the number of vested REUs credited to the member based on an Average Market Price of the

Trust’s units at the settlement date. At December 31, 2010, accounts payable and other liabilities include accrued

compensation costs relating to the REUs of $1.3 million (December 31, 2009 – $0.7 million).

15. Employee future benefits

The Trust maintains several pension plans for its employees.

(i) A defined contribution pension plan incurred current service costs in the amount of $0.6 million for the year ended

December 31, 2010 and $0.6 million for the year ended December 31, 2009.

(ii) There are three defined benefit pension plans, of which one is a registered plan and the other two are unregistered plans. The

plans’ benefits are based on a specified length of service, up to a stated maximum. Actuarial gains and losses are amortized

into income using the corridor approach. Under the corridor approach, actuarial gains and losses are amortized to the extent

that they exceed 10% of the greater of the market related value of assets in the plan, or the accrued benefit obligation.

A summary of the defined benefit pension plans is as follows:

Defined benefit pension plans’ information2010 2009

Registered pension plan accrued benefits $ 2 $ 1

Less: Fair value of plan assets (2) (1)

– –

Unregistered pension plans unfunded benefits 4 4

Accrued employee pension plan benefits $ 4 $ 4

Statements of EarningsFor the year ended December 31, 2010 2009

Defined benefit pension expense $ 1 $ 1

16. Investments in co-ownerships

A Summary of financial information relating to the Trust’s share of proportionately consolidated co-ownerships is as follows:

Balance Sheets 2010 2009

Assets $ 1,834 $ 1,598

Liabilities 1,153 907

Contingencies and commitments (Note 25)

Statements of Earnings


Revenue $ 230 $ 196

Net earnings 43 32

Statements of Cash Flows


Cash flow provided by operating activities $ 105 $ 60

Cash flow provided by financing activities 168 23

Cash flow used in investing activities (238) (172)

At December 31, 2010, mortgages and loans receivable include $154.3 million (December 31, 2009 – $154.8 million) receivable

from co-owners.



Generally, the Trust is only liable for its proportionate share of the obligations of the co-ownerships in which it participates, except

in limited circumstances. Credit risk arises in the event that co-owners default on the payment of their proportionate share of such

obligations. Co-ownership agreements will typically provide for an option on the part of a non-defaulting co-owner to advance a

default loan on behalf of the defaulting co-owner. These credit risks are mitigated as the Trust has recourse under its

co-ownership agreements in the event of default by its co-owners, in which case the Trust’s claim would be against both the

underlying real estate investments and the co-owners that are in default.

17. Changes in non-cash operating items and other

Cash flows provided by (used in)For the year ended December 31, 2010 2009

Amounts receivable $ 2 $ 4

Mortgage receivable interest (4) (5)

Prepaid expenses and other assets (18) (1)

Accounts payable and other liabilities 30 10

Other 7 1

$ 17 $ 9

18. Income taxes

The Trust currently qualifies as a mutual fund trust for income tax purposes. The Trust expects to distribute all of its taxable

income to unitholders and is entitled to deduct such distributions for income tax purposes. Accordingly, no provision for current

income taxes payable is required.

The Income Tax Act (Canada) (the “Act”) contains legislation affecting the tax treatment of publicly traded trusts (the “SIFT

Legislation”). The SIFT Legislation provided for a transition period until 2011 for publicly traded trusts like RioCan which existed

prior to November 1, 2006. In addition, the SIFT Legislation did not impose tax on a trust which qualifies under such Legislation as

a real estate investment trust (the “REIT Exception”). The Trust has completed the necessary tax restructuring to qualify

commencing for the 2011 taxation year as a REIT under the Canadian income tax legislation in 2011.

Where an entity does not qualify for the REIT Exception, certain distributions will not be deductible by that entity in computing its

income for tax purposes. As a result, the entity will be subject to tax at a rate substantially equivalent to the general corporate

income tax rate. Distributions paid in excess of taxable income will continue to be treated as a return of capital to unitholders.

