MORGUARD REAL ESTATE INVESTMENT TRUST 2014 ANNUAL REPORT MANAGING FOR PERFORMANCE

MORGUARD REAL ESTATE INVESTMENT TRUST 2014 ANNUAL REPORT MANAGING FOR PERFORMANCE

MORGUARD REAL ESTATE INVESTMENT TRUST Morguard Real Estate Investment Trust is a closed-end trust listed on the Toronto Stock Exchange (TSX) under the symbol MRT.UN. The Trust has total assets of $3.0 billion as at December 31, 2014. The mandate of the Trust is to accumulate a Canadian portfolio of high-quality real estate assets then actively manage the portfolio to generate steady, dependable returns for unitholders, through a stable and increasing cash flow. The Trust owns a diversified real estate portfolio (excluding properties held for sale) of 49 commercial properties consisting of approximately 8.6 million square feet of gross leasable area located in six provinces. The real estate portfolio includes well-located, high-quality office properties in major urban centres, large enclosed full-scale regional shopping malls that are dominant in their respective markets, neighbourhood and community shopping centres, and a small group of industrial properties. On our cover: Heritage Place, Ottawa, ON

FELLOW UNITHOLDERS In 2014, Morguard Real Estate Investment Trust extended its long record of delivering attractive returns to unitholders, through the prudent management of its high-quality portfolio of commercial real estate. The Trust s portfolio has been carefully diversified geographically across Canada, as well as by asset class, with a mix of retail, office and industrial properties. Strong financial performance in 2014 was supported by significant acquisitions in prior years. High levels of occupancy in the Trust s office and retail properties and a historically low cost of financing contributed to the Trust s results. In the year ahead, our focus remains on generating dependable distributions to our unitholders. While our efforts include managing to mitigate risk, we will also seek opportunities to enhance the Trust s portfolio. K. (RAI) SAHI President and Chief Executive Officer

2 MORGUARD REIT DELIVER ING STRONG FINANCIAL PERFORMANCE Standard Life Centre, Ottawa, ON

2014 ANNUAL REPORT 3 TOTAL REVENUE $280 $299 $236 $245 11 12 13 14 (in millions of dollars) NET OPERATING INCOME $161 $170 $134 $137 FINANCIAL PERFORMANCE THROUGH STRONG PORTFOLIO MANAGEMENT Since December 31, 2011, the Trust has increased revenue from $235.5 million to $298.5 million (December 31, 2014). This represents an increase of 26.8% or $63.0 million. During this same period, net operating income (revenue from real estate properties less operating expenses, property taxes and property management fees) has grown $36.1 million from $133.6 million to $169.7 million. This represents an increase of 27.0%. The growth in both revenue and net operating income is the result of a focused acquisition program that has improved the quality of the real estate portfolio and provided accretive returns. At the same time, the Trust has disposed of properties where both the cash flows and values have been maximized. In addition to managing the structure of the portfolio, management has been delivering increased revenue and net operating income within the core portfolio by increasing occupancy levels and market rents through a prudent program to remerchandise retail properties and enhance the office real estate portfolio. 11 12 (in millions of dollars) 13 14 The Trust continues to deliver on its mandate to generate a stable and increasing cash flow, resulting in reliable monthly distributions to our unitholders. FINANCIAL HIGHLIGHTS (in thousands of dollars, except per-unit amounts) 2011 2012 2013 2014 Revenue from real estate properties $235,460 $244,876 $279,651 $298,461 Net operating income 133,628 136,964 161,336 169,739 Funds from operations 78,355 85,982 100,763 106,516 Adjusted funds from operations 56,511 43,681 65,342 79,272 Funds from operations per unit basic $1.37 $1.44 $1.59 $1.71 Adjusted funds from operations per unit basic $0.99 $0.73 $1.03 $1.28 Cash distributions per unit $0.90 $0.95 $0.96 $0.96

