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Press release from Marketwire

Primaris Retail REIT Announces Record Fourth Quarter and Annual Financial Results

Thursday, March 01, 2012

Primaris Retail REIT Announces Record Fourth Quarter and Annual Financial Results18:07 EST Thursday, March 01, 2012TORONTO, ONTARIO--(Marketwire - March 1, 2012) - Primaris Retail REIT (TSX:PMZ.UN) is pleased to report positive operating results for the fourth quarter of 2011. These results have been prepared in accordance with International Financial Reporting Standards ("IFRS"). Prior year's results have been restated to conform to this change.President and CEO, John Morrison, commented "We are very pleased with our results for 2011. Funds from Operations for the fourth quarter were 16% stronger than our previous quarterly record. We completed a significant $572 million dollar acquisition during the year, establishing Primaris as the third largest and only public enclosed shopping centre owners in the country. In addition to the property acquisitions we added many strong people to our team, both at the property level and at our corporate offices. The strong financial results resulted from acquisitions, strict expense controls at the G&A level, and from seasonal occupancy gains during the fourth quarter. With a prudent financial structure and strong liquidity, Primaris is well positioned for the future."Highlights Funds from Operations (FFO) Funds from operations for the fourth quarter ended December 31, 2011 were $34.6 million, up $4.8 million from the $29.8 million reported for the fourth quarter of 2010 as restated. On a per unit diluted basis, funds from operations for the fourth quarter of 2011 were $0.407, down $0.009 from the $0.416 reported for the fourth quarter of 2010.FFO for the year ended December 31, 2011 were $110.8 million, up $11.9 million from the $98.9 million reported for the prior year. On a per diluted unit basis, fund from operations for the 2011 year were $1.415, as compared to the $1.451 reported for the prior year. The one time convertible debenture placement costs of $3,029 account for the difference. Without these additional finance costs Operating FFO per unit on a diluted basis for the year ended December 31, 2011 would be $1.451, unchanged from the prior year. FFO is not a term defined under International Financial Reporting Standards (IFRS) and may not be comparable to similar measures used by other Trusts. A reconciliation of net income to FFO is included. Net Operating Income (NOI) NOI for the fourth quarter ended December 31, 2011 was $59.3 million, an increase of $9.6 million from the $49.7 million recorded in the fourth quarter of 2010.NOI for the year ended December 31, 2011 was $208.3 million, an increase of $26.8 million from the $181.5 million recorded in 2010. NOI is not a term defined under IFRS and may not be comparable to similar measures used by other Trusts. A calculation of NOI is included. Same Properties - Net Operating Income NOI for the fourth quarter ended December 31, 2011, for the properties held continually for the past twenty-four months, increased 0.5% from the comparative three month period. NOI for the year ended December 31, 2011, on a same property basis, increased $1.2 million or 0.7% from 2010. Net Income Net income for the fourth quarter ended December 31, 2011 was $156.4 million, a decrease of $194.4 million from the $350.8 million recorded in the fourth quarter of 2010. There was a large, non-cash deferred income tax recovery recorded in 2010 that did not recur in 2011. Net income for the year ended December 31, 2011 was $231.8 million, a decrease of $173.7 million from the $405.5 million recorded in 2010. Again, the change is principally due to the change in deferred income tax recoveries. Operations Primaris renewed or leased 280,446 square feet of space during the fourth quarter. The weighted average new rent in these leases, on a cash basis, represented a 4.3% increase over the previous rent paid (7.8% if the major tenants are excluded). Primaris renewed or leased 1,235,102 square feet of space during 2011, which includes the renewal of 17 major tenants. The weighted average new rent in these leases, on a cash basis, represented a 5.7% increase over the previous rent paid (6.9% increase if the majors are