H&R REIT AND H&R FINANCE TRUST - MD&A - December 31, 2010  The primary reasons for the increase of $4.3 million in AFFO for the three months ended December 31, 2010 as compared to the  same period last year are:  The primary reasons for the decrease of $44.9 million in AFFO for the year ended December 31, 2010 as compared to the same  period last year are:  • An increase of $5.3 million in property operating income due to acquisitions during 2010.  • An increase of $3.6 million in additional rent recoverable from tenants in accordance with their leases for items which were  capitalized to building improvements net of items which were expensed in property operating costs; and  • An increase of $5.8 million due to lower interest expense; • An increase of $2.3 million due to lease terminations and other non-recurring items; • An increase of $4.0 million due to rent step ups throughout the portfolio; • A decrease of $2.5 million due to higher property management fees;  • A decrease of $4.0 million due to lower interest income, higher trust expenses and higher current income taxes;  • A decrease of $1.1 million in property operating income due to tenants who filed for protection under Chapter 11 of the  United States Bankruptcy Code and subsequently terminated their leases;  • A decrease of $6.4 million in property operating income from properties sold between January 1, 2009 and December 31,  2010; • A decrease of $8.2 million in property operating income primarily due to the average U.S./Canadian dollar foreign  exchange rate of $1.03 for the year ended December 31, 2010 as compared to $1.14 during the year ended December 31,  2009;  • A decrease of $4.8 million due to higher capital and tenant expenditures; • A decrease of $38.8 million due to the one-time loss on the repayment of the Non-Convertible Debentures;  • An increase of $0.9 million in additional rent recoverable from tenants in accordance with their leases for items which were  capitalized to building improvements net of items which were expensed in property operating costs; • An increase of $2.0 million due to lower interest expense; • An increase of $2.3 million in property operating income due to acquisitions during 2010;  • An increase of $2.8 million due to lower capital and tenant expenditures; • A decrease of $0.9 million in property operating income primarily due to the average U.S./Canadian dollar foreign  exchange rate of $1.00 for Q4 2010 as compared to $1.05 during Q4 2009;  • A decrease of $1.2 million in property operating income from properties sold between October 1, 2009 and December 31,  2010; • An decrease of $0.5 million due to lower interest income, lower trust expenses and lower current income taxes; and  • A decrease of $0.6 million due to higher property management fees.  Page 28 of 45 