4 MORGUARD REIT GROWTH THROUGH ACQUISITIONS AND INCREASED VALUE At December 31, 2014, the Trust s total assets were $3.0 billion, versus $2.1 billion at December 31, 2010. At the end of 2010, as part of its adoption of International Financial Reporting Standards ( IFRS ), the Trust adjusted its balance sheet to reflect the fair value of its real estate portfolio. The Trust uses 2010 as its benchmark year to measure growth in its balance sheet. The increase in total assets has been driven by acquisitions and complemented by increases in the value of the same asset portfolio. These value increases are a combination of capital reinvestment, improved cash flows and compressed capitalization rates. Acquisitions have allowed the Trust to balance its real estate portfolio between retail and office. At December 31, 2014, the Trust s retail portfolio accounted for 54% of the net operating income from real estate properties (excluding properties held for sale), with office accounting for 45% and industrial at 1%. WEIGHTED AVERAGE INTEREST RATE 5.3% 11 4.9% 12 4.4% 13 4.2% 14 The Trust completed its acquisition program using retained cash, new financing and refinancing of existing assets. New financing was secured directly against acquisitions along with an additional $150.0 million raised through the placement of convertible debentures in 2012. Refinancing of assets raised additional funds by leveraging the value of the underlying secured assets. This meant the Trust s debt ratios were maintained. The refinancing was completed at favourable rates allowing the Trust to significantly reduce its weighted average interest rate. As a result, The Trust reduced its weighted average interest rate from 5.3% (December 31, 2011) to 4.2% (December 31, 2014). PORTFOLIO DIVERSIFICATION The Trust s portfolio is diversified by both asset class and location across Canada. Retail 54% GROSS LEASABLE AREA BY REGION NET OPERATING INCOME (NOI) Office 45% Industrial 1% BC 14% Alberta 25% Manitoba 8% Saskatchewan 6% Ontario 38% Quebec 9%

2014 ANNUAL REPORT 5 Place Innovation, Saint-Laurent, QC Petroleum Plaza, Edmonton, AB Cambridge Centre, Cambridge, ON FUNDS FROM OPERATIONS RESULTS FOR UNITHOLDERS Per unit basic $1.37 $1.44 $1.59 $1.71 Delivering on increased revenue and net operating income, while decreasing the weighted average interest rate on debt, has resulted in an increase in funds from operations (basic) from $1.37 per unit (December 31, 2011) to $1.71 per unit (December 31, 2014). This represents an increase of 24.8%. Adjusted funds from operations has grown from $0.99 per unit (December 31, 2011) to $1.28 per unit (December 31, 2014). This represents an increase of 29.3%. 11 12 13 14 For unitholders, improved funds from operations and adjusted funds from operations means an increase in cash distributions. In 2011, the Trust distributed $0.90 per unit, compared to $0.96 per unit in 2014. ADJUSTED FUNDS FROM OPERATIONS Per unit basic $0.99 11 $0.73 12 $1.03 13 $1.28 14 Over time, the Trust has chosen a conservative payout ratio (cash distributions to adjusted funds from operations). At December 31, 2014, this payout ratio was 75%. This conservative ratio ensures adequate funds are available for reinvestment in the properties and maintains a stable distribution to unitholders. Recognizing that the market does not always value the Trust s units appropriately, the Trust uses its Normal Course Issuer Bid ( NCIB ) to buy units for cancellation. Since December 31, 2011, the Trust has repurchased 2,013,116 units at an average weighted unit price of $16.38. Effective January 28, 2015, the TSX accepted the Trust s notice of intention to make a normal course issuer bid through the facilities of the TSX and/or alternative Canadian trading platforms. This notice provides that the Trust may, during the 12 months beginning January 28, 2015, purchase for cancellation up to 3,247,282 units in total, being approximately 10% of the public float of outstanding units.

6 MORGUARD REIT GROW ING RETURNS SINCE 1997 Penn West Plaza, Calgary, AB

2014 ANNUAL REPORT 7 Morguard Real Estate Investment Trust became one of Canada s first institutional quality REITs when it was created in 1997. At its IPO, the Trust s real estate portfolio was valued at approximately $370 million and heavily weighted toward office and industrial. With a strategic focus on improving the quality of the Trust s portfolio, the Trust found that increased value and cash flow would come from retail and office investment. St. Laurent Centre, Ottawa, ON 12.5 % TOTAL RETURNS SINCE IPO The Trust began a program to reduce its holding of industrial properties in favour of dominant regional enclosed shopping centres and large Class A office properties. To acquire the most prestigious assets, the Trust recognized the benefits of co-ownership. At December 31, 2014, the Trust had $2.9 billion of real estate assets. Its portfolio net operating income derives from approximately 54% retail properties, 45% office properties and 1% in industrial properties. The outcome of the Trust s strategy is long-term positive returns for unitholders. Since its IPO in 1997, the Trust s units have produced total returns of 12.5%. The Trust s high-quality portfolio of commercial real estate properties is the outgrowth of a focused acquisition strategy. IPO Retail Portfolio 12.5% TOTAL RETURNS SINCE IPO Diversified Portfolio Class A Office Portfolio Dominant Regional Shopping Centre Class A Office Portfolio Dominant Regional Shopping Centre ACQUISITIONS Full Interest in Existing Class A Office Property 1997 2000 2003 2006/07 2010 2011/12 2013 2014

