CT Real Estate Investment Trust Annual Report 2014

FY2014 Annual Report · CT Real Estate Investment Trust

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CT REIT 2014 Annual Report

YEAR IN REVIEW AND HIGHLIGHTS

In fall 2013, CT REIT launched
with one of the most successful
Initial Public Offerings (IPO) for a
Canadian REIT in recent years.

In 2014, our first full year of operation, CT Real Estate
Investment Trust (CT REIT) met the expectations outlined in our
IPO – and exceeded them. In large measure, our performance
was driven by a diverse investment program that delivered
growth in adjusted funds from operations (AFFO) per Unit
in 2014 and is expected to keep delivering growth for years
to come.

Canadian Tire Corporation, Limited (CTC), our principal tenant
and largest Unitholder, is one of Canada’s most successful
retail organizations and home to several of the country’s most
highly regarded brands. Our special relationship with CTC
provides CT REIT with many advantages – including the right of
first offer on properties in its portfolio and special insights into
its development needs and strategy – that translate into low risk
growth opportunities.

We also purchased properties outside the retail sector: notably,
in July 2014, CT REIT entered into a co-ownership to acquire a
one-third interest in Canada Square, a mixed-use commercial
property at the intersection of Yonge Street and Eglinton
Avenue in Toronto. In the same month, CT REIT acquired a
well-located 201,415 square foot distribution centre in Calgary,
replacing a facility that CTC was leasing from a third party.
These accretive acquisitions add diversification to our portfolio
and align with our growth strategy.

In 2014, we completed thirteen property acquisitions, two
land acquisitions, two developments and six property
intensifications, increasing our total gross leasable area (GLA)
to more than 20 million square feet. Most of these acquisitions
were immediately accretive and, through escalating triple-net
leases, our new retail properties will provide built-in growth over
the long term.

The value we created was acknowledged by the market
and reflected in the more than 12 per cent increase in our Unit
price over the course of the year. This capital growth combined
with CT REIT’s dependable dividend payments provided our
Unitholders with a very attractive total return of more than
19 per cent in 2014.

Our success in implementing our growth strategy was
demonstrated by another key milestone. On November 3,
2014, CT REIT’s Board of Trustees authorized CT REIT’s first
distribution increase, a 2 per cent increase starting with the
distribution paid in January 2015.

All numbers and property listings current as at February 23, 2015, except where indicated.

This Annual Report contains information that is forward-looking. See page 14 of the
Management’s Discussion and Analysis.

CT REIT 2014 ANNUAL REPORT

MISSISSAUGA, ONTARIO

WELL-LOCATED PORTFOLIO
DIVERSIFIED BY MARKET SIZE1
% of annualized base minimum rent

DIVERSIFIED BY GEOGRAPHY1
% of annualized base minimum rent

17%

14%

69%

23%

26%

43%

Large urban
(pop. >100,000)

Medium

Small

(pop. 20,000–100,000)

(pop. <20,000)

Ontario
Western Canada

Quebec
Atlantic Canada

1 Excludes development properties and includes CT REIT’s one-third interest in Canada Square. As of December 31, 2014.

Invested $326.6 million in acquisitions,
intensifications and developments
Expanded portfolio to 278 properties
from 258
Grew to 20.7 million square feet
of gross leasable area

ABOUT CT REIT
CT REIT is an unincorporated, closed-end real estate investment trust formed to own income producing
commercial real estate, primarily retail properties located in Canada. Its portfolio comprises 278 properties
totalling 20.7 million square feet of GLA. CT REIT aims to create long-term value by generating reliable
and durable growth, benefiting from its relationship with Canadian Tire Corporation, its principal tenant and
largest Unitholder.

TSX: CRT.UN

CT REIT 2014 ANNUAL REPORT
CT REIT 2014 ANNUAL REPORT

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LETTER FROM THE CEO

KEN SILVER
Chief Executive Officer

“

Reliable. Durable. Growing. We kept that promise by
continuing to grow a portfolio of properties distinguished
by high occupancy, low lease turnover, long average
lease terms, long average maturity on our debt and an

investment grade major tenant, CTC.”

Dear Fellow Unitholders,

After our highly successful launch in 2013, I am very pleased
to share this report on 2014 – CT REIT’s highly successful first
full year of operation.

Unit price over the year. It showed that the market sees what
we are doing – and how we are growing – and that it wants to
be part of it.

CT REIT’s promise to Unitholders is “Reliable. Durable.
Growing.” We kept that promise by continuing to grow a
portfolio of properties distinguished by high occupancy,
low lease turnover, long average lease terms, long average
maturity on our debt and an investment grade major tenant,
CTC. And in doing so, we exceeded our Financial Forecast
we established at our IPO.

Our leases with CTC feature annual average rent escalations
of 1.5 per cent – the first of these rent increases started in
January 2015 – allowing us to deliver predictable, growing
cash flows to our Unitholders. Throughout 2014, we added
to this foundation of built-in growth, increasing our portfolio
through a total of 23 investments in property acquisitions,
land acquisitions, developments and property intensifications.
We expanded our GLA to more than 20 million square
feet through a combination of low risk strategies including
accretive acquisitions from CTC and third-party vendors,
intensification and expansion of our existing portfolio, and
development initiatives.

To deliver durable long-term value, we are always looking
for prime development and redevelopment opportunities. In
July 2014, we acquired a one-third interest in Canada Square,
a mixed-use property at one of the best corners in Toronto
and the home office of CTC and CT REIT. Though it was
immediately accretive, we believe that Canada Square, located
at what will be the intersection of two rapid transit lines, offers
extraordinary potential as a long-term redevelopment
opportunity.

CT REIT’s strong performance in 2014 led the Board of
Trustees to approve a 2 per cent increase in our monthly
distribution, effective with the distribution paid in January 2015.
Our success was also reflected in the steady increase in our

CT REIT 2014 ANNUAL REPORT

Looking ahead to next year, the cornerstone of our growth
strategy will continue to be the access to opportunities made
possible by our special relationship with CTC. Canadian
Tire is one of Canada’s truly iconic brands and its value has
been enhanced by the evolution of the Canadian Tire Family
of Companies.

Brands like Canadian Tire, Mark’s and Sport Chek provide
stability, growth and category diversification while attracting
customers and tenants to our properties. The lease
arrangements we have in place with CTC combined with its
record of retail success provide a durable, reliable foundation
that can support growth across a variety of market conditions.
With this foundation we expect CT REIT to continue to deliver in
2015 and beyond.

Before closing, I want to draw attention to another essential
element of our success in 2014, and that is our Board
of Trustees. Throughout the year, they were diligent in
representing the interests of Unitholders, active in ensuring
good governance, supportive in assisting us in implementing
best in class processes, and invaluable in providing guidance
on the development and implementation of our growth strategy.

Along with CFO Louis Forbes, I want to thank the Board for
their help during the year and our Unitholders for their
continued confidence and support.

KEN SILVER
Chief Executive Officer

LETTER FROM THE CHAIR

DAVID LAIDLEY
Chairman

year 2014, CT REIT continued to execute its strategy
and more than fulfilled the commitment reflected in

“ Building on a strong launch in fall 2013, during fiscal
its investor proposition: Reliable. Durable. Growing.”

Dear Fellow Unitholders,

On behalf of your Board of Trustees, I am very pleased to write
to you about the first full year of operation for CT REIT.

Building on a strong launch in fall 2013, during fiscal year
2014, CT REIT continued to execute its strategy and more than
fulfilled the commitment reflected in its investor proposition:
Reliable. Durable. Growing.

Through prudent management and judicious acquisitions,
CT REIT grew both the scale and the value of its portfolio.
The reliable performance of that portfolio enabled your Board
to not only approve 12 distributions in 2014, but to authorize
a 2 per cent increase in distributions effective with the
distribution paid in January 2015. The value of what CT REIT
achieved was recognized by the market and subsequently
reflected in the steady increase of its Unit price over the year.

Central to our success in 2014, and an important focus of
your Board, is the excellent relationship and close alignment
of interests shared by CT REIT and our largest Unitholder,
CTC. Through this relationship, and corresponding formal
agreements, CT REIT and our Unitholders benefit from a
low cost structure, favoured access to CTC’s outstanding
property portfolio and the insights provided through its deep
understanding of the evolving retail real estate market.

CT REIT also benefits from a clearly defined and clearly
demonstrated commitment to good governance, strong risk
management and full transparency. The Board is composed
of a majority of independent trustees who, collectively, bring
decades of experience in corporate governance, capital
markets, retail and real estate to their roles in overseeing
CT REIT and its activities.

Throughout the year, the Board worked closely with CEO
Ken Silver and CFO Louis Forbes, providing guidance and
support in the development and implementation of CT REIT’s
strategy for growth. The variety of investments made in
2014 shows that CT REIT is able to pursue a wide range of
opportunities in order to create value for Unitholders.

Looking forward to 2015, the Board will continue to represent
the interests of Unitholders by overseeing the evaluation and
management of risk, ensuring a high standard of governance
and supporting CT REIT’s management in their efforts to
deliver durable, reliable growth in the year ahead and over the
long term.

Let me close by thanking and congratulating Ken and Louis for
their leadership and hard work – their efforts made CT REIT’s
first year exceptionally strong. I also want to thank my fellow
trustees for their contribution and commitment and our
Unitholders for their continuing support.

DAVID H. LAIDLEY, FCPA, FCA
Chairman of the Board

CT REIT 2014 ANNUAL REPORT

Reliable

Durable

CT REIT’s relationship
with CTC is central to our
dependable performance
and our capacity to create
enduring value. Our largest
tenant and Unitholder, CTC
is a trusted name, one of
Canada’s most successful
retail organizations and
home to many iconic brands,
including Canadian Tire,
Mark’s and Sport Chek.

Though we’re a young
enterprise, our portfolio is
structured around a core of
well-located, high-performing
retail properties and was
carefully developed as part
of a retail network strategy.
These assets, combined
with an investment grade
tenant, long-term leases,
a strong balance sheet,
sound governance, a low
cost structure and a low risk
strategy, provide CT REIT
with a stable platform
for weathering volatile
markets and delivering
long-term growth.

Growing

CT REIT is built to grow.
Organic growth comes through
the escalating leases in place
at our retail properties. Growth
in scale comes through
our right of first offer on all
CTC properties that meet
our criteria, our preferred
access to participate in
development opportunities
with CTC, and our capacity to
acquire from – or with – third
parties. Growth in asset value
comes from many sources,
including intensification and
development and the sector-
leading brands on our tenant
roster. All of this supports
growth in our distributions
and Unit price.

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CT REIT 2014 ANNUAL REPORT
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Growing

OUR STRATEGY FOR GROWTH

Delivering predictability and
growth is an appealing – and
rare – combination

CT REIT offers investors predictability and attractive baseline
growth in AFFO per Unit. Escalating lease agreements in
place with our investment grade anchor tenant, as well as
our predictable low cost structure, position CT REIT to deliver
solid performance and dependable growth across a range
of market conditions.

We also offer investors the opportunity to benefit from
additional growth delivered through low risk strategies –
including acquisition, intensification and development – for
enhancing the value and return potential of our portfolio.

In 2014, CT REIT demonstrated predictability by comfortably
meeting the expectations outlined in our IPO – then we
demonstrated our potential for growth by significantly
exceeding those expectations.

We have a strong foundation for predictable, durable cash
flows and reliable monthly distributions. Our properties have a
99.9 per cent occupancy rate, and our portfolio of Canadian
Tire store leases contains contractual annual rent escalations
of 1.5 per cent per year on average over the initial term of the
leases and a weighted average lease term of 14.5 years, one of
the longest in the industry.

Our principal tenant, CTC, accounts for more than 96 per cent
of our base minimum rent. In 2014, CTC, one of Canada’s
leading retailers, reported revenues of $12.5 billion, a market
capitalization of $9.8 billion and was rated “BBB (high), stable”
by Dominion Bond Rating Service and “BBB+, stable” by
Standard & Poor’s.

CTC comprises iconic brands such as Canadian Tire, Mark’s
and Sport Chek which attract customers and other tenants –
among them, sector-leading brands such as McDonald’s,
RBC Financial Group and Tim Hortons.

CTC is both our primary tenant and our largest Unitholder,
and CT REIT enjoys the advantages of a relationship founded
upon closely aligned interests. We benefit from a range of
services provided on a cost pass-through basis by CTC and
Canadian Tire Real Estate Limited, which, in turn, enable
CT REIT to operate with a lean cost structure. Our relationship
also provides CT REIT with invaluable insights into the retail
and real estate markets along with an enduring growth pipeline
through our contractual right of first offer on properties owned
by CTC now and in the future.

CT REIT can also pursue growth through intensifications and
developments within our existing portfolio, and by acquiring
and developing properties from third parties. While our portfolio
is focused on retail assets, CT REIT has the flexibility to invest
in property sectors beyond retail when we see an opportunity
to create value for our Unitholders.

BOWMANVILLE, ONTARIO

CT REIT 2014 ANNUAL REPORT
CT REIT 2014 ANNUAL REPORT

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DEVELOPMENT CASE STUDY

New development in
Charlottetown drives growth for
our tenant and our Unitholders

To meet growing demand in the Charlottetown, PEI market,
Canadian Tire wanted to provide its customers with a larger,
more modern store. In December 2013, CT REIT purchased
a portion of land in a strip plaza co-anchored by national
grocery retailer Sobeys and adjacent to the largest enclosed
mall and power centre in PEI. Canadian Tire Real Estate began
construction in January and Charlottetown’s new Canadian
Tire store opened in October 2014. With 94,704 square feet
of GLA, the new store is approximately 30 per cent larger
than the old location, and offers customers an enhanced
shopping experience as well as 14 new auto service bays. As
is customary, our triple-net lease agreement with our Canadian
Tire tenant includes an annual 1.5 per cent rent escalation.

CT REIT can grow in many ways, including development –
acquiring land and building on it or purchasing existing
buildings and adding value through renovation or repurposing
the property. The new Charlottetown store shows that CT REIT,
by being “plugged in” to CTC’s development needs, is
positioned to grow with the company.

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CT REIT 2014 ANNUAL REPORT
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INTENSIFICATION CASE STUDY

Intensification in Thunder Bay
delivers more space, more
selection and more value

Adjacent to the largest enclosed mall and power centre in
Thunder Bay, the Canadian Tire store on Fort William Road is
one of the most popular shopping destinations for people living
in and around Thunder Bay, Ontario. The existing Canadian Tire
store was so popular that it did not have the space it needed to
keep pace with growing customer demand. To help meet that
welcomed challenge, we funded an addition, built onto one
side of the store, which expanded the GLA to 100,855 square
feet from 83,063 square feet. When upgrading or expanding an
existing CTC property, CT REIT funds the cost of construction,
and amends its lease agreements to provide for incremental,
supportable rent increases related to that capital investment.

Intensification, or finding ways to do more with the properties
in our portfolio, is a low risk strategy for delivering growth,
particularly in the short and medium term.

CT REIT 2014 ANNUAL REPORT
CT REIT 2014 ANNUAL REPORT

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ACQUISITION CASE STUDY

Canada Square – Long-term growth

In July 2014, CT REIT acquired a one-third interest in Canada
Square, a mixed-use commercial property at Yonge Street
and Eglinton Avenue in Toronto. While our focus remains retail,
this purchase complements our goals and our portfolio. Like
most of our properties, Canada Square is situated at a prime
location in a key urban market, and as the headquarters of
CTC and CT REIT, it has an investment grade anchor tenant.
In pursuing growth and value for our Unitholders, CT REIT
is guided by a strategy that gives us the flexibility to act on
many opportunities.

The Canada Square acquisition was immediately accretive
for Unitholders. Located as it is at one of the key intersections
in Canada’s largest city, it also provides long-term potential
development opportunities that we will be pursuing with
our co-owners.

13 New Properties This Year:

CALGARY, AB
CAMROSE, AB
MEDICINE HAT, AB
YORKTON, SK
BROCKVILLE, ON
BURLINGTON, ON
OSHAWA, ON
STRATFORD, ON
STRATHROY, ON
TORONTO (CANADA SQUARE1), ON
WASAGA BEACH, ON
SHERBROOKE, QC
VAUDREUIL, QC

201,415 SQ. FT.
28,126 SQ. FT.
63,023 SQ. FT.
34,621 SQ. FT.
70,380 SQ. FT.
63,899 SQ. FT.
99,532 SQ. FT.
97,908 SQ. FT.
67,834 SQ. FT.
843,912 SQ. FT.
54,081 SQ. FT.
97,522 SQ. FT.
73,965 SQ. FT.

1 CT REIT owns a one-third interest in Canada Square; GLA shown in the chart is at

100 per cent level.

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CT REIT 2014 ANNUAL REPORT
CT REIT 2014 ANNUAL REPORT

Our Portfolio of Properties

Location

Whitehorse, YT

Yellowknife, NT

Castlegar, BC

Chilliwack, BC

Dawson Creek, BC

Fernie, BC

Invermere, BC

Kamloops, BC

Kelowna, BC

Langley, BC

Merritt, BC

Mission, BC

Penticton, BC

Prince George, BC

Quesnel, BC

Sechelt, BC

Smithers, BC

Terrace, BC

Trail, BC

Vancouver, BC

Athabasca, AB

Brooks, AB

Calgary, AB

Camrose, AB

Cold Lake, AB

Drumheller, AB

Edmonton, AB

Fort Saskatchewan, AB

High Level, AB

High River, AB

Hinton, AB

Lethbridge, AB

Lloydminster, AB

Medicine Hat, AB

GLA

Property Type

Location

GLA

Property Type

103,276 sq. ft.

65,054 sq. ft.

67,585 sq. ft.

64,539 sq. ft.

56,586 sq. ft.

51,049 sq. ft.

28,670 sq. ft.

51,236 sq. ft.

24,338 sq. ft.

84,822 sq. ft.

88,266 sq. ft.

44,575 sq. ft.

40,621 sq. ft.

64,092 sq. ft.

96,197 sq. ft.

27,858 sq. ft.

37,082 sq. ft.

35,105 sq. ft.

64,164 sq. ft.

49,121 sq. ft.

181,212 sq. ft.

215,594 sq. ft.

39,119 sq. ft.

45,977 sq. ft.

72,996 sq. ft.

89,129 sq. ft.

201,415 sq. ft.

64,664 sq. ft.

28,126 sq. ft.

56,312 sq. ft.

31,183 sq. ft.

94,106 sq. ft.

64,786 sq. ft.

77,022 sq. ft.

79,555 sq. ft.

51,860 sq. ft.

28,676 sq. ft.

–

36,016 sq. ft.

78,860 sq. ft.

65,109 sq. ft.

115,949 sq. ft.

●

Medicine Hat, AB

Olds, AB

Peace River, AB

Red Deer, AB

63,023 sq. ft.

67,535 sq. ft.

28,162 sq. ft.

84,755 sq. ft.

Rocky Mountain House, AB

47,247 sq. ft.

Sherwood Park, AB

Slave Lake, AB

Spruce Grove, AB

St. Albert, AB

St. Paul, AB

Stettler, AB

Strathmore, AB

Sylvan Lake, AB

Vegreville, AB

Wainwright, AB

Wetaskiwin, AB

Whitecourt, AB

Estevan, SK

Humboldt, SK

Melfort, SK

Regina, SK

Saskatoon, SK

Swift Current, SK

Weyburn, SK

Yorkton, SK

Flin Flon, MB

Portage La Prairie, MB

Selkirk, MB

Steinbach, MB

Winnipeg, MB

Alexandria, ON

Alliston, ON

Amherstburg, ON

Ancaster, ON

Aylmer, ON

Bancroft, ON

Barrie, ON

Blenheim, ON

Bowmanville, ON

85,629 sq. ft.

45,995 sq. ft.

95,909 sq. ft.

101,034 sq. ft.

39,420 sq. ft.

28,783 sq. ft.

39,721 sq. ft.

59,143 sq. ft.

52,734 sq. ft.

45,804 sq. ft.

53,639 sq. ft.

64,021 sq. ft.

38,931 sq. ft.

28,677 sq. ft.

28,622 sq. ft.

100,480 sq. ft.

98,583 sq. ft.

82,989 sq. ft.

56,864 sq. ft.

–

39,659 sq. ft.

34,621 sq. ft.

38,620 sq. ft.

38,162 sq. ft.

67,474 sq. ft.

58,537 sq. ft.

98,897 sq. ft.

72,051 sq. ft.

17,368 sq. ft.

66,532 sq. ft.

44,261 sq. ft.

68,951 sq. ft.

27,867 sq. ft.

48,779 sq. ft.

115,680 sq. ft.

27,814 sq. ft.

125,981 sq. ft.

●

● Standalone

● Multi-tenant

● Standalone – Land Lease

● Multi-tenant – Land Lease

● Distribution Centre

● Development Property

CT REIT 2014 ANNUAL REPORT
CT REIT 2014 ANNUAL REPORT

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OUR PORTFOLIO CONTINUED

Location

Bracebridge, ON

Bradford, ON

Brampton, ON

Brantford, ON

Brockville, ON

Burlington North, ON

Cambridge, ON

Campbellford, ON

Carleton Place, ON

Casselman, ON

Chelmsford, ON

Cobourg, ON

Cochrane, ON

Cornwall, ON

Deep River, ON

Dryden, ON

Dunnville, ON

Elliot Lake, ON

Espanola, ON

Essex, ON

Etobicoke, ON

Exeter, ON

Fenelon Falls, ON

Fergus, ON

Fort Erie, ON

Fort Frances, ON

Guelph, ON

Hamilton, ON

Hanmer, ON

Hearst, ON

Huntsville, ON

Kanata, ON

Kemptville, ON

Kenora, ON

Keswick, ON

Kincardine, ON

Kingston, ON

Lindsay, ON

Listowel, ON

London, ON

Marathon, ON

Markham, ON

Midland, ON

GLA

Property Type

51,344 sq. ft.

45,004 sq. ft.

85,887 sq. ft.

84,507 sq. ft.

64,277 sq. ft.

107,139 sq. ft.

70,380 sq. ft.

63,899 sq. ft.

129,914 sq. ft.

28,410 sq. ft.

48,417 sq. ft.

42,466 sq. ft.

70,877 sq. ft.

92,771 sq. ft.

29,312 sq. ft.

88,522 sq. ft.

36,497 sq. ft.

41,132 sq. ft.

38,876 sq. ft.

20,561 sq. ft.

48,724 sq. ft.

47,033 sq. ft.

100,621 sq. ft.

28,134 sq. ft.

18,864 sq. ft.

36,813 sq. ft.

36,781 sq. ft.

55,737 sq. ft.

84,228 sq. ft.

52,864 sq. ft.

15,286 sq. ft.

52,982 sq. ft.

36,497 sq. ft.

61,604 sq. ft.

119,023 sq. ft.

62,666 sq. ft.

59,844 sq. ft.

59,125 sq. ft.

30,983 sq. ft.

119,791 sq. ft.

104,362 sq. ft.

35,188 sq. ft.

105,075 sq. ft.

100,233 sq. ft.

97,710 sq. ft.

28,164 sq. ft.

88,957 sq. ft.

69,868 sq. ft.

●

GLA

Property Type

Location

Milton, ON

Mississauga, ON

Morrisburg, ON

Nepean, ON

New Liskeard, ON

Newmarket, ON

North Bay, ON

Oakville, ON

Orangeville, ON

Orleans, ON

Oshawa, ON

Oshawa South, ON

Ottawa, ON

Owen Sound, ON

Pembroke, ON

Peterborough, ON

Pickering, ON

Port Elgin, ON

Port Perry, ON

Prescott, ON

Renfrew, ON

Rockland, ON

Smiths Falls, ON

St. Catharines, ON

St. Thomas, ON

Stratford, ON

Strathroy, ON

Sturgeon Falls, ON

Thornhill, ON

Thunder Bay, ON

Tilbury, ON

Timmins, ON

89,581 sq. ft.

114,804 sq. ft.

91,525 sq. ft.

99,333 sq. ft.

30,974 sq. ft.

107,222 sq. ft.

70,731 sq. ft.

84,679 sq. ft.

33,980 sq. ft.

126,758 sq. ft.

112,961 sq. ft.

99,074 sq. ft.

88,386 sq. ft.

88,847 sq. ft.

69,910 sq. ft.

119,753 sq. ft.

88,388 sq. ft.

99,532 sq. ft.

95,571 sq. ft.

75,146 sq. ft.

89,646 sq. ft.

91,157 sq. ft.

64,818 sq. ft.

89,858 sq. ft.

29,348 sq. ft.

45,152 sq. ft.

37,731 sq. ft.

40,604 sq. ft.

51,829 sq. ft.

56,712 sq. ft.

89,347 sq. ft.

71,726 sq. ft.

97,908 sq. ft.

67,834 sq. ft.

36,384 sq. ft.

70,301 sq. ft.

100,855 sq. ft.

11,904 sq. ft.

97,532 sq. ft.

Toronto (Canada Square1), ON

843,912 sq. ft.

Toronto, ON

Uxbridge, ON

Wasaga, ON

Waterdown, ON

Waterloo, ON

155,979 sq. ft.

109,674 sq. ft.

164,928 sq. ft.

56,875 sq. ft.

54,081 sq. ft.

71,424 sq. ft.

99,394 sq. ft.

57,580 sq. ft.

●

● Standalone

● Multi-tenant

● Standalone – Land Lease

● Multi-tenant – Land Lease

● Distribution Centre

● Development Property

1 CT REIT owns a one-third interest in Canada Square; GLA shown in the chart is at 100 per cent level.

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GLA

Property Type

Location

GLA

Property Type

Location

Welland, ON

Whitby, ON

Windsor, ON

Woodbridge, ON

Woodstock, ON

Baie-Comeau, QC

Blainville, QC

Boucherville, QC

Buckingham, QC

Chambly, QC

Châteauguay, QC

Chicoutimi, QC

98,145 sq. ft.

72,095 sq. ft.

77,209 sq. ft.

94,432 sq. ft.

90,452 sq. ft.

109,634 sq. ft.

90,051 sq. ft.

47,284 sq. ft.

64,919 sq. ft.

92,802 sq. ft.

65,633 sq. ft.

51,322 sq. ft.