Prior to compliance by the Trust with the REIT Exception, GAAP required RioCan to recognize future income tax assets and

liabilities based on temporary differences expected to reverse after January 1, 2011. As a result of the completion of its tax

restructuring, the non-cash future income tax liability of $144 million at September 30, 2010 that arose primarily as a result of the

introduction of the SIFT Legislation in 2007 reversed in the fourth quarter of 2010 through the consolidated statement of earnings

as a one-time non-cash future income tax recovery.

The carrying value of the Trust’s real estate at December 31, 2010 exceeded its tax basis by approximately $540 million.

Components of future income taxes on the Consolidated Balance Sheets

2010 2009

Tax effected temporary differences between accounting and tax basis of:

Real estate investments $ – $ 137

Other – 3

Future income taxes $ – $ 140

Consolidated Statements of Earnings


Current income taxes at statutory tax rate $ – $ –

Increase (decrease) in future incomes taxes resulting from a change during the year in temporary

differences expected to reverse after 2010 4 (3)

Decrease in future income taxes resulting from a change

in tax status upon qualification for the REIT Exception (144) –

Future income tax expense (recovery) $ (140) $ (3)



19. Segmented disclosures and additional information

The Trust operates in the shopping centre segment of the real estate industry in both Canada and in the United States.

As at December 31, 2010, the Trust’s portfolio is comprised of 297 retail properties, including 10 under development. Included in

the Trust’s portfolio, are 31 grocery anchored and new format retail centres (December 31, 2009 – 2) located in the United States

which the Trust owns through joint venture agreements with Cedar, Inland Western REIT and Kimco Realty Corporation and

Dunhill Partners, Inc.

The Trust’s joint investment in Cedar is consolidated at 100% with a 20% non-controlling interest. The Trust’s joint venture

agreements with Inland Western REIT and Kimco Realty Corporation and Dunhill Partners, Inc. are proportionately consolidated.

No single tenant accounts for 10% or more of the Trust’s consolidated rental revenue.

The following summary presents segmented financial information by geographic location:

Net earnings (loss) by reportable segment for the year ended December 31, 2010 is as follows:

Canada United States Eliminations Total

Revenue

Rentals $ 799 $ 35 $ – $ 834

Fees and other income 13 3 – 16

Interest 32 – (16) 16

Gain on properties held for resale 21 – – 21

Total revenue 865 38 (16) 887

Expenses

Property operating costs 268 8 – 276

Interest 209 22 (16) 215

General and administrative 30 1 – 31

Transition costs 5 – – 5

Amortization 179 12 – 191

Impairment provision 8 – – 8

Total expenses 699 43 (16) 726

Earnings (loss) before income taxes, non-controlling interest, and gain on

long-lived assets $ 166 $ (5) $ – $ 161

Gain on disposition of long-lived assets 3 – – 3

Future income tax recovery 139 1 – 140

Non-controlling interest – (1) – (1)

Net earnings (loss) $ 308 $ (5) $ – $ 303

The net book value of real estate investments and capital expenditures as at December 31, 2010 is as follows:



Income properties $ 5,319 $ 687 $ – $ 6,006

Properties under development 379 – – 379

$ 5,698 $ 687 $ – $ 6,385

Capital expenditures $ 142 $ – $ – $ 142



Net earnings (loss) by reportable segment for the year ended December 31, 2009 is as follows:


Revenue

Rentals $ 726 $ – $ – $ 726

Fees and other income 14 1 – 15

Interest 19 – (1) 18

Gain on properties held for resale (1) – – (1)

Total revenue 758 1 (1) 758

Expenses

Property operating costs 261 – – 261

Interest 192 1 (1) 192

General and administrative 26 – – 26

Transition costs 3 3

Amortization 165 – – 165

Total expenses 647 1 (1) 647

Earnings (loss) before income taxes and non-controlling interest $ 110 $ 1 $ – $ 111

Future income tax recovery 3 – – 3

Net earnings (loss) $ 113 $ 1 $ – $ 114

The net book value of real estate investments and capital expenditures as at December 31, 2009 is as follows:



Income properties $ 4,999 $ 43 $ – $ 5,042

Properties held for resale 9 – – 9

Properties under development 263 – – 263

$ 5,271 $ 43 $ – $ 5,314

Capital expenditures $ 127 $ – $ – $ 127

20. Distributions to unitholders

RioCan currently qualifies as a mutual fund trust and real estate investment trust for income tax purposes. RioCan intends to

distribute all of the Trust’s taxable income to unitholders’ in each year, for an amount not less than the Trust’s income for the year,

as calculated in accordance with the Income Tax Act (Canada) (the “Act”) after all permitted deductions under the Act have been

taken.

