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RioCan Real Estate Investment Trust Announces Financial Results and 5% Growth in Operating Income for Full Year 2016

TORONTO, ONTARIO -- (Marketwired) -- 02/16/17 --

RioCan's HIGHLIGHTS for the year ended December 31, 2016:


--  For the year ended December 31, 2016, Operating income increased to $700
    million from $664 million or 5.3% from the prior year. Operating income
    grew by 8.3% for the three months ended December 31, 2016 ("Fourth
    Quarter") to $181 million from $167 million for the quarter ended
    December 31, 2015; 
--  Revenue increased 4.2% for the year ended December 31, 2016 as compared
    to 2015; 
--  On a continuing operations basis, Operating Funds From Operations
    ("OFFO") increased $53 million, or 11.9% to $497 million for the year
    ended December 31, 2016, as compared to $444 million in 2015. In the
    Fourth Quarter on a continuing operations basis, OFFO increased $20
    million, or 17.8% to $132 million as compared to $112 million in the
    fourth quarter of 2015; 
--  For the year, same property Net Operating Income ("NOI") increased 0.5%
    or $2.7 million in 2016 as compared to 2015. Same property NOI grew by
    2.2%, or $3.3 million in the Fourth Quarter as compared to the same
    period in 2015; 
--  Committed occupancy improved 160 basis points to 95.6% at December 31,
    2016 as compared to 94.0% at December 31, 2015; 
--  RioCan's Total Debt to Total Assets ratio was 39.7% as at December 31,
    2016 as compared to 46.1%, providing financial capacity for RioCan to
    pursue its development and intensification program. With the proceeds
    from the sale of the Trust's U.S. operations, RioCan reduced its Total
    Debt by approximately $1.8 billion in 2016; 
--  As part of RioCan's ongoing capital recycling program, RioCan sold a
    portion of its marketable securities and recognized a gain of $14
    million related to the sale in 2016; and 
--  Subsequent to year end, RioCan completed the offering of $300 million
    Series Y senior unsecured debentures that mature in October 2022 with a
    2.83% coupon rate. 

RioCan Real Estate Investment Trust ("RioCan") (TSX:REI.UN) today announced its financial results for the three months and year ended December 31, 2016.

"2016 was the beginning of a transformational time for RioCan. With the completion of the sale of our U.S. portfolio, we once again became a completely Canadian focused REIT. The transformation of RioCan will continue in 2017 as we complete the re-tenanting of the space formerly occupied by Target and move forward with our intensification program," said Edward Sonshine, Chief Executive Officer of RioCan. "Operationally the portfolio is performing well, we have essentially completed the backfill of the space and replacing more than the rental revenue that was lost from Target, occupancy levels are returning to more historical norms and we are establishing same property NOI growth. Interest rates remain favourable, and I am confident in our capabilities and capacity for continued growth in our Canadian operations, organically and through disciplined investment in our development pipeline."

Financial Highlights

All figures are expressed in Canadian dollars unless otherwise noted. For further information about RioCan's results for the year ended December 31, 2016, this earnings release should be read in conjunction with our audited consolidated financial statements ("Consolidated Financial Statements"), as well as Management's Discussion and Analysis for the year ended December 31, 2016.

RioCan's Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). Consistent with RioCan's management framework, management uses certain financial measures to assess RioCan's financial performance, which are not generally accepted accounting principles (GAAP) under IFRS. For full definitions of these measures, please refer to the "Use of Non-GAAP Measures" in RioCan's December 31, 2016 Management's Discussion and Analysis. As a result of the sale of the U.S. operations, we have reported our former U.S. geographic segment performance as "discontinued operations" with comparative income statement amounts adjusted to reflect this change, unless otherwise noted.

Net income from continuing operations attributable to unitholders


                          Three months ended                                
                              December 31,         Year Ended December 31,  
                      ------------------------------------------------------
(in millions except                                                         
 percentages and per                                                        
 unit values)            2016     2015   % Change   2016     2015   % Change
----------------------------------------------------------------------------
Net income from                                                             
 continuing operations  $ 178    $ 200   (11.0)%   $ 683    $ 417    63.8 % 
----------------------------------------------------------------------------
Net income per unit                                                         
 from continuing                                                            
 operations                                                                 
 attributable to                                                            
 unitholders - diluted  $ 0.54   $ 0.61  (11.5)%   $ 2.06   $ 1.26   63.5 % 
----------------------------------------------------------------------------
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Continuing Operations

2016

Net income from continuing operations attributable to unitholders for the year ended December 31, 2016 is $683 million compared to $417 million during the same period in 2015, representing an increase of $266 million or 64%. Excluding fair value adjustments in both periods and the effects of the Target settlement in 2015, net income from continuing operations attributable to unitholders for the year ended December 31, 2016 would be $500 million compared to $420 million in 2015, representing an increase of $80 million or 19%.

