ANNUAL REPORT 2015 RioCan CORPORATEFounded in 1993, PROFILERioCan has become Canada’s largest Real Estate Investment Trust. RioCan invests in, develops, and manages more than 300 properties, including shopping centres and mixed-use developments in Canada’s six largest markets. Capitalizing on demographic, and retail trends, in key urban centres, RioCan’s properties are major draws for tenants and customers alike. RioCan brings to market winning, mixed-use developments that satisfy a range of needs, from quality shopping experiences, to condominiums or rentals, and, in some instances, office spaces. In Canada’s six major markets, RioCan is redefining urban real estate. TABLE OF CONTENTS 1 Financial Highlights 2 CEO’s Letter to Unitholders 12 Property Portfolio 23 Management’s Discussion and Analysis 97 Audited Annual Consolidated Financial Statements 105 Notes to Consolidated Financial Statements IBC Corporate Information 0_1 RIOCAN REAL ESTATE INVESTMENT TRUST ANNUAL REPORT 2015 Financial Highlights Total Assets 20,000 Operating Funds From Operations 15,000 600 500 10,000 Major Market Focus 80% $ millions 400 5,000 300 75% venue re $ millions 200 70% Total Assets 0 2012 2013 2014 2015 100 20,000 65% Operating 0 2012 2013 2014 2015 Funds From Operations 60% 15,000 600 % of annualized rental 500 Total Assets 55% 2010 2011 2012 10,000 Major Market Focus 2013 2014 2015 80% RioCan's portfolio is focused in Canada's six largest markets $ millions 20,000 400 Toronto, Vancouver, Edmonton, Calgary, Ottawa and Montreal. Operating 5,000 300 75% Funds From Operations venue 15,000 600 re $ millions 200 70% 0 500 2012 2013 2014 2015 10,000 Major Market Focus 100 80% 65% $ millions 400 0 2012 2013 2014 2015 5,000 75% 60% 300 venue re $ millions % of annualized rental 200 70% 55% 0 2010 2011 2012 2013 2014 2015 2012 2013 2014 2015 100 RioCan's portfolio is focused in Canada's six largest markets Toronto, Vancouver, Edmonton, Calgary, Ottawa and Montreal. 65% 0 2012 2013 2014 2015 60% % of annualized rental 55% 2010 2011 2012 2013 2014 2015 RioCan's portfolio is focused in Canada's six largest markets Toronto, Vancouver, Edmonton, Calgary, Ottawa and Montreal. Our Vision is in Our Strategy RioCan is Canada’s largest real estate investment trust with a total enterprise value of approximately $15 billion as of December 31, 2015. With 305 properties in canada, RioCan EDWARD SONSHINE, offers more than 46 million O.ONT.,Q.C. square feet of leasable space, generating more than $1 billion CHIEF EXECUTIVE OFFICER in annualized rent. THE RIGHT STRATEGY ... IMPLEMENTED CEO’S LETTER TO UNITHOLDERS Dear Unitholders, Unlike any year in our history of more than 20 years, 2015 will be remembered for challenges that impacted all sectors of the economy. Under a difficult economic climate, RioCan was tested in numerous ways. I am proud that RioCan’s model of fiscal discipline, risk management and diversification has stood the test of time and tribulation. RioCan is not standing still, however. The year started off with an unexpected announcement: Target would depart the Canadian marketplace. As a result, Target eventually returned more than two million square feet of leasable space to your REIT. Although RioCan was Target’s largest Canadian landlord, as part of your Trust’s diversification strategy, Target’s total leased space represented less than 2% of total annual rental revenue. 2_3 RIOCAN REAL ESTATE INVESTMENT TRUST ANNUAL REPORT 2015 RioCan’s management team had the foresight, and provide easy access for people to live, work, shop experience, and leverage to negotiate a “parent and play. guarantee” with Target, facilitating a rapid November 2015 settlement. Nonetheless, the scale of the Target With a blend of income from retail and residential space consumed a significant portion of the leasing streams, mixed-use properties help mitigate risk. and management teams’ time and efforts. I am pleased The residential component provides stable cash flow, to report that RioCan has made substantial progress while adding value to the retail mix with an adjacent leasing these spaces. As of the date of this year’s customer base. In sum, RioCan’s projects satisfy a range report, for instance, RioCan has agreements in place or of retail needs while helping consumers enhance their is in advanced stages of negotiations that will replace urban lifestyles. approximately 115% of this rent. Toronto awaits The Well Difficulties during the year did not stop with Target, however. Best Buy/Future Shop, and a number of Toronto is abuzz with anticipation over The Well, a mid-range fashion retailers announced store closings, world-class development and community-gathering and this was just in the first quarter of 2015. Nonetheless, hub, located near Toronto’s downtown core. The Well your Trust demonstrated its initiative, resiliency and will be a landmark mixed-use community that features strength of its high-traffic properties by achieving 7.6% retail at grade, rental and condominium