21. Capital management

The Trust defines capital as the aggregate of unitholders’ equity and debt. The Trust’s capital management framework is designed

to maintain a level of capital that: complies with investment and debt restrictions pursuant to RioCan’s Declaration, complies with

existing debt covenants, enables the Trust to achieve target credit ratings, funds its business strategies and builds long-term

unitholder value. The key elements of RioCan’s capital management framework are approved by its unitholders as related to the

Trust’s Declaration and by its Board of Trustees (“Board”) through their annual review of the Trust’s strategic plan and budget,

supplemented by periodic Board and Board Committee meetings. Capital adequacy is monitored by the Trust by assessing

performance against the approved annual plan throughout the year, which is updated accordingly, and by monitoring adherence to

investment and debt restrictions contained in the Declaration and debt covenants.

RioCan’s Declaration provides for maximum total debt levels up to 60% of Aggregate Assets (herein referred to as “Debt to

Aggregate Assets ratio” with Aggregate Assets defined in the Declaration as total assets plus accumulated amortization of income

properties as recorded by the Trust and calculated in accordance with GAAP). As income properties are not defined in the

Declaration or in GAAP, RioCan considers income properties to include those components in Note 2, with certain exceptions.



Additionally, RioCan’s Declaration contains provisions that have the effect of limiting capital expended by the Trust for, among

other items, the following:

• Direct and indirect investments (net of related mortgages payable) in non-income producing properties (including greenfield

developments and mortgages receivable to fund the Trust’s co-owners’ share of such developments) to no more than 15% of the

Adjusted Unitholders’ Equity of the Trust (herein referred to as the “Basket ratio” with Adjusted Unitholders’ Equity defined in

the Declaration as total unitholders’ equity plus accumulated amortization of income properties as recorded by the Trust and

calculated in accordance with GAAP). The Trust is in compliance with this restriction;

• Total investment by the Trust in mortgages receivable, other than mortgages taken back by the Trust on the sale of its

properties, to no more than 30% of the Adjusted Unitholders’ Equity of the Trust. The Trust is in compliance with this restriction;

• Any property acquired by the Trust, directly or indirectly, if the cost to the Trust of such acquisition (net of the amount of

mortgages payable assumed) exceeds 10% of the Adjusted Unitholders’ Equity of the Trust. The Trust is in compliance with this

restriction;

• Subject to the Basket ratio, securities of an entity, other than to the extent that such securities would, for the purpose of the

Declaration, constitute an investment in real estate. The Trust is in compliance with this restriction; and

• The amount of space which can be leased or subleased to any tenant, with certain exceptions, to a maximum space having an

aggregate gross leasable area of 20% of the aggregate gross leasable area of all real estate investments held by the Trust. The

Trust is in compliance with this restriction.

The Trust intends to distribute to its unitholders in each year an amount not less than the Trust’s income for the year, as calculated

in accordance with the Act after all permitted deductions under the Act have been taken. RioCan’s Trustees rely upon forward

looking cash flow information, including forecasts and budgets and the future business prospects of RioCan, to establish the level

of cash distributions.

The Trust’s debentures payable have covenants that are consistent with the Debt to Aggregate Assets ratio as discussed above,

maintenance of at least $1 billion of Adjusted Book Equity (defined as unitholders’ equity plus accumulated building amortization of

income properties calculated in accordance with GAAP), and maintenance of at least an interest coverage ratio of 1.65. Interest

coverage is defined as GAAP net earnings for a rolling twelve month period, before net interest expense, income taxes and income

property amortization (including provisions for impairment) divided by total interest expense (including interest that has been

capitalized).