excluded). The portfolio occupancy is relatively stable. It was 97.1% at December 31, 2011, compared to 96.5% at September 30, 2011, and 97.1% at December 31, 2010. Same tenant sales per square foot, for the 17 properties owned during all of the 24 months ended December 31, 2011 was $458 as compared to $462 for the previous 12 months. Liquidity At December 31, 2011, $6,779 of Primaris' $100.0 million credit facility was in use. Financial ResultsFFO for the fourth quarter ended December 31, 2011 were $34.6 million, up $4.8 million from the $29.8 million reported for the fourth quarter of 2010 as restated. On a per unit diluted basis, funds from operations for the fourth quarter of 2011 were $0.407, down $0.009 from the $0.416 reported for the fourth quarter of 2010.FFO for the year ended December 31, 2011 were $110.8 million, up $11.9 million from the $98.9 million reported for the prior year. On a per diluted unit basis, fund from operations for the 2011 year were $1.415, as compared to the $1.451 reported for the prior year. The one time convertible debenture placement costs of $3,029 account for the difference. Without these additional finance costs Operating FFO per unit on a diluted basis for the year ended December 31, 2011 would be $1.451, unchanged from the prior year.Net income for the fourth quarter ended December 31, 2011 was $156.4 million, a decrease of $194.4 million from the $350.8 million recorded in the fourth quarter of 2010. There was a large, non-cash deferred income tax recovery recorded in 2010 that did not recur in 2011.Net income for the year ended December 31, 2011 was $231.8 million, a decrease of $173.7 million from the $405.5 million recorded in 2010. Again, the change is principally due to the change in deferred income tax recoveries.The FFO distribution payout ratio for the fourth quarter of 2011, calculated on a diluted basis, was 74.9% as compared to a 73.2% payout ratio for the fourth quarter of 2010 and 87.4% for the previous quarter September 30, 2011. The payout ratios are sensitive to both seasonal operating results and financial leverage.The FFO distribution ratio for the 2011 year was 86.1% as compared to an 84.0% payout ratio for 2010.At December 31, 2011, Primaris' total enterprise value was approximately $3.4 billion (based on the market closing price of Primaris' units on December 31, 2011 plus total debt outstanding). At December 31, 2011 Primaris had $1,679.3 million of outstanding debt, equating to a debt to total enterprise value ratio of 49.6%. Primaris' debt consisted of $1,432.3 million of fixed-rate senior debt with a weighted average interest rate of 5.4% and a weighted average term to maturity of 5.8 years, $6.8 million utilization of the operating line of credit, $2.8 million of 6.75% fixed-rate convertible debentures, $93.5 million of 5.85% fixed-rate convertible debentures, $68.9 million of 6.30% fixed-rate convertible debentures and $75.0 million of 5.40% fixed-rate convertible debentures.Primaris had a debt to total asset ratio, as defined under the Declaration of Trust (to be ratified), of 46.6%. During the three months ended December 31, Primaris had an interest coverage ratio of 2.5 times as expressed by EBITDA divided by interest expense on mortgages, convertible debentures and bank indebtedness. Primaris defines EBITDA as net income increased by depreciation, finance costs, income tax expense and amortization of leasing costs and straight-line rent. EBITDA is not a term defined under IFRS and may not be comparable to similar measures used by other Trusts. See below under "Non-IFRS/GAAP Measures".Operating ResultsNet Operating Income - Same PropertiesIn thousands of dollars(unaudited) Three months ended December 31, 2011(unaudited) Three months ended December 31, 2010Variance to Comparative Period Favourable/ (Unfavourable)Operating revenue$82,490$80,905$1,585Less operating expenses(36,065)(34,707)(1,358)Net operating income$46,425$46,198$227NOI is not a term defined under IFRS and may not be comparable to similar measures used by other Trusts. Operating revenue from properties includes an adjustment for amortization of tenant improvement allowances, tenant inducements and straight-line rent to remove non-cash transactions from revenue for the calculation of net operating income. Operating expenses include