Crombie REIT announces fourth quarter and fiscal 2007 results



    STELLARTON, NS, Feb. 28 /CNW/ - Crombie Real Estate Investment Trust
("Crombie") (TSX: CRR.UN) is pleased to report its results for the fourth
quarter and year ended December 31, 2007.
    Funds from Operations (FFO) for the fourth quarter increased by 22.0% to
$13.1 million ($0.31 per unit) from $10.7 million ($0.26 per unit) in the
fourth quarter of 2006. The improvement was due to increased same-asset net
operating income (NOI) of 9.7% during the fourth quarter of 2007 and the net
impact from the five property acquisitions since December 31, 2006. Annual
2007 FFO is not comparable to the prior year results due to the abbreviated
reporting period in 2006 as Crombie began operations on March 23, 2006.
    Adjusted Funds from Operations (AFFO) for the fourth quarter of 2007 was
$7.6 million ($0.18 per unit) compared to $8.3 million ($0.20 per unit) for
the fourth quarter of 2006, due to higher maintenance capital and tenant
improvement costs. As maintenance capital and tenant improvement expenditures
are not incurred evenly throughout a fiscal year there can be volatility in
AFFO on a quarterly basis. Annual 2007 AFFO is not comparable to the prior
year results due again to the abbreviated reporting period in 2006, however
the AFFO payout ratio for the year ended December 31, 2007 was 100.4%, which
is consistent with the 2006 payout ratio of 99.6%.
    Total property NOI for the fourth quarter of 2007 increased by 19.3% to
$22.2 million from $18.6 million in the fourth quarter of 2006. Total property
NOI for the year ended December 31, 2007 was $84.3 million, representing a
13.6% increase over the estimated annual property NOI figure of $74.2 million
for 2006. The improvement in the NOI again resulted from improved same-asset
NOI, due to higher average rent per square foot results, as well as the impact
of the property acquisitions completed to date.
    Net income for the fourth quarter of 2007 was $4.1 million ($0.19 per
unit) compared to $3.2 million ($0.15 per unit) for the fourth quarter of
2006. Net income for the year ended December 31, 2007 was $10.7 million
($0.49  per unit) compared to $12.2 million ($0.57 per unit) for the estimated
annual period of 2006.
    Commenting on the annual results, J. Stuart Blair, President and Chief
Executive Officer stated: "I am very satisfied to see continuing growth of NOI
in our same-asset properties. Our acquisition activity during the year has
helped strengthen our presence in Ontario and Quebec. We have also achieved on
our anticipated annual payout ratios in 2007 and our leasing activity grew
rent per square foot on expiring leases an average of 16%."

    
    2007 Highlights

    - Crombie acquired five properties in 2007 increasing GLA by 403,000
      square feet for a combined purchase price of $68.9 million.
    - Crombie completed leasing activity on 99% of its 2007 expiring leases,
      increasing average net rent per square foot to $11.57 from the expiring
      rent per square foot of $9.97.
    - Overall occupancy at December 31, 2007 remained consistent with
      December 31, 2006 at 93.6%.
    - Property revenue for the year ended December 31, 2007 increased by
      $14.2 million, or 11.0%, to $143.6 million compared to $129.4 million
      for the estimated year ended December 31, 2006. The improvement was due
      to increased same-asset property results and the eight property
      acquisitions completed to date.
    - Same-asset NOI of $77.1 million increased by $3.5 million or 4.8%,
      compared to $73.6 million for the estimated prior year due primarily to
      an increased average rent per square foot ($11.79 in 2007 versus $11.37
      in 2006).
    - The AFFO payout ratio was 100.4% which was consistent with the
      anticipated annual AFFO payout ratio of 100% and the payout ratio for
      2006 of 99.6%.
    - Debt to gross book value remained unchanged at 48.1% at December 31,
      2007 compared to 48.1% at September 30, 2007.
    - Crombie's debt service coverage ratio in 2007 was 1.86 times EBITDA and
      interest service coverage ratio was 3.00 times EBITDA, compared to
      1.91 times EBITDA and 3.10 times EBITDA, respectively, for 2006.
    - During the fourth quarter of 2007 Crombie's management and their
      advisors underwent an extensive review of Crombie's organizational
      structure and operations to support Crombie's assertion that it meets
      the REIT criteria at January 1, 2008.

    The table below presents a summary of the financial performance for the
quarter and year ending December 31, 2007 compared to the same estimated
periods in fiscal 2006. Annual results for 2006 have been estimated by using
actual results for the quarters ended June 30, 2006, September 30, 2006 and
December 31, 2006 and pro-rating the results for the nine days of operations
from March 23, 2006 to March 31, 2006. It is believed that this method of
estimation of the results would be reflective of the actual results of Crombie
in all material respects had Crombie been in operation for the entire period.


    -------------------------------------------------------------------------
                                 Quarter     Quarter        Year        Year
    (In millions of dollars,       ended       ended       ended       ended
     except where otherwise      Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
     noted)                         2007        2006        2007        2006
    -------------------------------------------------------------------------
    Property revenue          $   37.059  $   33.717  $  143.606  $  129.406
    Property expenses             14.843      15.091      59.345      55.210
    -------------------------------------------------------------------------
    Property NOI                  22.216      18.626      84.261      74.196
    -------------------------------------------------------------------------
    NOI margin percentage           59.9%       55.2%       58.7%       57.3%
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative              2.492       2.293       8.177       7.052
      Interest                     6.667       5.523      25.275      21.262
      Depreciation and
       amortization                8.227       6.270      29.229      22.936
    -------------------------------------------------------------------------
                                  17.386      14.086      62.681      51.250
    -------------------------------------------------------------------------
    Income before income taxes
     and non-controlling
     interest                      4.830       4.540      21.580      22.946
    Income taxes - Future         (2.994)     (1.663)      1.030      (0.763)
    -------------------------------------------------------------------------
    Income before
     non-controlling interest      7.824       6.203      20.550      23.709
    Non-controlling interest       3.766       2.986       9.891      11.512
    -------------------------------------------------------------------------
    Net income                $    4.058  $    3.217  $   10.659  $   12.197
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Basic and diluted net
     income per unit          $     0.19  $     0.15  $     0.49  $     0.57
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Property NOI

    Fourth quarter and annual property NOI for 2007 increased to $22.2 million
(19.3%) and $84.3 million (13.6%) respectively from the same periods in 2006
due to improved same-asset property results and the property acquisitions
completed to date.