This increase of $80 million is largely the effect of $42 million of income primarily due to property acquisitions (net of dispositions), higher same property performance and completed developments, net of $7.0 million lower lease cancellation fees, $14 million in gains related to the sale of marketable securities, $9.9 million in lower debt redemption costs, $8.7 million in gross investment property transaction gains, $7.2 million in interest savings, and $5.1 million in higher deferred tax recoveries. These gains were partly offset by $3.5 million in lower property and management fees mainly related to lost management fees due to the purchase of our partners' interests in several properties, $2.5 million in lower income associated with our residential inventory sales, and $2.4 million in higher leasing and general and administrative expenses.

Q4 2016

Net income from continuing operations attributable to unitholders for the fourth quarter of 2016 is $178 million compared to $200 million during the same period in 2015, representing a decrease of $21 million. Excluding fair value adjustments in both periods and the effects of the Target settlement in 2015, net income from continuing operations attributable to unitholders for the fourth quarter of 2016 would be $134 million compared to $110 million in 2015, representing an increase of $24 million or 22%.

This increase of $24 million in the quarter is largely explained by $18 million of income primarily due to contributions from property acquisitions (net of dispositions), increased same property performance, net of lower lease cancellation fees, $4.4 million in lower interest expenses, $3.7 million in gains related to the sale of marketable securities, $4.4 million in higher deferred tax recoveries, and $2.6 million in lower transaction costs relating to decreased property acquisition and disposition activity. These gains were partially offset by $4.6 million in lower other income primarily due to a fourth quarter 2015 net transaction gain related to the transfer of certain assets and liabilities to form the RioCan-HBC joint venture, $2.5 million in lower income associated with our residential inventory sales due to cost adjustments, and $2.7 million in lower property and asset management fees, and lower dividend income.

Discontinued Operations

As a result of the sale of our U.S. Operations, net income excluding fair value adjustments, net of taxes for the year ended December 31, 2016 decreased by $76 million. The net loss from discontinued operations attributable to unitholders is $14 million this quarter compared to $378 million in 2015 due to the sale of our U.S. property portfolio.

Funds From Operations ("FFO") & OFFO


                          Three months ended                                
                              December 31,         Year Ended December 31,  
                      ------------------------------------------------------
(in millions except                                                         
 percentages and per                                                        
 unit values)            2016     2015   % Change   2016     2015   % Change
                                                                            
OFFO from continuing                                                        
 operations             $ 132    $ 112    17.8 %   $ 497    $ 444    11.9%  
OFFO from discontinued                                                      
 operations             $(0.3)    $ 30  (101.1 %)   $ 48    $ 112   (57.1%) 
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OFFO (i)                $ 132    $ 142    (7.3%)   $ 545    $ 557    (2.0%) 
OFFO per Unit -                                                             
 diluted                $ 0.40   $ 0.44   (8.6%)   $ 1.68   $ 1.74   (3.7%) 
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----------------------------------------------------------------------------
FFO from continuing                                                         
 operations             $ 133    $ 199   (33.2 %)  $ 497    $ 518    (4.1%) 
FFO from discontinued                                                       
 operations             $(0.3)    $ 22  (101.4 %)   $ 51    $ 104   (51.0%) 
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FFO (i)                 $ 132    $ 221   (40.2 %)  $ 548    $ 622   (12.0%) 
FFO per Unit - diluted  $ 0.40   $ 0.69  (41.0 %)  $ 1.68   $ 1.94  (13.5%) 
----------------------------------------------------------------------------

(i) A non-GAAP measurement. A reconciliation to net earnings can be found under "Results of Operations" in RioCan's Management's Discussion and Analysis for the period ending December 31, 2016.

2016

OFFO for 2016 is $545 million compared to $557 million in 2015, representing a decrease of $11 million or approximately 2.0%. On a per unit basis, OFFO is $1.68 compared to $1.74, representing a decrease of approximately 3.8%. The decline in OFFO in the current quarter and for the full year is primarily related to the sale of our U.S. portfolio. FFO for the full year is $548 million compared to $622 million in 2015, representing a decrease of $74 million. The key differences between FFO and OFFO are the inclusion of certain transaction gains and the Target settlement in FFO. In 2016, FFO includes gains on the sale of marketable securities of $14 million, which is not included in OFFO, and in 2015 FFO included $88 million of aggregate net cash proceeds relating to the Target settlement.

OFFO for 2016 from continuing operations increased $53 million, primarily due to higher NOI of $48 million (at RioCan's proportionate share) mainly as a result of net acquisition activity, $4.9 million in lower Series A preferred unit dividends and $5.8 million in lower interest costs, partly offset by lower property and asset management fees of $3.5 million and higher general and administrative expenses of $1.2 million.