2010 2009Increase

(decrease)

Capital

Mortgages payable and lines of credit (Note 10) $ 3,316 $ 2,669 $ 647

Debentures payable (Note 11) 1,094 994 100

Unitholders’ equity 2,151 1,857 294

Total capital $ 6,561 $ 5,520 $ 1,041

Debt to Aggregate Assets ratio 57.1% 55.6% 1.5%

Basket ratio 5.6% 7.5% (1.9%)

The period over period increase in the Debt to Aggregate Assets ratio primarily arises as a result of the relative increase in debt

levels.

The period over period decrease in the Basket ratio primarily arises as a result of the decrease in properties under development, a

decrease in mortgage receivables, and an increase in equity.

For the twelve months ended December 31, 2010 2009 Increase

Interest coverage ratio 2.5 2.2 0.3



22. Financial instruments

(i) Fair value of financial instruments

The Trust’s amounts receivable, mortgages and loans receivable and accounts payable and other liabilities are substantially

carried at amortized cost, which approximates fair value. Cash, short term investments and investments in the common

shares of Cedar are measured at fair value. The fair value of other financial instruments is based upon discounted future cash

flows using discount rates that reflect current market conditions for instruments with similar terms and risks. Such fair value

estimates are not necessarily indicative of the amounts the Trust might pay or receive in actual market transactions. Potential

transaction costs have also not been considered in estimating fair value.

Financial instruments carried at amortized cost

2010 2009

Carryingvalue

Fairvalue

Carryingvalue

Fairvalue

Mortgages payable and lines of credit $ 3,316 $ 3,487 $ 2,669 $ 2,688

Debentures payable 1,094 1,133 994 1,024

The fair value hierarchy of financial instruments measured at fair value on the consolidated balance sheets is as follows:

2010 2009

(thousands of dollars) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

Financial Assets:

Cash and cash equivalents $ 92 $ – $ – $ 147 $ – $ –

Investments 59 – – 47 3 –

Interest rate swap asset (Note 23) – – – – 1 –

Financial Liabilities:

Interest rate swap liability (Note 23) – 2 – – 1 –

(ii) Risk management

The main risks arising from the Trust’s financial instruments are credit, interest rate and liquidity risks. The Trust’s approach

to managing these risks is summarized below:

(a) Credit risk

Credit risk arises from the possibility that:

• Tenants may experience financial difficulty and be unable to fulfill their lease commitments or the failure of tenants to

occupy and pay rent in accordance with existing lease agreements, some of which are conditional.

• Borrowers default on the repayment of their mortgages to the Trust.

• Third parties default on the repayment of debt to the Trust (for discussion on co-ownerships, see Note 16 and on

guarantees, see Note 25).

As discussed in Note 21, RioCan’s Declaration contains provisions that have the effect of limiting the amount of space

which can be leased to one tenant and its investment in mortgages receivable.

Additionally, the Trust mitigates tenant credit risk through geographical diversification, staggered lease maturities,

diversification of revenue sources resulting from a large tenant base, avoiding dependence on any single tenant by

ensuring no individual tenant contributes greater than a significant percentage of the Trust’s gross revenue, ensuring a

considerable portion of the Trust’s revenue is earned from national and anchor tenants and conducting credit assessments

for new tenants.

As at December 31, 2010:

• Minimum annualized rentals (exclusive of recoverable property operating costs and taxes) for tenant leases expiring in

each of the next five years ending December 31 are as follows: 2011 – $50 million; 2012 – $54 million; 2013 – $56 million;

2014 – $69 million; and 2015 – $65 million.

The above aggregate renewals over the next five years represent annual lease payments of $294 million based on

current contractual rental rates. For every such lease renewed upon maturity at an aggregate rental rate differential of

100 basis points, the Trust’s operations would be impacted by approximately $2.9 million annually.

• No individual tenant comprises more than approximately 5% of the Trust’s annualized rental revenue for 2010 and 2009.