85,548 sq. ft.

75,617 sq. ft.

Coteau-du-Lac, QC

1,658,165 sq. ft.

Cowansville, QC

Dolbeau-Mistassini, QC

Donnacona, QC

Drummondville, QC

Gatineau, QC

Granby, QC

Greenfield Park, QC

Jonquière, QC

Kirkland, QC

L’Ancienne-Lorette, QC

La Baie, QC

La Sarre, QC

Lac-Mégantic, QC

Laval, QC

Lévis, QC

Longueuil, QC

Magog, QC

Mont-Laurier, QC

Montmagny, QC

Montréal, QC

Paspébiac, QC

Québec, QC

Repentigny, QC

Roberval, QC

Rosemère, QC

Rouyn-Noranda, QC

64,928 sq. ft.

53,367 sq. ft.

31,355 sq. ft.

108,722 sq. ft.

100,724 sq. ft.

118,926 sq. ft.

94,703 sq. ft.

64,566 sq. ft.

100,759 sq. ft.

92,041 sq. ft.

39,540 sq. ft.

35,026 sq. ft.

27,868 sq. ft.

70,027 sq. ft.

99,349 sq. ft.

64,744 sq. ft.

76,780 sq. ft.

88,960 sq. ft.

91,374 sq. ft.

75,271 sq. ft.

36,913 sq. ft.

41,829 sq. ft.

90,705 sq. ft.

89,287 sq. ft.

54,184 sq. ft.

73,044 sq. ft.

31,334 sq. ft.

88,295 sq. ft.

88,065 sq. ft.

122,235 sq. ft.

21,689 sq. ft.

103,252 sq. ft.

65,467 sq. ft.

Saint-Bruno-de-Montarville, QC

91,016 sq. ft.

●

Saint-Georges, QC

Saint-Hyacinthe, QC

Saint-Léonard, QC

Sainte-Marie, QC

58,867 sq. ft.

92,062 sq. ft.

77,253 sq. ft.

37,749 sq. ft.

Salaberry-de-Valleyfield, QC

97,021 sq. ft.

Sept-Îles, QC

Shawinigan, QC

Sherbrooke, QC

Sorel, QC

Terrebonne, QC

Trois-Rivières, QC

Val-d’Or, QC

Vaudreuil, QC

Atholville, NB

Bathurst, NB

Dieppe, NB

Edmundston, NB

Fredericton, NB

Grand Falls, NB

Miramichi, NB

Oromocto, NB

Riverview, NB

Saint John, NB

St. Stephen, NB

Tracadie Sheila, NB

Woodstock, NB

Amherst, NS

Bedford, NS

Cookville, NS

Digby, NS

Grace Bay, NS

Greenwood, NS

New Glasgow, NS

New Minas, NS

Port Hawkesbury, NS

Sydney, NS

Tantallon, NS

Truro, NS

Charlottetown, PE

Summerside, PE

Carbonear, NL

Clarenville, NL

Corner Brook, NL

Mount Pearl, NL

St. John’s, NL

Stephenville, NL

47,557 sq. ft.

109,843 sq. ft.

97,522 sq. ft.

72,705 sq. ft.

99,388 sq. ft.

47,423 sq. ft.

98,931 sq. ft.

90,225 sq. ft.

73,965 sq. ft.

45,384 sq. ft.

51,807 sq. ft.

64,814 sq. ft.

33,142 sq. ft.

81,740 sq. ft.

39,857 sq. ft.

78,588 sq. ft.

53,775 sq. ft.

23,460 sq. ft.

72,777 sq. ft.

58,691 sq. ft.

38,068 sq. ft.

68,160 sq. ft.

39,870 sq. ft.

48,852 sq. ft.

84,726 sq. ft.

68,031 sq. ft.

30,931 sq. ft.

20,419 sq. ft.

53,775 sq. ft.

80,403 sq. ft.

56,096 sq. ft.

27,449 sq. ft.

59,779 sq. ft.

37,208 sq. ft.

62,312 sq. ft.

94,704 sq. ft.

50,882 sq. ft.

38,420 sq. ft.

32,517 sq. ft.

74,486 sq. ft.

87,909 sq. ft.

59,743 sq. ft.

94,704 sq. ft.

31,306 sq. ft.

●

● Standalone

● Multi-tenant

● Standalone – Land Lease

● Multi-tenant – Land Lease

● Distribution Centre

● Development Property

CT REIT 2014 ANNUAL REPORT
CT REIT 2014 ANNUAL REPORT

11
11

BOARD OF TRUSTEES AND MANAGEMENT TEAM

DAVID LAIDLEY 1, 2

Chairman of the Board,
Westmount, Quebec

BRENT HOLLISTER 2, 3

Toronto, Ontario

ANNA MARTINI 1, 2

Town of Mount Royal,
Quebec

DEAN McCANN

Toronto, Ontario

JOHN O’BRYAN 1, 3

Toronto, Ontario

STEPHEN WETMORE 2

Toronto, Ontario

KEN SILVER 3

Trustee and Management,
Toronto, Ontario

LOUIS FORBES

Management,
Toronto, Ontario

1 Audit Committee (Chair: Anna Martini)
2 Governance, Compensation and Nominating Committee (Chair: Brent Hollister)
3 Investment Committee (Chair: John O’Bryan)

12
12

CT REIT 2014 ANNUAL REPORT
CT REIT 2014 ANNUAL REPORT

CT REIT is committed to providing our Unitholders
with reliable, durable and growing distributions
and to maximizing the value of their investment.
We believe that good governance and
transparency are essential to ensuring that the
REIT meets these commitments.

Under our Declaration of Trust, a majority of
CT REIT’s Board of Trustees, including the
Chairman, must be independent and unaffiliated
with Canadian Tire Corporation. Collectively, the
REIT’s trustees have extensive experience in
corporate governance, capital markets, retail and
real estate.

The management team is responsible for CT REIT’s
day-to-day operations and the implementation of
strategy, while the Board’s mandate is to provide
governance and stewardship for the REIT and
its business. The Board’s responsibilities include
monitoring the REIT’s performance, approving
strategic goals and performance objectives, and
ensuring that policies and procedures are in place
to identify and manage the principal risks inherent
in the REIT’s business.

Management’s Discussion and Analysis

CT REIT
Fourth Quarter and Full Year 2014

TABLE OF CONTENTS

FORWARD-LOOKING DISCLAIMER

PART I

Basis of presentation

Definitions

Accounting estimates and assumptions

Quarterly and annual comparisons in this MD&A

Non-GAAP and operational key performance indicators

Review and approval by the Board of Trustees

Nature and formation

PART II

Growth strategy and objectives

PART III

Overview of the property portfolio

PART IV

Results of operations

PART V

Liquidity and financial condition

PART VI

Equity

PART VII

Related party transactions

PART VIII

Accounting policies and estimates

PART IX

Non-GAAP and operational key performance indicators

PART X

Enterprise risk management

PART XI

Disclosure and internal control over financial reporting

PART XII

Forward looking information

CT REIT 2014 ANNUAL REPORT 13

FORWARD-LOOKING DISCLAIMER

This Management’s Discussion and Analysis (“MD&A”) contains statements that are forward-looking. Actual results or events may differ materially from those

forecasted in this disclosure because of the risks and uncertainties associated with the business of CT Real Estate Investment Trust and its subsidiaries,

(unless the context requires otherwise referred to herein as “CT REIT”, the “Trust” or the “REIT”) and the general economic environment. See Part XII in this

MD&A for additional important information and a caution on the use of forward-looking statements.

CT REIT cannot provide any assurance that forecasted financial or operational performance will actually be achieved or, if it is, that it will result in an increase

in the price of CT REIT’s units.

14 CT REIT 2014 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

PART I

BASIS OF PRESENTATION

The following MD&A is intended to provide readers with an assessment of the performance of CT REIT for the year ended December 31, 2014 (also referred

to as “2014”) and should be read in conjunction with the REIT’s audited consolidated financial statements (“consolidated financial statements”) and

accompanying notes for 2014 which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). In addition, the following

MD&A should be read in conjunction with CT REIT’s information about and caution with respect to the use of forward-looking statements which can be

found in Part XII of this MD&A. Information about CT REIT, including the prospectus dated October 10, 2013 (the “Prospectus”) filed in connection with its

initial public offering (the “Offering”), Annual

Information Form (“AIF”), Annual Report, and all other continuous disclosure documents required by the

Canadian securities regulators, can be found on the System for Electronic Document Analysis and Retrieval (“SEDAR”) website at www.sedar.com and on

CT REIT’s website in the Investors section at www.ctreit.com.

DEFINITIONS

In this document, the terms “CT REIT”, “the REIT”, and “the Trust”, refer to CT Real Estate Investment Trust and its subsidiaries unless the context requires

otherwise. In addition, “the Company”, “CTC” and the “Corporation” refer to Canadian Tire Corporation, Limited, entities that it controls and their collective

businesses unless the context requires otherwise. For commonly used defined terminology refer to the glossary of terms at the end of this 2014 Annual

Report.

ACCOUNTING ESTIMATES AND ASSUMPTIONS

The preparation of the consolidated financial statements in accordance with IFRS requires management to make judgements and estimates that affect the

application of accounting policies and the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the

consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Refer to Part VIII in this MD&A for further

information.

Financial data included in this MD&A includes material information up to February 23, 2015. Disclosure contained in this document is current to that date,

unless otherwise noted.

QUARTERLY AND ANNUAL COMPARISONS IN THIS MD&A

CT REIT was established on July 15, 2013 and commenced operations on October 23, 2013. CT REIT had no operations prior to October 23, 2013. The

variances between the three months ended December 31, 2014 (“Q4 2014”) and the three months ended December 31, 2013 as well as the variances

between the year ended December 31, 2014 and the period from July 15, 2013 to December 31, 2013 (“2013”) are primarily due to the shorter operating

period in 2013.

Unless otherwise indicated, all comparisons of results for Q4 2014 and 2014 are against forecasted results for the respective period.

All amounts in this MD&A are in thousands of Canadian dollars, except unit, per unit, square foot amounts or unless otherwise indicated.

NON-GAAP AND OPERATIONAL KEY PERFORMANCE INDICATORS

Net operating income (“NOI”), funds from operations (“FFO”), FFO per Unit, adjusted funds from operations (“AFFO”), AFFO per Unit, earnings before interest

and other financing costs, taxes and fair value adjustments (“EBITFV”), interest coverage ratio, indebtedness ratio, debt to enterprise value ratio and book

value per unit are key performance indicators used by management to track and assess CT REIT’s performance in meeting its principle objective of creating

Unitholder value. Some of these measures are not defined by IFRS, also referred to as GAAP, and therefore should not be construed as alternatives to net

income or cash flow from operating activities calculated in accordance with IFRS.

Further, the key performance indicators used by management may not be comparable to similar measures presented by other real estate investment trusts

or enterprises. Net income prepared in accordance with IFRS is also subject to varying degrees of judgment, and some meaningful differences in accounting

policies exist between publicly traded entities in Canada. Accordingly, net income as presented by CT REIT may not be comparable to net income

presented by other real estate investment trusts or enterprises.

For further information on the non-GAAP and operational key performance indicators used by management and for reconciliations to the nearest GAAP

measures, refer to Part IX.

REVIEW AND APPROVAL BY THE BOARD OF TRUSTEES

The Board of Trustees (“the Board”), on the recommendation of its Audit Committee, authorized for issuance the contents of this MD&A on February 23,

2015.

CT REIT 2014 ANNUAL REPORT 15

MANAGEMENT’S DISCUSSION AND ANALYSIS

NATURE AND FORMATION

CT REIT is an unincorporated, closed-end real estate investment trust established on July 15, 2013 pursuant to a declaration of trust under, and governed

by, the laws of the Province of Ontario as amended and restated as at October 22, 2013 (the “Declaration of Trust”). CT REIT commenced operations on

October 23, 2013. The principal, registered and head office of CT REIT is located at 2180 Yonge Street, Toronto, Ontario M4P 2V8. CTC owns an 83.2%

effective interest in CT REIT as of December 31, 2014, consisting of 59,711,094 of the issued and outstanding units of CT REIT (“Units”) and all of the

issued and outstanding Class B limited partnership units (“Class B LP Units”) of CT REIT Limited Partnership (the “Partnership”), which are economically

equivalent to and exchangeable for Units. CTC also owns all of the Class C limited partnership units (“Class C LP Units”) of the Partnership. The Units are

listed on the Toronto Stock Exchange (“TSX”) under the symbol CRT.UN.

CT REIT has one segment which comprises the ownership and operation of primarily retail investment properties located in Canada.

PART II

The following section contains forward-looking information and users are cautioned that actual results may vary.

GROWTH STRATEGY AND OBJECTIVES

The principal objective of CT REIT is to create Unitholder value over the long-term by generating reliable, durable and growing monthly distributions on a tax-

efficient basis. To achieve this objective, management is focusing on expanding the REIT’s asset base while also increasing its AFFO per Unit.

Future growth is expected to be achieved from a number of sources including:

The current portfolio of Canadian Tire store leases contain contractual annual rent escalations of 1.5% per year, on average, over the initial term of the

leases and have a weighted average remaining lease term of 14.5 years;

2. CT REIT has contractual arrangements with CTC whereby CT REIT has a right of first offer (“ROFO”) on all current and future CTC properties which

meet the REIT’s investment criteria and preferential rights, subject to certain exceptions, to participate in the development of, and to acquire, certain

new retail properties; and

3. CT REIT will seek to use its relationship with CTC to obtain insights into potential real estate acquisitions and development opportunities in markets

across Canada.

PART III

OVERVIEW OF THE PROPERTY PORTFOLIO

Property Profile

The property portfolio as at December 31, 2014 consists of 268 retail properties, two distribution centres, one mixed-use commercial property and two

development properties acquired for future development. These investment properties (the “Properties”) are located in each of the provinces and two

territories across Canada and the retail properties, distribution centres and mixed-use commercial property contain approximately 20.4 million square feet of

gross leasable area (“GLA”).

CT REIT’s consolidated financial position, results of operations and property portfolio analyses include the REIT’s one-third interest in Canada Square, a

mixed-use commercial property in Toronto, ON.

CTC is CT REIT’s largest tenant. At December 31, 2014, CTC represented 97.9% of total GLA and 96.4% of annual base minimum rent.

(in square feet)

Canadian Tire stores and gas bars

Distribution centres

Mixed-use property

Third party tenants (including other CTC banners)

Total

16 CT REIT 2014 ANNUAL REPORT

GLA

Occupied GLA

Occupancy

2014

17,642,796

1,859,580

281,304

574,440

270,594

561,997

20,358,120

20,334,967

100.0%

96.2%

97.8%

99.9%

MANAGEMENT’S DISCUSSION AND ANALYSIS

(in square feet)

Canadian Tire stores and gas bars

Distribution centres

Third party tenants (including other CTC banners)

Total

Number of Properties

Standalone properties

Multi-tenant properties anchored by Canadian Tire store

Multi-tenant properties not anchored by Canadian Tire store

Distribution centres

Mixed-use property

Total Operating properties

Development properties

Total properties

Number of Gas Bars

Gas bars at retail properties

2013

GLA

Occupied GLA

Occupancy

16,792,323

1,658,165

436,670

426,727

100.0%

97.7%

18,887,158

18,877,215

99.9%

2014

2013

238

271

273

229

256

258

2014

2013

CT REIT’s properties by region, as a percentage of total GLA as at December 31, 2014 are as follows:

PROPERTIES BY REGION
(% of total GLA)
9.5%

23.2%

27.4%

39.9%

Ontario
Quebec

Western
Atlantic

Six Largest Urban Markets

As at December 31, 2014, a significant portion of CT REIT’s properties reside in the following large urban markets:

Percentage of Annualized Base Minimum Retail Rent

Toronto

Montreal

Vancouver

Ottawa

Calgary

Edmonton

2014

2013

19.1% 17.4%

13.0% 13.1%

4.1%

5.3%

1.7%

3.9%

4.5%

5.7%

1.2%

4.2%

47.1% 46.1%

CT REIT 2014 ANNUAL REPORT 17

MANAGEMENT’S DISCUSSION AND ANALYSIS

Revenue by Province

CT REIT’s portfolio is located across Canada with approximately 65.7% of annual base minimum rent received in respect of properties in Ontario and

Quebec.

PROPERTIES BY REGION
(% of Annualized Base Minimum Rent)

8.0%

26.3%

22.7%

43.0%

Ontario
Quebec

Western
Atlantic

2014 Investment Activities

(in thousands of Canadian dollars, except for GLA amounts)

Property Location

Burlington, ON1

Camrose, AB1

Medicine Hat, AB1

Oshawa, ON1

Sherbrooke, QC1

Stratford, ON1

Vaudreuil, QC1

Yorkton, SK1

Toronto, ON1

Calgary, AB1

Strathroy, ON1

Wasaga Beach, ON1

Brockville, ON1

Sturgeon Falls, ON4

Thunder Bay, ON4

Oshawa, ON4

Regina, SK4

Swift Current, SK2

Charlottetown, PEI3

St. John’s, NL3

High River, AB2

Hull, QC4

Shawinigan, QC4

Total

1 Acquisition of investment property

2 Development land acquisition

3 Development

4 Intensification of existing asset

5 Net of post-closing adjustments

18 CT REIT 2014 ANNUAL REPORT

Total
Investment
Cost5

Transaction
Date

Feb 27, 2014

Apr 30, 2014

Jun 20, 2014

Jul 17, 2014

Jul 30, 2014

Sep 26, 2014

Nov 19, 2014

Dec 01, 2014

Dec 12, 2014

Dec 22, 2014

Dec 23, 2014

GLA

63,899

28,126

63,023

87,532

97,522

97,908

73,965

34,621

281,304

201,415

67,834

54,081

70,380

8,220

17,792

12,000

7,700

–

94,704

–

4,433

3,801

1,464,964

$ 264,580

MANAGEMENT’S DISCUSSION AND ANALYSIS

For the three months ended December 31, 2014, two development land acquisitions, two developments and six intensifications were completed at a total

cost of $36,140 and were funded as follows:

(in thousands of Canadian dollars)

Funded with working capital to CTC

Funded with working capital to third parties

Total costs

Acquisitions of
investment properties

Development
land acquisition

Developments

Intensifications

Total

Q4 2014 Investment Activity

–

244

$ 244

–

3,982

$ 19,929

$ 11,951

$ 31,880

–

4,260

$ 3,982

$ 19,963

$ 11,951

$ 36,140

For the year ended December 31, 2014, thirteen investment property acquisitions, two development land acquisitions, two developments and six

intensifications were completed at a total cost of $264,580 and were funded as follows:

(in thousands of Canadian dollars)

Funded with working capital to CTC1

Funded with working capital to third parties

Issuance of Class B LP Units to CTC

Issuance of Class C LP Units to CTC

Mortgages assumed

Total costs

1 Net of post-closing adjustments.

2013 Investment Activities

Acquisitions of
investment properties

Development
land acquisition

$ 31,479

71,267

19,464

47,279

59,195

–

3,982

–

2014 Investment Activity

Developments

Intensifications

Total

$ 19,929

$ 11,951

$ 63,359

–

75,283

19,464

47,279

59,195

$ 228,684

$ 3,982

$ 19,963

$ 11,951

$ 264,580

At October 23, 2013, the REIT, indirectly, purchased a portfolio of 256 properties (the “Initial Properties”) from CTC in exchange for a combination of Class B

LP Units (which are accompanied by an equivalent number of special voting units (the ‘‘Special Voting Units’’) of CT REIT; Class A limited partnership units

(“Class A LP Units”) which were then immediately acquired by CT REIT using the net proceeds from the Offering; and Class C LP Units. The purchase price

of the Initial Properties was $3,533,668 and was supported by independent appraisals. CT REIT incurred costs on the acquisition of the Initial Properties of

$468, which was added to the carrying value of the Initial Properties upon their recognition. The purchase price was satisfied as follows:

(in thousands of Canadian dollars)

Cash1

Units acquired by CTC

Class B LP Units

Class C LP Units

Total consideration paid

2013

240,958

597,111

895,599

1,800,000

$ 3,533,668

1 Represents proceeds from the Offering less issuance costs of $22,074 and property acquisition costs of $468.

On December 23, 2013, CT REIT completed two development land acquisitions from separate third-party vendors. The total purchase price was

approximately $9,011 including acquisition costs. These acquisitions were funded with cash.

Valuation Method

The fair value of the property portfolio represents 99.6% of the total assets of CT REIT as at December 31, 2014.

(in thousands of Canadian dollars)

Balance at beginning of year

Acquisitions of investment properties (including acquisition costs)2

Development land acquisitions

Developments

Intensifications

Recoverable capital expenditures

Capitalized interest and property taxes

Straight-line rent

Fair value adjustment on investment properties

Balance at end of year

1 Based on operations beginning October 23, 2013.

2 Net of post-closing adjustments.

2014

$ 3,547,864

20131

–

228,684

3,534,136

3,982

19,963

11,951

17,052

442

28,685

141,221

9,011

–

5,185

(468)

$ 3,999,844

$ 3,547,864

CT REIT 2014 ANNUAL REPORT 19

MANAGEMENT’S DISCUSSION AND ANALYSIS

Investment properties were subject to independent valuations when initially acquired in 2013. At December 31, 2014, management’s determination of fair

value was updated for current market assumptions, utilizing market capitalization rates provided by independent valuation professionals. CT REIT also

obtained independent valuations for certain properties based on a four-year rotation cycle during which substantially all of its properties will be independently

valued.

Included in CT REIT’s property portfolio are seven buildings with a fair value of approximately $127,926 that are situated on leased land. Assuming all

extension periods are exercised, the land leases have terms between 27 and 41 years with an average remaining lease term of 34 years.

Lease Maturities

CTC is CT REIT’s largest tenant. As at December 31, 2014 CTC, including all CTC banners, had leased over 20.0 million square feet of GLA, with

approximately 90% and 9% of the GLA attributable to retail and distribution properties, respectively. The weighted average term of the retail

leases with

CTC, including all CTC banners, is 14.5 years, excluding the exercise of any renewals. The weighted average term of the Canadian Tire store leases is

14.5 years, with a weighted average rental rate of $13.03 per square foot. The weighted average lease term of the distribution centres, which are both

leased by CTC, is 15.2 years. The weighted average lease term of the total portfolio, including all tenants, is 14.4 years.

The following graph sets out as of December 31, 2014 the lease maturity profile from 2015 to 2035 (assuming tenants do not exercise renewal options or

termination rights) as a percentage of total base minimum rent and GLA as of the time of expiry.

INITIAL TERM LEASE EXPIRY BY % OF INITIAL MINIMUM RENT AND GLA

Square Feet (millions)

13.7%

11.8%

10.1%

8.2%

9.4%

7.8%

5.2%

8.6%

8.0%

6.6%

5.6%

1.9%

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.0%

0.1% 0.4% 0.3% 0.3% 0.4%

1.3%

0.4%

0.1%

15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Canadian Tire Retail GLA

Distribution Centre GLA

Other GLA

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

Notes:

1 Excludes development properties

2 Total base minimum rent excludes contractual escalation

Top 10 Tenants Excluding CTC Banners

As at December 31, 2014, CT REIT’s 10 largest tenants, excluding CTC banners, as represented by the percentage of total annualized base rental revenue,

are:

Rank Tenant Name

Overwaitea Foods

Best Buy

Precise Parklink

Marshalls

RBC Royal Bank

Shoppers Drug Mart

PetSmart

Goodlife Fitness

TV Ontario

TD Canada Trust

20 CT REIT 2014 ANNUAL REPORT

Percentage of Total
Annualized Base
Rental Revenue

0.36%

0.30%

0.26%

0.22%

0.20%

0.19%

0.18%

0.17%

0.14%

2.28%

MANAGEMENT’S DISCUSSION AND ANALYSIS

PART IV

RESULTS OF OPERATIONS

This section of the MD&A covers the three months and year ended December 31, 2014 compared to the forecasted information contained in the

Prospectus (the “Forecast”) for the same time periods.

As of December 31, 2014, management has identified the following items that have caused the actual 2014 results to be different than the Forecast:
‰ the Forecast did not assume that the over-allotment option would be exercised. Pursuant to the exercise of the over-allotment option, on November 4,

2013 CT REIT issued 3,952,500 additional Units to the public at a price of $10.00 per unit;

‰ the Forecast did not assume that CT REIT would complete any property acquisitions following October 23, 2013 and, as such, the Forecast numbers do

not reflect this activity;

‰ the Forecast did not assume a fair value adjustment on the property portfolio. During the quarter, management’s determination of fair value incorporated a

fair value adjustment of $7,305. On a year-to-date basis, management’s determination of fair value gave rise to a fair value adjustment of $141,221;

‰ the Forecast had differing assumptions for certain expenses, such as property taxes and general and administrative expenses; and
‰ the Forecast assumed a lower rate of recovery of operating expenses from tenants than was realized for 2014.

CT REIT 2014 ANNUAL REPORT 21

MANAGEMENT’S DISCUSSION AND ANALYSIS

Summary of Selected Financial and Operational Information

Readers are reminded that certain key performance indicators may not have standardized meanings under GAAP. For further information on the REIT’s

operating measures and non-GAAP financial measures, refer to Parts I and IX.