8 MORGUARD REIT MODERN IZING77 BLOOR WEST TORONTO, ON 77 Bloor Street West, Toronto, ON

2014 ANNUAL REPORT 9 THE OPPORTUNITY Retrofit a 40-year-old, 21-storey, 393,000-square-foot office building in downtown Toronto to LEED Gold Standard for Existing Buildings by improving the energy and environmental performance. THE VALUE PROPOSITION 77 Bloor Street West, Toronto, ON Following the acquisition of the landmark building in 2009, the Trust and its co-owner identified the potential for real value growth through a significant retrofit at 77 Bloor Street West. To realize the vision, a detailed baseline analysis was undertaken. The outcome of the analysis pointed to an optimization strategy that would: add leasable area to the building significantly reduce operating costs improve tenant comfort align with tenants business, financial and operational goals Modernizing a major commercial property co-owned by the Trust has unlocked substantial value including an increase in leasable space and dramatic savings in operating costs. THE RESULT 33.5 % REDUCTION IN ENERGY USAGE Increased cash flow and property value through the renewal of a 10-year lease with the primary tenant, TD Waterhouse, and added almost 20,000 leasable square feet. Improved tenant comfort and satisfaction. There was immediate engagement by tenants in environmental programs in support of energy and water savings. Achieved a 33.5% reduction in energy usage in 2014 over the baseline year of 2012, resulting in savings of almost half a million dollars in annual operational cost. This performance was recognized with a CivicAction Race to Reduce 2014 Energy Reduction award.

10 MORGUARD REIT SHOWCAS ING WOODBRIDGE SQUARE VAUGHAN, ON Woodbridge Square, Vaughan, ON

2014 ANNUAL REPORT 11 THE OPPORTUNITY Woodbridge Square, a 113,000-square-foot community shopping centre in Vaughan, ON, required a strategic repositioning to maintain market share and better compete against new retail development in the growing community north of Toronto. The 25-year-old centre was challenged with rising vacancy and decreasing cash flow. THE VALUE PROPOSITION Woodbridge Square, Vaughan, ON The Trust created a fully managed plan that would realize value creation from redevelopment, remerchandising, and transitioning the property back to its original roots as a grocery-anchored community shopping centre. The plan identified three main initiatives to deliver the desired results: renovate the facade to achieve a more contemporary look secure a new grocery anchor tenant lead a remerchandising strategy identifying a co-tenancy mix that would improve the property s performance and draw new customers Our expertise in both retailing and development gave a fresh look to this community shopping centre located north of Toronto and co-owned by the Trust. THE RESULT 30 % INCREASE IN PROPERTY VALUE Achieved 100% occupancy, secured a long-term grocery anchor (Nations Fresh Food) and increased rental rates. Additionally, the property is positioned to unlock future value by leveraging entitlements for high density, mixed-use purposes in alignment with the new City of Vaughan Official Master Plan. Increased property value by 30%, which allowed full project funding secured by a 10-year mortgage and long-term cash flow stability for unitholders and the co-owner. Created a contemporary and well-trafficked, grocery-anchored community shopping centre that has successfully attracted new customers from its primary and secondary trade areas.

12 MORGUARD REIT PORTFOLIO SUMMARY Morguard Real Estate Investment Trust owns a diversified real estate portfolio (excluding properties held for sale) of 49 commercial properties located in six provinces across Canada. The real estate portfolio primarily includes well-located, high-quality office properties in major urban centres, dominant regional enclosed shopping centres, neighbourhood and community shopping centres, and a small group of industrial properties. $ 2.9B REAL ESTATE PROPERTIES 49 TOTAL PROPERTIES 28 OFFICE AND INDUSTRIAL PROPERTIES 8.6M GROSS LEASABLE AREA (SF) 21 RETAIL PROPERTIES 96 % PORTFOLIO OCCUPANCY