• Approximately 86% of the Trust’s annualized rental revenue is derived from national and anchor tenants (which tenant

covenants are expected to be of higher credit quality than other tenants) as compared to approximately 85% for the

comparative period of 2009.

(b) Interest rate and liquidity risks

The Trust is exposed to interest rate risk on its borrowings. Liquidity risk arises from the possibility of not having sufficient

debt and equity capital available to the Trust to fund its growth program and refinance its debts as they mature.

The Trust’s financial condition and results of operations would be adversely affected if it were unable to obtain financing, or

obtain cost-effective financing.

As discussed in Note 21, RioCan’s Declaration establishes a Debt to Aggregate Assets ratio limit of 60%.

Additionally, the Trust mitigates interest rate and liquidity risk by staggering the maturity dates of its long term debt (see

Notes 10 and 11 for Aggregate Debt), by entering into interest rate swap (option) agreements (see Note 23), and by limiting

the use of floating rate debt.

As at December 31, 2010:

• The Trust’s Aggregate Debt has a 4.5 year weighted average term to maturity bearing interest at a weighted average

contractual interest rate of 5.6% per annum;

• 1.7% of its Aggregate Debt is at floating interest rates as compared to 3.9% as at December 31, 2009;

• The Trust’s undrawn lines of credit are $385 million (see Note 10);

• The Trust’s Debt to Aggregate Assets ratio is 57.1%; and

• At December 31, 2010, the Trust had cash and equivalents of $92 million as compared to $146.8 million at December 31,

2009.

At December 31, 2010, the Trust has aggregate contractual debt principal maturities through to December 31, 2013 of

approximately $1,389 million (31.4% of RioCan’s Aggregate Debt) with a weighted average contractual interest rate of

5.58%. For every such amount refinanced upon maturity at an aggregate interest rate differential of 100 basis points, the

Trust’s net earnings would be impacted by approximately $13.9 million annually.

(c) Foreign exchange risk

The Trust operates in Canada and, through various joint venture agreements, in the United States. The functional currency

of the Trust is Canadian dollars as is the reporting currency. The functional currency of the Trust’s US joint ventures is the

US dollar. The Trust also has interest bearing debts and common shares of Cedar denominated in US dollars. The Trust is

exposed to both transaction and translation risk due to the volatility of foreign currency exchange rates, primarily arising

from its US dollar denominated investments and, to a lesser extent, its monetary assets and liabilities denominated in this

currency. The carrying values of these assets and liabilities, as well as the comprehensive income and earnings derived

from them, are subject to foreign exchange rate fluctuation.

Foreign exchange risk arises because the US dollar denominated financial statements of the joint ventures may vary on

consolidation into Canadian dollars and the value of the Trust’s investment in the common shares of Cedar will fluctuate

with changes in the US dollar. Exchange gains and losses from the translation of the US joint ventures and the foreign

exchange gains or losses on the common shares of Cedar are included in OCI. As a result, the Trust may experience

translation exposures because of volatility in the exchange rate between the Canadian and US dollar.

As at December 31, 2010, the Trust’s US denominated net assets are $264.8 million such that a 1% change in the value of

the US dollar will result in a gain or loss to the Trust of approximately $2.6 million.

23. Hedging activities

From time to time, the Trust may enter into interest rate swap transactions to modify the interest rate profile of its current or

future variable rate debts without an exchange of the underlying principal amount. The Trust applies hedge accounting to such

cash flow hedging relationships whereby the change in the fair value of the effective portion of the hedging derivative is recognized

in OCI. The ineffective portion, for accounting purposes in accordance with CICA Handbook Section 3865 “Hedges”, is recognized in

net earnings.