(in thousands of Canadian dollars, except per Unit, Unit and
square footage amounts)

Q4 2014

Q4 2014
Forecast

Variance

2014

2014
Forecast

Variance

Property revenue

Income before interest and other financing charges,

taxes and fair value adjustments1

Income before interest and other financing charges,

taxes and fair value adjustments/unit (basic)1, 2

Income before interest and other financing charges,

taxes and fair value adjustments/unit (diluted,

non-GAAP)1, 3

Net operating income1

Net income

Net income/Unit (basic)2

Net income/Unit (diluted)4

Funds from operations1

Funds from operations/Unit (diluted, non-GAAP)1,2,3

Adjusted funds from operations1

Adjusted funds from operations/Unit (diluted,

non-GAAP)1,2,3

Distributions/Unit – paid2

AFFO payout ratio1

Excess of AFFO over distributions:

Cash retained from operations before distribution

reinvestment7

Per Unit (diluted, non-GAAP)1,2,3

Weighted average number of Units outstanding2

Basic

Diluted4

Diluted (non-GAAP)1,3

Period-end Units outstanding2

Total assets at December 31, 2014

Total debt and Class C LP Units as at December 31,

2014

Book value per Unit as at December 31, 20141,2

OTHER DATA

Weighted average interest rate

Indebtedness ratio1

Interest coverage (times)1

Debt / enterprise value ratio1

Gross leaseable area5

Occupancy rate6

89,212 $

83,110 $

6,102 $

344,791 $

333,510 $

11,281

67,699 $

62,877 $

4,822 $

260,031 $

251,088 $

8,943

0.373 $

0.358 $

0.015 $

1.440 $

1.429 $

0.011

0.373 $

62,115 $

53,711 $

0.296 $

0.222 $

46,528 $

0.256 $

34,657 $

0.191 $

0.163 $

85%

0.358 $

57,903 $

42,295 $

0.241 $

0.176 $

42,295 $

0.241 $

31,656 $

0.180 $

0.163 $

90%

0.015 $

4,212 $

1.439 $

1.429 $

239,648 $

231,196 $

0.010

8,452

11,416 $

318,261 $

169,425 $

148,836

0.055 $

0.046 $

4,233 $

0.015 $

3,001 $

0.011 $

– $

1.762 $

1.203 $

0.965 $

0.704 $

176,798 $

169,425 $

0.979 $

0.965 $

132,866 $

126,836 $

0.736 $

0.650 $

88%

0.722 $

0.650 $

90%

0.797

0.499

7,373

0.014

6,030

0.014

–

5,170 $

0.028 $

3,030 $

0.017 $

2,140 $

0.011 $

15,520 $

0.086 $

12,682 $

0.072 $

2,838

0.014

181,468,432

175,620,865

5,847,567

180,599,151

175,620,865

4,978,286

334,627,758

355,620,865

(20,993,107)

332,346,061

355,620,865

(23,274,804)

181,524,387

175,620,865

5,903,522

180,643,636

175,620,865

5,022,771

181,485,782

175,620,865

5,864,917

181,485,782

175,620,865

5,864,917

4,017,420 $

3,596,900 $

420,520 $

4,017,420 $

3,596,900 $

420,520

1,983,773 $

1,800,000 $

(183,773) $

1,983,773 $

1,800,000 $

(183,773)

11.03 $

10.23 $

0.80 $

11.03 $

10.23 $

0.80

4.31%

49.4%

3.18

47.0%

4.50%

50.0%

3.05

50.6%

0.19%

0.6%

0.13

3.6%

4.31%

49.4%

3.13

47.0%

4.50%

50.0%

3.07

50.6%

0.19%

0.6%

0.06

3.6%

20,358,120

18,887,158

1,470,962

20,358,120

18,887,158

1,470,962

99.9%

–

99.9%

–

1 Non-GAAP key performance indicators. Refer to Part IX for further information.

2 Total Units consists of REIT Units and Class B LP Units outstanding.

3 Diluted Units used in calculating non-GAAP measures include restricted and deferred units issued under various plans and exclude the effect of assuming that all of the Class C LP Units will be settled with Class B

LP Units.

4 Diluted Units determined in accordance with IFRS includes restricted and deferred units issued under various plans and the effect of assuming that all of the Class C LP Units will be settled with Class B LP Units.

Refer to Part VI.

5 Gross leaseable area refers to retail, mixed-use and distribution properties and excludes development lands.

6 Refers to retail, mixed-use and distribution properties and excludes development lands.

7 Refer to Part VI for further information.

22 CT REIT 2014 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

Financial Results for the Three Months and Year Ended December 31, 2014

(in thousands of Canadian dollars)

Property revenue

Property expense

General and administrative expense

Interest income

Interest and other financing charges

Fair value adjustment on investment properties

Q4 2014

Q4 2014
Forecast

Variance

2014

2014
Forecast

Variance

$ 89,212

$ 83,110

$ 6,102

$ 344,791

$ 333,510

$ 11,281

(19,338)

(2,196)

(21,293)

7,305

(18,224)

(2,009)

–

(20,582)

(1,114)

(187)

(711)

–

7,305

(76,677)

(8,433)

350

(82,991)

141,221

(74,349)

(8,073)

–

(2,328)

(360)

350

(81,663)

(1,328)

–

141,221

Net income and comprehensive income

$ 53,711

$ 42,295

$ 11,416

$ 318,261

$ 169,425

$ 148,836

Property Revenue

Property revenue includes all amounts earned from tenants pursuant to lease agreements including property taxes, operating costs and other recoveries.

Many of CT REIT’s expenses are recoverable from tenants pursuant to their leases, with CT REIT absorbing these expenses to the extent of vacancies.

Total revenue for CT REIT was $89,212 for the three months ended December 31, 2014 which was $6,102 or 7.3% higher than Forecast, mainly due to

base rent related to properties acquired since the Offering which were not included in the Forecast and higher than Forecast common area maintenance

(“CAM”) recoveries, partially offset by lower property tax recoveries than Forecast. Total revenue included expense recoveries in the amount of $17,946.

Total revenue for the year ended December 31, 2014 was $344,791 which was $11,281 or 3.4% higher than Forecast, mainly due to base rent related to

properties acquired since the Offering which were not included in the Forecast and higher than Forecast CAM recoveries, partially offset by lower property

tax recoveries than Forecast. Total revenue included expense recoveries in the amount of $71,910.

The total amount of minimum lease payments to be received from operating leases is recognized on a straight-line basis over the term of the lease. For the

three months ended December 31, 2014, straight-line rent of $7,843 was included in total property revenue. For the year ended December 31, 2014,

straight-line rent of $28,685 was included in total property revenue.

Property Expense

The major components of property expense consist of property taxes and costs associated with the Property Management Agreement, as well as other

costs, the majority of which are recoverable from tenants, with CT REIT absorbing these expenses to the extent of vacancies.

Property expenses were $19,338 which is $1,114 or 6.1% higher than Forecast in the fourth quarter of 2014, largely due to property expenses related to

acquisitions, partially offset by lower property tax expense for the Initial Properties. Refer to Part VII for additional information on the Property Management

Agreement.

For the year ended December 31, 2014, property expenses were $76,677 which is $2,328 or 3.1% higher than Forecast, largely due to property expenses

related to acquisitions, partially offset by lower property tax expense for the Initial Properties.

Net Operating Income

CT REIT defines NOI as property revenue less property expense, adjusted further for straight-line rent and land lease adjustments. Management believes

that NOI is a useful key indicator of performance as it represents a measure over which management of property operations has control. NOI is also a key

input in determining the value of the portfolio.

(in thousands of Canadian dollars)

Property revenue

Less:

Property expense

Straight-line rent adjustment

Add:

Q4 2014

Q4 2014
Forecast

Variance

2014

2014 Forecast

Variance

$ 89,212

$ 83,110

$ 6,102

$ 344,791

$ 333,510

$ 11,281

(19,338)

(7,843)

(18,224)

(7,015)

(1,114)

(828)

(76,677)

(28,685)

(74,349)

(28,093)

(2,328)

(592)

Straight-line land lease expense adjustment

219

128

Net operating income1

$ 62,115

$ 57,903

$ 4,212

$ 239,648

$ 231,196

$ 8,452

1 Non-GAAP key performance measure. Refer to Part IX in this MD&A for further information.

For the three months and year ended December 31, 2014, there are two principal reasons for the variance in NOI:
‰ Acquisitions made to-date contributed $4,500 to NOI

in Q4 2014 and $8,217 to NOI on a year-to-date basis. The Forecast did not assume any

acquisitions in 2014.

CT REIT 2014 ANNUAL REPORT 23

MANAGEMENT’S DISCUSSION AND ANALYSIS

‰ There is a negative variance of approximately $200 in both the fourth quarter and full year results resulting from the timing of recoverable capital
expenditures, partially offsetting the benefit of acquisitions. The Forecast assumed that the capital improvements would be largely completed in the second

and third quarter of 2014 and that the run rate of recoveries during the fourth quarter would be close to a full rate of recovery. The actual results reflect the

expenditure of recoverable capital amounts in the third and fourth quarter, thereby delaying a full run rate of recovery revenue until the first quarter of 2015.

General and Administrative Expense

CT REIT has two broad categories of general and administrative expenses: i) public entity costs, and ii) outsourcing costs. The public entity costs reflect the

expenses related to ongoing operations of CT REIT which will fluctuate depending on when such expenses are incurred. The outsourcing costs are largely

related to the services provided by CTC pursuant to the Services Agreement. The Services Agreement provides for services to the REIT to be on a cost-

recovery basis with a fixed maximum fee for the first two calendar years. As such, costs did not fluctuate materially from quarter to quarter during 2014 and

are not expected to materially fluctuate in 2015. Refer to Part VII for additional information on the Services Agreement.

(in thousands of Canadian dollars)

Services Agreement

Public entity costs

General and administrative expense

As a percent of property revenue

Q4 2014

816

1,380

$ 2,196

2.5%

Q4 2014
Forecast

822

1,187

$ 2,009

Variance

(193)

$ (187)

2.4%

(0.1%)

2014

$ 3,288

5,145

$ 8,433

2.4%

2014
Forecast

$ 3,288

4,785

$ 8,073

2.4%

Variance

–

(360)

$ (360)

–

General and administrative expenses amounted to $2,196 or 2.5% of property revenue in Q4 2014 which is $187 or 9.3% higher than the Forecast mainly

due to higher legal and consulting costs, which were not included in the Forecast; partially offset by income resulting from the recognition of a deferred tax

asset, which was not included in the Forecast.

General and administrative expenses amounted to $8,433 or 2.4% of property revenue on a year-to-date basis which is $360 or 4.5% higher than Forecast

mainly due to higher legal and consulting costs and a fair value adjustment of equity awards, which were not included in the Forecast; partially offset by

income resulting from the recognition of a deferred tax asset, which was not included in the Forecast.

Interest Income

Interest income of $21 in Q4 2014 and $350 on a year-to-date basis is attributable to the interest earned from investing the REIT’s available cash in short-

term marketable securities.

Interest Expense

The Partnership has issued 1,847,279 Class C LP Units with a face value of $1,847,279 and bearing a weighted average distribution rate of 4.44% per

annum. The Class C LP Units are subject to redemption rights. Accordingly, the Class C LP Units are classified as financial liabilities and distributions on the

Class C LP Units are presented in interest expense in the consolidated statement of income and comprehensive income.

(in thousands of Canadian dollars)

Interest on Class C LP Units1

Mortgage interest

Bank Credit Facility interest

Bank Credit Facility costs

Less: capitalized interest

Q4 2014

Q4 2014
Forecast

Variance

2014

2014
Forecast

Variance

$ 20,515

$ 20,416

$ (99)

$ 81,643

$ 81,000

407

246

162

21,330

(37)

–

166

20,582

–

(407)

(246)

(748)

652

355

674

83,324

(333)

–

663

81,663

–

(643)

(652)

(355)

(11)

(1,661)

333

Interest and other financing charges

$ 21,293

$ 20,582

$ (711)

$ 82,991

$ 81,663

$ (1,328)

1 CTC elected to defer receipt of distributions on the Series 2-12 Class C LP Units for the three months and year ended December 31, 2014 in the amount of $18,765 and $68,425, respectively, until the first

business day following the end of the fiscal year and receive a loan in lieu thereof, which has been netted against interest payable on Class C LP Units and is included under the heading “other liabilities” on the

consolidated balance sheets.

CT REIT recognized interest expense of $21,293 and $82,991 during the three months and year ended December 31, 2014, respectively, which is $711

and $1,328, respectively, higher than Forecast largely due to mortgages assumed, draws on the bank credit facility (“Bank Credit Facility”), and the

issuances of 47,279 Class C LP Units during the first and second quarters, all in connection with acquisitions completed during the year, which were not

included in the Forecast. These variances were partially offset by the capitalization of interest in respect of development properties, which was also not

included in the Forecast.

During the fourth quarter of 2014, CT REIT recorded $41 to amortize the facility fee and agency fee and $121 in standby fees on the REIT’s committed Bank

Credit Facility. The standby fee is incurred at a rate of 0.24% per annum on the full amount of the Bank Credit Facility. Refer to Part V for additional

information on CT REIT’s Bank Credit Facility.

24 CT REIT 2014 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

Fair Value Adjustment on Investment Properties

During the quarter, CT REIT recorded a fair value gain of $7,305 on the portfolio of investment properties as a result of increased cash flows during the time

frame of the valuation models partially offset by the deduction of transaction costs incurred in connection with the acquisition of investment properties.

For the year ended December 31, 2014, CT REIT recorded a fair value gain of $141,221 on the portfolio of investment properties. Management’s

determination of fair value as at March 31, 2014 incorporated valuation parameters used by the independent appraisers, which gave rise to a fair value

adjustment of $126,959; management had previously placed greater weight on the valuations implied by the Offering. Fair value gains of $14,262 were

recorded in the remaining three quarters during 2014 as a result of increased cash flows during the time frames of the valuation models partially offset by the

deduction of transaction costs incurred in connection with the acquisition of investment properties.

Income Tax Expense

Management operates CT REIT in a manner that enables CT REIT to continue to qualify as a REIT pursuant to the Income Tax Act (Canada) (“ITA”). CT REIT

distributes 100% of its taxable income to Unitholders and therefore does not incur income tax expense in relation to its activities.

If CT REIT fails to distribute the required amount of income to Unitholders or if CT REIT fails to qualify as a REIT under the ITA, substantial adverse tax

consequences may occur. Refer to Part X for additional information on CT REIT’s enterprise risk management program.

Leasing Activities

The future financial performance of CT REIT will be impacted by occupancy rates, trends in rental rates achieved on leasing or renewing currently leased

space, and contractual increases in rent. There was no new significant leasing activity with tenants not related to CTC during the year ended December 31,

2014.

Recoverable Capital Costs

Many of the capital items that will be incurred by CT REIT are recoverable from tenants pursuant to the terms of their leases. The recoveries will occur either

in the year in which such expenditures are incurred or, in the case of a major item of repair, maintenance or replacement, on a straight-line basis over the

expected useful life together with an imputed rate of interest on the unrecovered balance at any point in time. From time to time, as a result of specific lease

terms which limit the recovery of expenses, CT REIT is unable to recover these costs from certain tenants. Capital expenditures of $6,188 and $17,052 were

incurred during the three months and year ended December 31, 2014, respectively. Management expects that most of the REIT’s recoverable capital

expenditures should relate to parking lots, roofs and heating, ventilation and air conditioning (“HVAC”), activities that are typically seasonal.

PART V

LIQUIDITY AND FINANCIAL CONDITION

Liquidity

CT REIT intends to fund capital expenditures for acquisitions and development activities through (i) cash on hand, (ii) issuances of Units, Class B LP Units

and Class C LP Units (iii) draws on the Bank Credit Facility, and/or (iv) other long-term financing.

(in thousands of Canadian dollars)

Cash and cash equivalents

Unused portion of Bank Credit Facility

Liquidity

As at December 31,
2014

As at December 31,
2013

2,710

122,000

$ 124,710

$ 46,999

200,000

$ 246,999

Cash flow generated from operating the property portfolio represents the primary source of liquidity to service debt and to fund planned maintenance

expenditures, leasing costs, general and administrative expenses and distributions to Unitholders and distributions on Class B LP Units (other sources being

interest income as well as cash on hand).

(in thousands of Canadian dollars)

Cash generated from operating activities2

Cash used for investing activities2

Cash (used for) generated from financing activities

Cash (used) generated in the period

1 Based on operations beginning October 23, 2013.

2 Prior year figures have been restated. Refer to note 25 of the consolidated financial statements.

2014

20131

$ 233,789

39,775

(157,543)

(120,535)

(250,437)

257,661

$ (44,289)

46,999

CT REIT 2014 ANNUAL REPORT 25

MANAGEMENT’S DISCUSSION AND ANALYSIS

Discussion of Cash Flows During the Year

Cash used during the year ended December 31, 2014 in the amount of $44,289 is primarily the result of investing activity exceeding retained cash flow.

Cash generated during the period ended December 31, 2013 of $46,999 primarily related to retained cash flow and net proceeds from the Offering offset by

2013 acquisition activity.

Credit Ratings

CT REIT is rated by two independent credit rating agencies: DBRS Limited (“DBRS”) and Standard & Poor’s Financial Services LLC (“S&P”) which provide

credit ratings of debt securities for commercial entities. A credit rating generally provides an indication of the risk that the borrower will not fulfill

its full

obligations in a timely manner with respect to both interest and principal commitments. Rating categories range from highest credit quality (generally “AAA”)

to default in payment (generally “D”).

CT REIT’s ratings are related to and currently equivalent to those of CTC, CT REIT’s most significant tenant for the forseeable future. This ratings

equivalence is largely based on CTC’s significant ownership position in CT REIT and the strategic relationship between and integration of CT REIT and CTC.

The following table sets out the current credit ratings of CT REIT:

Credit Ratings (Canadian Standards)

Issuer rating

Debt and Capital Structure

CT REIT’s debt and capital structure as at December 31 is as follows:

(in thousands of Canadian dollars)

Class C LP Units

Mortgages payable

Bank Credit Facility

Total indebtedness

Unitholders’ equity

Non-controlling interests

DBRS

S&P

Credit Rating

Trend

Credit Rating

BBB (high)

Stable

BBB+

Trend

Stable

As at December 31,
2014

As at December 31,
2013

$ 1,847,279

$ 1,800,000

58,494

78,000

1,983,773

982,588

1,019,601

–

1,800,000

880,199

900,187

Total capital under management

$ 3,985,962

$ 3,580,386

CT REIT’s total indebtedness at December 31, 2014 is higher than the period ended December 31, 2013 due to the assumption of mortgages, the issuance

of the additional Class C LP Units, and draws on its Bank Credit Facility in connection with its 2014 investment activities.

CT REIT’s Unitholders’ equity and non-controlling interest at December 31, 2014 increased as compared to December 31, 2013 as a result of retained cash

flow exceeding distributions.

Future payments are as follows:

(in thousands of Canadian dollars)

For the period ending December 31:

2015

2016

2017

2018

2019

2020 and thereafter

Total contractual obligation

Unamortized portion of mark to market interest rates on liabilities

assumed in connection with the acquisition of properties

Unamortized debt financing cost

26 CT REIT 2014 ANNUAL REPORT

Mortgages Payable

Principal
Amortization

Maturities

Class C
LP Units

Bank Credit
Facility

Total

200,000

$ 78,000

279,158

$ 1,158

1,199

1,241

422

–

16,661

37,625

200,000

47,279

–

1,400,000

–

201,199

48,520

17,083

37,625

1,400,000

4,020

54,286

1,847,279

78,000

1,983,585

–

381

(193)

–

381

(193)

$ 4,020

$ 54,474

$ 1,847,279

$ 78,000

$ 1,983,773

MANAGEMENT’S DISCUSSION AND ANALYSIS

Interest rates on CT REIT’s indebtedness range from 1.28% to 5.00%. The maturity dates on the indebtedness range from May 2015 to May 2038.

Indebtedness at December 31, 2014 has a weighted average interest rate of 4.31%. At December 31, 2014, floating rate and fixed rate indebtedness were

$109,133 and $1,874,640, respectively.

(in thousands of Canadian dollars)

Variable rate debt

Total debt

Variable rate debt / total debt

The following table presents the contractual maturities of CT REIT’s financial liabilities:

As at December 31,
2014

As at December 31,
2013

109,133

–

$ 1,983,773

$ 1,800,000

5.50%

–

(in thousands of Canadian dollars)

Class C LP Units1

Payments on Class C LP Units1

Other liabilities

Payable on Class C LP Units, net of loans receivable

Distributions payable2

Mortgages payable

Bank Credit Facility

1 Assumes redemption on maturity of initial fixed rate period for each series .

2 On Units and Class B LP Units .

Payments Due By Period

Total

1 year

2-3 years

4-5 years

After 5 years

$ 1,847,279

$ 200,000

$ 247,279

–

$ 1,400,000

$ 1,066,314

$ 77,977

$ 138,419

$ 134,000

14,593

6,838

10,027

58,306

78,000

$ 14,033

6,838

$ 10,027

1,158

$ 78,000

560

–

2,440

$ 54,708

–

715,918

–

The table below presents CT REIT’s interest in assets at fair value that are available to it to finance and/or refinance its debt as at December 31, 2014:

(in thousands of Canadian dollars, except percentage amounts)

Unencumbered investment property assets

Unencumbered development property assets

Unencumbered assets

Encumbered assets

Total

Number of
Properties

266

268

273

The table below presents CT REIT’s secured debt as a percentage of total debt:

(in thousands of Canadian dollars)

Secured debt

Total debt

Secured debt / total debt

The table below presents CT REIT’s debt to EBITFV ratio:

(in thousands of Canadian dollars)

Total debt

EBITFV2

Total debt / EBITFV

1 CT REIT’s debt to EBITFV ratio normalized for 70 operating days in 2013 is 7.33.

2 Non-GAAP key performance indicator. Refer to Part IX for further information.

Fair Value of
Income
Properties

$ 3,874,371

3,984

3,878,355

121,489

Percentage
of Total
Assets

Mortgages
Payable

Debt to Book
Value Ratio

96.4%

0.1%

–

3.0%

58,494

–

0.48

0.01

$ 3,999,844

99.5%

$ 58,494

As at December 31,
2014

As at December 31,
2013

58,494

–

$ 1,983,773

$ 1,800,000

2.95%

–

As at December 31,
2014

As at December 31,
20131

$ 1,983,773

$ 1,800,000

260,031

47,113

7.63

38.21

CT REIT 2014 ANNUAL REPORT 27

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following section contains forward-looking information and users are cautioned that actual results may vary.

Class C LP Units

At December 31, 2014 there were 1,847,279 Class C LP Units outstanding, all of which were held by CTC. The Class C LP Units are designed to provide

CTC with an interest in the Partnership that entitles holders to a fixed cumulative monthly payment during the initial fixed rate period for each Series of Class

C LP Units (the “Initial Fixed Rate Period”) equal to a weighted average of 4.44% of the aggregate capital amount ascribed to the Class C LP Units, in priority

to distributions made to holders of the Class A LP Units, Class B LP Units and CT REIT GP Corp. (“GP”) Units (subject to certain exceptions), if, as and

when declared by the Board of Directors of the GP, payable monthly at an annual distribution rate for each series as set out in the table below. In addition,

the Class C LP Units are entitled to receive Special Voting Units in certain limited circumstances.

During the five-year period beginning immediately following the completion of the Initial Fixed Rate Period, and each five-year period thereafter, the fixed

payment rate for Class C LP Units will be reset, and the holders of Class C LP Units will be entitled, subject to certain conditions, to elect either a fixed rate

or floating rate option.

On expiry of the Initial Fixed Rate Period applicable to each series of Class C LP Units, and every five years thereafter, each such series of Class C LP Units

is redeemable at par (together with all accrued and unpaid payments thereon) at the option of the Partnership or the holder, upon giving at least 120 days’

notice. The Partnership further has the ability to redeem any of the Class C LP Units at any time after January 1, 2019 at a price equal to the greater of par

and a price to provide a yield equal to the then equivalent Government of Canada bond yield plus a spread, so long as such redemption is in connection

with a sale of properties.

Such redemptions of Class C LP Units (other than upon a change of control at CT REIT) can be settled, at the option of the Partnership, in cash or Class B

LP Units of equal value.

The following table presents the details of the Class C LP Units:

Series of Class C LP Units

Series 1

Series 2

Series 3

Series 4

Series 5

Series 6

Series 7

Series 8

Series 9

Series 10

Series 11

Series 12

Total / weighted average

Current

Non-current

Total

Annual Distribution
Rate During Initial
Fixed Rate Period

Expiry of Initial Fixed
Rate Period

% of Total
Class C
LP Units1

3.50%

4.50%

5.00%

2.38%

2.20%

2.23%

4.44%

May 31, 2015 (0.4 years)

May 31, 2016 (1.4 years)

May 31, 2020 (5.4 years)

May 31, 2024 (9.4 years)

May 31, 2028 (13.4 years)

May 31, 2031 (16.4 years)

May 31, 2034 (19.4 years)

May 31, 2035 (20.4 years)

May 31, 2038 (23.4 years)

May 31, 2017 (2.4 years)

10.8%

0.4%

1.1%

12.0 years

100%

Initial Subscription
Price ($000)

200,000

7,130

20,685

19,464

$ 1,847,279

200,000

1,647,279

$ 1,847,279

1 This column adds to 100%, the percentages of individual series have been rounded.

Assuming a future economic environment that is substantially similar to the current environment, management does not foresee any material impediments to

refinancing a redemption request.

28 CT REIT 2014 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

Mortgages Payable

Mortgages payable, secured by certain of CT REIT’s investment properties, include the following:

(in thousands of Canadian dollars)

Current

Non-current

Total

As at December 31, 2014

As at December 31, 2013

Face value

Carrying
amount

Face value

Carrying
amount

$ 1,158

$ 1,275

57,148

57,219

$ 58,306

$ 58,494

$ –

–

$ –

–

$ –

The REIT’s one-third interest in a mixed-use commercial property in Toronto, ON, was refinanced in Q4 2014 with no change in the loan amount and a

decrease in the credit spread from 3% per annum to 1.65% per annum.

Bank Credit Facility

The Partnership has a $200,000, revolving Bank Credit Facility, which is available to the Partnership until October 2017, with an option to increase it by an

additional $100,000. The Bank Credit Facility bears interest at a rate based on the bank’s prime rate of interest or bankers’ acceptances plus a margin. A

stand-by fee is charged on the Bank Credit Facility.

As at December 31, 2014, $78,000 (2013 – nil) of cash advances had been drawn on the Bank Credit Facility. The unamortized balance of transaction costs

incurred in connection with the arrangement of the Bank Credit Facility of $434 is recorded in other assets on the consolidated balance sheets. For the year

ended December 31, 2014, amortization of the transaction costs of $182, as well as the standby fee of $492 are included in interest and other financing

charges on the consolidated statement of income and comprehensive income.