2014 ANNUAL REPORT 13 The Centre at Circle and Eighth, Saskatoon, SK Parkland Mall, Red Deer, AB Cambridge Centre, Cambridge, ON RETAIL PORTFOLIO Ownership Gross Interest Leasable Occupancy Property City Prov. (%) Area (SF) 1 (%) Major Tenants Shelbourne Plaza Victoria BC 100 57,000 100 Fairway Market, TD Canada Trust, Scotiabank Burquitlam Plaza Coquitlam BC 100 67,500 96 Shoppers Drug Mart, Dollarama, CIBC Pine Centre Mall Prince George BC 100 476,000 99 Sears, Sport Chek, Shoppers Drug Mart Prairie Mall Grande Prairie AB 50 148,000 96 Mark s Work Wearhouse, Shoppers Drug Mart, Dollarama Airdrie Co-op Centre Airdrie AB 100 65,000 100 Co-op Grocery Store, TD Canada Trust, Co-op Liquor Store Airdrie Rona Centre Airdrie AB 100 44,000 100 Rona Heritage Towne Centre Calgary AB 100 133,500 95 Home Outfitters, Ashley Furniture, Dollarama Parkland Mall Red Deer AB 100 429,500 90 Walmart, Sport Chek, Dollarama The Centre at Circle and Eighth Saskatoon SK 100 489,500 95 Saskatoon Co-op Food Store, Sport Chek, Shoppers Drug Mart Brandon Shoppers Mall Brandon MB 100 366,500 98 Capitol Theatre, Sport Chek Charleswood Centre Winnipeg MB 100 116,000 100 Safeway, Shoppers Drug Mart, Dollarama Southdale Mall Winnipeg MB 100 175,500 97 Dollarama, Rexall, Bank of Montreal Wonderland Corners London ON 100 47,500 91 Swiss Chalet Cambridge Centre Cambridge ON 100 726,500 96 Sears, Hudson s Bay, Sport Chek, H&M Kingsbury Centre Mississauga ON 100 70,000 95 Longo s, Shoppers Drug Mart Woodbridge Square Vaughan ON 50 56,500 98 Nations Fresh Foods, Party Packagers, Scotiabank Aurora Centre Aurora ON 100 288,500 99 Sobeys, Cineplex Odeon Market Square Kanata ON 100 58,000 100 Farm Boy, LCBO, TD Canada Trust Hampton Park Ottawa ON 100 102,000 89 Food Basics, Rexall, Swiss Chalet Home Base Ottawa ON 100 10,000 100 Royal Bank St. Laurent Centre Ottawa ON 100 850,000 97 Hudson s Bay, Sears, Toys R Us TOTAL RETAIL 4,777,000 96 1 GLA represents the Trust s ownership share.

14 MORGUARD REIT Scotia Place, Edmonton, AB Place Innovation, Saint-Laurent, QC OFFICE PORTFOLIO Ownership Gross Interest Leasable Occupancy Property City Prov. (%) Area (SF) 1 (%) Major Tenants Seymour Place Victoria BC 100 239,000 100 Province of British Columbia Chancery Place Vancouver BC 100 142,500 100 Ministry of Citizens Service and Open Government 111 Dunsmuir Vancouver BC 100 222,000 100 AMEC Americas, Stantec Consulting Alberta Treasury Calgary AB 100 41,500 100 Alberta Treasury Branches Centre 810 Calgary AB 100 77,500 95 Tektelic Communications Inc., The MI Group, Brisbin & Sentis Citadel West Calgary AB 100 78,500 100 CH2M Hill Canada Deerport Centre Calgary AB 100 47,500 100 Colleaux Engineering, Aerotek, State Farm Duncan Building Calgary AB 100 81,000 100 RCMP 7315 Eighth Street Calgary AB 100 19,500 100 Genesis Land Development 505 Third Street Calgary AB 50 71,000 100 Horizon Logistics, Strike Energy, Step Energy Penn West Plaza Calgary AB 100 636,500 100 Penn West Petroleum Petroleum Plaza Edmonton AB 50 152,000 100 Alberta Infrastructure Scotia Place Edmonton AB 20 114,500 85 City of Edmonton, Duncan and Craig, APEGA, Grant Thornton 77 Bloor Street West Toronto ON 50 196,500 98 TD Waterhouse, Harry Rosen, Realstar 200 Yorkland Toronto ON 100 149,000 87 Ferring, Investors Group, AG Simpson 525 Coventry Ottawa ON 100 42,500 100 TD Waterhouse Green Valley Office Park Ottawa ON 100 123,000 94 Ottawa Fertility Centre, Canadian Centre for Ethics in Sports Heritage Place Ottawa ON 50 113,500 81 Public Works 301 Laurier Ave Ottawa ON 50 13,000 100 Unifor St. Laurent Business Centre Ottawa ON 100 88,000 69 Intact Insurance Co., The Pythian Group Standard Life Centre Ottawa ON 50 190,500 99 Public Works Time Square Ottawa ON 100 111,000 98 Public Works, Le Droit, Empire Grill Centre de la Cité Montreal QC 100 127,500 79 Sun Life Assurance, Jeffrey Simbrow Assoc. Place Innovation Saint-Laurent QC 50 448,000 100 Bombardier, AJW Technique, Amdocs TOTAL OFFICE 3,525,500 96 1 GLA represents the Trust s ownership share.