operating expenses from properties, property taxes and ground rent. The same-property comparison consists of the 26 properties that were owned throughout both the current and comparative three month periods. NOI, on a same-property basis, increased $0.2 million, or 0.5%, in relation to the comparable three month period.Liquidity At December 31, 2011, $6,779 of Primaris' $100.0 million credit facility was in use.Tenant SalesFor the 17 reporting properties owned throughout both the twelve month periods ended December 31, 2011 and 2010, sales per square foot, on a same-tenant basis, have decreased slightly to $458 from $462 per square foot. For the same 15 properties the all tenant total sales volume has increased 0.1%.(unaudited) Same Tenant Sales per Square FootVariance(unaudited) All Tenant Total Sales VolumeVariance20112010$%20112010$%Dufferin Mall54554230.6%91,48590,4691,0161.1%Eglinton Square351361(10)-2.9%30,45227,6142,83810.3%Heritage Place307314(7)-2.3%25,66325,739(76)-0.3%Lambton Mall333346(13)-3.9%45,58249,140(3,558)-7.2%Place d'Orleans448465(17)-3.7%104,224108,302(4,078)-3.8%Place Du Royaume41941451.3%114,596113,1301,4661.3%Place Fleur De Lys319320(1)-0.2%70,84671,918(1,072)-1.5%Stone Road Mall52451591.7%115,795112,3183,4773.1%Aberdeen Mall370372(2)-0.5%48,77948,2195601.2%Cornwall Centre558542162.9%85,93981,3434,5965.7%Grant Park53752981.5%26,85027,255(405)-1.5%Midtown Plaza56255571.2%133,996131,6922,3041.7%Northland Village462464(2)-0.4%43,66844,440(772)-1.7%Orchard Park485492(7)-1.4%131,738129,9991,7391.3%Park Place Mall477481(4)-0.9%76,75576,6441110.1%Sunridge Mall478499(21)-4.2%91,89393,153(1,260)-1.4%Woodgrove Centre473492(19)-3.9%92,23497,983(5,749)-5.9%458462(4)-0.9%1,330,4951,329,3581,1350.1%The same tenants' sales decreased 0.9% per square foot, while the national average tenant sales as reported by the International Council of Shopping Centers ("ICSC") for the 12-month period ended December 31, 2011, increased 4.1%. Primaris' sales productivity of $458 is lower than the ICSC average of $589, largely because the ICSC includes sales from super regional malls that have the highest sales per square foot in the country.Leasing ActivityPrimaris Retail REIT's property portfolio remains well leased.The portfolio occupancy rate is relatively stable. It was 97.1% at December 31, 2011, compared to 96.5% at September 30, 2011, and 97.1% at December 31, 2010. These percentages include space for which signed leases are in place but where the tenant may not yet be in occupancy.Primaris renewed or leased 280,446 square feet of space during the fourth quarter of 2011. Approximately 48.2% of the leased spaces during the fourth quarter of 2011 consisted of the renewal of existing tenants. The weighted average new rent in these leases, on a cash basis, represented a 4.3% increase over the previous rent.Primaris renewed or leased 1,235,102 square feet of space during 2011. Approximately 59.7% of the leased spaces during 2011 consisted of the renewal of existing tenants. The weighted average new rent in these leases, on a cash basis, represented a 5.7% increase over the previous rent (a 6.9% increase when renewals of major tenants are excluded).At year end, Primaris had a weighted average term to maturity of leases of 5.4 years.Development ActivityDuring 2009 Primaris completed phase one of a three phase redevelopment at Lambton Mall in Sarnia, Ontario. Although this first phase created a vacant anchor store location, it provided an opportunity not only to add a food court where none existed previously, but also to backfill the anchor store with a new large tenant.Construction is complete on the second phase which introduced a new eight unit food court that opened December 1, 2011. Negotiations have advanced significantly with regard to replacements for the vacant anchor space.A redevelopment project at Orchard Park Shopping Centre in Kelowna, British Columbia for the construction of approximately 25,000 square feet of new retail space and the redevelopment of about 10,000 square feet of existing area was completed in mid-November 2011. The project brought Best Buy, a dynamic first-to-market tenant, to the centre and relocated the mall administration offices.A redevelopment project is well underway at Grant Park Shopping Centre in Winnipeg, Manitoba to accommodate an