The table below summarizes the details of the Bank Credit Facility as at December 31, 2014:

(in thousands of Canadian dollars)

Bank Credit Facility
Maximum Loan Amount

$ 200,000

Cash Advances

$ 78,000

Letters of Credit

Available to be Drawn

$ –

$ 122,000

The Bank Credit Facility is subject to the maintenance of certain financial covenants and as at December 31, 2014 CT REIT was in compliance with all such

financial covenants.

The following section contains forward-looking information and users are cautioned that actual results may vary.

Capital Strategy

Management expects the REIT’s future debt will be in the form of:
‰ Class C LP Units (treated as debt for accounting purposes);
‰ funds drawn on the Bank Credit Facility;
‰ unsecured public debt; and
‰ limited use of secured debt assumed upon acquisition of properties.

Management’s objectives are to access the lowest cost of capital with the most flexible terms, to have a maturity/redemption schedule (for fixed term

obligations) spread over a time horizon so as to manage refinancing risk, and to be in a position to finance acquisition opportunities when they become

available.

The Declaration of Trust limits the REIT’s overall indebtedness ratio to 60% of total assets, excluding convertible debentures, and 65% including convertible

debentures. This limitation is in relation to the assets of CT REIT in aggregate.

CT REIT’s indebtedness ratio was 49.4% as at December 31, 2014. Refer to Part IX for the definition and calculation of CT REIT’s indebtedness ratio.

At December 31, 2014 CT REIT was in compliance with all investment guidelines and operating policies contained in the Declaration of Trust.

CT REIT has also adopted interest coverage guidelines which provide an indication of the ability to service or pay the interest charges relating to the

underlying debt.

CT REIT will generally operate its affairs and manage its capital structure so that its interest coverage ratio is in a range of 2.4 to 3.8 times. For the year

ended December 31, 2014, CT REIT’s interest coverage ratio was 3.1 times. Refer to Part IX for the definition and calculation of CT REIT’s interest coverage

ratio.

CT REIT 2014 ANNUAL REPORT 29

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following section contains forward-looking information and users are cautioned that actual results may vary.

Commitments and Contingencies

CT REIT has committed to expansion or development expenditures representing approximately $18,530 in payments primarily to CTC, which are expected

to be incurred in 2015.

CT REIT has sufficient liquidity to fund these future commitments as a result of (i) its conservative use of leverage on the balance sheet, (ii) liquidity on hand,

(iii) its Bank Credit Facility, (iv) an investment grade credit rating, (v) unencumbered assets, and (vi) sufficient operating cash flow retained in the business.

Subsequent Events

A redemption notice was submitted by CT REIT to CTC, the holder of Series 1 of the Class C LP Units, which have a maturity date of May 31, 2015. As a

result, this series of Class C LP Units will either be redeemed or will have their rate reset, in either case effective May 31, 2015.

During February 2015, CT REIT completed five investment property acquisitions from CTC including two retail properties in Ontario, two in Quebec and one

in Alberta. The total purchase price of approximately $62,000 was satisfied by an issuance of 4,799,539 Class B LP Units.

The following section contains forward-looking information and users are cautioned that actual results may vary.

Base Shelf Prospectus

CT REIT intends to file a base shelf prospectus in Q1 2015 under which it may raise up to $1.5 billion of debt and equity capital. The shelf also qualifies the

sale of CT REIT Units by CTC.

PART VI

EQUITY

Authorized Capital and Outstanding Units

CT REIT is authorized to issue an unlimited number of Units. As of December 31, 2014, CT REIT had a total of 90,188,210 Units outstanding, 59,711,094 of

which were held by CTC and 91,297,572 Class B LP Units outstanding (together with a corresponding number of Special Voting Units), all of which were

held by CTC.

Class B LP Units are economically equivalent to Units, are accompanied by a Special Voting Unit and are exchangeable at the option of the holder for Units

(subject to certain conditions). Holders of the Class B LP Units are entitled to receive distributions when declared by the Partnership equal to the per unit

amount of distributions payable on the Units. However, Class B LP Units have limited voting rights over the Partnership.

The following table summarizes the total number of Units issued:

Total outstanding at beginning of year

Issued

Total outstanding at end of period

Total outstanding at beginning of year

Issued

Total outstanding at end of period

As at December 31, 2014

Units

Class B
LP Units

Total

90,026,773

89,559,871

179,586,644

161,437

1,737,701

1,899,138

90,188,210

91,297,572

181,485,782

As at December 31, 2013

Units

–

Class B
LP Units

–

Total

–

90,026,773

89,559,871

179,586,644

90,026,773

89,559,871

179,586,644

Each Unit is transferable and represents an equal, undivided beneficial interest in the REIT and any distributions from the REIT. Each Unit entitles the holder

to one vote at all meetings of Unitholders.

Special Voting Units are only issued in tandem with Class B LP Units, or in limited circumstances, to holders of the Class C LP Units and are not transferable

separately from the Class B LP Units or Class C LP Units to which they relate. Each Special Voting Unit entitles the holder thereof to one vote at all meetings

30 CT REIT 2014 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

of Unitholders or with respect to any written resolution of Unitholders. Except for the right to attend meetings and vote on resolutions, Special Voting Units

do not confer upon the holders thereof any other rights.

Net income attributable to Unitholders and weighted average Units outstanding used in determining basic and diluted net income per Unit are calculated as

follows:

Net income attributable to Unitholders – basic

Income effect of settling Class C LP Units with Class B LP Units

Net income attributable to Unitholders – diluted

Weighted average Units outstanding – basic

Dilutive effect of other Unit plans

Dilutive effect of settling Class C LP Units with Class B LP Units

Weighted average Units outstanding – diluted

Net income attributable to Unitholders – basic

Income effect of settling Class C LP Units with Class B LP Units

Net income attributable to Unitholders – diluted

Weighted average Units outstanding – basic

Dilutive effect of other Unit plans

Dilutive effect of settling Class C LP Units with Class B LP Units

Weighted average Units outstanding – diluted

Year ended December 31, 2014

Units

Class B
LP Units

159,282

158,979

Total

318,261

81,643

399,904

90,110,919

90,488,232

180,599,151

44,485

151,702,425

332,346,061

Period ended December 31, 2013

Units

Class B
LP Units

15,269

15,727

Total

30,996

15,534

46,530

89,339,035

89,559,871

178,898,906

25,148

168,299,232

347,223,286

The calculation of diluted per Unit amounts is determined on a combined basis for the Units and the Class B LP Units given that the Class B LP Units are

exchangeable into Units on a one for one basis and are entitled to an equivalent amount of net income per Class B LP Unit as the Units, and to reflect the

dilutive effect of potentially settling Class C LP Units with Class B LP Units.

Equity

Equity – beginning of the period

Issuance of Trust Units, net of issue costs

Issuance of Class B LP Units, net of issue costs

Net income and comprehensive income for the year

Issuance of Units under Distribution Reinvestment Plan

Distributions to non-controlling interests

Distributions to Unitholders

Equity – end of the period

2014

$ 1,780,386

–

19,406

318,261

1,781

(58,971)

(58,674)

2013

–

875,988

895,599

30,996

136

(11,139)

(11,194)

$ 2,002,189

$ 1,780,386

The following section contains forward-looking information and users are cautioned that actual results may vary.

Distributions

CT REIT’s primary business goal

is to accumulate a portfolio of high-quality real estate assets and deliver the benefits of such real estate ownership to

Unitholders. The primary benefit to Unitholders is expected to be reliable, durable and growing distributions, over time.

In determining the amount of the monthly distributions paid to Unitholders, the Board applies discretionary judgment to forward-looking cash flow

information, such as forecasts and budgets, and many other factors including provisions in the Declaration of Trust, the macro-economic and industry-

specific environment, debt maturities and covenants and taxable income.

CT REIT 2014 ANNUAL REPORT 31

MANAGEMENT’S DISCUSSION AND ANALYSIS

The Board regularly reviews CT REIT’s rate of distributions to ensure an appropriate level of distributions.

On November 3, 2014, the Board reviewed the then current rate of distributions of $0.650 per Unit per year and approved an increase in the annual rate of

distribution to $0.663 effective with the first distribution paid in 2015.

On December 15, 2014, CT REIT’s Board declared a distribution of $0.05525 per Unit paid on January 15, 2015 to holders of Units and Class B LP Units of

record as of December 31, 2014.

On January 15, 2015, CT REIT’s Board declared a distribution of $0.05525 per Unit which was paid on February 13, 2015 to holders of Units and Class B

LP Units of record as of January 30, 2015.

On February 13, 2015, CT REIT’s Board declared a distribution of $0.05525 per Unit payable on March 13, 2015 to holders of Units and Class B LP Units of

record as of February 27, 2015.

Net income prepared in accordance with IFRS recognizes certain revenues and expenses at time intervals that do not match the receipt or payment of cash.

Therefore, in applying judgment, consideration is given to AFFO (which is the product of the cash generated from, and required for, operating activities) and

other factors when establishing distributions to Unitholders.

(in thousands of Canadian dollars, except per Unit amounts)

Distributions before distribution reinvestment – paid

Distribution reinvestment

Distributions paid net of distribution reinvestment

Distributions per Unit – paid

1 Based on operations beginning October 23, 2013.

2014

20131

$ 117,346

$ 22,333

1,781

136

$ 115,565

$ 22,197

0.650

$ 0.124

The distributions per unit for the year are higher than 2013 because 2013 reflected a partial period with only 70 days of operations. The distributions match

the Forecast.

CT REIT’s distributions are less than the REIT’s cash generated from operating activities, cash generated from operations reduced by interest expense and

AFFO.

(in thousands of Canadian dollars, except per Unit amounts)

AFFO2

Distributions paid before distribution reinvestment

Excess of AFFO over distributions paid

1 Based on operations beginning October 23, 2013.

2 Non-GAAP key performance indicator. Refer to Part IX for further information.

PART VII

RELATED PARTY TRANSACTIONS

2014

20131

$ 132,866

$ 23,467

117,346

22,333

$ 15,520

$ 1,134

CT REIT’s controlling Unitholder is CTC, which, on December 31, 2014, held an approximate 83.2% effective interest in the REIT, through ownership of

59,711,094 Units and all of the issued and outstanding Class B LP Units and Class C LP Units.

In addition to its ownership interest, CTC is CT REIT’s largest tenant representing approximately 96.4% of the annual base minimum rent earned by CT REIT

and approximately 97.9% of its GLA as at December 31, 2014.

In the normal course of its operations, CT REIT enters into various transactions with related parties that have been valued at amounts agreed to between the

parties and recognized in the consolidated financial statements. Investment property transactions with CTC amounted to $31,880 and $130,102 for the

three months and year ended December 31, 2014. Refer to note 4 to the consolidated financial statements for additional information.

Services Agreement

Under the Services Agreement, CTC provides the Partnership and CT REIT with certain administrative, legal, financial, information technology, internal audit

and other support services as may be reasonably required from time to time (the “Services”). CTC provides these Services to CT REIT on a cost-recovery

basis pursuant to which CT REIT reimburses CTC for all costs and expenses incurred by CTC in connection with providing the Services, plus applicable

taxes, with a fixed maximum fee not to exceed $3,288 for the year ended December 31, 2014 with adjustments to such fee based on the Consumer Price

32 CT REIT 2014 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

Index (“CPI”) for the following year. The CPI factor for 2015 is 1.4%. The Services Agreement’s initial term ends on December 31, 2015 and is renewable for

further one year terms thereafter, unless otherwise terminated. The Services Agreement has been renewed for 2016.

Property Management Agreement

Under the Property Management Agreement, CTC provides the Partnership with customary property management services (the ‘‘Property Management

Services’’). CTC agreed to provide Property Management Services to the Partnership on a cost-recovery basis pursuant to which the Partnership

reimburses CTC for all costs and expenses incurred by CTC in connection with providing the Property Management Services, plus applicable taxes, with a

fixed maximum fee not to exceed $2,333 for the year ended December 31, 2014, with adjustments to such fee based on the CPI for the following year,

which is 1.4% for 2015. The Property Management Agreement’s initial term ends on December 31, 2015 and is renewable for further one year terms

thereafter, unless otherwise terminated. The Property Management Agreement has been renewed for 2016.

Development Agreement

CT REIT, the Partnership and CTC entered into the Development Agreement for a term expiring on the later of: (i) 10 years from the Closing; (ii) the time

when CTC ceases to hold, directly or indirectly, a majority of the Voting Units comprising any combination of Units and Special Voting Units. Pursuant to the

Development Agreement CT REIT has a preferential right to participate in property developments that meet CT REIT’s investment and other criteria, an

option to purchase development properties and an option to provide mezzanine financing for development properties. The Agreement requires CTC to

present, in certain circumstances, new shopping centre acquisition opportunities in Canada to the REIT.

Refer to CT REIT’s AIF for additional information on related party agreements and arrangements with CTC.

CT REIT’s policy is to conduct all transactions and settle all balances with related parties on market terms and conditions. The following table summarizes

CT REIT’s related party transactions as at December 31, 2014:

(in thousands of Canadian dollars)

Rental revenue

Property Management and Services Agreement expense

Distributions on Units

Distributions on Class B LP Units

Interest expense on Class C LP Units

1 Based on operations beginning October 23, 2013.

2 Excludes acquisition activity. See Part III for further information.

The net balance due to CTC is comprised of the following:

(in thousands of Canadian dollars)

Tenant and other receivables

Class C LP Units

Interest payable on Class C LP Units

Loans receivable in lieu of payments on Class C LP Units

Other liabilities

Loans receivable in lieu of distributions on Class B LP Units

Distributions payable on Units and Class B LP Units

Net due to CTC

PART VIII

ACCOUNTING POLICIES AND ESTIMATES

Significant Areas of Estimation

20142

20131 2

$ 332,212

$ 61,342

5,621

38,877

58,971

81,643

1,090

7,426

11,139

15,534

2014

(8,505)

2013

(554)

1,847,279

1,800,000

75,263

(68,425)

6,023

(565)

8,908

14,778

(7,991)

2,503

–

8,086

$ 1,859,978

$ 1,816,822

The preparation of the consolidated financial statements requires management to apply judgments, and to make estimates and assumptions that affect the

reported amounts of assets, liabilities, revenues and expenses. Estimates are based upon historical experience and on various other assumptions that are

reasonable under the circumstances. The result of ongoing evaluation of these estimates forms the basis for applying judgment with regards to the carrying

values of assets and liabilities and the reported amounts of revenues and expenses. Actual results may differ from estimates. CT REIT’s significant

accounting policies are described in note 3 to the annual consolidated financial statements, the most significant of which is the fair value of investment

properties.

CT REIT 2014 ANNUAL REPORT 33

MANAGEMENT’S DISCUSSION AND ANALYSIS

Fair Value of Investment Properties

To determine fair value, CT REIT uses the income approach. Fair value is estimated by capitalizing the cash flows that a property can reasonably be

expected to produce over its remaining economic life. The income approach is derived from two methods: the overall capitalization rate (“OCR”) method,

whereby the net operating income is capitalized at the requisite OCR, or the discounted cash flow (“DCF”) method, in which the cash flows are projected

over the anticipated term of the investment plus a terminal value discounted using an appropriate discount rate.

Properties under development are measured using a DCF method, net of costs to complete, as of the balance sheet date. Development sites in the

planning phases are measured using comparable market prices for similar assets.

New standards implemented

Financial instruments presentation: Asset and liability offsetting

In December 2011, the IASB amended IAS 32 – Financial Instruments: Presentation (“IAS 32”) to clarify the requirements which permit offsetting a financial

asset and liability in the financial statements. The IAS 32 amendments were effective for annual periods beginning on or after January 1, 2014 and were

applied retrospectively. The implementation of the IAS 32 amendments did not have an impact on CT REIT.

Financial instruments: Novation of derivatives and continuation of hedge accounting

In June 2013, the IASB issued Novation of Derivatives and Continuation of Hedge Accounting – Amendments to IAS 39. This amendment to IAS 39 –

Financial Instruments: Recognition and Measurement provides an exception to the requirement to discontinue hedge accounting in situations where over-

the-counter derivatives designated in hedging relationships are directly or indirectly novated to a central counterparty as a consequence of laws or

regulations, or the introduction of laws or regulations. The IAS 39 amendments were effective for annual periods beginning on or after January 1, 2014 and

were applied retrospectively. The implementation of the IAS 39 amendments did not have an impact on CT REIT.

Levies

In May 2013, the IASB issued IFRS Interpretation Committee (“IFRIC”) 21 – Levies (“IFRIC 21”), which is an interpretation of IAS 37 – Provisions, Contingent

Liabilities and Contingent Assets. IFRIC 21 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant

legislation that triggers the payment of the levy. IFRIC 21 was effective for annual periods beginning on or after January 1, 2014 and was applied

retrospectively. The implementation of IFRIC 21 did not have an impact on CT REIT.

Standards, amendments and interpretations issued and not yet adopted

The following new standards, amendments and interpretations have been issued but are not effective for the fiscal year ended December 31, 2014, and,

accordingly, have not been applied in preparing these consolidated financial statements.

Financial instruments

In July 2014, the IASB issued the final version of IFRS 9 – Financial Instruments (“IFRS 9”), which brings together the classification and measurement,

impairment and hedge accounting phases of the IASB’s project to replace IAS 39.

Classification and measurement – Financial assets are classified and measured based on the business model under which they are managed and the

contractual cash flow characteristics of the financial assets. Financial

liabilities are classified in a similar manner as under IAS 39, except that financial

liabilities measured at fair value will have fair value changes resulting from changes in the entity’s own credit risk recognized in Other Comprehensive Income

instead of net income, unless this would create an accounting mismatch.

Impairment – The measurement of impairment of financial assets is based on an expected credit loss model. It is no longer necessary for a triggering event

to have occurred before credit losses are recognized. IFRS 9 also includes new disclosure requirements about expected credit losses and credit risk.

Hedge accounting—The new general hedge accounting model more closely aligns hedge accounting with risk management activities undertaken by entities

when hedging their financial and non-financial risk exposures. It will provide more opportunities to apply hedge accounting to reflect actual risk management

activities.

IFRS 9 will be applied retrospectively for annual periods beginning on or after January 1, 2018. Early adoption is permitted. CT REIT is assessing the

potential impact of this standard.

Revenue from Contracts with Customers

In May 2014, the IASB issued IFRS 15 – Revenue from Contracts with Customers (“IFRS 15”), which replaces IAS 11 – Construction Contracts, IAS 18 –

Revenue and IFRIC 13 – Customer Loyalty Programmes (“IFRIC 13”), as well as various other interpretations regarding revenue. IFRS 15 outlines a single

comprehensive model for entities to use in accounting for revenue arising from contracts with customers, except for contracts that are within the scope of

the standards on leases, insurance contracts and financial instruments. IFRS 15 also contains enhanced disclosure requirements.

IFRS 15 will be applied retrospectively for annual periods beginning on or after January 1, 2017. Early adoption is permitted. CT REIT is assessing the

potential impact of this standard.

34 CT REIT 2014 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

Disclosure Initiative

In December 2014, the IASB issued Disclosure Initiative – Amendments to IAS 1 as part of the IASB’s Disclosure Initiative. These amendments encourage

entities to apply professional judgment regarding disclosures and presentation in their financial statements.

These amendments are effective for annual periods beginning on or after January 1, 2016. Earlier application is permitted. CT REIT is assessing the potential

impact of these amendments.

PART IX

NON-GAAP AND OPERATIONAL KEY PERFORMANCE INDICATORS

CT REIT uses non-GAAP key performance indicators including NOI, FFO, FFO per Unit, AFFO, AFFO per Unit, EBITFV, interest coverage ratio, indebtedness

ratio, debt to enterprise value ratio and book value per Unit. CT REIT believes these non-GAAP measures and ratios provide useful supplemental information

to both management and investors in measuring the financial performance of CT REIT in meeting its principle objective of the creation of Unitholder value by

generating reliable, durable and growing monthly distributions. When calculating diluted FFO and AFFO per Unit, management excludes the effect of settling

the Class C LP Units with Class B LP Units, which is required when calculating diluted Units in accordance with IFRS.

These measures and ratios do not have a standardized meaning prescribed by GAAP and therefore they may not be comparable to similarly titled measures

and ratios presented by other publicly traded entities, and should not be construed as an alternative to other financial measures determined in accordance

with GAAP.

Net Operating Income

CT REIT defines NOI as property revenue less property expense and is adjusted further for straight-line rent and land lease adjustments. Management

believes that NOI is a useful key indicator of performance as it represents a measure over which management of property operations has control. NOI is also

a key input in determining the value of the portfolio. Refer to Part IV for the calculation of NOI.

Funds From Operations

FFO is a non-GAAP financial measure of operating performance widely used by the real estate industry, particularly by those publicly traded entities that own

and operate income-producing properties. FFO should not be considered as an alternative to net income or cash flows provided by operating activities

determined in accordance with IFRS. CT REIT calculates its FFO in accordance with the Real Property Association of Canada White Paper on FFO for IFRS

issued in April 2014. The purpose of the White Paper was to provide reporting issuers and investors with greater guidance on the definition of FFO and to

help promote more consistent disclosure amongst reporting issuers. The use of FFO, combined with the required IFRS presentations, has been included for

the purpose of improving the understanding of the operating results of CT REIT.

Management believes that FFO provides an operating performance measure that, when compared period-over-period, reflects the impact on operations of

trends in occupancy levels, rental rates, operating costs and property taxes, acquisition activities and interest costs, and provides a perspective of the

financial performance that is not immediately apparent from net income determined in accordance with IFRS. FFO adds back to net income items that do

not arise from operating activities, such as fair value adjustments.

FFO, however, still

includes non-cash revenues related to accounting for straight-line rent and makes no deduction for the recurring capital expenditures

necessary to sustain the existing earnings stream.

Adjusted Funds From Operations

AFFO is a supplemental measure of operating performance widely used in the real estate industry to assess an entity’s ability to pay distributions.

Management believes that AFFO is an effective measure of the cash generated from operations, after providing for operating capital requirements which are

referred to as “productive capacity maintenance expenditures”.

CT REIT calculates AFFO by adjusting FFO for non-cash income and expense items such as amortization of straight-line rents. FFO is also adjusted for a

reserve for maintaining productive capacity required for sustaining property infrastructure and revenue from real estate properties and direct leasing costs.

Property capital expenditures do not occur evenly during the fiscal year or from year to year. The property capital reserve in the AFFO calculation is intended

to reflect an average annual spending level. The reserve is based on a 15-year average expenditure as determined by building condition reports prepared

during 2013 by an independent consultant. The amount is also consistent with actual average amounts spent by CTC prior to October 2013.

There is currently no standard industry-defined measure of AFFO. As such, CT REIT’s method of calculating AFFO may differ from that of other real estate

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

CT REIT 2014 ANNUAL REPORT 35

MANAGEMENT’S DISCUSSION AND ANALYSIS

A reconciliation of the IFRS term “Cash Generated from Operating Activities” (refer to the consolidated statement of cash flow for the year ended

December 31, 2014) to AFFO is as follows:

(in thousands of Canadian dollars)

Cash generated from operating activities

Changes in working capital and other3

Deferred taxes

Fair value adjustment of equity awards

Interest and other financing charges

Straight-line rental income

Straight-line land lease expense

FFO

Less:

Straight-line rent adjustment

Straight-line land lease expense adjustment

Capital expenditure reserve2

AFFO

1 Based on operations beginning October 23, 2013.

2014

20131

$ 233,789

$ 39,775

(2,224)

2,184

(527)

285

–

(82,991)

(15,649)

28,685

(219)

5,185

(30)

$ 176,798

$ 31,465

(28,685)

(5,185)

219

(15,466)

(2,843)

$ 132,866

$ 23,467

2 Normalized 2014 maintenance capital expenditure is approximately $15,466. In 2014, $14,963 of actual sustaining capital expenditures were paid.

3 Prior year figures have been restated. Refer to note 25 of the consolidated financial statements.

The following table reconciles FFO and AFFO to GAAP net income and comprehensive income:

(in thousands of Canadian dollars, except per unit amounts)

Q4 2014

Q4 2014
Forecast

Variance

2014

2014
Forecast

Variance

Net Income and comprehensive income

53,711

42,295

$ 11,416 $

318,261

169,425

$ 148,836

Fair value adjustment of investment property

Deferred taxes

Fair value adjustment of equity awards

Funds from operations

Properties straight-line rent adjustment

Land lease straight-line expense adjustment

Capital expenditure reserve1

Adjusted funds from operations

FFO per Unit – basic

FFO per Unit – diluted (non-GAAP)2

AFFO per Unit – basic

AFFO per Unit – diluted (non-GAAP)2

AFFO payout ratio3

Distribution per Unit – paid

(7,305)

(163)

285

46,528

(7,843)

(4,112)

34,657

0.256

0.191

85%

0.163

–

42,295

(7,015)

(3,656)

(7,305)

(141,221)

(163)

285

4,233

(828)

(456)

(527)

285

176,798

(28,685)

219

(15,466)

31,656

$ 3,001 $

132,866

0.241

$ 0.015 $

0.241

$ 0.015 $

0.180

$ 0.011 $

0.180

$ 0.011 $

90%

0.163

– $

0.979

0.736

88%

0.650

–

169,425

(28,093)

128

(14,624)

126,836

0.965

0.722

90%

0.650

(141,221)

(527)

285

7,373

(592)

(842)

6,030

0.014

–

Weighted average units outstanding – basic

181,468,432

175,620,865

180,599,151

175,620,865

Weighted average units outstanding – diluted

(non-GAAP)2

181,524,387

175,620,865

180,643,636

175,620,865

Number of units outstanding, end of period

181,485,782

175,620,865

181,485,782

175,620,865

1 Normalized Q4 2014 and 2014 maintenance capital expenditures are approximately $4,112 and $15,466, respectively. In Q4 2014 and 2014, $9,038 and $14,963, respectively, of actual sustaining capital

expenditures were paid.

2 For the purposes of calculating diluted FFO and AFFO per Unit, diluted Units includes restricted and deferred units issued under various plans and excludes the effects of settling the Class C LP Units with Class B

LP Units.