2014 ANNUAL REPORT 15 Alberta Treasury, Calgary, AB Heritage Place, Ottawa, ON Prairie Mall, Grande Prairie, AB INDUSTRIAL PORTFOLIO Ownership Gross Interest Leasable Occupancy Property City Prov. (%) Area (SF) 1 (%) Major Tenants 1875 Leslie Toronto ON 100 52,000 96 Body and Soul Fitness, Goose & Firkin 279 Yorkland Toronto ON 100 18,000 100 Loblaw Properties Inc. 285 Yorkland Toronto ON 100 25,000 100 Mitchell Partnerships 825 Des Érables Salaberry-de- QC 50 242,500 100 Diageo Valleyfield TOTAL INDUSTRIAL 337,500 99 TOTAL 8,640,000 96 1 GLA represents the Trust s ownership share.

CORPORATE INFORMATION TRUSTEES 1, 3, 4 Fraser R. Berril President Fragin Holdings Limited 1, 2, 3, 4 Michael A.J. Catford Real Estate Consultant Paul F. Cobb 1, 3 Corporate Director David A. King 2 Corporate Director 1, 3, 4 Edward C. Kress Corporate Director Brookfield Group K. (Rai) Sahi 2 Chairman and Chief Executive Officer Morguard Corporation Antony K. Stephens Corporate Director Timothy J. Walker Corporate Director 1 Independent Trustee 2 Investment Committee 3 Audit Committee 4 Compensation and Governance Committee OFFICERS David A. King Chairman K. (Rai) Sahi President and Chief Executive Officer Pamela McLean Chief Financial Officer Beverley G. Flynn General Counsel and Secretary John Levac Vice President Asset Management Paul Miatello Vice President Robert D. Wright Vice President INVESTOR INFORMATION Head Office Morguard Real Estate Investment Trust 55 City Centre Drive Suite 1000 Mississauga, ON L5B 1M3 Tel: 905-281-4800 or 1-800-928-6255 info@morguard.com Listing Toronto Stock Exchange (TSX) Symbol MRT.UN MRT.DB Eligibility RRSP RRIF DPSP RPP TFSA Auditors Ernst & Young LLP Principal Bankers Bank of Montreal Toronto-Dominion Bank Transfer Agent Computershare Trust Company of Canada 1-800-387-0825 inquiries@canstockta.com Investor Relations Visit our website at www.morguard.com or view our filings on SEDAR at www.sedar.com For additional information, please contact: Beverley G. Flynn General Counsel and Secretary Tel: 905-281-4800 info@morguard.com Pamela McLean Chief Financial Officer Tel: 905-281-4800 info@morguard.com Annual Unitholder Meeting Wednesday, May 13, 2015 at 9:45 a.m. Rattlesnake Point Golf Club 5407 Regional Road 25 Milton, ON L9T 2X5 Design: www.jumpcommunicationsinc.com

The selected annual financial information in the 2014 Annual Report highlights certain key metrics for the Trust. As a result, this Report should be read in conjunction with the Trust s Consolidated Financial Statements for the year ended December 31, 2014, related Management s Discussion and Analysis ( MD&A ) and the Annual Information Form ( AIF ). These documents are available on the Trust s website at www.morguard.com. All continuous disclosure documents required by securities regulators are also filed on the System for Electronic Document Analysis and Retrieval ( SEDAR ) and can be accessed electronically at www.sedar.com.

55 City Centre Drive Suite 1000 Mississauga, ON L5B 1M3 905-281-4800 MORGUARD.COM