Q4 2016

OFFO for the fourth quarter of 2016 is $132 million compared to $142 million during the same period in 2015, representing a decrease of $11 million or approximately 7.3%. Excluding $30 million of OFFO from discontinued operations from this decrease, OFFO from continuing operations for the fourth quarter of 2016 is $132 million compared to $112 million in 2015, representing an increase of $20 million or 18%. On a per unit basis, OFFO is $0.40 compared to $0.44, representing a decrease of approximately 8.6% due primarily to the sale of our US portfolio. FFO for the Fourth Quarter is $132 million compared to $221 million in same period of 2015, representing a decrease of $89 million. In the Fourth Quarter, FFO includes gains in marketable securities of $3.7 million, which is not included in OFFO, and in the fourth quarter of 2015 FFO included $88 million of aggregate net cash proceeds relating to the Target settlement.

OFFO from continuing operations increased $20 million in the Fourth Quarter, primarily due to higher NOI of $18 million (at RioCan's proportionate share) as a result of acquisition activity, net of dispositions, and higher same property performance, $1.6 million in lower Series A preferred unit dividends and $4.4 million in lower interest costs, partly offset by lower property and asset management fees of $1.4 million and less investment income from marketable securities of $1.3 million.

Operational Performance

Same Store and Same Property NOI Growth


                                     Three months ended      Year ended     
                                      December 31, 2016   December 31, 2016 
----------------------------------------------------------------------------
Same Store Growth                           1.8%                0.6%        
Same Property Growth                        2.2%                0.5%        
----------------------------------------------------------------------------

Refers to same store and same property NOI growth on a year over year basis.

Same store NOI in 2016 increased 0.6% or $3.2 million as compared to 2015 as explained by the following aggregate changes:


--  $25.4 million of higher NOI comprising $14.8 million from new leasing
    (including re-leased space due to bankruptcies and lease cancellations),
    $6.4 million increased rent from renewals and rent steps, $3.5 million
    in percentage rent and a decrease of $0.7 million in Target co-tenancy
    losses; partially offset by 
--  $22.2 million of lower NOI resulting from vacancies (including the
    impact of previously agreed upon lease cancellations). 

Same property NOI increased 0.5% or $2.7 million in 2016 primarily due to the reasons cited above as well as the 18 disclaimed Target properties that have been in development since July 1, 2015, partially offset by the completion of other development properties.

Same store NOI increased 1.8% or $2.5 million in the Fourth Quarter compared to the same period in 2015 as explained by the following aggregate changes:


--  $8.1 million of higher NOI comprising $4.2 million from new leasing
    (including re-leased space due to bankruptcies and lease cancellations),
    $1.4 million increased rent from renewals and rent steps, $1.3 million
    increase in percentage rent and a decrease of $1.2 million in Target Co-
    Tenancy losses; partially offset by 
--  $5.6 million of lower NOI due to increased vacancies (including the
    impact of previously agreed upon lease cancellations) 

The impact of Target co-tenancy losses on same store NOI was favourable this quarter due to the reduction in the number of tenants that are entitled to rent abatement provisions as compared to prior periods.

Same property NOI increased 2.2% or $3.3 million this quarter primarily driven by the reasons cited above, as well as the completion of other development properties, including a portion of Target backfill on three locations.

The key performance indicators related to operating and leasing for the Canadian portfolio over the last eight quarters is as follows:


                                2016                        2015            
----------------------------------------------------------------------------
                         Q4     Q3     Q2     Q1     Q4     Q3     Q2     Q1
----------------------------------------------------------------------------
Committed occupancy   95.6%  95.3%  95.1%  94.8%  94.0%  93.2%  93.1%  96.7%
Economic occupancy    92.6%  92.5%  92.3%  91.9%  92.2%  91.6%  91.9%  95.3%
Retention rate        84.0%  83.1%  91.6%  84.4%  81.4%  89.8%  87.7%  83.5%
% increase in                                                               
 average net rent                                                           
 per sq ft             8.1%   6.6%   3.3%   6.2%   4.0%   8.6%   9.5%   9.5%
----------------------------------------------------------------------------

Other Operating Statistics


--  Since Target's departure, RioCan has essentially completed the backfill
    leasing on the vacated space with 47 leases that are either committed
    leases, conditional lease agreements, or in advanced negotiations on
    leases that collectively represent approximately $14.2 million versus
    $11.6 million of total base rental revenue lost through Target's
    departure (at RioCan's proportionate share) not including the enhanced
    common area maintenance and realty tax recoveries; and 
--  Consistent with RioCan's stated strategy, its portfolio is concentrated
    in Canada's six major markets (consisting of Toronto, Ottawa, Calgary,
    Edmonton, Montreal and Vancouver). Assets in these markets contribute
    approximately 75.5% of RioCan's annualized rental revenue as at December
    31, 2016 (74.8% at December 31, 2015). The increase was driven by
    RioCan's acquisition of Kimco's and CPPIB's share of assets located
    primarily in these six major markets. 