    Same-Asset Property NOI

    -------------------------------------------------------------------------
                                 Quarter     Quarter        Year        Year
                                   ended       ended       ended       ended
                                 Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
    (In millions of dollars)        2007        2006        2007        2006
    -------------------------------------------------------------------------
    Same-asset property
     revenue                  $   34.628  $   33.717  $  133.570  $  128.641
    Same-asset property
     expenses                     14.204      15.091      56.440      55.063
    -------------------------------------------------------------------------
    Same-asset property NOI   $   20.424  $   18.626  $   77.130  $   73.578
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Same-asset NOI margin %         59.0%       55.2%       57.7%       57.2%
    -------------------------------------------------------------------------

    Same-asset property revenue of $34.6 million in the fourth quarter of 2007
and $133.6 million for annual 2007 was 2.7% higher than the fourth quarter in
2006 and 3.8% higher than the estimated annual results for 2006 due primarily
to the increased average rent per square foot.
    Same-asset property expenses of $14.2 million in the fourth quarter of
2007 and $56.4 million for annual 2007 were 5.9% lower than the $15.1 million
for the fourth quarter of 2006 and 2.5% higher than the $55.1 million for the
estimated annual results for 2006. The increased annual property expenses were
due to increased recoverable common area expenses primarily from increased
property taxes during the year. The reduction in the property expenses in the
fourth quarter of 2007 was a result of the seasonal nature of non-recoverable
landlord repair and maintenance expenditures, which were lower than the fourth
quarter of 2006.
    Same-asset NOI for the fourth quarter of 2007 grew by 9.7% over the same
period in 2006 while 2007 annual same-asset NOI grew by 4.8% over the
estimated annual results for 2006.

    Acquisition Property NOI

    The eight property acquisitions completed since September 30, 2006
provided the following results:

    -------------------------------------------------------------------------
                                 Quarter     Quarter        Year        Year
                                   ended       ended       ended       ended
                                 Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
    (In millions of dollars)        2007        2006        2007        2006
    -------------------------------------------------------------------------
    Acquisition property
     revenue                  $    2.431  $        -  $   10.036  $    0.765
    Acquisition property
     expense                       0.639           -       2.905       0.147
    -------------------------------------------------------------------------
    Acquisition property NOI  $    1.792  $        -  $    7.131  $    0.618
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Acquisition NOI margin %        73.7%          -%       71.1%       80.8%
    -------------------------------------------------------------------------

    General and Administrative Expenses

    General and administrative expenses increased by 8.7% during the fourth
quarter of 2007 to $2.5 million and 16.0% for the year ended December 31, 2007
to $8.2 million from the same actual and estimated periods in the prior year
due to higher professional fees and other public entity compliance costs.
During the fourth quarter, there were additional professional fees incurred of
approximately $0.265 million to ensure Crombie could comply with the REIT
taxation requirements.

    Interest

    -------------------------------------------------------------------------
                                 Quarter     Quarter        Year        Year
                                   ended       ended       ended       ended
                                 Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
    (In millions of dollars)        2007        2006        2007        2006
    -------------------------------------------------------------------------
    Same-asset interest
     expense                  $    5.533  $    5.523  $   20.643  $   20.800
    Acquisition interest
     expense                       1.134           -       4.632       0.462
    -------------------------------------------------------------------------
    Interest expense          $    6.667  $    5.523  $   25.275  $   21.262
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The increase in interest expense for both the fourth quarter and annual
results of 2007 were due to the property acquisitions completed to date.

    Income Taxes

    During the fourth quarter of 2007 Crombie's management and their advisors
underwent an extensive review of Crombie's organizational structure and
operations to support Crombie's assertion that it meets the REIT criteria at
January 1, 2008.
    Crombie believes it has organized its assets and operations to permit
Crombie to satisfy the criteria contained in the Income Tax Act (Canada) in
regard to the definition of a REIT. The relevant tests apply throughout the
taxation year of Crombie and, as such, the actual status of Crombie for any
particular taxation year can only be ascertained at the end of the year.
    In addition, the issuance of proposed technical amendments on December 20,
2007 provided further clarity to the tax rules and criteria that were part of
Bill C-52 and applicable to Crombie. These technical amendments provided more
certainty that Crombie qualifies as a REIT.
    A trust that satisfies the criteria of a REIT throughout its taxation year
will not be subject to income tax in respect of distributions to its
unitholders or be subject to the restrictions on its growth that would apply
to trusts classified as specified investment flow-through entities ("SIFTs").