expanded and repositioned Manitoba Liquor Control Commission ("MLCC") store, and relocated retail tenants. This project also includes the realignment and upgrade of almost 11,500 square feet of common area with new floor and ceiling finishes which has revitalized the west end of the shopping centre. A portion of the exterior of the building and the west mall entrance is being renovated to provide a marquee entry to the new redevelopment inside. Construction activities commenced in June 2011, with relocated retail tenants opening October 2011, and a targeted spring 2012 opening for the MLCC expansion. The project is on budget and is expected to cost $6.5 million. This phased redevelopment has already created an additional consumer draw to the centre.Comparison to Prior Period Financial Results - in thousands of dollarsThree Months Ended December 31, 2011(unaudited)Three Months Ended December 31, 2010 (unaudited)Comparative Period Favourable/ (Unfavourable)RevenueMinimum rent$61,833$50,015$11,818Recoveries from tenants38,62030,9777,643Percent rent893918(25)Parking1,9981,92078Other income719417302104,06384,24719,816ExpensesProperty operating27,38222,001(5,381)Property tax18,59714,698(3,899)Ground rent332295(37)General & administrative2,110545(1,565)Depreciation282283148,70337,822(10,881)Income from operations$55,360$46,425$8,935Finance income722844Finance costs(32,951)(19,815)(13,136)Fair value adjustment on investment properties133,95630,653103,303Deferred income tax recovery-293,514(293,514)Net income$156,437$350,805$(194,368)Fair value adjustment on investment properties(133,956)(30,653)(103,303)Fair value adjustment on convertible debentures9,000(277)9,277Fair value adjustment on exchangeable units24044196Fair value adjustment on unit-based compensation108113(5)Distributions on exchangeable units667676(9)Amortization of tenant improvement allowances2,1762,641(465)Deferred income taxes-(293,514)293,514Funds from operations(1)$34,672$29,835$4,837Funds from operations per unit - basic$0.420$0.434$(0.014)Funds from operations per unit - diluted$0.407$0.416$(0.009)Funds from operations - payout ratio74.9%73.2%1.7%Distributions per unit$0.305$0.305$-Weighted average units outstanding - basic82,641,32968,720,84313,920,486Weighted average units outstanding - diluted93,987,25278,316,67915,670,573Units outstanding, end of period82,740,23268,794,67913,945,553(1) Funds from Operations, which is not a defined term within IFRS, has been calculated by management, using International Financial Reporting Standards, in accordance with REALpac's White Paper on Funds from Operations. The White Paper adds back to net income items that do not arise from operating activities, such as amortization of tenant improvements, deferred income taxes and fair value adjustments. Funds from Operations may not be comparable to similar measures used by other entities. See below under "Non-IFRS/GAAP Measures".Funds from operations for the quarter ended December 31, 2011 were $4.8 million greater than the comparative period.International Financial Reporting Standards ("IFRS")In February 2008, the Canadian Accounting Standards Board confirmed that IFRS would replace Canadian generally accepted accounting principles ("GAAP"), for Canadian publically accountable profit-oriented enterprises, effective for fiscal periods beginning on or after January 1, 2011. The December 31, 2011 consolidated financial statements and related disclosures include 2010 comparative results restated to IFRS and reconciliations to the previously reported Canadian GAAP statements.Supplemental InformationPrimaris' consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the three-month periods ended December 31, 2011 and 2010 are available on Primaris' website at www.primarisreit.com.Forward-Looking InformationThe MD&A contains forward-looking information based on management's best estimates and the current operating environment. These forward-looking statements are related to, but not limited to, Primaris' operations, anticipated financial performance, business prospects and strategies. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan" or similar words suggesting future outcomes. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements.In particular, certain statements in this document discuss Primaris' anticipated outlook of future events. These statements include, but are not limited to:(i) the accretive acquisition of properties and the anticipated extent of the accretion of any acquisitions, which could be impacted by demand for properties and the effect that demand has on acquisition capitalization rates and changes in the cost of capital;(ii)reinvesting to make improvements and maintenance to existing properties, which could be impacted by the availability of labour and capital resource allocation decisions; (iii)generating improved rental income and occupancy levels, which could be impacted by changes in demand for Primaris' properties, tenant bankruptcies, the effects of general economic conditions and supply of competitive locations in proximity to Primaris locations; (iv)overall indebtedness levels, which could be impacted by the level of acquisition activity Primaris is able to achieve and future financing opportunities; (v) tax exempt status, which can be impacted by regulatory changes enacted by governmental authorities;(vi)anticipated distributions and payout ratios, which could be impacted by capital expenditures, results of operations and capital resource allocation decisions; (vii)the effect that any contingencies could have on Primaris' financial statements; (viii)anticipated replacement of expiring tenancies, which could be impacted by the effects of general economic conditions and the supply of competitive locations; and (ix) the development of properties which could be impacted by real estate market cycles, the availability of labour and general economic conditions.Although the forward-looking statements contained in this document are based on what management of Primaris believes are reasonable assumptions, forward-looking statements involve significant risks and uncertainties. They should not be read as guarantees of future performance or results and will not necessarily be an accurate indicator of whether or not such results will be achieved. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future results to differ from targets, expectations or estimates expressed in the forward-looking statements. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include: a less robust retail environment; relatively stable interest costs; access to equity and debt capital markets to fund, at acceptable costs, the future growth program and to enable Primaris to refinance debts as they mature, and the availability of purchase opportunities for growth.Except as required by applicable law, Primaris undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.Non-IFRS/GAAP MeasuresFunds from operations ("FFO"), net operating income ("NOI") and earnings before interest, taxes, depreciation and amortization ("EBITDA") are widely used supplemental measures of a Canadian real estate investment trust's performance and are not defined under IFRS. Management uses these measures when comparing itself to industry data or others in the marketplace. Primaris' MD&A describes FFO, NOI and EBITDA and provides reconciliations to net income, as defined under IFRS, for FFO and EBITDA. A reconciliation of FFO to net income, as defined by IFRS, and a calculation of NOI also appear at the end of the press release. FFO, NOI and EBITDA should not be considered alternatives to net income or other measures that have been calculated in accordance with IFRS and may not be comparable to measures presented by other issuers.Conference CallPrimaris invites you to participate in the conference call that will be held on Friday March 2, 2012 at 9am EST to discuss these results. Senior management will speak to the results and provide a brief corporate update. The telephone numbers for the conference call are: 416-340-8530 (within Toronto), and 1-877-240-9772 (within North America).Audio replays of the conference call will be available for 24 hours immediately following the completion of the conference call, by dialling 905-694-9451 or 1-800-408-3053 and using pass code 1208535. The audio replay will also be available for download at www.primarisreit.com/q4conference.Primaris is a TSX listed real estate investment trust (TSX:PMZ.UN). Primaris owns 32 income-producing properties comprising approximately 13.5 million square feet located in Canada. As of February 29, 2012, Primaris had 83,159,632 units issued and