Portfolio Activity

Acquisitions

During the year ended December 31, 2016, RioCan purchased interests in 17 income properties aggregating $595 million at a weighted average capitalization rate of 5.7%, comprised of approximately 1.8 million square feet. In connection with these acquisitions, RioCan assumed mortgage financing of $48 million at a weighted average interest rate of 3.8%. During the Fourth Quarter, RioCan did not complete any income property acquisitions.

Dispositions

During the year ended December 31, 2016, we sold interests in nine income properties aggregating $126 million representing a weighted average capitalization rate of 6.1%, comprised of approximately 711,000 square feet. Our mortgage obligations related to these properties was $29 million. During the Fourth Quarter, RioCan did not complete any income property dispositions.

Development Activities

As at December 31, 2016, RioCan had ownership interests in 15 development projects that represents approximately 6.4 million square feet upon completion (3.8 million square feet at RioCan's interest). In addition to its development projects, RioCan continued its urban intensification activities, primarily in the Toronto and Ottawa, Ontario and Calgary, Alberta markets. In 2016, RioCan transferred properties under development with a carrying value of $274 million to income producing properties pertaining to 733,000 square feet of completed greenfield development or expansion and redevelopment projects.

Some of the larger projects that were transferred from properties under development included:


--  RioCan Scarborough Centre II, Toronto, ON, 116,000 square feet leased to
    Costco; 
--  RioCan Colossus Centre, Vaughan, ON, 114,000 square feet leased to Bed,
    Bath & Beyond, Buy Buy Baby, Staples, Chop; 
--  1860 Bayview Avenue, Toronto, ON, 76,000 square feet leased to Whole
    Foods, Shoppers Drug Mart, TD Bank; 
--  Lawrence Square, Toronto, ON, 62,000 square feet leased to HomeSense,
    Marshalls, PetSmart; 
--  East Hills, Calgary, AB, 57,000 square feet, leased to Sport Chek, Bed,
    Bath & Beyond, Dollarama, Michaels, Marshalls; 
--  Sage Hill, Calgary, AB 51,000 square feet leased to McDonald's, Liquor
    Max, Bulk Barn, London Drugs, Bank of Nova Scotia. 

Urban Intensification Activities

In total, RioCan has currently identified nearly 50 properties that it considers to be strong possible intensification opportunities, all of which are in the six major markets and are typically located in the vicinity of substantive transit infrastructure. These locations will provide a pipeline of development opportunities for RioCan as it redevelops and intensifies these properties to enhance future cash flow growth and diversify the Trust's sources of rental revenue. Our development plans will be implemented in a prudent manner so as to manage the balance sheet and the cash flows of the Trust in order to maintain our growth targets for the business. Furthermore, as Canada's major markets continue to grow and improve transit infrastructure we believe that additional opportunities will present themselves.

Since the introduction of this intensification strategy, RioCan has obtained approvals for 12 projects and has begun construction at four of the sites with plans to begin construction on another two sites in 2017. There are 11 properties where RioCan has submitted an application for redevelopment with an additional 25 properties that RioCan has identified as ones with potential for intensification. Of these applications, RioCan anticipates that it will receive approvals at six of these sites in 2017.

Liquidity and Capital

RioCan's debt and leverage metrics are disclosed below to help facilitate an understanding of RioCan's leverage and its ability to service such leverage. The definitions that management uses, as well as the calculation methodology for the ratios included in the table below are described in RioCan's Management's Discussion and Analysis for the year ended December 31, 2016.


                                                  Rolling 12 months ended   
                                              ------------------------------
                                                 December 31,   December 31,
                                                         2016           2015
----------------------------------------------------------------------------
Interest coverage - RioCan's proportionate                                  
 share                                                  3.36x          3.07x
Debt service coverage - RioCan's proportionate                              
 share                                                  2.61x          2.37x
Fixed charge coverage - RioCan's proportionate                              
 share                                                  1.10x          1.11x
Debt to Adjusted EBITDA - RioCan's                                          
 proportionate share                                    8.10x          8.34x
Operating debt to Operating EBITDA - RioCan's                               
 proportionate share                                    7.74x          7.93x
Unencumbered assets (millions) (i)                     $6,625         $3,321
% of NOI generated from unencumbered assets                                 
 (i)                                                   49.5 %         25.1 %
Unencumbered assets to unsecured debt (i)               240 %          166 %
----------------------------------------------------------------------------

Coverage metrics include results from both continuing and discontinued operations except for (i) which is calculated on a continuing operations basis.

Interest and debt service coverage ratios calculated for the year ended December 31, 2016 have improved compared to December 31, 2015 mainly due to lower interest and debt service costs, partially offset by lower adjusted EBITDA as a result of the sale of the U.S. portfolio.