    Other Performance Measures

    -------------------------------------------------------------------------
                                                                      Period
                                                                        from
                                 Quarter     Quarter        Year     Mar. 23,
    (In millions of dollars,       ended       ended       ended     2006 to
     except where otherwise      Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
     noted)                         2007        2006        2007        2006
    -------------------------------------------------------------------------
    Distributable income      $   11.515  $    9.815  $   45.340  $   33.288
    FFO                       $   13.057  $   10.699  $   50.809  $   35.237
    AFFO                      $    7.561  $    8.263  $   34.842  $   25.912
    Distributions             $    8.867  $    8.346  $   34.983  $   25.809
    DI payout ratio                 77.0%       85.0%       77.2%       77.5%
    AFFO payout ratio              117.3%      101.0%      100.4%       99.6%
    -------------------------------------------------------------------------
                                 Dec. 31,     Dec. 31,
                                    2007         2006
    	                          -------------------------
    Debt to gross book value        48.1%        44.8%
    ---------------------------------------------------

    The annual distributable income payout ratio of 77.2% is slightly below
the anticipated annual payout ratio of 80% while the AFFO payout ratio of
100.4% is consistent with the anticipated annual payout ratio of 100%.

    Definition of Non-GAAP Measures

    Certain financial measures included in this news release do not have
standardized meaning under Canadian generally accepted accounting principles
and therefore may not be comparable to similarly titled measures used by other
publicly traded companies. Crombie includes these measures because it believes
certain investors use these measures as a means of assessing Crombie's
financial performance.

    - Property NOI is property revenue less property expenses.
    - Debt is defined as bank loans plus commercial property debt.
    - Gross book value means, at any time, the book value of the assets of
      Crombie and its consolidated subsidiaries plus accumulated depreciation
      and amortization in respect of Crombie's properties (and related
      intangible assets) less (i) the amount of any receivable reflecting
      interest rate subsidies on any debt assumed by Crombie and (ii) the
      amount of future income tax liability arising out of the fair value
      adjustment in respect of the indirect acquisitions of certain
      properties.
    - Distributable income is defined as net income of Crombie, on a
      consolidated basis, as determined in accordance with GAAP, subject to
      certain adjustments as set out in the declaration of trust, including:
      (i) adding back the following items: non-controlling interest,
      depreciation of buildings and improvements (excluding amortization of
      tenant improvements, leasing commissions and deferred financing costs)
      and amortization of related intangibles (including amortization of
      value of tenant rents for in-place lease agreements, amortization of
      differential between original rent and above market rents, amortization
      of customer relationships), future income tax expense, losses on
      dispositions of assets and amortization of any net discount on
      long-term debt assumed from vendors of properties at rates of interest
      less than fair value; (ii) deducting the following items: amortization
      of differential between original rents and below market rents, future
      income tax credits, gains on dispositions of assets and amortization of
      any net premium on long-term debt assumed from vendors of properties at
      rates of interest greater than fair value (except where such
      amortization is funded); and (iii) adjusting for differences, if any,
      resulting from recognizing rental revenues on a straight line basis as
      opposed to contractual rental amounts.
    - FFO is calculated as net income (computed in accordance with GAAP),
      excluding gains (or losses) from sales of depreciable real estate and
      extraordinary items, plus depreciation and amortization, future income
      taxes and after adjustments for equity accounted entities and
      non-controlling interests.
    - AFFO is defined as distributable income, less maintenance capital
      expenditures and unamortized additions to tenant improvements and lease
      costs.

    About Crombie

    Crombie is an open-ended real estate investment trust established under,
and governed by, the laws of the Province of Ontario. The trust invests in
income-producing retail, office and mixed-use properties in Canada, with a
future growth strategy focused primarily on the acquisition of retail
properties. Crombie currently owns a portfolio of 52 commercial properties in
six provinces, comprising approximately 8.0 million square feet of rentable
space.

    This news release contains forward looking statements that reflect the
current expectations of management of Crombie about Crombie's future results,
performance, achievements, prospects and opportunities. Wherever possible,
words such as "may", "will", "estimate", "anticipate", "believe", "expect",
"intend" and similar expressions have been used to identify these forward
looking statements. These statements reflect current beliefs and are based on
information currently available to management of Crombie. Forward looking
statements necessarily involve known and unknown risks and uncertainties. A
number of factors, including those discussed in the 2007 annual Management
Discussion and Analysis under "Risk Management", could cause actual results,
performance, achievements, prospects or opportunities to differ materially
from the results discussed or implied in the forward looking statements. These
factors should be considered carefully and a reader should not place undue
reliance on the forward looking statements. There can be no assurance that the
expectations of management of Crombie will prove to be correct.

    In particular, certain statements in this document discuss Crombie's
anticipated outlook of future events. These statements include, but are not
limited to:
    (i) anticipated distributions and payout ratios, which could be impacted
by seasonality of capital expenditures, results of operations and capital
resource allocation decisions.

    Readers are cautioned that such forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from these statements. Crombie can give no assurance that actual
results will be consistent with these forward-looking statements.

    Additional information relating to Crombie can be found on Crombie's web
site at www.crombiereit.com or on the SEDAR web site for Canadian regulatory
filings at www.sedar.com.