outstanding (including exchangeable units for which units have not yet been issued).PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUSTConsolidated Statements of Financial Position(In thousands of dollars)December 31,December 31,January 1,201120102010AssetsNon-current assets:Investment properties$3,557,900$2,804,900$2,541,700Current assets:Rents receivable7,3876,0964,907Other assets and receivables25,01011,00612,083Cash and cash equivalents-6,50015,45232,39723,60232,442$3,590,297$2,828,502$2,574,142Liabilities and EquityNon-current liabilities:Mortgages payable$1,372,871$1,103,084$1,061,153Convertible debentures268,766196,703189,847Exchangeable units45,07943,32537,239Accounts payable and other liabilities1,205533410Deferred tax liability--264,2861,687,9211,343,6451,552,935Current liabilities:Current portion of mortgages payable53,00461,68525,929Bank indebtedness6,77910,00015,000Accounts payable and other liabilities61,74451,32453,519Distribution payable8,2516,8096,358129,778129,818100,8061,817,6991,473,4631,653,741Equity1,772,5981,355,039920,401$3,590,297$2,828,502$2,574,142PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUSTConsolidated Statements of Income and Comprehensive Income(In thousands of dollars, except per unit amounts)(unaudited) Three months endedYear endedDecember 31,December 31,2011201020112010Revenue:Minimum rent$61,833$50,015$219,113$188,704Recoveries from tenants38,62030,977135,464114,607Percentage rent8939182,6522,658Parking1,9981,9206,5566,308Other income7194171,5681,274104,06384,247365,353313,551Expenses:Property operating27,38222,00192,74579,601Property taxes18,59714,69868,56956,469Ground rent3322951,2461,178General and administrative2,1105459,8409,150Depreciation2822831,0391,43348,70337,822173,439147,831Income from operations 55,36046,425191,914165,720Finance income722816883Finance costs(32,951)(19,815)(109,396)(99,928)Fair value adjustment on investment properties133,95630,653149,11375,890Gain on sale of land---74Income (loss) before income taxes156,43757,291231,799141,839Deferred income tax recovery-293,514-263,692Net income (loss)156,437350,805231,799405,531Other comprehensive income: Amortization of deferred net loss on cash flow hedges5758230236Tax effect of deferred loss on cash flow hedges-681-594Comprehensive income (loss)$156,494$351,544$232,029$406,361PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUSTConsolidated Statements of Cash Flows(In thousands of dollars)Year endedDecember 31,20112010Cash flows from operating activities:Net income$231,799$405,531Adjustments for:Amortization of tenant improvement allowances7,4196,931Amortization of tenant inducements168235Amortization of straight-line rent(2,030)(1,950)Value of units and options granted under unit-based compensation plan1,9571,765Depreciation of fixtures and equipment1,0391,433Net finance costs109,22899,845Fair value adjustments on investment properties(149,113)(75,890)Gain on sale of land-(74)Deferred income taxes-(263,692)200,467174,134Other non-cash operating working capital(7,892)(7,019)Leasing commissions(773)(519)Tenant improvements(18,078)(7,008)Tenant inducements(15)(1,000)Cash generated from operating activities173,709158,588Interest received16883Net cash from operating activities173,877158,671Cash flows from financing activities:Mortgage principal repayments(28,146)(22,748)Proceeds of new mortgage financing333,600105,000Proceeds of bridge financing57,500-Repayment of financing(99,933)(3,685)Repayment of bank indebtedness(3,221)(5,000)Interest paid on financing(83,378)(72,667)Additions to capitalized debt placement costs(2,736)(1,021)Issuance of units270,239101,735Unit issue costs(11,144)(4,472)Issuance of convertible debentures75,000-Convertible debenture issuance costs(3,029)-Distributions to Unitholders(92,730)(80,092)Purchase of units under normal course issuer bid(589)(1,130)Net cash flow from financing activities411,43315,920Cash flows from investing activities:Acquisitions of investment properties(585,388)(169,322)Additions to buildings and building improvements(13,778)(7,927)Additions to recoverable improvements(12,087)(6,248)Additions to fixtures and equipment(390)(134)Gross proceeds of disposition19,83388Net cash flow used in investing activities(591,810)(183,543)Decrease in cash and cash equivalents(6,500)(8,952)Cash and cash equivalents, beginning