H&R REIT AND H&R FINANCE TRUST - MD&A - December 31, 2010  SECTION I  FORWARD-LOOKING DISCLAIMER Management’s discussion and analysis (“MD&A”) of the combined financial position and the combined results of operations of H&R  Real Estate Investment Trust (the “REIT”) and H&R Finance Trust (“Finance Trust” and collectively with the REIT, (the “Trusts”) for  the year ended December 31, 2010 should be read in conjunction with the Trusts’ combined financial statements and the notes  thereto for the years ended December 31, 2010 and 2009. Historical results, including trends which might appear, should not be  taken as indicative of future operations or results. Certain prior period items have been reclassified to conform with the presentation  adopted in the current period.  Certain information in this MD&A contains forward-looking information within the meaning of applicable securities laws (also known  as forward-looking statements) including, among others, statements made or implied under the headings “Results of Operations”,  “Liquidity and Capital Resources”, “Outlook” and “Risks and Uncertainties” relating to the Trusts’ objectives, strategies to achieve  those objectives, the Trusts’ beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated  future events, results, circumstances, performance or expectations that are not historical facts including, in particular, the Trusts’  expectation regarding future development in connection with the Bow. Forward-looking statements generally can be identified by  words such as “outlook”, “objective”, “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans”, “project”,  “budget” or “continue” or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect the  Trusts’ current beliefs and are based on information currently available to management. Forward-looking statements are provided for the purpose of presenting information about management’s current expectations and  plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. These  statements are not guarantees of future performance and are based on the Trusts’ estimates and assumptions that are subject to  risks and uncertainties, including those described below under “Risks and Uncertainties” and those discussed in the Trusts’ materials  filed with the Canadian securities regulatory authorities from time to time, which could cause the actual results and performance of  the Trusts to differ materially from the forward-looking statements contained in this MD&A. Those risks and uncertainties include,  among other things, risks related to: unit prices; availability of cash for distributions; development and financing relating to the Bow  development; restrictions pursuant to the terms of indebtedness; liquidity; credit risk and tenant concentration; interest rate and other  debt related risk; tax risk; ability to access capital markets; dilution; lease rollover risk; construction risks; currency risk; unitholder  liability; co-ownership interest in properties; competition for real property investments; environmental matters; reliance on one  corporation for management of substantially all the REIT’s properties; changes in legislation, indebtedness of the Trusts and the  impact of adopting Internal Financial Reporting Standards (“IFRS”). Material factors or assumptions that were applied in drawing a  conclusion or making an estimate set out in the forward-looking statements include that the general economy is stable; local real  estate conditions are stable; interest rates are relatively stable; and equity and debt markets continue to provide access to capital.  The Trusts caution that this list of factors is not exhaustive. Although the forward-looking statements contained in this MD&A are  based upon what the Trusts believe are reasonable assumptions, there can be no assurance that actual results will be consistent  with these forward-looking statements.  Readers are also urged to examine the REIT and Finance Trust’s materials filed with the Canadian securities regulatory authorities  from time to time as they may contain discussions on risks and uncertainties which could cause the actual results and performance  of the REIT and Finance Trust to differ materially from the forward-looking statements contained in this MD&A. Neither Finance  Trust nor any of its trustees or officers, assumes any responsibility for the completeness of the information contained in the REIT’s  materials filed with the Canadian securities regulatory authorities or for any failure of the REIT or its trustees or officers to disclose  events or facts which may have occurred or which may affect the significance or accuracy of any such information. Neither the REIT  nor any of its trustees or officers, assumes any responsibility for the completeness of the information contained in Finance Trust’s  materials filed with the Canadian securities regulatory authorities or for any failure of Finance Trust or its trustees or officers to  disclose events or facts which may have occurred or which may affect the significance or accuracy of any such information.  All forward-looking statements in this MD&A are qualified by these cautionary statements. These forward-looking statements are  made as of February 24, 2011 and the Trusts, except as required by applicable law, assume no obligation to update or revise them  to reflect new information or the occurrence of future events or circumstances. All information for the three months ended December  31, 2010 and 2009 is unaudited and has not been reviewed by an auditor.  Page 1 of 45 