    Conference Call Invitation

    Crombie will provide additional details concerning its annual results on a
conference call to be held Friday, February 29, 2008, at 12:00 p.m. AST. To
join this conference call you may dial (416) 644-3419 or (800) 731-6941. You
may also listen to a live audio web cast of the conference call by visiting
Crombie's website located at www.crombiereit.com. Replay will be available
until midnight March 7, 2008, by dialling (416) 640-1917 or (877) 289-8525 and
entering pass code 21263285#, or on the Crombie website for 90 days after the
meeting.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
                      Consolidated Financial Statements
                              December 31, 2007



                     CROMBIE REAL ESTATE INVESTMENT TRUST
                         Consolidated Balance Sheets
                          (In thousands of dollars)
    -------------------------------------------------------------------------

                                                    December 31, December 31,
                 `                                         2007         2006
                                                  ---------------------------

    Assets
      Commercial properties (Note 5)               $    909,095  $   836,913
      Intangible assets (Note 6)                         60,480       63,021
      Notes receivable (Note 7)                          20,968       41,459
      Other assets (Note 8)                              20,731       21,362
      Cash and cash equivalents                           2,708        1,180
                                                  ---------------------------
                                                   $  1,013,982  $   963,935
                                                  ---------------------------
                                                  ---------------------------

    Liabilities and Unitholders' Equity
      Commercial property debt (Note 9)            $    500,578  $   432,963
      Payables and accruals (Note 10)                    39,174       37,432
      Intangible liabilities (Note 11)                   16,562       17,681
      Employee future benefits obligation (Note 20)       4,458        4,064
      Distributions payable                               2,956        2,781
      Future income tax liability (Note 15)              81,501       80,471
                                                  ---------------------------
                                                        645,229      575,392

      Non-controlling interest (Note 12)                177,919      187,649

      Unitholders' equity                               190,834      200,894
                                                  ---------------------------
                                                   $  1,013,982  $   963,935
                                                  ---------------------------
                                                  ---------------------------

    Commitments and contingencies (Note 17)


    ON BEHALF OF THE BOARD OF TRUSTEES

    ----------------------------------    ----------------------------------
    David Hennigar                        Frank Sobey
    Trustee                               Trustee

    See accompanying notes to the consolidated financial statements.



                     CROMBIE REAL ESTATE INVESTMENT TRUST
                      Consolidated Statements of Income
             (In thousands of dollars, except per unit amounts)
    -------------------------------------------------------------------------

                                                                 Period from
                                                                    March 23,
                                                     Year Ended      2006 to
                                                    December 31, December 31,
                                                           2007         2006
                                                  ---------------------------
                                                                     (Note 1)
    Revenues
      Property revenue (Note 14)                   $    143,606  $    99,949
                                                  ---------------------------

    Expenses
      Property expenses                                  59,345       42,214
      General and administrative expenses                 8,177        5,738
      Interest expense                                   25,275       16,492
      Depreciation of commercial properties              12,499        8,620
      Amortization of tenant improvements/lease
       costs                                              2,747          441
      Amortization of deferred financing costs                -          268
      Amortization of intangible assets                  13,983        8,747
                                                  ---------------------------
                                                        122,026       82,520
                                                  ---------------------------

    Income before income taxes and
     non-controlling interest                            21,580       17,429


    Income tax expense(recovery) -
     future (Note 15)                                     1,030         (763)
                                                  ---------------------------

    Income before non-controlling interest               20,550       18,192
    Non-controlling interest                              9,891        8,787
                                                  ---------------------------
    Net income                                     $     10,659  $     9,405
                                                  ---------------------------
                                                  ---------------------------

    Basic and diluted net income per unit          $       0.49  $      0.44
                                                  ---------------------------
                                                  ---------------------------

    Weighted average number of units outstanding
      Basic                                          21,535,233   21,444,568
                                                  ---------------------------
                                                  ---------------------------
      Diluted                                        21,646,135   21,498,595
                                                  ---------------------------
                                                  ---------------------------



               Consolidated Statements of Comprehensive Income
                          (In thousands of dollars)
    -------------------------------------------------------------------------

                                                                 Period from
                                                                    March 23,
                                                     Year Ended      2006 to
                                                    December 31, December 31,
                                                           2007         2006
                                                  ---------------------------
                                                                     (Note 1)

    Net income                                     $     10,659  $     9,405
                                                  ---------------------------

    Net change in derivatives designated as
     cash flow hedges                                    (2,838)           -
                                                  ---------------------------
    Other comprehensive loss                             (2,838)           -
                                                  ---------------------------
    Comprehensive income                           $      7,821  $     9,405
                                                  ---------------------------

       See accompanying notes to the consolidated financial statements.



                     CROMBIE REAL ESTATE INVESTMENT TRUST
               Consolidated Statements of Unitholders' Equity
                          (In thousands of dollars)
    -------------------------------------------------------------------------

                                                Accumu-
                                                 lated
                                                 Other
                                                Compre-
                                      Contri-  hensive
                  REIT       Net       buted    Income      Distri-
                 Units    Income     Surplus     (Loss)    butions     Total
              ---------------------------------------------------------------
              (Note 13)

    Unitholders'
     equity,
     January
     1,
     2007     $204,831  $  9,405  $       27  $    Nil  $  (13,369) $200,894
    Transition
     adjustment
     (Note 3)        -         -           -      (162)          -      (162)
    Units
     released
     under
     EUPP           52         -         (52)        -           -         -
    Units
     issued
     under
     EUPP          215         -           -         -           -       215
    Loans
     receivable
     under
     EUPP         (215)        -           -         -           -      (215)
    EUPP
     compensation    -         -          37         -           -        37
    Repayment
     of EUPP
     loans
     receivable    390         -           -         -           -       390
    Net income       -    10,659           -         -           -    10,659
    Distributions    -         -           -         -     (18,146)  (18,146)
    Other
     comprehensive
     loss            -         -           -    (2,838)          -    (2,838)
              ---------------------------------------------------------------
    Unitholders'
     equity,
     December
     31,
     2007     $205,273  $ 20,064  $       12  $ (3,000) $  (31,515) $190,834
              ---------------------------------------------------------------
              ---------------------------------------------------------------

    Unitholders'
     equity,
     March
     23,
     2006
     (Note 1) $    Nil  $    Nil  $      Nil  $    Nil  $      Nil  $    Nil
    Unit
     issue
     proceeds,
     net of
     costs of
     $ 10,274  204,821         -           -         -           -   204,821
    Units
     issued
     under
     EUPP        1,261         -           -         -           -     1,261
    Loans
     receivable
     under
     EUPP       (1,251)        -           -         -           -    (1,251)
    Net income       -     9,405           -         -           -     9,405
    Unit
     purchase
     plan
     compensation    -         -          27         -           -        27
    Distributions    -         -           -         -     (13,369)  (13,369)
              ---------------------------------------------------------------
    Unitholders'
     equity,
     December
     31, 2006 $204,831  $  9,405  $       27  $    Nil  $  (13,369) $200,894
              ---------------------------------------------------------------
              ---------------------------------------------------------------

       See accompanying notes to the consolidated financial statements.