living, and an growth in the Trust’s operating funds from operations office tower on the northeast corner of the development. (“OFFO”) on the year. RioCan is also slowly restoring Developed by RioCan and its partners Allied Properties occupancy rates in our Canadian properties from a low REIT and Diamond Corporation, this expansive site of 93.1% on June 30, 2015 to the current rate of 94.0%, is spread over more than 7.5 acres, and offers 3 million and we expect to be back at our more usual rates of over square feet of space. By incorporating a dynamic 95% within the year. retail mix, entertainment, leading restaurants, and green space, The Well will become a magnet for RioCan thrives on the challenges of a constantly thousands of Torontonians living in the downtown changing retail landscape. Rather than imposing a west, as well as for visitors who seek out this uniform design on every property, RioCan leads the exciting destination. market with customized site plans based on retail trends, demographics, income levels, and traffic patterns. RioCan, in partnership with KingSett Capital, is currently RioCan offers consumers a range of shopping options in redeveloping the Yonge Sheppard Centre. Earlier this its properties, while designing residential living spaces year, zoning was approved for the redevelopment plans in select urban sites. With rigorous research, financial for this site at the intersections of two bustling subway discipline, and an innovative approach, RioCan brings the lines in north Toronto. The retail section is currently right solution to the right project. being renovated. Key tenants include a Longo’s grocery store which has leased 54,000 square feet and LA RioCan is on the move. To ensure future growth, RioCan Fitness which has leased another 50,000 square feet. actively conceives – and develops select high-profile To complement the retail spaces, 339,000 square feet projects, some independently, and others with partners. of residential rental space is included in the plan. Final RioCan’s development pipeline is robust, comprising 16 approval for the site’s redevelopment plan is anticipated transformative projects in the urban cores of Canada’s in the first quarter of 2016. six major markets. Transforming urban centres Intensifying urban properties Both The Well and the Yonge Sheppard Centre are In the highly populated urban centres in Canada’s six integral to RioCan’s program to intensify forty-six major markets, where space is at a premium, RioCan properties with a residential component, either in the has designated forty-six properties for potential form of condominiums or rental properties. Based on intensification. These exciting mixed-use communities current plans, RioCan has designated bringing to are conveniently located on or near major transit hubs, market up to approximately 18,000 residential units over the next decade. Currently, RioCan has obtained planning approvals accrued value of the U.S. properties. With the proceeds for seven mixed-use projects. RioCan has also filed of the sale, the balance sheet will be considerably applications for twenty-one mixed-use projects which, strengthened, providing liquidity, and financial flexibility based on planning approvals, will comprise a total for new projects. Finally, with a less complex business of approximately 13.6 million square feet, of which structure, RioCan will be a pure-play Canadian REIT approximately 11 million square feet will be residential that will focus exclusively on managing Canadian spaces, while 3.1 million square feet will be incremental operations, and bringing to market our significant commercial gross leasable area. Depending on market development pipeline. conditions, the mix between condominium and rental residential may change over time, but RioCan may have The sale proceeds of the U.S. properties resulted in an an interest in as many as 11,000 residential rental units. internal rate of return of approximately 16% in Canadian dollars. These gains are based on valuable properties coupled with the strength of the U.S. dollar relative to Emerging from Target’s departure in a the Canadian currency. With these proceeds, RioCan strengthened position can fortify the Trust’s balance sheet and provide an even Target Corporation’s financial settlement provides a stronger financial foundation for future growth. substantial amount of capital most of which will be used in the Trust’s redevelopment efforts. To lease Management anticipates that in the near term, the the former Target spaces, RioCan has entered into proceeds from the sale will lower the Trust’s operating advanced discussions, conditional agreements or signed funds from operations. With our acquisition of our agreements with grocers, sporting goods suppliers, partner Kimco’s share in twenty-three Canadian fitness operators, discount retailers, service providers, properties, the Trust has also reduced a portion of near and others. Of note, these signings will replace an term dilution.