During 2009 and 2010, the Trust has entered into interest rate swap agreements on floating interest rate first mortgages to hedge

the variability in cash flows attributed to fluctuating interest rates. Settlement on both the fixed and variable portion of the interest

rate swaps occurs on a monthly basis. The following table summarizes the details of the interest rate swaps that are outstanding

at December 31, 2010:

Transaction dateMortgages payable

original principal amountEffective fixed

interest rate Maturity date

November 2009 $ 36 5.76% November 2014

June 2009 33 6.10% June 2014

April 2009 23 5.10% April 2014

February 2009 103 4.87% February 2014

January 2010 26 5.27% January 2015

December 2010 15 5.03% December 2020

$ 236

The Trust has assessed that there is no ineffectiveness in the hedge of its interest rate exposure. The effectiveness of the hedging

relationships is reviewed on a quarterly basis. As an effective hedge, unrealized gains or losses on the interest rate swap

agreements are recognized in OCI. At December 31, 2010, the fair value of the interest rate swaps are, in aggregate, a financial

liability of $2.4 million, of which $0.1 million has been recognized as an asset in receivables and other assets and $2.5 million has

been recognized as a liability in accounts payable and other liabilities. The associated unrealized gains or losses that are

recognized in OCI will be reclassified into net earnings in the same period or periods during which the interest payments on the

hedged item affect net earnings.

The Trust hedges its net investment in the US operation (on an after tax basis) with US dollar-denominated debt. At December 31,

2010, the Trust had designated the Series N US$100 million debenture as a net investment hedge, the carrying value of which was

$99 million as at that date. Exchange gains and losses from the translation of the Series N debenture are included in OCI.

24. Related party transactions

During the third quarter of 2010, RRVLP, a limited partnership in which RioCan has a 15% interest, sold Niagara Square for

$47 million to a joint venture in which RioCan holds a 30% interest. In consideration for arranging the transaction, RioCan earned a

fee of $0.7 million from the purchaser.

During the first quarter of 2010, the Trust increased its ownership interest in Chapman Mills Marketplace to 75% from 62.5% by

purchasing an additional 12.5% interest from Trinity Development Group (“Trinity”), an existing joint venture partner on the project.

The purchase price was approximately $11.9 million.

During 2009, the Trust purchased from a co-owner, for approximately $8.1 million, a 50% interest in a $20.2 million mortgage

receivable granted on the sale of an asset by the co-ownership. The purchase increased the Trust’s ownership interest in this

mortgage receivable from 50% to 100%. The mortgage receivable requires semi-annual installments of $100,000 each and is

non-interest bearing until December 23, 2012, and thereafter is interest bearing at a contractual rate of 6% per annum with

blended monthly installments on account of principal and interest until maturity on December 23, 2015. Based on the purchase

price of $8.1 million, the effective rate of interest on the mortgage receivable is 6.09%.

25. Contingencies and commitments

(a) Guarantees

The Trust provides guarantees on behalf of third parties, including co-owners and partners. In addition, the Trust’s guarantees

remain in place for debts assumed by purchasers in connection with certain property dispositions and will remain until such

debts are extinguished or the lenders agree to release the Trust’s covenants. Credit risks arise in the event that these parties

default on repayment of their debt as they are guaranteed by the Trust. These credit risks are mitigated as the Trust has

recourse under these guarantees in the event of a default by the borrowers, in which case the Trust’s claim would be against

the underlying real estate investments. At December 31, 2010, the estimated amount of debt subject to such guarantees, and

therefore the maximum exposure to credit risk, is approximately $400 million (December 31, 2009 – $444 million) with expiry

dates between 2010 and 2034. There have been no defaults by the primary obligors for debts on which the Trust has provided

its guarantees, and as a result, no contingent loss on these guarantees has been recognized in these consolidated financial

statements. At December 31, 2010, RioCan has provided guarantees totalling $307 million to partners and co-owners and $93

million on the assumption of mortgages by purchasers on property dispositions.



(b) Contractual obligations on real estate investments

Currently, RioCan has various acquisitions under contract. The aggregate purchase would be approximately $46 million and if

completed, would add approximately 318,000 square feet to the Trust’s portfolio. The centres are located in Ontario, Quebec

and Massachusetts. The Trust has waived all material conditions with respect to these properties and expects to close these


Additionally, the Trust has acquisitions under contract to increase its ownership interest in 5 properties owned with Trinity.