                     CROMBIE REAL ESTATE INVESTMENT TRUST
                    Consolidated Statements of Cash Flows
                          (In thousands of dollars)
    -------------------------------------------------------------------------

                                                                 Period from
                                                                    March 23,
                                                     Year Ended      2006 to
                                                    December 31, December 31,
                                                           2007         2006
                                                  ---------------------------
                                                                     (Note 1)
    Cash flows provided by (used in)

    Operating Activities
      Net income                                   $     10,659  $     9,405
      Items not affecting cash
        Non-controlling interest                          9,891        8,787
        Depreciation of commercial properties            12,499        8,620
        Amortization of tenant improvements/
         lease costs                                      2,747          441
        Amortization of deferred financing costs            415          268
        Amortization of intangible assets                13,983        8,747
        Amortization of above-market leases               2,982        2,090
        Amortization of below-market leases              (4,489)      (2,896)
        Accrued rental revenue                           (1,195)        (702)
        Unit-based compensation                              37           27
        Future income taxes                               1,030         (763)
                                                  ---------------------------
                                                         48,559       34,024

    Additions to tenant improvements and
     lease costs                                        (11,223)      (7,302)
    Change in other non-cash operating items
     (Note 16)                                           (3,400)      21,275
                                                  ---------------------------
    Cash provided by operating activities                33,936       47,997
                                                  ---------------------------

    Financing Activities
    Issue of commercial property debt                    89,475      113,200
    Issue costs of commercial property debt              (1,064)           -
    Repayment of commercial property debt               (39,021)     (20,304)
    Collection of notes receivable                       20,491       21,223
    Units issued on initial public offering                   -      215,095
    Unit issue costs                                          -      (19,767)
    Repayment of EUPP loan receivable                       390            -
    Payment of distributions                            (34,808)     (25,809)
                                                  ---------------------------
    Cash provided by financing activities                35,463      283,638
                                                  ---------------------------

    Investing Activities
    Business acquisition (Note 4)                             -     (263,542)
    Additions to commercial properties                  (16,822)     (26,574)
    Acquisition of commercial properties (Note 5)       (51,049)     (40,339)
                                                  ---------------------------
    Cash used in investing activities                   (67,871)    (330,455)
                                                  ---------------------------

    Increase in cash and cash equivalents during
     the period                                           1,528        1,180
    Cash and cash equivalents, beginning of period        1,180          Nil
                                                  ---------------------------
    Cash and cash equivalents, end of period       $      2,708  $     1,180
                                                  ---------------------------
                                                  ---------------------------

       See accompanying notes to the consolidated financial statements.



                     CROMBIE REAL ESTATE INVESTMENT TRUST
                 Notes to Consolidated Financial Statements
             (In thousands of dollars, except per unit amounts)
                              December 31, 2007
    -------------------------------------------------------------------------

    1) CROMBIE REAL ESTATE INVESTMENT TRUST

    Crombie Real Estate Investment Trust ("Crombie") is an unincorporated
"open-ended" real estate investment trust created pursuant to the Declaration
of Trust dated January 1, 2006, as amended. Crombie commenced operations on
March 23, 2006. The units of Crombie are traded on the Toronto Stock Exchange
("TSX") under the symbol "CRR.UN".

    2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    (a) Basis of presentation

    These consolidated financial statements are prepared in accordance with
generally accepted accounting principles ("GAAP") as prescribed by the
Canadian Institute of Chartered Accountants ("CICA").

    (b) Basis of consolidation

    The consolidated financial statements include the accounts of Crombie and
its incorporated and unincorporated subsidiaries.

    (c) Property acquisitions

    Upon acquisition of commercial properties, Crombie performs an assessment
of the fair value of the properties' related tangible and intangible assets
and liabilities (including land, buildings, origination costs, in-place
leases, above and below-market leases, and any other assumed assets and
liabilities), and allocates the purchase price to the acquired assets and
liabilities. Crombie assesses and considers fair value based on cash flow
projections that take into account relevant discount and capitalization rates
and any other relevant sources of market information available. Estimates of
future cash flow are based on factors that include historical operating
results, if available, and anticipated trends, local markets and underlying
economic conditions.

    Crombie allocates the purchase price based on the following:

    Land - The amount allocated to land is based on an appraisal estimate of
its fair value.

    Buildings - Buildings are recorded at the fair value of the building on an
"as-if-vacant" basis, which is based on the present value of the anticipated
net cash flow of the building from vacant start up to full occupancy.

    Origination costs for existing leases - Origination costs are determined
based on estimates of the costs that would be incurred to put the existing
leases in place under the same terms and conditions. These costs include
leasing commissions as well as foregone rent and operating cost recoveries
during an assumed lease-up period.

    In-place leases - In-place lease values are determined based on estimated
costs required for each lease that represents the net operating income lost
during an estimated lease-up period that would be required to replace the
existing leases at the time of purchase.