3 Calculated as Distributions per Unit divided by AFFO per Unit - diluted (non-GAAP).

FFO for the three months and year ended December 31, 2014 amounted to $46,528 or $0.256 per unit and $176,798 or $0.979 per unit, respectively. FFO

for the three months and year ended December 31, 2014 was $4,233 and $7,373 higher than Forecast largely due to the impact of NOI variances

discussed earlier, differing assumptions in the Forecast for general and administrative expenses and interest income earned on investing the REIT’s existing

cash balances which are higher than Forecast, all partially offset by higher interest expense.

36 CT REIT 2014 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

AFFO for the three months and year ended December 31, 2014 amounted to $34,657 or $0.191 per unit and $132,866 or $0.736 per unit, respectively.

AFFO for the three months and year ended December 31, 2014 was $3,001 and $6,030 higher than Forecast largely due to the reasons noted above.

The AFFO payout ratio for the three months and year ended December 31, 2014 was 85% and 88% which is better than the REIT’s forecasted AFFO

payout ratio of approximately 90% during 2014.

Earnings Before Interest and other Financing Costs, Taxes and Fair Value Adjustments

EBITFV is a non-GAAP measure of a REIT’s operating cash flow and it is used in place of IFRS net income because it excludes major non-cash items

(including fair value adjustments on investment properties), interest expense and other financing costs, income tax expense, losses or gains on disposition of

property, and other non-recurring items that may occur under IFRS that management considers non-operating in nature. EBITFV should not be considered

as an alternative to net income or cash flows provided by operating activities determined in accordance with IFRS

EBITFV is used as an input in some of CT REIT’s debt metrics, providing information with respect to certain financial ratios that CT REIT uses in measuring

its debt profile and assessing the REIT’s ability to satisfy its obligations, including servicing its debt. For the three months and year ended December 31,

2014, EBITFV was calculated as follows:

(in thousands of Canadian dollars)

Q4 2014

Q4 2014
Forecast

Variance

2014

2014
Forecast

Variance

Net Income and comprehensive income

$ 53,711

$ 42,295

$ 11,416

$ 318,261

$ 169,425

$ 148,836

Fair value adjustment on investment properties

Interest expense and other financing charges

(7,305)

21,293

–

(7,305)

(141,221)

–

(141,221)

20,582

711

82,991

81,663

1,328

EBITFV

$ 67,699

$ 62,877

$ 4,822

$ 260,031

$ 251,088

8,943

Interest Coverage Ratio

Interest coverage ratios are used to measure an entity’s ability to service its debt, including construction financing or development debt. Generally, the

higher the ratio is, the lower the risk of default on debt. EBITFV is a generally accepted proxy for operating cash flow. The ratio is calculated as follows:

(in thousands of Canadian dollars)

EBITFV (A)

Interest and other financing charges (B)

Interest coverage (A)/(B)

Interest coverage normalized for one-time start-up costs2

1 Based on operations beginning October 23, 2013.

2 One-time start-up costs were $822 and expensed in 2013.

2014

20131

$ 260,031

$ 47,113

$ 82,991

$ 15,649

3.13

3.01

3.06

The interest coverage for the year ended December 31, 2014 is comparable against the period ended December 31, 2013.

Indebtedness Ratio

CT REIT has adopted an indebtedness ratio guideline which management uses as a measure to evaluate its leverage and the strength of its equity position,

expressed as a percentage of financing provided by debt. CT REIT’s Declaration of Trust limits its indebtedness (plus the aggregate par value of the Class C

LP Units) to a maximum of 60% of the gross book value, excluding convertible debentures, and 65% including convertible debentures. Gross book value is

defined as total assets as reported on the latest consolidated balance sheet. CT REIT calculates its indebtedness ratio as follows:

(in thousands of Canadian dollars)

Total assets1 (A)

Total indebtedness2 (B)

Indebtedness ratio (B)/(A)

As at December 31,
2014

As at December 31,
2013

$ 4,017,420

$ 1,983,773

$ 3,603,252

$ 1,800,000

49.4%

50.0%

1 Prior year figures have been restated. Refer to note 25 of the consolidated financial statements .

2 Total indebtedness as at December 31, 2014 and December 31, 2013 reflects the value of the Class C LP Units, the mortgages payable and the Bank Credit Facility.

The indebtedness ratio calculation for the year ended December 31, 2014 is lower than for the period ended December 31, 2013 as the 2014 balance

reflects a higher total asset balance due to the fair value adjustments made to the investment property portfolio and the 2014 investing activities, partially

offset by an increase in indebtedness during the year.

CT REIT 2014 ANNUAL REPORT 37

MANAGEMENT’S DISCUSSION AND ANALYSIS

Debt to Enterprise Value Ratio

CT REIT’s debt to enterprise value ratio is a non-GAAP measure and is calculated as total debt divided by enterprise value which is the sum of: i) total debt

and ii) period-end Units and Class B LP Units outstanding multiplied by the period end Unit closing price (“Equity Value”). Enterprise value is an economic

measure reflecting the market value of an entity. CT REIT’s debt to enterprise value ratio is an indicator of how indebted it is relative to its enterprise value.

(in thousands of Canadian dollars, except for per Unit amounts)

Total debt (A)

Equity value

Period-end Units and Class B LP Units outstanding

Unit closing price

Equity value (B)

Enterprise value (A + B)

Debt / Enterprise value (A / (A + B))

As at December 31,
2014

As at December 31,
2013

1,983,773

1,800,000

181,485,782

179,586,644

12.31

2,234,090

4,217,863

47.0%

10.92

1,961,086

3,761,086

47.9%

CT REIT’s debt to enterprise value ratio at December 31, 2014 decreased slightly as compared to December 31, 2013 as a result of an increase in total

debt due to acquisitions made during the year, offset by an increase in equity value as a result of an increased closing Unit price.

Book Value per Unit

Book value per Unit is a non-GAAP measure and represents Total Equity from the consolidated balance sheets divided by the sum of the period end Units

and Class B LP Units outstanding. It is an indication of the residual book value available to Unitholders. As well, book value per Unit is compared to the

REIT’s Unit trading price in order to assess a premium or discount.

(in thousands of Canadian dollars, except for per Unit amounts)

Total Equity (A)

Period-end Units and Class B LP Units outstanding (B)

Book value per Unit (A / B)

As at December 31,
2014

As at December 31,
2013

2,002,189

1,780,386

181,485,782

179,586,644

11.03

9.91

CT REIT’s book value per Unit for the year ended December 31, 2014 increased from December 31, 2013 largely due to net income exceeding

distributions. This excess is principally the result of fair value adjustments on the property portfolio.

Selected Quarterly Consolidated Information

(in thousands of Canadian dollars, except per Unit amounts)

2014

As at and for the quarter ended

Property revenue

Net income

Net income per Unit

– basic

– diluted

FFO – diluted, non-GAAP2

AFFO – diluted, non-GAAP2

Total assets3

Total debt and Class C LP Units payable

Total distributions to unitholders – paid

Total distributions to unitholders per Unit – paid

Book value per Unit2

Market price per Unit

– high

– low

– close

89,212

53,711

0.296

0.222

0.256

0.191

89,535

49,197

0.271

0.202

0.247

0.185

83,364

45,689

0.254

0.200

0.238

0.179

82,680

169,664

0.944

0.550

0.238

0.180

2013

Q41

63,026

30,996

0.173

0.134

0.176

0.131

$ 4,017,420

$ 3,974,736

$ 3,842,218

$ 3,757,682

$ 1,983,773

$ 1,950,346

$ 1,847,279

$ 1,807,130

$ 3,603,252

$ 1,800,000

29,078

0.163

11.03

12.55

10.50

12.31

29,081

0.162

10.90

11.96

11.00

11.02

28,576

0.163

10.79

11.63

10.81

11.40

28,830

0.162

10.70

11.58

10.61

11.16

22,197

0.124

9.91

11.10

10.00

10.92

1 Based on operations beginning October 23, 2013.

2 Non-GAAP key performance indicators. Refer to Part IX for further information.

3 Prior year figures have been restated. Refer to note 25 of the consolidated financial statements .

38 CT REIT 2014 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

PART X

The following section contains forward-looking information and users are cautioned that actual results may vary.

ENTERPRISE RISK MANAGEMENT

To preserve and enhance Unitholder value over the long term, CT REIT approaches the management of risk strategically through its enterprise risk

management program (“ERM Program”). The ERM Program provides an integrated approach to the management of risks, through a disciplined manner

that:
‰ aligns key strategies, imperatives, and objectives and related risks;
‰ considers all forms of risk, specifically strategic, financial and operational risks;
‰ requires the evaluation of risk mitigation practices which are designed to help support and optimize risk/reward related decisions; and
‰ integrates with the strategic, planning and reporting processes.

The REIT’s ERM Program continues to further enhance risk reporting through developing and refining underlying processes and tools aimed at supporting

risk identification and risk monitoring.

Risk Governance

The mandate of the Board includes the responsibility to monitor the REIT’s ERM Program and oversee management’s implementation of appropriate

systems to effectively identify, monitor, manage, and mitigate the impact of risks inherent in the REIT’s business and operations.

The Board has delegated primary responsibility to the Audit Committee to:
‰ consider the Principal Risks of the REIT as identified by management and ensure appropriate policies and systems have been implemented to manage

these risks;

‰ review the REIT’s ERM Program, including its policies and processes with respect to risk identification, assessment, and management of the REIT’s risks;
‰ receive periodic reports from the head of the risk management function; and
‰ periodically report to the Board on any major issues arising from the ERM Program.

Principal Risks

A key element of the REIT’s ERM Program is the periodic review, identification and assessment of Principal Risks. The REIT defines a Principal Risk as one

that, alone or in combination with other interrelated risks, can have a significant adverse impact on the REIT’s brand, reputation, strategies, objectives,

financial performance, or ability to service its stakeholders and has, in the absence of controls, a credible probability of occurring. These Principal Risks are

enterprise-wide in scope and represent strategic, financial and operational risks. Management has completed its formal review of its Principal Risks, which

has been presented to the Audit Committee and approved by the Board. The mitigation and management of Principal Risks is approached holistically with a

view to ensuring all risk exposures associated with a Principal Risk are considered.

The following table provides a high-level perspective on each of the identified eight Principal Risks and describes the main strategy that the REIT has in

place to mitigate the potential impacts of these risks on its business objectives. Information on the REIT’s risk factors is presented in the REIT’s AIF.

Principal Risks

Marketplace

Risk Management Strategy

Risk due to fluctuations or fundamental changes in the external business

The REIT regularly monitors and analyzes external economic, political,

environment resulting in financial loss. Fluctuations or fundamental shifts in

demographic, consumer behaviour and competitive developments in

the market place could include:
‰ Changes in macroeconomic conditions (including recession, depression,
increased unemployment, and increased interest rates)

high inflation,

Canada. Results are shared with the REIT executives, who are

accountable for any necessary amendments to the strategic and

operational plans and for on-going investment decisions in order

resulting in a reduction in consumer spending;

respond to evolving market and economic trends.

‰ Changes in the competitive landscape in the retail or real estate sectors

impacting the attractiveness and the value of real estate holdings;

‰ Changes in the domestic or international political environments (including

new legislation) impacting the ability to do business; and

‰ Shifts in the demographics of the Canadian population reducing the

relevance of the products and services offered by key tenants,

which may result in a negative impact on the valuation of the REIT or the

ability to achieve its strategic objectives.

CT REIT 2014 ANNUAL REPORT 39

MANAGEMENT’S DISCUSSION AND ANALYSIS

Interest Rate

Risk associated with fundamental changes in the economic environment,

The indebtedness of the REIT is predominantly at fixed rates and its

or significant events or volatility in the financial markets resulting in

floating interest rate exposure is minimal. The weighted average term to

changes in interest rates that affect: the value of real estate, the value of

maturity of the REIT’s debt portfolio is managed to align with or be greater

the REIT’s Units, the economics of acquisition activity and the availability

than the weighted average term to maturity of the REIT’s assets. The REIT

of capital; resulting in financial

loss and resulting in a decrease in or the

manages refinancing risk by maintaining a diversified debt maturity

elimination of distributions to Unitholders.

schedule to limit the amount of debt maturing in any one year. The REIT

may use interest rate hedges from time to time to manage interest rate

risk and to provide more certainty regarding the FFO available to

Unitholders, subject to the REIT’s investment guidelines and operating

policies.

Tenant Concentration

The REIT’s revenues are dependent on the ability of its key tenant, CTC,

The REIT benefits from the stability offered by CTC businesses including

to meet its rent obligations and renew its tenancies. The future financial

Canadian Tire retail, one of Canada’s most shopped general merchandise

performance and operating results of CTC’s business are subject

retailers with high recognition and a strong reputation throughout the

inherent risks and uncertainties, such as general economic conditions,

communities it serves. The Canadian Tire retail

leases have a weighted

changing consumer preferences, and other strategic,

financial, and

average remaining lease term of 14.5 years, which provides the REIT with

operational risk factors. A downturn in CTC’s business could have a

reliable, durable, and growing monthly distributions. Management regularly

material effect on the financial performance of the REIT, its cash flows,

monitors the operating results and credit ratings of CTC.

and the ability to make distributions to Unitholders.

Significant Ownership by CTC

CTC holds the majority interest

in the REIT.

In situations where the

Appropriate governance structures,

including policies, processes and

interests of CTC and the REIT are in conflict, CTC may utilize its

other management activities and practices are in place to maintain and

ownership interest in, and contractual rights with the REIT, to further

monitor the relationship between the REIT and CTC.

CTC’s own interest which may not be the same as the REIT’s interest in

all cases, causing the REIT not to be able to operate in a manner that is to

its favour, which could adversely affect the REIT’s cash flows, operating

results, valuation, and overall financial condition.

Operations

The risk that a direct or indirect loss may result from internal or outsourced

The REIT has appropriate governance structures,

including policies,

business activities, business disruptions, inadequate or failed operations

processes, contracts, service agreements and other management

processes (property management, development,

redevelopment, and

activities in place to maintain the operational performance of the REIT,

acquisitions), people, and systems to support the REIT’s key business

comply with legal and regulatory requirements, and to support the REIT’s

objectives. Failed processes in terms of design,

integration, and/or

business and strategic objectives.

execution may result in incremental financial expenditures, theft or fraud,

legal or regulatory issues, and materially adversely impact the REIT’s

financial position and results of operation.

Tax

Risk related to changes in income tax laws applicable to the REIT such

Management of the REIT ensures that the REIT satisfies the conditions to

that the REIT would not qualify as a mutual fund trust for purposes of the

qualify as a closed-end mutual

fund trust by complying with the

Tax Act, including the treatment of real estate investment trusts, mutual

restrictions in the Tax Act as they are interpreted and applied by the

fund trusts, or the REIT Exception for a taxation year under the Tax Act,

Canada Revenue Agency. No assurance can be given that the REIT will

which could have a material and adverse impact on the value of the Units,

be able to comply with these restrictions at all times. There can be no

and on distributions to Unitholders.

assurance that income tax laws applicable to the REIT, including the

treatment of real estate investment trusts and mutual fund trusts under the

Tax Act, will not be changed in a manner which adversely affects the REIT

or the Unitholders.

40 CT REIT 2014 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

Environmental Matters

The REIT is subject to various federal, provincial, territorial and municipal

The REIT has allocated the necessary capital and operating expenditures

laws relating to environmental matters. Changes in legislation may result in

to comply with environmental

laws

and address any material

the REIT bearing the risk of cost-intensive assessment,

removal of

environmental

issues. Additionally,

the REIT has limited environmental

contamination, hazardous or other

regulated substances causing an

liability coverage under its general

liability insurance policy for third-party

adverse effect on the REIT’s financial condition, results of operation, and

bodily injury and property damage claims arising from unexpected and

cash available for distribution to Unitholders.

unintentional pollution incidents (commonly referred to as “sudden and

accidental” coverage) that are discovered and reported quickly. It also has

more extensive coverage under a separate environmental

liability

insurance policy which adds coverage for certain gradual pollution

conditions and first party clean ups. Pursuant

to the Canadian Tire

Leases, CTC has indemnified the REIT for any environmental

issues

existing on the initial properties. Furthermore, the REIT’s operating policy

includes a Phase I environmental site assessment conducted by an

independent and experienced environmental consultant prior to acquiring

a property.

Financial Reporting

Risk of restatement and reissue of CT REIT’s financial statements due to:
‰ Failure to adhere to financial accounting and presentation standards and

Internal controls which include policies, processes and procedures,

provide reasonable assurance regarding the reliability of financial reporting

securities regulations relevant to financial reporting;

and the preparation of

financial statements and other disclosure

‰ Fraudulent activity and/or failure to maintain an effective system of

documents. This includes monitoring and responding to changing

internal controls; and/or

regulations

and

standards

governing

accounting

and

financial

‰ Inadequate explanation of the REITs operating performance, financial

presentation.

condition, and future prospects,

which may result in regulatory related issues or decrease in Unit price.

PART XI

DISCLOSURE AND INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining a system of controls and procedures over the public disclosure of financial and non-financial

information regarding CT REIT. Such controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and

reported, on a timely basis, to senior management, including the Chief Executive Officer and the Chief Financial Officer, so that they can make appropriate

decisions regarding public disclosure.

CT REIT’s system of disclosure controls and procedures includes, but is not limited to, its Disclosure Policy, its Code of Business Conduct, the effective

functioning of its Disclosure Committee, procedures in place to systematically identify matters warranting consideration of disclosure by the Disclosure

Committee, verification processes for individual financial and non-financial metrics and information contained in annual and interim filings, including the

consolidated financial statements, MD&As, AIF and other documents and external communications.

As required by CSA National

Instrument 52-109 (“NI 52-109”), Certification of Disclosure in Issuers’ Annual and Interim Filings, an evaluation of the

effectiveness of the design and operation of CT REIT’s disclosure controls and procedures was conducted, under the supervision of management, including

the CEO and CFO, as of December 31, 2014. The evaluation included documentation review, enquiries and other procedures considered by management

to be appropriate in the circumstances. Based on that evaluation, the CEO and the CFO have concluded that the design and operation of the system of

disclosure controls and procedures was effective as at December 31, 2014.

Internal control over financial reporting

Management is also responsible for establishing and maintaining appropriate internal controls over financial reporting. CT REIT’s internal controls over

financial reporting include, but are not limited to, detailed policies and procedures related to financial accounting and reporting and controls over systems

that process and summarize transactions. CT REIT’s procedures for financial reporting also include the active involvement of qualified financial professionals,

senior management and its Audit Committee.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide

only reasonable assurance with respect to financial statement preparation and presentation.

CT REIT 2014 ANNUAL REPORT 41

MANAGEMENT’S DISCUSSION AND ANALYSIS

As required by NI 52-109, management, including the CEO and CFO, evaluated the design and operation of CT REIT’s internal control over financial

reporting as defined in NI 52-109 as at December 31, 2014. In making this assessment, management, including the CEO and CFO, used the criteria set

forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). This evaluation

included review of the documentation of controls, evaluation of the design and testing the operating effectiveness of controls and a conclusion about this

evaluation. Based on their evaluation, the CEO and the CFO have concluded that, as at December 31, 2014, CT REIT’s internal control over financial

reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements

for external purposes in accordance with GAAP.

Changes in internal control over financial reporting

During the quarter and year ended December 31, 2014, there have been no changes in CT REIT’s internal control over financial reporting that have

materially affected, or are reasonably likely to materially affect, CT REIT’s internal control over financial reporting.

PART XII

FORWARD LOOKING INFORMATION

This MD&A, and the documents incorporated by reference herein, contain forward-looking statements that involve a number of risk and uncertainties,

including statements regarding the outlook for CT REIT’s business results of operations. Forward-looking statements are provided for the purposes of

providing information about CT REIT’s future outlook and anticipated events or results and may include statements regarding known and unknown risks and

uncertainties and other factors that may cause the actual results to differ materially from those indicated. Such factors include, but are not limited to, general

economic conditions, financial position, business strategy, availability of acquisition opportunities, budgets, capital expenditures, financial results, taxes,

plans and objectives of or involving CT REIT. Particularly, statements regarding future acquisitions, developments, distributions, results, performance,

achievements, prospects or opportunities for CT REIT or the real estate industry are forward-looking statements. In some cases, forward-looking information

can be identified by such terms such as “may”, “might”, “will”, “could”, “should”, “would”, “occur”, “expect”, “plan”, “anticipate”, “believe”, “intend”,

“estimate”, “predict”, “potential”, “continue”, “likely”, “schedule”, “resolved to”, or the negative thereof or other similar expressions concerning matters that

are not historical facts. Some of the specific forward-looking statements in this document include, but are not limited to, statements with respect to the

following:
‰ CT REIT’s growth strategy and objectives under Part II;
‰ CT REIT’s ability to refinance a redemption under Part V;
‰ CT REIT’s capital strategy under Part V;
‰ CT REIT’s commitments and contingencies under Part V;
‰ CT REIT’s base shelf prospectus under Part V;
‰ CT REIT’s distributions under Part VI;
‰ CT REIT’s access to available sources of debt and/or equity financing;
‰ the expected tax treatment of CT REIT and its distributions to Unitholders;
‰ CT REIT’s ability to expand its asset base, make accretive acquisitions, develop or intensify its property and participate with CTC in the development or

intensification of the properties;

‰ the ability of CT REIT to qualify as a “mutual fund trust”, as defined in the Tax Act, and as a “real estate investment trust”, as defined in the SIFT Rules; and
‰ CT REIT’s enterprise risk management under Part X.

CT REIT has based these forward-looking statements on factors and assumptions about future events and financial trends that it believes may affect its

financial condition, results of operations, business strategy and financial needs, including that the Canadian economy will remain stable over the next

12 months, that inflation will remain relatively low, that tax laws remain unchanged, that conditions within the real estate market, including competition for

acquisitions, will be consistent with the current climate, that the Canadian capital markets will provide CT REIT with access to equity and/or debt at

reasonable rates when required and that CTC will continue its involvement with CT REIT on the basis described in its AIF.

Although the forward-looking statements contained in this MD&A are based upon assumptions that management of CT REIT believes are reasonable based

on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements.

Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond the REIT’s control, that may cause

CT REIT’s or the industry’s actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those

expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the factors discussed under “Risk

Factors” section of the AIF and also in Part X of this MD&A.

For more information on the risks, uncertainties and assumptions that could cause CT REIT’s actual results to differ from current expectations, please also

refer to CT REIT’s public filings available on SEDAR at www.sedar.com and at www.ctreit.com.

42 CT REIT 2014 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

CT REIT cautions that the foregoing list of important factors and assumptions is not exhaustive and other factors could also adversely affect its results.

Investors and other readers are urged to consider the foregoing risks, uncertainties, factors and assumptions carefully in evaluating the forward-looking

information and are cautioned not to place undue reliance on such forward-looking information. Statements that include forward-looking information do not

take into account the effect that transactions or non-recurring or other special

items announced or occurring after the statements are made have on CT

REIT’s business. For example, they do not include the effect of any dispositions, acquisitions, asset write-downs or other charges announced or occurring

after such statements are made. The forward-looking information in this MD&A is based on certain factors and assumptions made as of the date hereof or

the date of the relevant document incorporated herein by reference, as applicable. CT REIT does not undertake to update the forward-looking information,

whether written or oral, that may be made from time to time by it or on its behalf, to reflect new information, future events or otherwise, except as required

by applicable securities laws.

Information contained in or otherwise accessible through the websites referenced in this MD&A or the documents incorporated by reference herein (other

than CT REIT’s profile on SEDAR at www.sedar.com) does not form part of this MD&A or the documents incorporated by reference herein and is not

incorporated by reference into this MD&A. All references to such websites are inactive textual references and are for information only.

Commitment to disclosure and investor communication

The Investor Relations section of the REIT’s website www.ctreit.com includes the following documents and information of interest to investors:

‰ Annual Information Form;
‰ Management Information Circular;
‰ the Prospectus;
‰ quarterly reports; and
‰ conference call webcasts (archived for one year).

Additional

information about the REIT has been filed electronically with various securities regulators in Canada through SEDAR and is available online at

www.sedar.com.

If you would like to contact the Investor Relations department directly, call Andrea Orzech at (416) 480-3195 or email investor.relations@ctreit.com.

February 23, 2015

CT REIT 2014 ANNUAL REPORT 43

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

INDEPENDENT AUDITOR’S REPORT

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets

Consolidated Statements of Income and Comprehensive Income

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Nature of CT Real Estate Investment Trust

Note 2 Basis of presentation

Note 3 Significant accounting policies

Note 4 Investment properties

Note 5 Tenant and other receivables

Note 6 Other assets

Note 7 Cash and cash equivalents

Note 8 Class C LP Units

Note 9 Mortgages payable

Note 10 Bank Credit Facility

Note 11 Other liabilities

Note 12 Distributions on Units and Class B LP Units

Note 13 Equity

Note 14 Unit based compensation plans

Note 15 Non-controlling interests

Note 16 Revenue and expenses

Note 17 General and administrative expenses

Note 18 Interest and other financing charges

Note 19 Changes in working capital and other

Note 20 Segmented information

Note 21 Commitments and contingencies

Note 22 Related-party transactions

Note 23 Financial instruments and risk management

Note 24 Capital management and liquidity

Note 25 Comparative figures

Note 26 Subsequent events

GLOSSARY OF TERMS

44 CT REIT 2014 ANNUAL REPORT

Management’s Responsibility for Financial Statements

The management of CT Real Estate Investment Trust is responsible for the accompanying consolidated financial statements. The financial statements have

been prepared by management in accordance with International Financial Reporting Standards, which recognize the necessity of relying on some best

estimates and informed judgements. All financial

information in our Management’s Discussion and Analysis is consistent with the consolidated financial

statements.

To discharge its responsibilities for financial reporting and safeguarding of assets, management depends on CT REIT’s systems of internal accounting

control. These systems are designed to provide reasonable assurance that the financial records are reliable and form a proper basis for the timely and

accurate preparation of financial statements. Management meets the objectives of internal accounting control on a cost effective basis through the prudent

selection and training of personnel, adoption and communication of appropriate policies, and employment of an internal audit program.