The aggregate purchase price for the additional interest in these properties would be approximately $59 million and if

acquired, would add 360,000 square feet to the Trust’s portfolio. These centres are located in Ontario.

(c) Lease Commitments

The Trust is committed under long term operating leases with various expiry dates to 2029. Minimum annual rentals for the

next five years are as follows:

For the year ending December 31: 2011 $ 3

2012 3

2013 3

2014 1

2015 1

(d) Litigation

The Trust is involved with litigation and claims which arise from time to time in the normal course of business. In the opinion

of management, any liability that may arise from such contingencies will not have a significant adverse effect on the Trust’s

consolidated financial statements.

26. Subsequent events

On January 20, 2011, the Trust redeemed all of the outstanding $200 million Series F debentures, due on March 8, 2011, in

accordance with their terms, at a total redemption price of $1,004.89 plus accrued and unpaid interest of $18.02575, both per

$1,000 principal amount.

On February 24, 2011, the Trust redeemed all of the currently outstanding $180 million Series L debentures due April 3, 2014, in

accordance with their terms, at a total redemption price of $1,131.85 plus accrued and unpaid interest of $32.86356, both per

$1,000 principal amount. This early extinguishment of the Series L debentures payable resulted in RioCan having to pay a

prepayment penalty in the amount of $23.7 million in aggregate or $131.85 per $1,000 principal amount.

On January 21, 2011, the Trust issued $225 million of Series O debentures which mature on January 17, 2016 and carry a coupon rate

of 4.499%. These debentures are subject to the same covenants as the other above noted outstanding debentures, with the exception

of Series I which has an additional provision as discussed in Note 11. Debenture issuance costs were approximately $1.6 million.

On January 26, and February 17, 2011, the Trust issued a total of 5 million Cumulative Rate Reset Preferred Trust Units, Series A

(the “Series A Units”) at a price of $25 per unit for aggregate gross proceeds of $125 million. The Series A Units will pay a

distribution yield 5.25% per annum, payable quarterly, as and when declared by the board of trustees of RioCan, for the initial five-

year period ending March 31, 2016. The distribution rate will be reset on March 31, 2016 and every five years thereafter at a rate

equal to the sum of the then five-year Government of Canada bond yield and 2.62%. The Series A Units are redeemable by RioCan,

at its option, on March 31, 2016 and on March 31 of every fifth year thereafter.

Holders of Series A Units will have the right to reclassify all or any part of their units as Cumulative Floating Rate Preferred Trust

Units, Series B (the “Series B Units”), subject to certain conditions, on March 31, 2016 and on March 31 of every fifth year thereafter.

Holders of Series B Units will be entitled to receive a cumulative quarterly floating distribution at a rate equal to the sum of the then

90-day Government of Canada Treasury Bill yield plus 2.62%, as and when declared by the board of trustees of RioCan.


Senior Management, Board of Trustees and Unitholder Information

Senior Management

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

Frederic A. WaksExecutive Vice President and Chief Operating Officer

Raghunath Davloor, C.A.Senior Vice President, Corporate Secretary

and Chief Financial Officer

John BallantyneSenior Vice President, Asset Management

Michael ConnollySenior Vice President, Construction

Jonathan GitlinSenior Vice President, Investments

Danny KissoonSenior Vice President, Operations

Donald MacKinnonSenior Vice President, Real Estate Finance

Jordan RobinsSenior Vice President, Planning and Development

Jeff RossSenior Vice President, Leasing

Oliver HarrisonVice President, Asset Management

Suzanne MarineauVice President, Human Resources

Jane PlettVice President, Operations – Western Canada

Maria Rico, C.A.Vice President, Financial Reporting

Kenneth SiegelVice President, Leasing

Board of Trustees

Paul Godfrey, C.M. 1,2,3,4

(Chairman of Board of Trustees)