    Tenant relationships - Tenant relationship values are determined based on
costs avoided if the respective tenants were to renew their leases at the end
of the existing term, adjusted for the estimated probability that the tenants
will renew.

    Above- and below-market existing leases - Values ascribed to above- and
below-market existing leases are determined based on the present value of the
difference between the rents payable under the terms of the respective leases
and estimated future market rents.

    Fair value of debt - Values ascribed to fair value of debt is determined
based on the differential between contractual and market interest rates on
long term liabilities assumed at acquisition.

    (d) Commercial properties

    Commercial properties include land, buildings and tenant improvements.
Commercial properties are carried at cost less accumulated depreciation and
are reviewed periodically for impairment as described in Note 2(m).
    Depreciation of buildings is calculated using the straight-line method
with reference to each property's cost, its estimated useful life (not
exceeding 40 years) and its residual value.
    Amortization of tenant improvements is determined using the straight-line
method over the terms of the tenant lease agreements and renewal periods where
applicable.
    Repair and maintenance improvements that are not recoverable from tenants
are either expensed as incurred or, in the case of a major item, capitalized
to commercial properties and amortized on a straight-line basis over the
expected useful life of the improvement.

    (e) Intangible assets and liabilities

    Intangible assets include the value of origination costs for existing
leases, the value of the differential between original and market rents for
above market existing leases, the value of the immediate cash flow stream from
in-place leases and the value of tenant relationships.
    Intangible liabilities are the value of the differential between original
and market rents for below market existing leases.
    Amortization of the value of origination costs, in-place leases and tenant
relationships is determined using the straight-line method over the terms of
the tenant lease agreements and renewal periods where applicable and is
recorded as amortization. The value of the differential between original and
market rents for above and below market existing leases is recognized using
the straight-line method over the terms of the tenant lease agreements and
recorded as property revenue.
    Intangible assets are reviewed for impairment as described in Note 2(m).

    (f) Revenue recognition

    Property revenue includes rents earned from tenants under lease
agreements, percentage rent, realty tax and operating cost recoveries, and
other incidental income. Certain leases have rental payments that change over
their term due to changes in rates. Crombie records the rental revenue from
these leases on a straight-line basis over the term of the lease. Accordingly,
an accrued rent receivable/payable is recorded for the difference between the
straight-line rent recorded as property revenue and the rent that is
contractually due from the tenants. Percentage rents are recognized when
tenants are obligated to pay such rent under the terms of the related lease
agreements. The value of the differential between original and market rents
for existing leases is amortized using the straight-line method over the terms
of the tenant lease agreements. Realty tax and other operating cost
recoveries, and other incidental income, are recognized on an accrual basis.

    (g) Cash and cash equivalents

    Cash and cash equivalents are defined as cash on hand, cash in bank, and
short-term guaranteed investment certificates.

    (h) Income taxes

    Crombie is taxed as a "mutual fund trust" for income tax purposes.
Pursuant to the terms of the Declaration of Trust, Crombie must make
distributions not less than the amount necessary to ensure that Crombie will
not be liable to pay income tax, except for the amounts incurred in its
incorporated subsidiaries.
    Future income tax liabilities of Crombie relate to tax and accounting
basis differences of all incorporated subsidiaries of Crombie. Income taxes
are accounted for using the liability method. Under this method, future income
taxes are recognized for the expected future tax consequences of differences
between the carrying amount of balance sheet items and their corresponding tax
values. Future income taxes are computed using substantively enacted corporate
income tax rates for the years in which tax and accounting basis differences
are expected to reverse.

    (i) Financial instruments

    Crombie has a fixed interest rate swap agreement and a number of delayed
interest rate swap agreements. Crombie has identified these hedges against
interest rate fluctuations and has formally documented all relationships
between these derivative financial instruments and hedged items, as well as
the risk management strategy and objectives. Crombie assesses on an ongoing
basis whether the derivative financial instrument continues to be effective in
offsetting changes in interest rates on the hedged items. The effective
portion of the change in the fair value of these hedging derivatives is
recognized in other comprehensive income. Any ineffective portion as defined
by the standard is recognized in net income. Upon the termination of these
swaps, the realized gain or loss is deferred and amortized into interest
expense using the effective interest rate method.

    (j) Employee future benefits obligation

    The cost of pension benefits for defined contribution plans are expensed
as contributions are paid. The cost of defined benefit pension plans and other
benefit plans is accrued based on actuarial valuations, which are determined
using the projected benefit method pro-rated on service and management's best
estimate of the expected long-term rate of return on plan assets, salary
escalation, retirement ages and expected growth rate of health care costs. The
defined benefit plans are unfunded.
    The impact of changes in plan amendments is amortized on a straight-line
basis over the expected average remaining service life (EARSL) of active
members. For the supplementary executive retirement plan, the impacts of
changes in the plan provisions are amortized over five years.

    (k) Executive unit purchase plan

    Crombie has a Unit purchase plan for certain employees which is described
in Note 13. In accordance with the Emerging Issues Committee Abstract 132,
loans granted to employees to purchase units under the plan are accounted for
as stock-based compensation.

    (l) Use of estimates

    The preparation of consolidated financial statements in conformity with
Canadian generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the balance sheet, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates. The
significant areas of estimation and assumption include:

    - Impairment of assets;
    - Depreciation;
    - Allocation of purchase price on property acquisitions;
    - Fair value of mortgages.

    (m) Impairment of long-lived assets

    Long-lived assets are reviewed for impairment annually or whenever events
or changes in circumstances indicate the carrying value of an asset may not be
recoverable.
    If it is determined that the net recoverable value of a long-lived asset
is less than its carrying value, the long-lived asset is written down to its
fair value. Net recoverable amount represents the undiscounted estimated
future cash flow expected to be received from the long-lived asset. Assets
reviewed under this policy include commercial properties and intangible
assets.