The Board of Trustees oversees management’s responsibilities for the consolidated financial statements primarily through the activities of

its Audit

Committee, which is composed solely of trustees who are neither officers nor employees of CT REIT. This Committee meets with management and CT

REIT’s independent auditors, Deloitte LLP, to review the consolidated financial statements and recommend approval by the Board of Trustees. The Audit

Committee is also responsible for making recommendations with respect to the appointment of and for approving remuneration and the terms of

engagement of CT REIT’s auditors. The Audit Committee also meets with the auditors, without the presence of management, to discuss the results of their

audit, their opinion on internal accounting controls, and the quality of financial reporting.

The consolidated financial statements have been audited by Deloitte LLP. Their report is presented below.

Kenneth Silver

Chief Executive Officer

February 23, 2015

Louis Forbes

Chief Financial Officer

CT REIT 2014 ANNUAL REPORT 45

Independent Auditor’s Report

To the Unitholders of CT Real Estate Investment Trust

We have audited the accompanying consolidated financial statements of CT Real Estate Investment Trust, which comprise the consolidated balance sheets

as at December 31, 2014 and December 31, 2013, and the consolidated statements of income and comprehensive income, consolidated statements of

changes in equity and consolidated statements of cash flows for the year ended December 31, 2014 and the period from July 15, 2013 (date of formation)

to December 31, 2013 and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial

Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements

that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with

Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to

obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The

procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial

statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and

fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the

purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting

policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated

financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of CT Real Estate Investment Trust as at

December 31, 2014 and December 31, 2013, and its financial performance and its cash flows for the year ended December 31, 2014 and the period from

July 15, 2013 (date of formation) to December 31, 2013 in accordance with International Financial Reporting Standards.

Chartered Professional Accountants, Chartered Accountants

Licensed Public Accountants

February 23, 2015

Toronto, Ontario

46 CT REIT 2014 ANNUAL REPORT

Consolidated Balance Sheets

As at
(C$ in thousands)

ASSETS

Non-current assets

Investment properties

Other assets

Current assets

Tenant and other receivables

Other assets

Cash and cash equivalents

Total assets

LIABILITIES

Non-current liabilities

Class C LP Units

Mortgages payable

Other liabilities

Current liabilities

Class C LP Units

Mortgages payable

Bank credit facility

Other liabilities

Distributions payable

Total liabilities

EQUITY

Unitholders’ equity

Non-controlling interests

Total equity

Total liabilities and equity

Note

December 31, 2014

December 31, 2013

(Note 25)

$ 3,999,844

$ 3,547,864

2,526

638

4,002,370

3,548,502

10,349

1,991

2,710

15,050

696

7,055

46,999

54,750

$ 4,017,420

$ 3,603,252

$ 1,647,279

$ 1,800,000

57,219

560

–

275

1,705,058

1,800,275

200,000

1,275

78,000

20,871

10,027

310,173

–

12,864

9,727

22,591

2,015,231

1,822,866

13,15

982,588

1,019,601

2,002,189

880,199

900,187

1,780,386

$ 4,017,420

$ 3,603,252

The related notes form an integral part of these consolidated financial statements.

David Laidley

Trustee

Anna Martini

Trustee

CT REIT 2014 ANNUAL REPORT 47

Consolidated Statements of Income and
Comprehensive Income

(C$ in thousands, except per unit amounts)

Property revenue

Property expense

General and administrative expense

Interest income

Interest and other financing charges

Fair value adjustment on investment properties

Net income and comprehensive income

Net income and comprehensive income attributable to:

Unitholders

Non-controlling interests

Net income per unit – basic

Net income per unit – diluted

The related notes form an integral part of these consolidated financial statements.

For the year ended
December 31, 2014

Note

For the period from July 15,
2013 (date of formation) to
December 31, 2013

$ 344,791

$ 63,026

(76,677)

(8,433)

350

(82,991)

141,221

(13,773)

(2,223)

(15,649)

(468)

$ 318,261

$ 30,996

$ 159,282

158,979

$ 318,261

1.76

1.20

$ 15,269

15,727

$ 30,996

0.17

0.13

48 CT REIT 2014 ANNUAL REPORT

Consolidated Statements of Changes in Equity

(C$ in thousands)

Balance at December 31, 2013

Net income and comprehensive income for the year

Issuance of Class B LP Units, net of issue costs

Distributions

Issuance of Units under Distribution Reinvestment Plan

Note

Units

Retained
Earnings

Unitholders’
equity

Non-controlling
interests

Total Equity

$ 876,124

4,075

$ 880,199

900,187

$ 1,780,386

–

159,282

–

(58,674)

1,781

–

1,781

158,979

19,406

(58,971)

–

318,261

19,406

(117,645)

1,781

Balance at December 31, 2014

$ 877,905

$ 104,683

$ 982,588

$ 1,019,601

$ 2,002,189

(C$ in thousands)

Balance at July 15, 2013

Net income and comprehensive income for the period

Issuance of Units, net of issue costs

Issuance of Class B LP Units

Distributions

Issuance of Units under Distribution Reinvestment Plan

Note

Units

Retained
Earnings

Unitholders’
equity

Non-controlling
interests

Total Equity

–

875,988

–

136

–

15,269

–

15,269

875,988

–

(11,194)

–

136

15,727

–

895,599

(11,139)

–

30,996

875,988

895,599

(22,333)

136

Balance at December 31, 2013

$ 876,124

4,075

$ 880,199

900,187

$ 1,780,386

The related notes form an integral part of these consolidated financial statements.

CT REIT 2014 ANNUAL REPORT 49

Consolidated Statements of Cash Flows

For the year ended
December 31, 2014

Note

For the period from July 15,
2013 (date of formation) to
December 31, 2013

(Note 25)

$ 318,261

30,996

(141,221)

(28,685)

219

82,991

2,224

233,789

(106,684)

(35,896)

(14,963)

(157,543)

–

(58)

(56,786)

(58,779)

(81,591)

78,000

(31,133)

31,133

(314)

(1,007)

(120,535)

(44,289)

46,999

468

(5,185)

15,649

(2,183)

39,775

(241,426)

(9,011)

–

(250,437)

303,025

(24,149)

–

(6,182)

(6,286)

(8,747)

–

257,661

46,999

–

2,710

46,999

(C$ in thousands)

Cash generated from (used for):

Operating activities

Net income

Add (deduct):

Fair value adjustment on investment properties

Straight-line rental income

Straight-line land lease expense

Interest and other financing charges

Changes in working capital and other

Cash generated from operating activities

Investing activities

Acquisition of investment properties

Land acquisitions and development activities

Capital expenditures recoverable from tenants

Cash used for investing activities

Financing activities

Proceeds from issuance of Units

Unit issue costs

Class B LP Unit issue costs

Unit distributions

Class B LP Unit distributions paid or loaned

Payments on Class C LP Units

Bank Credit Facility draws

Mortgage repayment – Canada Square

Mortgage borrowing – Canada Square

Mortgage principal repayments

Interest paid

Cash (used for) generated from financing activities

Cash (used) generated in the year

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

The related notes form an integral part of these consolidated financial statements.

50 CT REIT 2014 ANNUAL REPORT

Notes to the Consolidated Financial Statements

For the year ended December 31, 2014 and the period from July 15, 2013 (date of formation) to December 31, 2013

(All dollar amounts are in thousands, except per unit amounts)

1. Nature of CT Real Estate Investment Trust

CT Real Estate Investment Trust is an unincorporated, closed-end real estate investment trust. CT Real Estate Investment Trust and its subsidiaries, unless

the context requires otherwise, are together referred to in these consolidated financial statements as “CT REIT”. CT REIT commenced operations on

October 23, 2013, and was formed to own income-producing commercial properties located primarily in Canada. The principal and registered head office of

CT REIT is located at 2180 Yonge Street, Toronto, Ontario M4P 2V8.

Canadian Tire Corporation, Limited (“CTC”) owns an 83.2 per cent effective interest in CT REIT as of December 31, 2014, consisting of 59,711,094 of the

issued and outstanding units of CT REIT (“Units”), all of the issued and outstanding Class B limited partnership units (“Class B LP Units”) of CT REIT Limited

Partnership (the “Partnership”), which are economically equivalent to and exchangeable for Units, and all of the issued and outstanding Class C limited

partnership units (“Class C LP Units”) of the Partnership (see Note 8). CT REIT Units are listed on the Toronto Stock Exchange (the “TSX”) under the symbol

CRT.UN.

CT REIT has one segment, which comprises the ownership and operation of primarily retail investment properties located in Canada.

2. Basis of Presentation

(a) Fiscal Year

The fiscal years for the consolidated financial statements and the notes presented for 2014 are for the year ended December 31, 2014 and for 2013 are for

the period from July 15, 2013 (date of formation) to December 31, 2013. CT REIT did not carry on operations prior to October 23, 2013.

(b) Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the

International Accounting Standards Board (“IASB”) using the accounting policies that are described herein.

These consolidated financial statements were authorized for issuance by CT REIT’s Board of Trustees (the “Board”) on February 23, 2015.

These consolidated financial statements have been prepared on the historical cost basis except for investment properties and liabilities for unit-based

compensation plans, which are measured at fair value.

These financial statements are presented in Canadian dollars (“C$”) rounded to the nearest thousand, except per unit amounts.

(d) Critical judgments in applying significant accounting policies

The following are the critical

judgments that have been made in applying CT REIT’s accounting policies and that have the most significant effect on the

amounts in the consolidated financial statements:

(i)

Leases

CT REIT’s policy for revenue recognition is described in Note 3(e). In applying this policy, judgments are made with respect to whether tenant

improvements provided in connection with a lease enhance the value of the leased property, which determines whether such amounts are treated as

additions to investment property as well as the point in time at which revenue recognition under the lease commences. In addition, where a lease allows

a tenant to elect to take all or a portion of any unused tenant improvement allowance as rent abatement, CT REIT must exercise judgment in

determining the extent to which the allowance represents an inducement that is amortized as a reduction of lease revenue over the term of the lease.

CT REIT also makes judgments in assessing the classification of its leases with tenants as operating leases, in particular long-term leases in single

tenant properties. CT REIT has determined that all of its leases are operating leases.

(ii)

Investment properties

CT REIT applies judgment in determining whether the properties it acquires are considered to be asset acquisitions or business combinations. CT REIT

considers all properties acquired to date to be asset acquisitions.

Judgment is applied in determining whether certain costs are additions to the carrying amount of the investment property.

CT REIT 2014 ANNUAL REPORT 51

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At each reporting period, internal valuations are prepared by management for all

investment properties. In determining the fair value of investment

properties, judgment is applied in selecting the extent and frequency of independent appraisals. Independent valuations are obtained on properties

such that substantially all of the properties will be independently appraised over a four-year period.

(iii)

Income taxes

CT REIT makes judgments that, with the exception of transactions involving CT REIT GP Corp., deferred income taxes are not recognized in CT REIT’s

financial statements on the basis that CT REIT can deduct distributions paid such that its liability for income taxes is substantially reduced or eliminated

for the period, and CT REIT intends to continue to distribute its taxable income and continue to qualify as a real estate investment trust for the

foreseeable future.

(iv) Consolidation of the Partnership

CT REIT makes judgments in the application of IFRS 10 – Consolidated Financial Statements in its assessment of control over the Partnership,

including the purpose for which the Partnership was created, the power to direct the relevant activities of the Partnership, its exposure or rights to the

variable returns of the Partnership and its ability to use its power to affect its returns.

(v) Proportionate consolidation of interest in Canada Square

CT REIT makes judgments in the application of IFRS 11 – Joint Arrangements in its assessment of joint control over the interest held in Canada Square,

a mixed-use commercial property in Toronto (the “Co-ownership”), and its rights to the assets and obligations for the liabilities related to the Co-

ownership.

(e) Critical accounting estimates and assumptions

CT REIT makes estimates and assumptions that affect the carrying amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the

reported amount of earnings for the period. Actual results may differ from estimates. The estimates and assumptions underlying the valuation of investment

properties, as set out in Note 4, are considered critical.

(f) New standards implemented

(i)

Financial instruments presentation: Asset and liability offsetting

In December 2011, the IASB amended IAS 32 – Financial Instruments: Presentation (“IAS 32”) to clarify the requirements which permit offsetting a

financial asset and liability in the financial statements. The IAS 32 amendments were effective for annual periods beginning on or after January 1, 2014

and were applied retrospectively. The implementation of the IAS 32 amendments did not have a significant impact on CT REIT.

(ii) Financial instruments: Novation of derivatives and continuation of hedge accounting

In June 2013, the IASB issued Novation of Derivatives and Continuation of Hedge Accounting – Amendments to IAS 39. This amendment to IAS 39 –

Financial Instruments: Recognition and Measurement provides an exception to the requirement to discontinue hedge accounting in situations where

over-the-counter derivatives designated in hedging relationships are directly or indirectly novated to a central counterparty as a consequence of laws or

regulations, or the introduction of laws or regulations. The IAS 39 amendments were effective for annual periods beginning on or after January 1, 2014

and were applied retrospectively. The implementation of the IAS 39 amendments did not have an impact on CT REIT.

(iii) Levies

In May 2013, the IASB issued IFRS Interpretation Committee (“IFRIC”) 21 – Levies (“IFRIC 21”), which is an interpretation of IAS 37 – Provisions,

Contingent Liabilities and Contingent Assets. IFRIC 21 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described

in the relevant legislation that triggers the payment of the levy. IFRIC 21 was effective for annual periods beginning on or after January 1, 2014 and was

applied retrospectively. The implementation of IFRIC 21 did not have an impact on CT REIT.

(f) Standards, amendments and interpretations issued but not yet adopted

The following new standards, amendments and interpretations have been issued but are not effective for the fiscal year ended December 31, 2014, and,

accordingly, have not been applied in preparing these consolidated financial statements.

(i)

Financial instruments

In July 2014, the IASB issued the final version of IFRS 9 – Financial Instruments (“IFRS 9”), which brings together the classification and measurement,

impairment and hedge accounting phases of the IASB’s project to replace IAS 39.

Classification and measurement – Financial assets are classified and measured based on the business model under which they are managed and the

contractual cash flow characteristics of the financial assets. Financial liabilities are classified in a similar manner as under IAS 39, except that financial

liabilities measured at fair value will have fair value changes resulting from changes in the entity’s own credit risk recognized in Other Comprehensive

Income instead of net income, unless this would create an accounting mismatch.

52 CT REIT 2014 ANNUAL REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Impairment – The measurement of impairment of financial assets is based on an expected credit loss model. It is no longer necessary for a triggering

event to have occurred before credit losses are recognized. IFRS 9 also includes new disclosure requirements about expected credit losses and credit

risk.

Hedge accounting – The new general hedge accounting model more closely aligns hedge accounting with risk management activities undertaken by

entities when hedging their financial and non-financial risk exposures. It will provide more opportunities to apply hedge accounting to reflect actual risk

management activities.

IFRS 9 will be applied retrospectively for annual periods beginning on or after January 1, 2018. Early adoption is permitted. CT REIT is assessing the

potential impact of this standard.

(ii) Revenue from Contracts with Customers

In May 2014, the IASB issued IFRS 15 – Revenue from Contracts with Customers (“IFRS 15”), which replaces IAS 11 – Construction Contracts,

IAS 18 – Revenue and IFRIC 13 – Customer Loyalty Programmes, as well as various other interpretations regarding revenue. IFRS 15 outlines a single

comprehensive model for entities to use in accounting for revenue arising from contracts with customers, except for contracts that are within the scope

of the standards on leases, insurance contracts and financial instruments. IFRS 15 also contains enhanced disclosure requirements.

IFRS 15 will be applied retrospectively for annual periods beginning on or after January 1, 2017. Early adoption is permitted. CT REIT is assessing the

potential impact of this standard.

(iii) Disclosure initiative

In December 2014, the IASB issued Disclosure Initiative – Amendments to IAS 1 as part of the IASB’s Disclosure Initiative. These amendments

encourage entities to apply professional judgment regarding disclosures and presentation in their financial statements.

These amendments are effective for annual periods beginning on or after January 1, 2016. Earlier application is permitted. CT REIT is assessing the

potential impact of these amendments.

3. Significant Accounting Policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

(a) Basis of consolidation

These consolidated financial statements include the accounts of CT REIT and its consolidated subsidiaries consisting of the Partnership and CT REIT GP

Corp., which are the entities over which CT REIT has control. Control exists when CT REIT has the ability to direct the relevant activities of an entity, has

exposure or rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. CT REIT

reassesses whether or not it controls an entity if facts and circumstances indicate that there are changes to one or more of the three elements of control.

Consolidation of a subsidiary begins when CT REIT obtains control over the subsidiary and ceases when CT REIT loses control of the subsidiary. All intra-

group assets and liabilities, equity, income, expenses and cash flows relating to transactions between CT REIT and its subsidiaries, and among subsidiaries

of CT REIT, are eliminated on consolidation.

Net income and comprehensive income are attributed to the Unitholders of CT REIT and to the non-controlling interest even if this results in the non-

controlling interest having a deficit balance.

CT REIT holds all of the Class A limited partnership units (“Class A LP Units”) of the Partnership, which are the sole class of Partnership units that carry

voting rights. In addition, CT REIT holds all of the shares of CT REIT GP Corp. (the “GP”), the general partner of the Partnership, which has the power to

direct the relevant activities of the Partnership. Accordingly, CT REIT is exposed to variable returns from its interest in the Partnership and has the ability to

direct the relevant activities thereof to affect its returns. Therefore CT REIT consolidates the Partnership.

Non-controlling interests in the equity of the Partnership, which consists of Class B LP Units held by a wholly owned subsidiary of CTC, is shown separately

in equity on the consolidated balance sheet.

(b) Joint arrangements

A joint arrangement is an arrangement in which two or more parties have joint control. Joint control is the contractually agreed sharing of control whereby

decisions about relevant activities require unanimous consent of the parties sharing control. A joint arrangement is classified as a joint operation when the

parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities related to the arrangement. A joint arrangement is

classified as a joint venture when the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A party to a joint

operation records its interest in the assets, liabilities, revenue and expenses of the joint operation.

CT REIT 2014 ANNUAL REPORT 53

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CT REIT acquired a one-third interest in the Co-ownership, pursuant to a co-ownership arrangement. The Co-ownership is a joint arrangement as the

material decisions about relevant activities require unanimous consent of the co-owners. This joint arrangement is a joint operation as each co-owner has

rights to the assets and obligations for the liabilities related to the Co-ownership. Accordingly, CT REIT recognizes its proportionate share of the assets,

liabilities, revenue and expenses of the Co-ownership in its financial statements.

Investment properties include income-producing properties and properties under development that are held by CT REIT to earn rental

income. CT REIT

accounts for its investment properties in accordance with IAS 40 – Investment Property (‘‘IAS 40’’). For acquired investment properties that meet the

definition of a business, the acquisition is accounted for as a business combination in accordance with IFRS 3 – Business Combinations (‘‘IFRS 3’’),

otherwise they are initially measured at cost including directly attributable acquisition costs. Subsequent to acquisition, investment properties are carried at

fair value, which is determined based on available market evidence at the balance sheet date including, among other things, rental revenue from current

leases and reasonable and supportable assumptions that represent what knowledgeable, willing parties would assume about rental revenue from future

leases less future cash outflows in respect of capital expenditures. Gains and losses arising from changes in fair value are recognized in net income in the

period of change.

The initial cost of properties under development includes the acquisition cost of the properties, direct development costs, realty taxes and borrowing costs

attributable to properties under development. Borrowing costs associated with direct expenditures on properties under development are capitalized. The

amount of capitalized borrowing costs is determined first by reference to property-specific borrowings, where relevant, and otherwise by applying a

weighted average cost of borrowings to eligible expenditures after adjusting for borrowings associated with other specific developments. Where borrowings

are associated with specific developments, the amount capitalized is the gross cost incurred on those borrowings less any investment income arising on

their temporary investment. Borrowing costs are capitalized from the commencement of the development until the date of practical completion. The

capitalization of borrowing costs is suspended if there are prolonged periods when development activity is interrupted. Practical completion is when the

property is capable of operating in the manner intended by management. Generally, this occurs on completion of construction and receipt of all necessary

occupancy and other material permits.

If considered reliably measurable, properties under development are carried at fair value. Properties under development are measured at cost if fair value is

not reliably measurable. In determining the fair value of properties under development, management considers, among other things, the development risk of

the property, the provisions of the construction contract, the stage of completion and the level of reliability of cash inflows after completion.

Leasing costs incurred by CT REIT in negotiating and arranging tenant leases are added to the carrying amount of investment properties. Payments to

tenants under lease contracts are characterized as either capital expenditures in the form of tenant improvements that enhance the value of the property or

lease inducements. Tenant improvements are capitalized as part of investment properties. Lease inducements are capitalized as a component of investment

properties and are amortized over the term of the lease as a reduction of revenue.

When an investment property is sold, the gain or loss is determined as the difference between the net disposal proceeds and the carrying amount of the

property and is recognized in net income in the period of disposal.

(d) Business combinations

CT REIT accounts for investment property acquisitions as a business combination if the particular assets and set of activities acquired can be operated and

managed as a business in its current state. CT REIT applies the acquisition method to account for business combinations. The consideration transferred for

a business combination is the fair value of the assets transferred, the liabilities incurred of the former owners of the acquiree and the equity interests issued

by CT REIT. The total consideration includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets

acquired as well as liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

Acquisition related costs incurred in a business combination are expensed as incurred.

CT REIT recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s

proportionate share of the recognized amounts of the acquiree’s identifiable net assets.

(e) Revenue recognition

CT REIT has retained substantially all of the risks and benefits of ownership of its investment properties and therefore accounts for leases with its tenants as

operating leases. Revenue recognition under a lease commences when the tenant has a right to use the leased asset. Generally, this occurs on the lease

inception date or, where CT REIT is required to make additions to the property in the form of tenant improvements that enhance the value of the property,

upon substantial completion of those improvements. Property revenue includes all amounts earned from tenants related to lease agreements including

property tax, operating cost and other recoveries.

54 CT REIT 2014 ANNUAL REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The total amount of minimum lease payments to be received from operating leases is recognized on a straight-line basis over the term of the lease. A

straight-line rent receivable, which is included in the carrying amount of investment properties, is recorded for the difference between the rental revenue

recorded and the contractual amount of minimum base rent received or receivable.

(f) Income taxes

CT REIT is a “mutual fund trust” under the Income Tax Act (Canada). The Trustees intend to distribute or designate all taxable income directly earned by

CT REIT to Unitholders and to deduct such distributions for income tax purposes.

Legislation relating to the federal income taxation of Specified Investment Flow Through (“SIFT”) trusts or partnerships provide that certain distributions from

a SIFT will not be deductible in computing the SIFT’s taxable income and that the SIFT will be subject to tax on such distributions at a rate that is

substantially equivalent to the general tax rate applicable to Canadian corporations. However, distributions paid by a SIFT as a return of capital should

generally not be subject to tax.

Under the SIFT rules, the taxation regime will not apply to a real estate investment trust that meets prescribed conditions relating to the nature of its assets

and revenue (the “REIT Conditions”). CT REIT has reviewed the SIFT rules and has assessed their interpretation and application to CT REIT’s assets and

revenue. While there are uncertainties in the interpretation and application of the SIFT rules, CT REIT believes that it meets the REIT Conditions. Accordingly,

with the exception of transactions with CT REIT GP Corp., no net current income tax expense or deferred income tax assets or liabilities have been recorded

in the consolidated statements of net income and comprehensive income.

(g) Class C LP Units

Each series of the Class C LP Units are redeemable, at the option of the holder, at a specified future date and can be settled at the option of the Partnership

in cash or a variable number of Class B LP Units. Accordingly, the Class C LP Units are classified as financial liabilities and fixed payments on the Class C

LP Units are presented as interest expense in the consolidated statement of income and comprehensive income in the period using the effective interest

method.

(h) Non-controlling interests

Class B LP Units are classified as non-controlling interests and are presented as a component of equity as they represent equity interests in the Partnership

not attributable, directly or indirectly, to CT REIT.

(i) Provisions

A provision is a liability of uncertain timing or amount. Provisions are recognized when CT REIT has a present legal or constructive obligation as a result of

past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not

recognized for future operating losses. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation

using a discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. Provisions are remeasured

at each balance sheet date using the current discount rate. The increase in the provision due to the passage of time is recognized as interest expense.

(j) Unit based compensation plans

CT REIT offers a Deferred Unit Plan (the “DU Plan”) for trustees who are not employees or officers of CT REIT or its affiliates, whereby such trustees may

elect to receive all or a portion of their annual compensation in deferred units (“DUs”). CT REIT has a Restricted Unit Plan (the “RU Plan”) for executives,

whereby the executives of CT REIT may elect to receive all or a portion of their annual short-term incentive plan awards in restricted units (“RUs”), and a

Performance Unit Plan (the “PU Plan”) whereby the Board grants performance units (“PUs”) to executives of CT REIT as part of their long-term incentive

plan.

DUs, RUs and PUs are recorded as liabilities and expensed as compensation expense over the vesting period based upon the fair value of the respective

units granted.

(k) Cash and cash equivalents

Cash and cash equivalents include cash and short-term investments with original maturities of three months or less.

(l) Financial instruments and derivatives

Financial

instruments are classified, at the time of initial recognition, according to their characteristics and management’s classifications and intentions

related thereto for the purposes of ongoing measurement. Classification choices are: (i) held-to-maturity, (ii) loans and receivables, (iii) fair value through profit

or loss (“FVTPL”), (iv) available for sale, or (v) other financial liabilities. Financial assets and liabilities classified as FVTPL are measured at fair value with gains

and losses recognized in the consolidated statements of income and comprehensive income. Financial instruments classified as held-to-maturity, loans and

receivables or other liabilities are measured at amortized cost, using the effective interest method. Available-for-sale financial instruments are measured at

fair value and any unrealized gains and losses will be recognized in other comprehensive income. CT REIT does not hold any held-to-maturity, FVTPL or

available for sale financial instruments.