Debt to adjusted EBITDA has decreased to 8.10x for the year ended December 31, 2016 mainly as a result of lower average debt outstanding, which more than offset a decline in adjusted EBITDA during the year in connection with the U.S. portfolio sale. This ratio is expected to show continued improvement over the next 12 to 18 months as gains on the sale of marketable securities, the annualized impact of acquisitions and same property growth more than offset the loss of EBITDA from the U.S. property portfolio sale.

The unencumbered assets to unsecured debt ratio increased from 166% as of December 31, 2015 to 240% as of December 31, 2016, above our target ratio of 200%. The percentage NOI expected to be generated from unencumbered assets has also improved from 25.1% as of December 31, 2015 to 49.5% as of December 31, 2016. The improvements are a result of the following:


--  the sale of our U.S. portfolio and repayment of related mortgages, 
--  the utilization of U.S. net sales proceeds to pay down secured Canadian
    mortgages, and 
--  the conversion from a secured credit facility to unsecured credit
    facility during June 2016, which enabled RioCan to unencumber multiple
    investment properties that were previously designated as collateral for
    the former secured credit facilities. 

Selected Financial Information

The following includes financial information prepared by management in accordance with IFRS and based on the Trust's 2016 Audited Consolidated Financial Statements. This financial information does not contain all disclosures required by IFRS, and accordingly should be read in conjunction with the Trust's Audited Consolidated Financial Statements and Management's Discussion and Analysis for the period ended December 31, 2016, which is available on RioCan's website and on SEDAR.


                                                                            
CONSOLIDATED BALANCE SHEETS                                                 
(In thousands of Canadian dollars, except per unit amounts)                 
(unaudited)                                                                 
                                                                            
As at                                         December 31,      December 31,
                                                      2016              2015
----------------------------------------------------------------------------
                                                                            
Assets                                                                      
Investment properties                    $      13,287,038 $      12,152,176
Deferred tax assets                                 11,609             8,009
Equity accounted investments                       185,278           158,994
Mortgages and loans receivable                     118,017           129,258
Residential inventory                               48,414            45,276
Assets held for sale                                60,530         2,968,095
Receivables and other assets                       408,508           451,365
Cash and cash equivalents                           54,366            83,318
----------------------------------------------------------------------------
Total assets                             $      14,173,760 $      15,996,491
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities                                                                 
Debentures payable                       $       2,248,024 $       2,000,066
Mortgages payable and lines of credit            3,405,568         4,164,669
Deferred tax liabilities                                 -           230,474
Liabilities associated with assets held                                     
 for sale                                                -         1,248,635
Accounts payable and other liabilities             510,280           425,826
----------------------------------------------------------------------------
Total liabilities                        $       6,163,872 $       8,069,670
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Equity                                                                      
Unitholders' equity:                                                        
  Preferred                              $         144,755 $         265,451
  Common                                         7,865,133         7,660,588
----------------------------------------------------------------------------
Total unitholders' equity                        8,009,888         7,926,039
Non-controlling interests                                -               782
----------------------------------------------------------------------------
Total equity                                     8,009,888         7,926,821
----------------------------------------------------------------------------
Total liabilities and equity             $      14,173,760 $      15,996,491
----------------------------------------------------------------------------
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CONSOLIDATED STATEMENTS OF INCOME                                           
(In thousands of Canadian dollars, except per unit amounts)                 
(unaudited)                                                                 
                                                                            
Year ended December 31,                              2016              2015 
----------------------------------------------------------------------------
Revenue                                                                     
Rental revenue                           $      1,103,884  $      1,039,068 
Residential inventory sales                        16,262            31,937 
Property and asset management fees                 13,186            16,731 
----------------------------------------------------------------------------
                                                1,133,332         1,087,736 
----------------------------------------------------------------------------
Operating costs                                                             
Rental operating costs                                                      
  Recoverable under tenant leases                 397,776           373,698 
  Non-recoverable costs                            19,684            20,465 
Residential inventory cost of sales                16,188            29,343 
----------------------------------------------------------------------------
                                                  433,648           423,506 
----------------------------------------------------------------------------
Operating income                                  699,684           664,230 
----------------------------------------------------------------------------
Other income                                                                
Interest income                                     5,744             5,370 
Income from equity accounted investments            9,972            10,378 
Fair value gain (loss) on investment                                        
 properties, net                                  182,888           (91,548)
Investment and other income                        33,268            98,426 
----------------------------------------------------------------------------
                                                  231,872            22,626 
----------------------------------------------------------------------------
Other expenses                                                              
Interest costs                                    179,527           186,772 
General and administrative                         52,220            51,051 
Leasing costs                                      10,931             9,750 
Transaction and other costs                         9,577            10,498 
Long-term debt redemption costs                         -             9,929 
----------------------------------------------------------------------------
                                                  252,255           268,000 
----------------------------------------------------------------------------
Income before income taxes                        679,301           418,856 
Deferred income tax expense (recovery)             (3,850)            1,290 
----------------------------------------------------------------------------
Net income from continuing operations    $        683,151  $        417,566 
Net income (loss) from discontinued                                         
 operations                                       147,687          (275,129)
----------------------------------------------------------------------------
Net income                               $        830,838  $        142,437 
----------------------------------------------------------------------------
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Net income attributable to                                                  
  Unitholders                            $        830,747  $        141,763 
  Non-controlling interests                            91               674 
----------------------------------------------------------------------------
                                         $        830,838  $        142,437 
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Net income (loss) per unit - basic:                                         
  From continuing operations             $           2.06  $           1.26 
  From discontinued operations                       0.45             (0.86)
----------------------------------------------------------------------------
Net income per unit - basic              $           2.51  $           0.40 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net income (loss) per unit - diluted:                                       
  From continuing operations             $           2.06  $           1.26 
  From discontinued operations                       0.45             (0.86)
----------------------------------------------------------------------------
Net income per unit - diluted            $           2.51  $           0.40 
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Weighted average number of units (in                                        
 thousands):                                                                
  Basic                                           325,386           319,492 
  Diluted                                         325,665           319,983 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
CONSOLIDATED STATEMENTS OF INCOME                                           
(In thousands of Canadian dollars, except per unit amounts)                 
(unaudited)                                                                 
                                                                            