    3) CHANGES IN ACCOUNTING POLICIES

    Effective January 1, 2007 Crombie has adopted three new accounting
standards that were issued by the CICA in 2005. These accounting policy
changes were adopted on a retroactive basis with no restatement of prior
period financial statements.
    The new standards and accounting policy changes are as follows:

    Financial Instruments - Recognition and Measurement (Section 3855)

    In accordance with this new standard, Crombie now classifies all financial
instruments, including derivatives, as either held to maturity,
available-for-sale, held for trading, loans and receivables or other financial
liabilities. Financial assets held to maturity, loans and receivables, and
financial liabilities other than those held for trading, are measured at
amortized cost. Available-for-sale financial assets are measured at fair value
with unrealized gains and losses recognized in other comprehensive income.
Financial instruments classified as held for trading are measured at fair
value with unrealized gains and losses recognized in the consolidated
statement of income.

    Comprehensive Income (Section 1530)

    Comprehensive income is the change in Unitholders' equity during a period
from transactions and other events and circumstances from non-owner sources.
In accordance with this new standard, Crombie now reports a consolidated
statement of comprehensive income, comprising net income and other
comprehensive income(loss) for the period. A new category, accumulated other
comprehensive income(loss), has been added to the consolidated statements of
unitholders' equity.

    Hedges (Section 3865)

    This new section establishes standards for when and how hedge accounting
may be applied, as well as the disclosure requirements. Hedge accounting
enables the recording of gains, losses, revenues and expenses from the
derivative financial instruments in the same period as for those related to
the hedged item.
    The new standard outlines the criteria for applying hedge accounting to
cash flow hedges and fair value hedges. Cash flow hedges are recognized on the
balance sheet at fair value with the effective portion of the hedging
relationship recognized in other comprehensive income. Any ineffective portion
of the cash flow hedge is recognized in net income. Amounts recognized in
accumulated other comprehensive income are reclassified to net income in the
same periods in which the hedged item is recognized in net income. Fair value
hedges and the related hedge items are recognized on the balance sheet at fair
value with any changes in fair value recognized in net income. To the extent
the fair value hedge is effective, the changes in the fair value of the hedge
and the hedged item will offset each other.
    In accordance with the provisions of these new standards, on January 1,
2007 Crombie recorded:

    i)  an adjustment to reflect a reallocation on the consolidated balance
        sheet of $1,578 from deferred financing charges to commercial
        property debt for unamortized transaction costs previously incurred
        and accounted for separately; and
    ii) a transition adjustment to recognize the fair value of a derivative
        designated as a cash flow hedge. The fair value at January 1, 2007
        was $(310), of which $(162) has been allocated to unitholders' equity
        and $(148) to non-controlling interest.

    The adoption of these new standards has been reflected on Crombie's
consolidated financial statements. The unrealized gains and losses included in
"accumulated other comprehensive income" were recorded net of applicable
taxes.

    Transaction costs

    Crombie adds transaction costs directly attributable to the acquisition or
issue of a financial asset or financial liability, other than for those
classified as held for trading, to the fair value of the financial asset or
financial liability.

    Cash Flow Statements (Section 1540)

    Amendments to CICA Section 1540, Cash Flow Statements, require entities to
disclose total cash distributions on financial instruments classified as
equity in accordance with a contractual agreement and the extent to which
total cash distributions are non-discretionary. This disclosure requirement is
effective for annual financial statements for fiscal periods ending on or
after March 31, 2007. The determination to declare and make payable
distributions from Crombie are at the discretion of the Board of Trustees of
Crombie and, until declared payable by the Board of Trustees of Crombie,
Crombie has no contractual requirement to pay cash distributions to
Unitholders' of Crombie. During the year ended December 31, 2007, $34,983
(period March 23, 2006 to December 31, 2006 - $25,809) in cash distributions
were declared payable by the Board of Trustees to Crombie Unitholders and
Crombie Limited Partnership Unitholders (the "Class B LP Units").

    4) BUSINESS ACQUISITION

    On March 23, 2006, Crombie directly or indirectly acquired 44 commercial
properties from Empire Company Limited's subsidiary, ECL Properties Limited
("ECL") and certain of its affiliates for an aggregate purchase price of
$801,246, of which $414,777 was financed with new and assumed debt, $195,167
was financed through the public offering of REIT units and $191,302 was
financed through the issuance of Class B LP Units to ECL.
    The acquisition of the properties has been accounted for using the
purchase method of accounting with the results of operations included in
income from the date of acquisition. The purchase price allocated to the
assets acquired and liabilities assumed, based on their fair values at the
date of acquisition, was as follows:

    Commercial property acquired, net:
    -------------------------------------------------------------------------
    Tangible assets                                               $  772,040
    Net intangible assets                                             46,577
    Other assets, net of liabilities                                   1,181
    Notes receivable                                                  62,682
    Future income tax liability                                      (81,234)
    -------------------------------------------------------------------------
    Net purchase price                                               801,246
    Assumed mortgages (marked to market)                            (333,644)
    -------------------------------------------------------------------------
                                                                  $  467,602
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration paid, funded by:
    -------------------------------------------------------------------------
    Class B LP Units (non-controlling interest)                   $  200,795
    Cash                                                             263,542
    Land transfer costs and additional financing costs                 3,265
    -------------------------------------------------------------------------
                                                                  $  467,602
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    5) COMMERCIAL PROPERTIES