CT REIT 2014 ANNUAL REPORT 55

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following summarizes CT REIT’s classification and measurement of financial instruments:

Financial assets and liabilities

Cash and cash equivalents

Other assets

Tenant and other receivables

Mortgages payable

Class C LP Units

Accounts payable and other liabilities

Distributions payable

Classification

Measurement

Loans and receivables

Amortized cost

Loans and receivables

Amortized cost

Loans and receivables

Amortized cost

Loans and receivables

Amortized cost

Other liabilities

Amortized cost

Other liabilities

Amortized cost

Other liabilities

Amortized cost

Transaction costs, other than those related to financial

instruments classified as FVTPL, which are expensed as incurred, are capitalized to the carrying

amount of the instrument and amortized using the effective interest method. These costs include interest, discounts or premiums relating to borrowings,

fees and commissions paid to agents, brokers and advisers and transfer taxes and duties incurred in connection with the arrangement of borrowings.

4. Investment Properties

Balance at beginning of year

Acquisitions of investment properties (including acquisition costs)1

Development land acquisitions

Developments

Intensifications

Recoverable capital expenditures

Capitalized interest and property taxes

Straight-line rent

Fair value adjustment on investment properties

Balance at end of year

1 Net of post-closing adjustments

December 31, 2014

December 31, 2013

$ 3,547,864

–

228,684

3,982

19,963

11,951

17,052

442

28,685

141,221

3,534,136

9,011

–

5,185

(468)

$ 3,999,844

$ 3,547,864

To determine fair value, CT REIT uses the income approach. Fair value is estimated by capitalizing the cash flows that the property can reasonably be

expected to produce over its remaining economic life. The income approach is derived from two methods: the overall capitalization rate (“OCR”) method,

whereby the net operating income is capitalized at the requisite OCR, or the discounted cash flow (“DCF”) method, in which the cash flows are projected

over the anticipated term of the investment plus a terminal value discounted using an appropriate discount rate.

Properties under development are measured using a DCF model, net of costs to complete, as of the balance sheet date. Development sites in the planning

phases are measured using comparable market prices for similar assets.

Investment properties were subject to independent appraisals when initially acquired in 2013. At December 31, 2014, management’s determination of fair

value was updated for current market assumptions, utilizing market capitalization rates provided by independent valuation professionals.

CT REIT also obtained independent valuations for certain properties based on a four-year rotation cycle during which substantially all of its properties will be

independently valued. During 2014, independent appraisals were obtained on a total of 68 properties, 34 were completed in Q2 having a fair value of

$615,360 effective June 30, 2014 and 34 were completed in Q4 having a fair value of $560,890 effective December 31, 2014.

The fair value of investment properties is based on Level 3 inputs (see Note 23(a) for definition of levels). There have been no transfers during the period

between levels.

56 CT REIT 2014 ANNUAL REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The significant inputs used to determine the fair value of CT REIT’s investment properties are as follows:

Number of properties

Value as at December 31, 2014

Discount rate

Terminal capitalization rate

Overall capitalization rate

Hold period (years)

Properties valued by the
OCR method

Properties valued by
the DCF method

227

$ 3,127,673

$ 851,137

–

6.34%

–

6.91%

6.50%

–

Valuations determined by the OCR method are most sensitive to changes in capitalization rates. Valuations determined by the DCF method are most

sensitive to changes in discount rates.

The following table summarizes the sensitivity of the fair value of investment properties to changes in the capitalization rate:

Rate sensitivity

+ 75 basis points

+ 50 basis points

+ 25 basis points

Base rate

– 25 basis points

– 50 basis points

– 75 basis points

2014 Acquisition Activity

OCR Sensitivity

DCF Sensitivity

Fair value

Change in
fair value

Fair value

Change in
fair value

$ 2,810,215

$ (317,458)

$ 809,752

$ (41,385)

2,908,248

3,013,768

3,127,673

3,251,006

3,384,994

3,531,086

(219,425)

(113,905)

–

123,333

257,321

403,413

823,222

837,022

851,137

865,647

880,491

895,704

(27,915)

(14,115)

–

14,510

29,354

44,567

For the year ended December 31, 2014, thirteen investment property acquisitions and two development land acquisitions were completed at a total cost of

$228,684 and $3,982 respectively. In addition, two development and six intensification projects were completed at a total cost of $19,963 and $11,951

respectively. The costs for these acquisitions were funded as follows:

Funded with working capital to CTC1

Funded with working capital to third parties

Issuance of Class B LP Units to CTC

Issuance of Class C LP Units to CTC

Mortgages assumed

Total Costs

1 Net of post-closing adjustments.

2013 Acquisition Activity

2014 Acquisition Activity

Acquisitions
of investment
properties

Development
land acquisitions

Developments

Intensifications

31,479

–

$ 19,929

$ 11,951

71,267

19,464

47,279

59,195

3,982

–

$ 228,684

$ 3,982

$ 19,963

$ 11,951

CT REIT acquired a portfolio of 256 properties (the “Initial Properties”) from CTC in exchange for a combination of Class B LP Units (which are accompanied

by an equivalent number of special voting units in CT REIT (the ‘‘Special Voting Units’’), Class A LP Units, which were immediately acquired by CT REIT

using the net proceeds from the Offering, and Class C LP Units. The purchase price of the Initial Properties was $3,533,668 and was supported by

independent appraisals. CT REIT incurred costs on the acquisition of the Initial Properties of $468, which was added to the carrying value of the Initial

Properties upon their recognition. The purchase of the Initial Properties was accounted for as an asset acquisition.

CT REIT 2014 ANNUAL REPORT 57

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The purchase price was satisfied as follows:

Cash1

Units acquired by CTC

Class B LP Units

Class C LP Units

240,958

597,111

895,599

1,800,000

$ 3,533,668

1 Represents proceeds from the Offering less issuance costs of $22,074 and property acquisition costs of $468.

Development properties represent $3,984 (2013 – $9,011) of the total value of investment properties including capitalized interest of $2 (2013 – nil).

Investment properties with a fair value of approximately $127,926 (2013 – $60,658) are situated on land held under leases with remaining initial terms of

between 4 and 41 years, and an average initial term of 17 years.

5. Tenant and Other Receivables

The components of tenant and other receivables were as follows:

Rent and other receivables1

Allowance for doubtful accounts

Tenant and other receivables

1 Includes $8,505 receivable from CTC (2013 – $554).

6. Other Assets

Prepaid expenses and deposits

Deferred assets

Less: non-current portion of other assets

Other assets

December 31, 2014

December 31, 2013

$ 10,429

(80)

$ 10,349

$ 696

–

$ 696

December 31, 2014

December 31, 2013

$ 3,420

1,097

(2,526)

$ 1,991

$ 6,859

834

(638)

$ 7,055

Deferred assets include the costs incurred in connection with the arrangement of the Bank Credit Facility, which are being amortized over 48 months (see

Note 10).

7. Cash and Cash Equivalents

At December 31, 2014, CT REIT did not have any short-term deposits (2013 – $44,065). For the year ended December 31, 2014, interest income of $350

(2013 – $83) was earned on cash and cash equivalents and is recorded as interest income in the statements of income and comprehensive income.

8. Class C LP Units

The Class C LP Units entitle the holder to a fixed cumulative monthly payment during the initial fixed rate period for each Series of Class C LP Units (the

“Initial Fixed Rate Period”) equal to a weighted average of 4.44 per cent of the aggregate capital amount ascribed to the Class C LP Units, in priority to

distributions made to holders of the Class A LP Units, Class B LP Units and GP Units, subject to certain exceptions. During the five-year period beginning

immediately following the completion of the Initial Fixed Rate Period, and each five-year period thereafter, the fixed payment rate for Class C LP Units will be

reset, and the holders of Class C LP Units will be entitled, subject to certain conditions, to elect either a fixed rate or floating rate option.

On expiry of the Initial Fixed Rate Period applicable to each series of Class C LP Units, and every five years thereafter, each such series of Class C LP Units

is redeemable at par (together with all accrued and unpaid payments thereon) at the option of the Partnership or the holder, upon giving at least 120 days’

notice. The Partnership further has the ability to settle any of the Class C LP Units at any time after January 1, 2019 at a price equal to the greater of par and

a price to provide a yield equal to the then equivalent Government of Canada bond yield plus a spread, so long as such redemption is in connection with a

sale of properties.

58 CT REIT 2014 ANNUAL REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Such redemptions of Class C LP Units (other than upon a change of control at CT REIT) can be settled at the option of the Partnership, in cash or Class B

LP Units of equal value.

The following table presents the details of the Class C LP Units:

Series

Series 1

Series 2

Series 3

Series 4

Series 5

Series 6

Series 7

Series 8

Series 9

Series 10

Series 11

Series 12

Weighted average / Total

Current

Non-current

Total

Expiry of initial fixed
rate period

Annual distribution rate
during initial fixed par
value

Carrying amount at
December 31,
2014

Carrying amount at
December 31, 2013

May 31, 2015

May 31, 2016

May 31, 2020

May 31, 2024

May 31, 2028

May 31, 2031

May 31, 2034

May 31, 2035

May 31, 2038

May 31, 2017

3.50%

4.50%

5.00%

2.38%

2.20%

2.23%

4.44%

200,000

7,130

20,685

19,464

200,000

–

$ 1,847,279

$ 1,800,000

200,000

–

1,647,279

1,800,000

$ 1,847,279

$ 1,800,000

There are no principal payments on the Class C LP Units during the Initial Fixed Rate Period. For the year ended December 31, 2014, interest expense of

$81,643 (2013 – $15,534) was recognized in respect of the Class C LP Units (see Note 18). The holders of the Class C LP Units may elect to defer receipt

of all or a portion of payments declared by CT REIT until the first day following the end of the fiscal year. If the holder so elects to defer receipt of payments,

CT REIT will loan the holder the amount equal to the deferred payment without interest, and the loan will be due and payable in full on the first business day

following the end of the fiscal year the loan was advanced, the holder having irrevocably directed that any payment of the deferred payments be applied to

repay such loans. At the election of the holder, payments on the Class C LP Units for the year ended December 31, 2014 of $68,425 (2013 – $7,991) were

deferred until the first day following the end of the fiscal year and non-interest bearing loans equal to the deferred payments were advanced in lieu thereof.

The net amount of payments due in respect of the Class C LP Units at December 31, 2014 of $6,838 (2013 – $6,787) is included in other liabilities on the

consolidated balance sheet (see Note 11). These loans were settled on January 2, 2015.

9. Mortgages Payable

Mortgages payable, secured by certain of CT REIT’s investment properties, include the following:

Current

Non-current

Total

December 31, 2014

December 31, 2013

Face value

Carrying
amount

Face value

Carrying
amount

$ 1,158

$ 1,275

57,148

57,219

$ 58,306

$ 58,494

$ –

–

$ –

–

$ –

CT REIT 2014 ANNUAL REPORT 59

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Future repayments are as follows:

For the period ending December 31:

2015

2016

2017

2018

2019

2020 and thereafter

Total contractual obligation

Unamortized portion of mark to market interest rates on liabilities assumed at the acquisition of properties

Unamortized debt financing cost

Principal Amortization

Maturities

Total

$ 1,158

1,199

1,241

422

–

16,661

37,625

–

1,158

1,199

1,241

17,083

37,625

–

4,020

54,286

58,306

381

(193)

58,494

Mortgages payable have interest rates that range from 2.95% to 3.60%, and have maturity dates that range from January 2018 to December 2019.

Mortgages payable at December 31, 2014 had a weighted average interest rate of 3.19% (2013 – nil). At December 31, 2014, floating rate and fixed rate

mortgages were $31,133 (2013 – nil) and $27,173 (2013 – nil), respectively.

Investment properties having a fair value of $121,489 have been pledged as security for mortgages payable.

10. Bank Credit Facility

The Partnership has a $200,000, revolving credit facility (the “Bank Credit Facility”), which is available to the Partnership until October 2017, with an option

to increase it by an additional $100,000. The Bank Credit Facility bears interest at a rate based on the bank’s prime rate of interest or bankers’ acceptances

plus a margin. A standby fee is charged on the Bank Credit Facility.

As at December 31, 2014, $78,000 (2013 – nil) of cash advances had been drawn on the Bank Credit Facility. The unamortized balance of transaction costs

incurred in connection with the arrangement of the Bank Credit Facility of $434 (2013 – $616) is recorded in other assets on the consolidated balance

sheets. For the year ended December 31, 2014, amortization of the transaction costs of $182 (2013 – $35), as well as the standby fee of $492 (2013 – $80)

are included in interest and other financing charges on the consolidated statement of income and comprehensive income (see Note 18).

The following table summarizes the details of Bank Credit Facility as at December 31, 2014:

Bank Credit Facility Maximum Loan Amount

$ 200,000

Cash Advances

$ 78,000

Letters of Credit

Available to be Drawn

$ –

$ 122,000

11. Other Liabilities

Other liabilities are comprised of the following:

Property operating costs1
Recoverable capital expenditures
Construction holdbacks2
Interest on Class C LP Units3
Deferred revenue4
Other5
Less: non-current portion of other liabilities

Other liabilities

1 Includes $496 payable to CTC (2013 – $2,483).

2 Includes $3,188 payable to CTC (2013 – nil).

3 Net of loans receivable of $68,425 (2013 – $7,991). See Note 22.

4 Prepaid rent from CTC.

5 Includes $101 payable to CTC (2013 – $20).

60 CT REIT 2014 ANNUAL REPORT

December 31, 2014

December 31, 2013

$ 3,188
2,089
3,515
6,838
2,238
3,563
(560)

$ 20,871

$ 2,751
–
–
6,787
–
3,601
(275)

$ 12,864

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. Distributions on Units and Class B LP Units

The following table presents total distributions declared on Units and Class B LP Units:

Units1

Class B LP Units2

1 Includes $38,877 (2013 – $7,426) paid or payable to CTC.

2 Paid or payable to CTC.

For the year ended
December 31, 2014

For the period from July 15, 2013
to December 31, 2013

Total
Distributions

Distributions
per Unit

Total
Distributions

Distributions
per Unit

$ 58,674

$ 58,971

$ 0.65

$ 11,194

$ 11,139

$ 0.12

CT REIT has adopted a distribution reinvestment plan (“DRIP”), which allows certain Canadian resident Unitholders to elect to have all or a portion of their

cash distributions reinvested in additional Units (at a price per unit calculated by reference to the five-day volume weighted average for the Units on the TSX

for the five business days immediately preceding the distribution payment date). No brokerage commissions or service charges are payable in connection

with the purchase of Units under the DRIP and CT REIT will pay all administrative costs. The automatic reinvestment of distributions under the DRIP does

not relieve holders of Units of any income tax applicable to such distributions. Unitholders who participate in the DRIP receive an additional distribution of

units equal to 3.0% of each distribution that was reinvested by them.

For the year ended December 31, 2014 161,437 (2013 – 13,179) Units were issued under the DRIP for $1,781 (2013 – $136).

On November 3, 2014, the Board approved an increase in the annual rate of distribution to $0.663 effective with the first distribution paid in 2015.

On December 15, 2014, CT REIT’s Board declared a distribution of $0.05525 per Unit paid on January 15, 2015 to holders of Units and Class B LP Units of

record as of December 31, 2014.

On January 15, 2015, CT REIT’s Board declared a distribution of $0.05525 per Unit paid on February 13, 2015 to holders of Units and Class B LP Units of

record as of January 30, 2015.

On February 13, 2015, CT REIT’s Board declared a distribution of $0.05525 per Unit payable on March 13, 2015 to holders of Units and Class B LP Units of

record as of February 27, 2015.

The holders of the Class B LP Units may elect to defer receipt of all or a portion of distributions declared by CT REIT until the first day following the end of

the fiscal year. If the holder so elects to defer receipt of distributions, CT REIT will

loan the holder the amount equal to the deferred distribution without

interest, and the loan will be due and payable in full on the first business day following the end of the fiscal year the loan was advanced, the holder having

irrevocably directed that any payment of the deferred distributions be applied to repay such loans. For the year ended December 31, 2014, the holders of

the Class B LP Units elected to defer distributions in the amount of $565 (2013 – nil). See Note 22(b). These loans were settled on January 2, 2015.

13. Equity

Authorized and outstanding units

CT REIT is authorized to issue an unlimited number of Units. As of December 31, 2014, CT REIT had 90,188,210 (2013 – 90,026,773) Units outstanding,

59,711,094 (2013 – 59,711,094) of which were held by CTC and 91,297,572 (2013 – 89,559,871) Class B LP Units outstanding (together with a

corresponding number of Special Voting Units), all of which were held by CTC.

The following tables summarize the changes in Units and Class B LP Units:

Total outstanding at beginning of year

Issued

Total outstanding at end of period

Total outstanding at beginning of period

Issued

Total outstanding at end of period

For the year ended December 31, 2014

Units

Class B LP Units

Total

90,026,773

89,559,871

179,586,644

161,437

1,737,701

1,899,138

90,188,210

91,297,572

181,485,782

For the period from July 15, 2013 to December 31, 2013

Units

Class B LP Units

–

Total

–

90,026,773

89,559,871

179,586,644

90,026,773

89,559,871

179,586,644

CT REIT 2014 ANNUAL REPORT 61

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Net income attributable to Unitholders and weighted average units outstanding used in determining basic and diluted net income per unit for the year ended

December 31, 2014 and period from July 15, 2013 to December 31, 2013, are calculated as follows, respectively:

Net income attributable to unitholders – basic

Income effect of settling Class C LP Units with Class B LP Units

Net income attributable to unitholders – diluted

Weighted average Units outstanding – basic

Dilutive effect of other Unit plans

Dilutive effect of settling Class C LP Units with Class B LP Units

Weighted average Units outstanding – diluted

Net income attributable to unitholders – basic

Income effect of settling Class C LP Units with Class B LP Units

Net income attributable to unitholders – diluted

Weighted average Units outstanding – basic

Dilutive effect of other Unit plans

Dilutive effect of settling Class C LP Units with Class B LP Units

Weighted average Units outstanding – diluted

For the year ended December 31, 2014

Units

Class B LP Units

159,282

158,979

Total

318,261

81,643

399,904

90,110,919

90,488,232

180,599,151

44,485

151,702,425

332,346,061

For the period from July 15, 2013 to December 31, 2013

Units

Class B LP Units

15,269

15,727

Total

30,996

15,534

46,530

89,339,035

89,559,871

178,898,906

25,148

168,299,232

347,223,286

The calculation of diluted per unit amounts is determined on a combined basis for the Units and Class B LP Units as the Class B LP Units are exchangeable

into Units on a one-for-one basis and are entitled to an equivalent amount of net income per unit as the Units.

Units

Each Unit is transferable and represents an equal, undivided, beneficial interest in CT REIT and any distributions, whether of net income, net realized capital

gains, or other amounts, and in the event of the termination or winding-up of CT REIT, in CT REIT’s net assets remaining after satisfaction of all liabilities. All

Units rank among themselves equally and ratably without discrimination, preference or priority. Each Unit entitles the holder thereof to one vote at all

meetings of Unitholders or with respect to any written resolution of Unitholders. The Units have no conversion, retraction or redemption rights.

Non-controlling interests

The Class B LP Units are exchangeable on a one-for-one basis (subject to customary anti-dilution provisions) for Units at the option of the holder. Each

Class B LP Unit is accompanied by a Special Voting Unit. The holders of Class B LP Units are entitled to receive distributions when declared by the

Partnership equal to the per unit amount of distributions payable to each holder of Units. However, the Class B LP Units have limited voting rights over the

Partnership.

Special Voting Units

Special Voting Units are only issued (i) in tandem with Class B LP Units of the Partnership or (ii) in limited circumstances to holders of the Class C LP Units

and are not transferable separately from the Class B LP Units or Class C LP Units, as the case may be, to which they relate. Upon any transfer of Class B

LP Units or Class C LP Units, as the case maybe, such Special Voting Units will automatically be transferred to the transferee of the Class B LP Units. As

Class B LP Units are exchanged for Units or purchased for cancellation, the corresponding Special Voting Units will be cancelled for no consideration.

Each Special Voting Unit entitles the holder thereof to one vote at all meetings of Unitholders or with respect to any resolution in writing of Unitholders.

Except for the right to attend and vote at meetings of the Unitholders or with respect to written resolutions of the Unitholders, Special Voting Units do not

confer upon the holders thereof any other rights. A Special Voting Unit does not entitle its holder to any economic interest in CT REIT, or to any interest or

share in CT REIT, or to any interest in any distributions (whether of net income, net realized capital gains, or other amounts), or to any interest in any net

assets in the event of termination or winding-up.

CT REIT’s Board retains full discretion with respect to the timing and quantum of distributions. Declared distributions are paid to Unitholders of record at the

close of business on the last day of the month on or about the 15th day of the following month.

62 CT REIT 2014 ANNUAL REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14. Unit Based Compensation Plans

Deferred Unit Plan for Trustees

Under the DU Plan, trustees who are eligible to participate in the DU Plan may elect to receive all or a portion of their annual compensation, which is paid

quarterly, in DUs. The number of DUs to be issued is determined by dividing the quarterly compensation amount the trustee has elected to receive in DUs

by the weighted average price at which Units trade on the TSX during the five trading days immediately preceding the end of the calendar quarter. The DU

account of each trustee includes the value of distributions, if any, which are reinvested in additional DUs. DUs represent a right to receive an equivalent

number of Units or, at the trustee’s election, the cash equivalent thereof, upon the trustee’s departure from the Board. DUs that are converted to cash will

be equivalent to the market value of Units at the time the conversion takes place pursuant to the terms of the DU Plan.

As at December 31, 2014, accrued Trustee compensation costs relating to the DU Plan totaled $440 (2013 – $79). The fair value of DUs is equal to the

trading price of Units. Compensation expense recorded for the year ended December 31, 2014 was $51 (2013 – $1) for DUs issued to Trustees and is

included in general and administrative expense.

Performance Unit Plan

Each PU award entitles the executive to receive a cash payment equal to the weighted average price of Units traded on the TSX during the 10 calendar day

period commencing the first business day following the end of the performance period, multiplied by a factor determined by specific performance-based

criteria, as set out in the performance unit plan. The performance period of each PU award is approximately three years from the date of issuance.

As at December 31, 2014, the accrued compensation costs relating to the PU Plan totaled $232 (2013 – nil). Compensation expense recorded for the year

ended December 31, 2014 for PUs granted to executive officers was $232 (2013 – nil), and is included in general and administrative expense.

Restricted Unit Plan for Executives

Under the RU Plan executives may elect to receive all or a portion of their short-term incentive plan (“STIP”) award for any fiscal year in restricted units

(“RUs”) which entitle the executive to receive an equivalent number of Units, or, at the executive’s election, the cash equivalent thereof, at the end of the

vesting period, which is generally five years from the STIP payment date. The number of RUs to be issued is determined by dividing the STIP amount the

executive has elected to receive in RUs by the volume weighted average price at which Units trade on the TSX during the five business days immediately

prior to the tenth business day following the release of CT REIT’s financial statements for the year in respect of which the STIP was earned. The RU Plan

also provides for discretionary grants of RUs which entitle the executive to receive an equivalent number of Units or, at the executive’s election, the cash

equivalent thereof, at the end of the vesting period which is generally three years from the date of issuance. RUs that are converted to cash will be

equivalent to the market value of Units on the conversion date pursuant to the terms of the RU Plan. The RU account for each executive includes the value

of distributions, if any, which are reinvested in additional RUs.

As at December 31, 2014, accrued RU compensation costs relating to the RU Plan totaled $328 (2013 – $275). The fair value of RUs is equal to the trading

price of Units. Compensation expense recorded for the year ended December 31, 2014 for RUs issued to executive officers was $53 (2013 – $275), and is

included in general and administrative expense.

15. Non-Controlling Interests

Details of non-wholly owned subsidiaries of CT REIT that have material non-controlling interests are as follows:

Proportion of ownership interests
held by non-controlling interests

Net income and comprehensive income
allocated to non-controlling interests

Accumulated non-controlling
interests

Name of subsidiary

December 31, 2014

December 31, 2013

For the year ended
December 31, 2014

For the period ended
December 31, 2013

December 31, 2014

December 31,
2013

CT REIT Limited Partnership

50.31%

49.87%

$ 158,979

$ 15,727

$ 1,019,601

$ 900,187

The following is a continuity of non-controlling interests:

Balance at beginning of year

Non-controlling interests arising on the issuance of Class B LP Units, net of issue costs

Share of net income and comprehensive income

Distributions

Balance at end of period

For the year ended
December 31, 2014

For the period ended
December 31, 2013

900,187

–

19,406

158,979

(58,971)

895,599

15,727

(11,139)

$ 1,019,601

$ 900,187

CT REIT 2014 ANNUAL REPORT 63

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

There are no restrictions on CT REIT’s ability to access or use the assets and settle the liabilities of

its subsidiaries and there are no contractual

arrangements that could require CT REIT to provide financial support.

16. Revenue and Expenses

(a) Property revenue

CT REIT leases income-producing commercial properties to tenants under operating leases. The CTC leases have staggered initial terms ranging from 5.8

to 20.1 years, with a weighted average remaining initial term of approximately 14.5 years. Annual base minimum rent for CTC leases will have weighted

average annual rent escalations of approximately 1.5% per year, commencing January 1, 2015.