President and Chief Executive Officer,

The National Post

Clare R. Copeland 1,2

Chair of Toronto Hydro Corporation

Raymond GelgootPartner, Fogler, Rubinoff LLP

Frank W. King, O.C. 1,2

President, Metropolitan In vestment Corporation

Dale H. LastmanCo-Chair and Partner, Goodmans LLP

Ronald W. Osborne 1

Chairman of the Board of Sun Life Financial Inc.

and Sun Life Assurance Company of Canada

Sharon Sallows 3,4

Partner, Ryegate Capital Corporation

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

RioCan Real Estate Investment Trust

Charles M. Winograd 3,4

President, Winograd Capital Incorporated

1 member of the Audit Committee2 member of the Human Resources & Compensation Committee3 member of the Nominating & Governance Committee4 member of the Investment Committee

Unitholder Information

Head Office

RioCan Real Estate Investment TrustRioCan Yonge Eglinton Centre, 2300 Yonge Street, Suite 500

P.O. Box 2386, Toronto, Ontario M4P 1E4

Tel: 416-866-3033 or 1-800-465-2733

Fax: 416-866-3020

Website: www.riocan.com

Email: [email protected]

Unitholder and Investor Contact

Christian GreenDirector, Investor Relations

Tel: 416-864-6483


Auditors

Ernst & Young LLP

Transfer Agent and Registrar

CIBC Mellon Trust CompanyP.O. Box 7010, Adelaide Street Postal Station,

Toronto, Ontario M5C 2W9

Answerline: 1-800-387-0825 or 416-643-5500

Fax: 416-643-5501

Website: www.cibcmellon.com


Unit Listing

The units are listed on the Toronto Stock Exchange

under the symbol REI.UN.

Annual Meeting

The 2010 Annual Meeting of RioCan REIT

will be held on Wednesday, June 8, 2011 at

10:00 a.m. at SilverCity Theatres located at

RioCan Yonge Eglinton Centre, 2300 Yonge

Street, Toronto, Ontario. All unitholders

are invited and encouraged to attend.

On peut obtenir une version française

du présent rapport annuel sur le site

web de RioCan: www.riocan.com

A French language version of this annual

report is available on RioCan’s website:

www.riocan.com

CONSERVATIVE LEVERAGE RioCan takes ameasured approach to leverage and maintains astrong Balance Sheet with solid coverage metrics.

STAGGERING OF LEASE MATURITIES RioCan has staggeredits lease maturities to provide additional security from marketfluctuations and to reduce the risk that any single tenant or leaseexpiry will have a material impact on its business. In fact, RioCanhas no more than 10–12% of its leases expire in any given year.

DIVERSIFIED TENANT PROFILE To ensure thestability of the Trust, RioCan’s revenue sourcesare derived from more than 6,700 individual tenants.

GEOGRAPHIC DIVERSIFICATION RioCan is strategicallypositioned in Canada’s major population centres and owns agrowing portfolio in the US. In fact, two-thirds of the Trust’sCanadian income is derived from Canada’s six major markets,which include Calgary and Edmonton, Alberta, Vancouver,British Columbia, Toronto and the greater Ottawa region,Ontario, and Montreal, Quebec.

LADDERED MATURITIES To avoid the fluctuations ofdebt markets, RioCan has laddered its debt maturitieswith no more than 15–17% of its debt maturing in anygiven year.

STRENGTH IN MANAGEMENT From the beginning,RioCan has maintained a consistant vision andphilosophy. The management team is comprisedof well seasoned and experienced professionals,many of whom have been with RioCan since theTrust started in 1994.

STABLE PROPERTY TYPES AND TENANTSRioCan has focused on stable sectors, such asgrocery, that will withstand the highs and lowsof the marketplace. Furthermore, stability isprovided by a large proportion of anchor andnational tenants, which combined generateapproximately 86% of RioCan’s rental revenue.

1 Financial Highlights

2 Property Portfolio

11 Financial Review – Table of Contents


99 Audited Consolidated Financial Statements

126 Senior Management, Board of Trustees and Unitholder Information

CONTENTS

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Co r e P r i n c i p l e s


REALESTATEINVESTMENTTRUST


RIOCANFINANCIALANNUALREPORT2010

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

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