                                                                           -
Three months ended December 31,                      2016              2015 
----------------------------------------------------------------------------
Revenue                                                                     
Rental revenue                           $        285,257  $        263,893 
Residential inventory sales                         3,353            22,888 
Property and asset management fees                  2,968             4,355 
----------------------------------------------------------------------------
                                                  291,578           291,136 
----------------------------------------------------------------------------
Operating costs                                                             
Rental operating costs                                                      
  Recoverable under tenant leases                 101,058            96,386 
  Non-recoverable costs                             5,233             6,316 
Residential inventory cost of sales                 4,550            21,563 
----------------------------------------------------------------------------
                                                  110,841           124,265 
----------------------------------------------------------------------------
Operating income                                  180,737           166,871 
----------------------------------------------------------------------------
Other income                                                                
Interest income                                     1,657             1,457 
Income from equity accounted investments            4,521             4,510 
Fair value gain (loss) on investment                                        
 properties, net                                   44,371             1,183 
Investment and other income                         6,762            97,261 
----------------------------------------------------------------------------
                                                   57,311           104,411 
----------------------------------------------------------------------------
Other expenses                                                              
Interest costs                                     43,464            47,853 
General and administrative                         14,000            14,854 
Leasing costs                                       2,663             2,340 
Transaction and other costs                         2,449             5,046 
----------------------------------------------------------------------------
                                                   62,576            70,093 
----------------------------------------------------------------------------
Income before income taxes                        175,472           201,189 
Deferred income tax expense (recovery)             (3,000)            1,350 
----------------------------------------------------------------------------
Net income from continuing operations    $        178,472  $        199,839 
Net income (loss) from discontinued                                         
 operations                                       (14,013)         (377,837)
----------------------------------------------------------------------------
Net income                               $        164,459  $       (177,998)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income attributable to                                                  
  Unitholders                            $        164,459  $       (178,041)
  Non-controlling interests                             -                43 
----------------------------------------------------------------------------
                                         $        164,459  $       (177,998)
----------------------------------------------------------------------------
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Net income (loss) per unit - basic:                                         
  From continuing operations             $           0.54  $           0.61 
  From discontinued operations                      (0.04)            (1.17)
----------------------------------------------------------------------------
Net income per unit - basic              $           0.50  $          (0.56)
----------------------------------------------------------------------------
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Net income (loss) per unit - diluted:                                       
  From continuing operations             $           0.54  $           0.61 
  From discontinued operations                      (0.04)            (1.17)
----------------------------------------------------------------------------
Net income per unit - diluted            $           0.50  $          (0.56)
----------------------------------------------------------------------------
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Weighted average number of units (in                                        
 thousands):                                                                
  Basic                                           326,466           321,894 
  Diluted                                         326,639           322,195 
----------------------------------------------------------------------------
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CONSOLIDATED STATEMENTS OF CASH FLOWS                                       
(In thousands of Canadian dollars)                                          
(unaudited)                                                                 
                                                                            