The components of revenue are as follows:

Base minimum rent

Straight-line rental

Subtotal base rent

Property tax and operating expense recoveries

Capital expenditure and interest recovery charge

Other revenues

Property revenue

Base minimum rent

Straight-line rental

Subtotal base rent

Property tax and operating expense recoveries

Property revenue

Future base minimum rental commitments on non-cancellable tenant operating leases are as follows:

Less than one year

Between one and five years

More than five years

Total

(b) Property expense

The major components of operating costs consist of realty taxes and other recoverable costs:

Property taxes

Property management1

Other recoverable operating costs

Other non-recoverable costs

Ground rent

Property insurance

Property expense

1 Includes $2,333 (2013 – $405) with CTC. See Note 22.

64 CT REIT 2014 ANNUAL REPORT

CTC

Other

For the year ended
December 31, 2014

$ 235,851

7,867

$ 243,718

28,104

263,955

68,092

165

–

581

8,448

3,818

–

313

28,685

272,403

71,910

165

313

$ 332,212

$ 12,579

$ 344,791

CTC

Other

For the period from
July 15, 2013 to
December 31, 2013

$ 43,881

$ 1,172

$ 45,053

5,134

49,015

12,327

1,223

461

5,185

50,238

12,788

$ 61,342

$ 1,684

$ 63,026

December 31, 2014

258,453

1,063,500

2,767,588

$ 4,089,541

For the year ended
December 31, 2014

For the period from
July 15, 2013 to
December 31, 2013

$ 68,615

$ 12,644

2,515

3,225

2,147

463

303

–

347

$ 76,677

$ 13,773

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

17. General and Administrative Expenses

General and administrative expenses are comprised of the following:

Services Agreement with CTC1

Personnel expense

Other

General and administrative expenses

1 See Note 22.

18. Interest and Other Financing Charges

Interest and other financing charges are comprised of the following:

Interest on Class C LP Units

Interest on Mortgages Payable

Interest on Bank Credit Facility

Standby fees – Bank Credit Facility

Amortization of financing costs – Bank Credit Facility

Amortization of agency fees – Bank Credit Facility

Capitalized interest

Interest and other financing charges

19. Changes in Working Capital and Other

Changes in working capital are comprised of the following:

Changes in working capital and other

Tenant and other receivables

Other assets

Other liabilities

Changes in working capital and other

20. Segmented Information

For the year ended
December 31, 2014

For the period from
July 15, 2013 to
December 31, 2013

$ 3,288

2,134

3,011

$ 8,433

627

809

787

$ 2,223

For the year ended
December 31, 2014

For the period from
July 15, 2013 to
December 31, 2013

$ 81,643

$ 15,534

652

355

492

153

83,324

(333)

–

15,649

–

$ 82,991

$ 15,649

For the year ended
December 31, 2014

For the period from
July 15, 2013 to
December 31, 2013

$ (9,653)

3,176

8,701

$ 2,224

(696)

(7,728)

6,241

$ (2,183)

CT REIT has one segment, which comprises the ownership and operation of primarily retail investment properties located in Canada.

21. Commitments and Contingencies

CT REIT has agreed to indemnify, in certain circumstances, the trustees and officers of CT REIT and its subsidiaries.

CT REIT has committed to development expenditures representing approximately $18,530 (2013 – $19,997) in future payments.

CT REIT 2014 ANNUAL REPORT 65

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

22. Related-Party Transactions

In the normal course of operations, CT REIT enters into various transactions with related parties that have been measured at amounts agreed to between

the parties and are recognized in the consolidated financial statements.

(a) Arrangements with CTC
Services Agreement

Under the Services Agreement, CTC provides CT REIT with certain administrative, legal, financial, information technology, internal audit and other support

services as may be reasonably required from time to time (the “Services”). CTC provides these Services to CT REIT on a cost recovery basis pursuant to

which CT REIT reimburses CTC for all costs and expenses incurred by CTC in connection with providing the Services, plus applicable taxes, with a fixed

maximum fee not to exceed $3,288 for the year ended December 31, 2014 with adjustments to such fee based on the Consumer Price Index (“CPI”), for

the following year. The CPI factor for 2015 is 1.4%. The Services Agreement’s initial term ends on December 31, 2015 and is renewable for further one year

terms thereafter, unless otherwise terminated. The Services Agreement has been renewed for 2016.

Property Management Agreement

Under the Property Management Agreement, CTC provides the Partnership with customary property management services (the ‘‘Property Management

Services’’). CTC agreed to provide Property Management Services to the Partnership on a cost recovery basis pursuant to which the Partnership

reimburses CTC for all costs and expenses incurred by CTC in connection with providing the Property Management Services, plus applicable taxes, with a

fixed maximum fee not to exceed $2,333 for the year ended December 31, 2014, with adjustments to such fee based on the CPI for the following year,

which is 1.4% for 2015. The Property Management Agreement’s initial term ends on December 31, 2015 and is renewable for further one year terms

thereafter, unless otherwise terminated. The Property Management Agreement has been renewed for 2016.

Development Agreement

CT REIT, the Partnership and CTC entered into the Development Agreement for a term expiring on the later of: (i) 10 years from the Closing; (ii) the time

when CTC ceases to hold, directly or indirectly, a majority of the Voting Units comprising any combination of Units and Special Voting Units. Pursuant to the

Development Agreement CT REIT has a preferential right to participate in property developments that meet CT REIT’s investment and other criteria, an

option to purchase development properties and an option to provide mezzanine financing for developments. The Agreement requires CTC to present, in

certain circumstances, new shopping centre acquisition opportunities in Canada to CT REIT.

(b) Transactions and balances with related parties

Transactions with CTC are comprised of the following:

Rental revenue

Property Management and Services Agreement expense

Distributions on Units

Distributions on Class B LP Units

Interest expense on Class C LP Units

1 Excludes acquisition activity. See Note 4.

The net balance due to CTC is comprised of the following:

Tenant and other receivables

Class C LP Units

Interest payable on Class C LP Units

Loans receivable in lieu of distributions on Class C LP Units

Other liabilities

Loans receivable in lieu of distributions on Class B LP Units

Distributions payable on Units and Class B LP Units

Net due to CTC

66 CT REIT 2014 ANNUAL REPORT

For the year ended
December 31, 20141

For the period from
July 15, 2013 to
December 31, 20131

$ 332,212

$ 61,342

5,621

38,877

58,971

81,643

1,090

7,426

11,139

15,534

December 31, 2014

December 31, 2013

(8,505)

(554)

1,847,279

1,800,000

75,263

(68,425)

6,023

(565)

8,908

14,778

(7,991)

2,503

–

8,086

$ 1,859,978

$ 1,816,822

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The remuneration of management personnel including the chief executive officer, chief financial officer and the trustees who were not employees or officers

of the REIT or any of its affiliates was as follows:

Salaries and short-term employee benefits

Unit-based awards

Total

For the year ended
December 31, 2014

For the period from
July 15, 2013 to
December 31, 2013

$ 2,226

336

$ 2,562

$ 603

276

$ 879

The remuneration of management consists principally of base salary, short-term cash incentives and long-term incentives (in the form of Unit-based awards).

The remuneration is determined by CT REIT’s Board of Trustees, on the recommendation of the Governance, Compensation and Nominating Committee.

The compensation of trustees, excluding employees and officers of the REIT or any of its affiliates, consists of annual retainer and meeting fees.

23. Financial Instruments and Risk Management

(a) Fair value of financial instruments

For financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value

measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
‰ Level 1 inputs: Are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
‰ Level 2 inputs: Are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
‰ Level 3 inputs: Are unobservable inputs for the asset or liability.

The fair value of the Class C LP Units is determined by discounting contractual principal and interest payments at estimated current market interest rates for

the instrument. Current market interest rates are determined with reference to current benchmark rates for a similar term and current credit spreads for debt

with similar terms and risks.

The fair value of the Class C LP Units and mortgages payable at December 31, 2014, was $1,931,316 and $59,452 respectively (2013 – $1,691,100 and

nil, respectively). The fair value measurement of the Class C LP Units and mortgages payables was based on Level 2 inputs. The significant inputs used to

determine the fair value of the Class C LP Units and mortgages payable are interest rates, interest rate volatility, and credit spreads. There have been no

transfers during the period between levels.

Current financial assets consist of cash and cash equivalents and tenant and other receivables and loans receivable, which are classified as loans and

receivables and carried at amortized cost. Current financial

liabilities consist of accounts payable, Bank Credit Facility, other liabilities and distributions

payable, which are classified as other liabilities and carried at amortized cost. The carrying amounts approximate their fair value due to their short-term

nature.

(b) Financial risk management

In the normal course of business, CT REIT has exposure to risks from its use of financial

instruments. CT REIT is exposed to liquidity and credit risk in

connection with its financial instruments. Financial risk management policies are established for CT REIT to identify and analyze the risks faced by CT REIT,

to set acceptable risk tolerance limits and controls and to monitor risks and adherence to limits. CT REIT is not exposed to significant currency or market

risk arising from financial instruments. Additionally, CT REIT currently does not have any significant direct exposure to interest rate risk in respect of the Class

C LP Units during the Initial Fixed Rate Term, the earliest of which expires on May 31, 2015 (see Note 8).

Liquidity risk

Liquidity risk is the risk that CT REIT will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash

or another financial asset. CT REIT’s approach to managing liquidity is to ensure that it has sufficient liquidity available through cash, assets readily

convertible to cash and committed bank lines of credit to support its monthly cash distributions to Unitholders, meet operating and strategic plan

requirements and meet unexpected financial challenges. CT REIT has in place a leverage and liquidity policy to manage its exposure to liquidity risk.

Management has identified key financial credit metric ratios and calculates these ratios in a manner to approximate the methodology of debt rating agencies.

Management monitors these metrics against industry-accepted targets to maintain investment-grade ratings from two credit rating agencies.

CT REIT uses a detailed consolidated cash flow forecast model to regularly monitor its near-term and longer-term cash flow requirements, which assists in

optimizing its cash distributions to Unitholders and evaluating longer-term funding strategies.

CT REIT 2014 ANNUAL REPORT 67

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CT REIT has access to the following financing sources to ensure that the appropriate level of liquidity is available to meet its monthly distributions and

strategic objectives: committed bank lines totaling $200,000, direct access to debt and equity markets subject to consent from CTC, and contributions from

CTC to the extent cash flows from property operations are not sufficient.

Credit risk

Credit risk is the risk of financial loss if a counterparty to a financial instrument fails to meet its contractual obligations and arises principally from CT REIT’s

tenants and from investment securities counterparties. Credit risk arises from the possibility that CT REIT’s tenants may experience financial difficulty and be

unable to meet their lease obligations. CTC is CT REIT’s most significant tenant and will be for the foreseeable future with Canadian Tire Retail stores and

the distribution centre. CT REIT’s revenues will be dependent on the ability of CTC to meet its rent obligations and CT REIT’s ability to collect rent from CTC.

CT REIT has a Securities and Counterparty Risk Management Policy in place for management of counterparty risk related to investing activity. The overall

credit risk compliance mechanisms established in this policy include credit rating requirements, approval authorities, counterparty limits, notional limits, term

to maturity and portfolio diversification requirements. CT REIT limits its exposure to credit risk by investing only in highly liquid and rated term deposits,

bankers’ acceptances or other approved securities and only with highly rated financial institutions and government counterparties.

Interest rate risk

Interest rate risk is the potential for financial loss arising from increases in interest rates. CT REIT has minimal exposure to interest rate changes as the initial

rate on the Class C LP units is at fixed interest rates and CT REIT currently has $78,000 (2013 – nil) in short-term borrowings outstanding under its Bank

Credit Facility.

24. Capital Management and Liquidity

CT REIT’s objectives when managing capital are to ensure access to capital and sufficient liquidity is available to support ongoing property operations,

developments and acquisitions while generating reliable, durable and growing monthly cash distributions on a tax-efficient basis to maximize long-term

Unitholder value.

The definition of capital varies from entity to entity, industry to industry and for different purposes. CT REIT’s strategy and process for managing capital is

driven by requirements established under the Declaration of Trust and the Bank Credit Facility.

The following schedule details the capitalization of CT REIT:

Liabilities

Class C LP Units

Mortgages payable

Bank Credit Facility

Equity

Unitholders’ equity

Non-controlling interest

Total

December 31, 2014

December 31, 2013

$ 1,847,279

$ 1,800,000

58,494

78,000

982,588

1,019,601

–

880,199

900,187

$ 3,985,962

$ 3,580,386

CT REIT’s Class C LP Units have a fixed, cumulative, preferential cash distribution, if, as and when declared by the board of directors of the GP, beginning

on October 23, 2013 and ending, for each series, on the date set out in the Initial Fixed Rate Period for such series, which is payable monthly at an annual

distribution rate for each series.

Under the Declaration of Trust and the syndicated bank credit agreement, key financial covenants are reviewed on an ongoing basis by management to

monitor compliance with the agreements. The key financial covenants for CT REIT are as follows:
‰ a requirement to maintain, at all times:

‰ a specified maximum ratio of total indebtedness of CT REIT (plus the aggregate par value of the Class C LP Units) to gross book value
‰ a specified maximum ratio of total secured indebtedness of CT REIT (plus the aggregate par value of the Class C LP Units) to gross book value
‰ a minimum Unitholders’ equity
‰ a ratio of unencumbered assets to unconsolidated unsecured indebtedness
‰ a specified minimum debt service coverage ratio defined as earnings before interest and taxes as a percentage of interest expense, which for greater

clarity includes payments on the Class C LP Units

As at December 31, 2014, CT REIT was in compliance with all of its financial covenants. Under these financial covenants, CT REIT has sufficient flexibility to

fund business growth and maintain or amend distribution rates within its existing distribution policy.

68 CT REIT 2014 ANNUAL REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CT REIT’s strategy is to satisfy its liquidity needs using cash flows generated from operating activities and cash provided by financing activities. Rental

income, recoveries from tenants, interest and other income, draws on the Bank Credit Facility and further issuance of debt and equity are CT REIT’s

principal sources of liquidity used to pay operating expenses, distributions, debt service, and recurring capital and leasing costs in its investment property

portfolio.

The principal

liquidity needs for periods beyond the next year are for unit distributions, scheduled debt maturities and capital expenditures. CT REIT’s

strategy is to meet these needs through cash flows generated from operating activities and further issuance of debt and equity.

The following table presents the contractual maturities of CT REIT’s financial liabilities:

Total

1 year

2-3 years

4-5 years

After 5 years

$ 1,847,279

$ 200,000

$ 247,279

–

$ 1,400,000

Payments Due By Period

1,066,314

14,593

6,838

10,027

58,306

78,000

77,977

14,033

6,838

10,027

1,158

78,000

138,419

134,000

715,918

560

–

2,440

–

54,708

–

Class C LP Units1

Payments on Class C LP Units1

Other liabilities

Payable on Class C LP Units, net of loans receivable

Distributions payable2

Mortgages payable

Bank Credit Facility

1 Assumes redemption on expiry of initial fixed rate period for each series.

2 On Units and Class B LP Units.

25. Comparative Figures

Certain of the prior period’s figures have been restated to correspond to the current period presentation.

26. Subsequent Events

A redemption notice was submitted by CT REIT to CTC, the holders of Series 1 of the Class C LP Units, which have a maturity date of May 31, 2015. As a

result, this series of Class C LP Units will either be redeemed or will have their rate reset, in either case effective May 31, 2015.

During February 2015, CT REIT completed five investment property acquisitions from CTC including two retail properties in Ontario, two in Quebec and one

in Alberta. The total purchase price of approximately $62,000 was satisfied by an issuance of 4,799,539 Class B LP Units.

CT REIT 2014 ANNUAL REPORT 69

GLOSSARY OF TERMS

CT REIT

Glossary of Terms

“AFFO” is funds from operation (“FFO”) subject to certain adjustments to

(a) remove the impact of: (i) adjusting for any differences resulting from

recognizing property rental revenues or expenses on a straight-line basis;

and (ii) initial one-time costs to establish the REIT; and (b) deduct a reserve

for normalized maintenance capital expenditures, tenant inducements and

leasing commissions.

“Atlantic Canada” means the provinces of New Brunswick, Newfoundland

and Labrador, Nova Scotia and Prince Edward Island.

“Board” means the Board of Trustees of the REIT.

“Capitalization Rate” refers to a rate of return calculated by dividing the

expected net operating income of a property by its total value.

“Development Lands” means, collectively,

the property located on

22 Avenue NE in Swift Current, Saskatchewan, acquired by the REIT on

December 1, 2014 and the property located on the southeast corner of

5th Street and 12th Avenue in High River, Alberta acquired by the REIT on

December 22, 2014.

“EBITFV” represents earnings before interest expense and other financing

costs,

income tax expense,

fair value adjustments on investment

properties, losses or gains on disposition of property, and excludes other

non-recurring items that may occur under IFRS.

“FFO” has the meaning given in the white paper on funds from operations

prepared by the Real Property Association of Canada (“REALpac”), and is

calculated as net income in accordance with GAAP, adjusted by removing

the impact of (i) fair value adjustments on investment properties; (ii) other

fair value adjustments;

(iii) gains and losses on the sale of

investment

properties; (iv) change in fair value of non cash compensation incentive

plans; and (v) amortization of tenant incentives.

“GAAP” means generally accepted accounting principles in Canada (which

for Canadian reporting issuers is IFRS) as in effect from time to time and as

“Change of Control” means the acquisition by a person, or group of

adopted by the REIT from time to time for the purposes of

its public

persons acting jointly or in concert, directly or indirectly, other than CTC or

financial reporting.

any of its Subsidiaries, of more than 50% of the aggregate voting rights

attached to the Units and Special Voting Units of the REIT (taking into

account (i) full dilution from the exchange of all then-outstanding Class B

LP Units into Units of the REIT; and (ii) in respect of any other securities

that are convertible or exchangeable into Units of the REIT, only dilution

resulting from the conversion or exercise of such other convertible or

exchangeable securities held by such person or group of persons).

“GLA” means gross leasable area.

“Gross Book Value” means at any time the total assets of the REIT as

shown in its then most recent consolidated balance sheet.

“IFRS” means International Financial Reporting Standards as issued by the

International Accounting Standards Board and as adopted by the

Chartered Professional Accountants of Canada in Part

I of The CPA

Canada Handbook – Accounting, as amended from time to time.

“Class A LP Units” means, collectively, the Class A limited partnership

“Indebtedness” of any person means (without duplication)

(i) any

units of the Partnership.

“Class B LP Units” means, collectively, the Class B limited partnership

units of the Partnership, and “Class B LP Unit” means any one of them.

obligation of such person for borrowed money (including,

for greater

certainty, the full principal amount of convertible debt, notwithstanding its

presentation under GAAP), (ii) any obligation of such person incurred in

connection with the acquisition of property, assets or businesses, (iii) any

“Class C LP Units” means, collectively, the Class C limited partnership

obligation of such person issued or assumed as the deferred purchase

units of the Partnership, and “Class C LP Unit” means any one of them.

“Closing” means the closing of the REIT’s Initial Public Offering, Acquisition

and other related transactions on October 23, 2013.

“Competitor” is a person who carries on business, or any person who

controls or is controlled by such person, in one or more of the following

categories:

hardware,

automotive,

sporting

goods,

apparel

and

housewares.

price of property, (iv) any capital

lease obligation of such person, and

(v) any obligations of the type referred to in clauses (i) through (iv) of another

person the payment of which such person has guaranteed or for which

such person is responsible or liable; provided that, (A) for the purpose of

clauses (i) through (v) (except in respect of convertible debt, as described

above), an obligation will constitute Indebtedness of such person only to

the extent that it would appear as a liability on the consolidated balance

sheet of such person in accordance with GAAP, (B) obligations referred to

in clauses (i) through (iii) exclude trade accounts payable, distributions

“CTC” means Canadian Tire Corporation, Limited together with its

payable to Unitholders, accrued liabilities arising in the ordinary course of

subsidiaries (excluding the REIT and the REIT’s subsidiaries), or, as the

business which are not overdue or which are being contested in good faith,

context requires, any of them.

“CTC Banner” means a CTC name or

trademark,

including the

Canadian Tire®, SportChek and Marks, name and trademark.

deferred revenues, intangible liabilities, deferred income taxes, deferred

financing costs, tenant deposits and indebtedness with respect to the

unpaid balance of

installment receipts where such indebtedness has a

term not in excess of 12 months, and (C) Units, Class A LP Units, Class B

“Development Agreement” means the development agreement among

LP Units, Class C LP Units and exchangeable securities do not constitute

the REIT, the Partnership, CTREL and CTC entered into at Closing, as

Indebtedness.

described under “Arrangements with CTC — Commercial Agreements with

“Initial Public Offering” refers to the distribution to the public of the Units

CTC” of this AIF.

pursuant to the Prospectus.

70 CT REIT 2014 ANNUAL REPORT

GLOSSARY OF TERMS

“Intensification” means the development of a property, site or area at a

“Straight-Line Rent” refers to the recognition of rental revenue on a

higher density than currently exists, through development, redevelopment,

straight-line basis over the lease term in accordance with IAS 17, Leases.

infill and expansion or conversion of existing buildings.

“Unitholders” means holders of Units, and “Unitholder” means any one of

“Investment Properties” means the portfolio of properties owned by CT

them.

REIT.

“Net Income Per Unit – Basic” is calculated by dividing net

income

attributable to the Unitholders and Class B LP Unitholders by the weighted

average number of Units and Class B LP Units outstanding during the

reporting period.

“Net Income Per Unit – Diluted” is calculated by adjusting net income

attributable to the Unitholders and the weighted average numbers of units

outstanding for the effects of all dilutive potential equity instruments, which

comprises settling the Class C LP Units with Class B LP Units, as well as

restricted and deferred Units issued under various plans.

“NOI” means property revenue less property expense (including property

management fees).

“Non-Controlling Interest” refers to the classification of Class B LP Units,

which are presented as a component of equity as they represent equity

interests in the Partnership not attributable to CT REIT.

“Operating Leases” refers to the lease agreements of the Investment

Properties treated in accordance with IAS 17, Leases.

“Property Management Agreement” means the property management

agreement among the Partnership and CTC entered into at Closing,

pursuant to which CTC provides the Partnership with customary Property

Management Services.

“Prospectus” means the prospectus filed in respect of the REIT’s initial

public offering dated October 10, 2013.

“REIT Exception” means the exclusion from the definition of “SIFT trust” in

the Tax Act for a trust qualifying as a “real estate investment trust” under

the Tax Act.

“ROFO Agreement” means the right of first offer agreement among the

REIT, the Partnership and CTC entered into at Closing. Pursuant to the

agreement, CTC has provided the REIT with a right of first offer to acquire

any interest of CTC in the properties it owns after Closing, which meet the

REIT’s investment criteria, prior to the disposition of any such property to

third parties, on terms no less favourable to the REIT than those offered by

or to such third party.

“Services Agreement” means the services agreement among the REIT,

the Partnership and CTC entered into at Closing pursuant to which CTC or

certain of its Subsidiaries provide the REIT with certain administrative, legal,

financial, information technology, human resources and ancillary services.

The Services are provided to the REIT on a cost-recovery basis only,

pursuant to which the REIT reimburses CTC for all costs and expenses

incurred by CTC in connection with providing the Services.

“SIFT Rules” means the rules applicable to SIFT trusts and SIFT

partnerships in the Tax Act.

“Special Voting Units” means, collectively, special voting units of the

REIT, and “Special Voting Unit” means any one of them.

“Units” means trust units in the capital of the REIT, other than Special

Voting Units, and “Unit” means any one of them.

“Western Canada” means the provinces of British Columbia, Alberta,

Saskatchewan and Manitoba, and the Northwest Territories and Yukon

Territory.

CT REIT 2014 ANNUAL REPORT 71

DISCLOSURE DOCUMENTS
Corporate governance disclosure
and other investor information are
available online on CT REIT’s website
at www.ctreit.com.

Additional copies of the Annual Report
and other disclosure documents, such
as CT REIT’s Management Information
Circular, the Annual Information
Form and quarterly reports, can be
downloaded or requested in print form
from the same website.

VERSION FRANÇAISE DU RAPPORT
Pour télécharger la version française
du rapport annuel de CT Real Estate
Investment Trust ou demander un
exemplaire, veuillez consulter le
site Web de la fiducie, à l’adresse
www.ctreit.com/fr.

CORPORATE INFORMATION

HOME OFFICE
CT REIT
2180 Yonge Street
P.O. Box 770, Station K
Toronto, Ontario M4P 2V8
Canada
Telephone: 416-480-2029
Toll-free: 1-855-770-7348 (REIT)
Website: www.ctreit.com

INVESTOR RELATIONS CONTACTS
Andrea Orzech
Associate Vice-President,
Investor Relations
andrea.orzech@cantire.com

Investor Relations email:
investor.relations@ctreit.com

MEDIA CONTACT
Sandra Buckler
Vice-President, Communications
sandra.buckler@cantire.com

ANNUAL MEETING OF UNITHOLDERS
Famous Players Canada Square
2190 Yonge Street
Toronto, Ontario
Tuesday, May 12, 2015
10:00 a.m. (EDT)

EXCHANGE LISTINGS
The Toronto Stock Exchange (CRT.UN)

AUDITORS
Deloitte LLP
Chartered Accountants

BANKERS
Bank of Montreal
Caisse Central Desjardins
Canadian Imperial Bank of Commerce
National Bank of Canada
Royal Bank of Canada
The Bank of Nova Scotia
The Toronto-Dominion Bank

REGISTRAR AND TRANSFER AGENT
Computershare Trust Company of Canada
100 University Avenue, 8th Floor
Toronto, Ontario M5J 2Y1
Canada
Telephone: 514-982-7555
Toll-free: 1-877-982-8768
Fax: 1-866-249-7775
Email: service@computershare.com

For Unitholder inquiries related
to participation in the distribution
reinvestment plan, electronic delivery
of Unitholder documents, distribution
payments or direct deposit of
distributions into your Canadian bank
account, change of address, transfer of
Units, consolidation of multiple mailings
to one Unitholder, estate settlements or
for other Unitholder account inquiries,
please contact the principal offices
of Computershare Trust Company of
Canada in Halifax, Montreal, Toronto,
Calgary or Vancouver.

CT REIT 2014 ANNUAL REPORT

CHARLOTTETOWN, PRINCE EDWARD ISLAND

OAKVILLE, ONTARIO

THUNDER BAY, ONTARIO

COTEAU-DU-LAC, QUEBEC

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CT REIT 2014 ANNUAL REPORT

LOCATION LOCATION LOCATION
+ STRATEGIC FOCUS

Canadian Tire Corporation always recognized the strategic importance
and value of real estate. Guided by this insight, the company developed an
exceptional in-house real estate team and, over decades, created a portfolio of
real estate assets that would be impossible to replicate today. In 2013, CT REIT
acquired most of those assets for our portfolio and we are uniquely positioned
to extend CTC’s legacy of strategic real estate investing.

Part of the Canadian Tire Family of Companies, CT REIT is entirely dedicated
to real estate, to enhancing the value of our assets, to leveraging our access
to CTC’s market insight and development pipeline and to delivering reliable,
durable and growing distributions to our Unitholders. If location is the key
to value in real estate, strategic focus is the key to value in real estate companies.

www.ctreit.com

TORONTO, ONTARIO

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