of period6,50015,452Cash and cash equivalents, end of period$-$6,500Supplemental disclosure of non-cash operating, financing and investing activities:Value of units issued from conversion of convertible debentures17,9267,846Value of units issued upon exchange5971,605PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUSTConsolidated Statements of Cash Flows(In thousands of dollars)(Unaudited) Three months endedDecember 31,20112010Cash flows from operating activities:Net income$156,437$350,805Adjustments for:Amortization of tenant improvement allowances2,1762,641Amortization of tenant inducements70124Amortization of straight-line rent(669)(328)Value of units and options granted under unit-based compensation plan359(227)Depreciation of fixtures and equipment282283Net finance costs32,87919,787Fair value adjustments on investment properties(133,956)(30,653)Gain on sale of land--Deferred income taxes-(293,514)57,57848,918Other non-cash operating working capital4,91810,636Leasing commissions(408)(132)Tenant improvements(6,576)(2,179)Tenant inducements(15)-Cash generated from operating activities55,49757,243Interest received7228Net cash from operating activities55,56957,271Cash flows from financing activities:Mortgage principal repayments(8,033)(6,238)Proceeds of new mortgage financing--Repayment of financing(5,394)-Repayment of bank indebtedness(221)(5,000)Interest paid on financing(21,259)(18,317)Additions to capitalized debt placement costs7(33)Issuance of units2,0791,480Unit issue costs(50)(11)Issuance of convertible debentures--Convertible debenture issuance costs--Distributions to Unitholders(25,242)(20,985)Purchase of units under normal course issuer bid-(1,130)Net cash flow used in financing activities(58,113)(50,234)Cash flows from investing activities:Acquisitions of investment properties(3,005)-Additions to buildings and building improvements(5,748)(3,148)Additions to recoverable improvements(7,821)(3,051)Additions to fixtures and equipment(286)(6)Gross proceeds of disposition18,266-Net cash flow from (used in) investing activities1,406(6,205)Increase (decrease) in cash and cash equivalents(1,138)832Cash and cash equivalents, beginning of period1,1385,668Cash and cash equivalents, end of period$-$6,500Supplemental disclosure of non-cash operating, financing and investing activities:Value of units issued from conversion of convertible debentures2,0374,192Value of units issued upon exchange--PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUSTReconciliation of Net Income to Funds from Operations(In thousands of dollars) (unaudited) Three Months Ended(unaudited) Three Months EndedDecember 31, 2011December 31, 2010Net income$156,437$350,805Fair value adjustment on investment properties(133,956)(30,653)Fair value adjustment on convertible debentures9,000(277)Fair value adjustment on exchangeable units24044Fair value adjustment on unit-based compensation108113Distributions on exchangeable units667676Amortization of tenant improvement allowances2,1762,641Deferred income taxes-(293,514)Funds from operations$34,672$29,835Funds from Operations, which is not a defined term within IFRS, has been calculated by management, using International Financial Reporting Standards, in accordance with REALpac's White Paper on Funds from Operations. The White Paper adds back to net income items that do not arise from operating activities, such as amortization of tenant improvements, deferred income taxes and certain fair value adjustments. Funds from Operations may not be comparable to similar measures used by other entities. Calculation of Net Operating Income All Properties(In thousands of dollars)(unaudited) Three Months Ended(unaudited) Three Months EndedDecember 31, 2011December 31, 2010Revenue$104,063$84,247Add:Amortization of leasing costs1,5772,437Less:Property operating expenses(27,382)(22,001)Property tax expense(18,597)(14,698)Ground Rent(332)(295)Net operating income$59,329$49,690Net Operating Income is not a defined term within IFRS. Net Operating Income may not be comparable to similar measures used by other entities.FOR FURTHER INFORMATION PLEASE CONTACT: John R. MorrisonPrimaris Retail REITPresident & Chief Executive Officer(416) 642-7860ORLouis M. ForbesPrimaris Retail REITExecutive Vice President & Chief Financial Officer(416) 642-7810www.primarisreit.com