Year ended December 31,                              2016              2015 
----------------------------------------------------------------------------
Operating activities                                                        
Net income (loss) from:                                                     
  Continuing operations                  $        683,151  $        417,566 
  Discontinued operations                         147,687          (275,129)
----------------------------------------------------------------------------
Net income                                        830,838           142,437 
  Items not affecting cash:                                                 
    Depreciation and amortization                   4,398             4,655 
    Amortization of straight-line rent             (8,006)           (9,328)
    Unit-based compensation expense                 1,640             5,135 
    Income from equity accounted                                            
     investments                                   (9,972)           (6,233)
    Fair value (gains) losses on                                            
     investment properties, net                  (199,787)          238,608 
    Deferred income taxes (recovery)             (234,525)          231,764 
  Transaction (gain) loss, net on                                           
   disposition of:                                                          
    Available-for-sale securities                 (14,040)                - 
    Canadian investment properties                 (6,075)            2,631 
    U.S. investment properties                    (65,116)           (7,529)
Adjustments for other changes in working                                    
 capital items                                    156,069            12,676 
----------------------------------------------------------------------------
Net operating cash flow activities                455,424           614,816 
----------------------------------------------------------------------------
Investing activities                                                        
Acquisitions of investment property, net                                    
 of assumed debt                                 (556,203)         (732,635)
Construction expenditures on properties                                     
 under development                               (249,429)         (187,062)
Capital expenditures on income                                              
 properties                                       (46,780)          (34,705)
Expenditures for leasing commissions and                                    
 tenant installation costs                        (47,593)          (33,208)
Proceeds from sale of investment                                            
 properties                                     2,042,829           135,376 
Earn-outs on investment properties                 (7,022)           (2,034)
Contributions to associates and joint                                       
 ventures                                         (26,750)           (3,108)
Distributions received from equity                                          
 accounted investments                             11,196            13,447 
Proceeds on disposition of an equity                                        
 accounted investment                                   -            43,079 
Advances of mortgages and loans                                             
 receivable                                        (3,894)          (24,255)
Repayments of mortgages and loans                                           
 receivable                                        25,301            33,439 
Purchases of available-for-sale                                             
 securities, net of financing                           -           (12,749)
Proceeds from sale of available-for-sale                                    
 securities, net of selling costs                  51,974                 - 
----------------------------------------------------------------------------
Net investing cash flow activities              1,193,629          (804,415)
----------------------------------------------------------------------------
Financing activities                                                        
Proceeds from mortgage financing, net of                                    
 issue costs                                      204,281           650,901 
Repayments of mortgage principal               (1,599,076)         (704,195)
Advances from bank credit lines, net of                                     
 issue costs                                    1,115,424           776,594 
Repayment of bank credit lines                 (1,154,814)         (341,830)
Proceeds from issuance of debentures,                                       
 net of issue costs                               248,669           484,110 
Repayment of unsecured debentures                       -          (349,900)
Distributions to common trust                                               
 unitholders, net of distributions                                          
 reinvested                                      (397,143)         (309,614)
Distributions to preferred trust                                            
 unitholders                                       (8,667)          (13,590)
Distributions paid to non-controlling                                       
 interests                                            (91)             (190)
Return of capital to non-controlling                                        
 interests                                           (782)                - 
Proceeds received from issuance of                                          
 common units, net                                 39,194            24,358 
Redemption of preferred units                    (125,000)                - 
----------------------------------------------------------------------------
Net financing cash flow activities             (1,678,005)          216,644 
----------------------------------------------------------------------------
Net change in cash and cash equivalents           (28,952)           27,045 
Cash and cash equivalents, beginning of                                     
 year                                              83,318            56,273 
----------------------------------------------------------------------------
Cash and cash equivalents, end of year   $         54,366  $         83,318 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Conference Call and Webcast

Interested parties are invited to participate in a conference call with management on Thursday, February 16, 2017 at 10:00 a.m. Eastern time. You will be required to identify yourself and the organization on whose behalf you are participating.

In order to participate, please dial 416-340-2216 or 1-866-223-7781. If you cannot participate in the live mode, a replay will be available until March 16, 2017. To access the replay, please dial 905-694-9451 or 1-800-408-3053 and enter passcode 3238528#.

Scheduled speakers include Edward Sonshine, O.Ont. Q.C., Chief Executive Officer, Rags Davloor, President and Chief Operating Officer and Cynthia Devine, Executive Vice President, Chief Financial Officer and Corporate Secretary. Management's presentation will be followed by a question and answer period. To ask a question, press "star 1" on a touch-tone phone. The conference call operator will be notified of all requests in the order in which they are made, and will introduce each questioner.

Alternatively, to access the simultaneous webcast, go to the following link on RioCan's website http://investor.riocan.com/investor-relations/events-and-presentations/events/ and click on the link for the webcast. The webcast will be archived 24 hours after the end of the conference call and can be accessed for 120 days.

About RioCan

RioCan is Canada's largest real estate investment trust with a total enterprise value of approximately $14.6 billion as at December 31, 2016. RioCan owns and manages Canada's largest portfolio of shopping centres with ownership interests in a portfolio of 300 Canadian retail and mixed use properties, including 15 properties under development, containing an aggregate net leasable area of 47 million square feet. For further information, please refer to RioCan's website at www.riocan.com.

Non-GAAP Measures

RioCan's consolidated financial statements are prepared in accordance with IFRS. Consistent with RioCan's management framework, management uses certain financial measures to assess RioCan's financial performance, which are not generally accepted accounting principles (GAAP) under IFRS. The following measures, RioCan's Interest, Funds From Operations ("FFO"), Operating Funds From Operations ("OFFO"), Adjusted Funds From Operations ("AFFO"), and Adjusted Earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), Operating EBITDA, Interest Coverage Ratio, Debt Service Coverage Ratio, Debt to Operating EBITDA, Operating Income ("NOI"), Same Store NOI, Same Property NOI, Total Enterprise Value, and RioCan's Proportionate Share as well as other measures discussed elsewhere in this release, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. RioCan supplements its IFRS measures with these non-GAAP measures to aid in assessing the Trust's underlying performance and reports these additional measures so that investors may do the same. Non GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flow, and profitability. For a full definition of these measures, please refer to the "Use of Non-GAAP Measures" in RioCan's Management Discussion and Analysis for the period ending December 31, 2016.

Forward-Looking Information

This news release contains forward-looking information within the meaning of applicable Canadian securities laws. This information includes, but is not limited to, statements made in "Financial Highlights", "Corporate Developments", "Portfolio Activity", "Operational Highlights", "Development Activities", Liquidity and Capital" 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 information 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 information reflects management's current beliefs and is based on information currently available to management. All forward-looking information in this News Release is qualified by these cautionary statements.

Forward-looking information is not a guarantee of future events or performance and, by its nature, is based on RioCan's current estimates and assumptions, which are subject to numerous risks and uncertainties, including those described under "Risks and Uncertainties" in RioCan's Management's Discussion and Analysis for the period ended December 31, 2016 ("MD&A"), which could cause actual events or results to differ materially from the forward-looking information contained in this News Release. Those risks and uncertainties include, but are not limited to, those related to: liquidity and general market conditions; tenant concentrations and related risk of bankruptcy or restructuring (and the terms of any bankruptcy or restructuring proceeding), occupancy levels and defaults, including the failure to fulfill contractual obligations by the tenant or a related party thereof; lease renewals and rental increases; the ability to re-lease and find new tenants for vacant space; retailer competition; access to debt and equity capital; interest rate and financing risk; joint ventures and partnerships; the relative illiquidity of real property; unexpected costs or liabilities related to acquisitions and dispositions; development risk associated with construction commitments, project costs and related approvals; environmental matters; litigation; reliance on key personnel; unitholder liability; income, sales and land transfer taxes; and credit ratings.

RioCan currently qualifies as a real estate investment trust for Canadian tax purposes and intends to qualify for future years. The Income Tax Act (Canada) contains provisions which potentially impose tax on publicly traded trusts that qualify as specified investment flow-through entities (the SIFT Provisions). However, the SIFT Provisions do not impose tax on a publicly traded trust which qualifies as a REIT. Should RioCan no longer qualify as a Canadian REIT under the SIFT Provisions, certain statements contained in this News Release may need to be modified. RioCan is still subject to Canadian tax in its incorporated Canadian subsidiaries.

Our U.S. subsidiary qualified as a REIT for U.S. income tax purposes up to May 25, 2016, subsequent to the closing date of the sale of our U.S. property portfolio. For U.S. income tax purposes, the subsidiary distributed all of its U.S. taxable income and is entitled to deduct such distributions against its taxable income. The subsidiary's qualification as a REIT depends on the REIT's satisfaction of certain asset, income, organizational, distribution, unitholder ownership and other requirements up until May 25, 2016. Our U.S. subsidiary was subject to a 30% or 35% withholding tax on distributions of its U.S. taxable income to Canada. We do not intend to distribute any withholding taxes paid or payable to our unitholders related to the disposition.

Other factors, such as general economic conditions, including interest rate fluctuations, may also have an effect on RioCan's results of operations. 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 stable retail environment; relatively low and stable interest costs; a continuing trend toward land use intensification, including residential development in urban markets; access to equity and debt capital markets to fund, at acceptable costs, future capital requirements and to enable our refinancing of debts as they mature; and the availability of investment opportunities for growth. For a description of additional risks that could cause actual results to materially differ from management's current expectations, see "Risks and Uncertainties" in RioCan's MD&A for the period ended December 31, 2016, and in "Risks and Uncertainties" in RioCan's most recent Annual Information Form. Although the forward-looking information contained in this News Release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with this forward-looking information. Certain statements included in this News Release may be considered "financial outlook" for purposes of applicable Canadian securities laws, and as such the financial outlook may not be appropriate for purposes other than this News Release. The forward-looking information contained in this News Release is made as of the date of this News Release, and should not be relied upon as representing RioCan's views as of any date subsequent to the date of this News Release.

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

Contacts:
RioCan Real Estate Investment Trust
Cynthia J. Devine
Executive Vice President, Chief Financial Officer and
Corporate Secretary
(416) 866-3033
www.riocan.com

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