                                                  December 31, 2007
                                       --------------------------------------
                                                    Accumulated
                                                          Depre-         Net
                                              Cost      ciation   Book Value
                                       --------------------------------------
    Land                               $   183,407  $       Nil  $   183,407
    Buildings                              731,470       21,119      710,351
    Tenant improvements and
     leasing costs                          18,525        3,188       15,337
                                       --------------------------------------
                                       $   933,402  $    24,307  $   909,095
                                       --------------------------------------
                                       --------------------------------------

                                                  December 31, 2006
                                       --------------------------------------
                                                    Accumulated
                                                          Depre-         Net
                                              Cost      ciation   Book Value
                                       --------------------------------------
    Land                               $   168,087  $       Nil  $   168,087
    Buildings                              670,585        8,620      661,965
    Tenant improvements and
     leasing costs                           7,302          441        6,861
                                       --------------------------------------
                                       $   845,974  $     9,061  $   836,913
                                       --------------------------------------
                                       --------------------------------------


    Property Acquisitions

    2007
    ----

    On January 17, 2007, Crombie acquired a property in Carleton Place,
Ontario, representing a 79,700 square foot increase to the portfolio, for
$11,800 plus additional closing costs, from an unrelated third party. The
acquisition was initially financed through Crombie's floating rate revolving
credit facility. On April 27, 2007, a mortgage of $7,850 at a fixed rate of
5.18% and a term of 12 years was established for the property.
    On March 7, 2007, Crombie acquired a property in Perth, Ontario
representing a 102,500 square foot increase to the portfolio, for $17,900 plus
additional closing costs, from an unrelated third party. The acquisition was
initially financed through Crombie's floating rate revolving credit facility.
On April 20, 2007, a mortgage of $12,600 at a fixed rate of 5.43% and a term
of 15 years was established for the property.
    On July 26, 2007, Crombie acquired a property in Fort Erie, Ontario
representing a 92,500 square foot increase to the portfolio, for $19,200 plus
additional closing costs, from an unrelated third party. The acquisition was
financed through an assumption of an existing mortgage of $11,418 at a fixed
rate of 5.36% and a term of eight years with the balance of the purchase price
paid in cash using funds from the revolving credit facility.
    On August 24, 2007, Crombie acquired a property in Brossard, Quebec
representing a 38,800 square foot increase to the portfolio, for $7,300 plus
additional closing costs, from an unrelated third party. The acquisition was
financed through an assumption of an existing mortgage of $3,425 at a fixed
rate of 6.44% and a term of 17 years with the balance of the purchase price
paid in cash using funds from the revolving credit facility.
    On October 15, 2007, Crombie acquired a property in LaSalle, Ontario
representing an 87,700 square foot increase to the portfolio, for $12,700 plus
additional closing costs, from an unrelated third party. The acquisition was
financed through an assumption of an existing mortgage of $4,220 at a fixed
rate of 6.0% and an approximate term of four years with the balance of the
purchase price paid in cash using funds from the revolving credit facility.

    2006
    ----

    On October 2, 2006, Crombie acquired properties in Oshawa and Brampton,
Ontario, representing a 149,000 square foot increase to the portfolio, for
$31,885 plus additional closing costs, from subsidiaries of Empire Company
Limited. The acquisitions were financed through new mortgages totalling
$20,300 at a fixed rate of 5.15% and a term of seven years with the balance of
the purchase price paid in cash using funds from the revolving credit
facility.
    On December 20, 2006, Crombie acquired a property in Burlington, Ontario
representing a 56,000 square foot increase to the portfolio, for $14,200 plus
additional closing costs, from an unrelated third party. The acquisition was
financed through the assumption of an existing mortgage of $6,423 at a fixed
rate of 6.39% and a term of seven years with the balance of the purchase price
paid in cash using funds from the revolving credit facility.


    -------------------------------------------------------------------------

                                                                 Period from
                                                                    March 23,
                                                     Year Ended      2006 to
                                                    December 31, December 31,
    Commercial property acquired, net:                     2007         2006
    -------------------------------------------------------------------------
    Land                                           $     15,102  $    14,279
    Buildings                                            44,281       25,779
    Intangible assets:
      Lease origination costs                             3,473        2,758
      Tenant relationships                                4,806        1,822
      Above-market leases                                 1,086        1,618
      In-place leases                                     5,059        2,633
    Intangible liabilities
      Below-market leases                                (3,370)      (2,127)
    -------------------------------------------------------------------------
                                                         70,437       46,762
    Assumed mortgages                                   (19,063)      (6,423)
    Fair value debt adjustment on assumed mortgages        (325)           -
    -------------------------------------------------------------------------
    Total                                          $     51,049  $    40,339
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Consideration paid, funded by:
    -------------------------------------------------------------------------
    Floating rate revolving credit facility        $     26,449  $    20,039
    Mortgage financing                                   20,450       20,300
    Application of deposit                                4,150            -
    -------------------------------------------------------------------------
    Total                                          $     51,049  $    40,339
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    6) INTANGIBLE ASSETS

                                                  December 31, 2007
                                       --------------------------------------
                                                    Accumulated
                                                         Amorti-         Net
                                              Cost       zation   Book Value
                                       --------------------------------------
    Origination costs for
     existing leases                   $    14,354  $     5,567  $     8,787
    In-place leases                         21,992        9,628       12,364
    Tenant relationships                    35,945        7,535       28,410
    Above-market existing leases            15,991        5,072       10,919
                                       --------------------------------------
                                       $    88,282  $    27,802  $    60,480
                                       --------------------------------------
                                       --------------------------------------

                                                  December 31, 2006
                                       --------------------------------------
                                                    Accumulated
                                                         Amorti-         Net
                                              Cost       zation   Book Value
                                       --------------------------------------
    Origination costs for
     existing leases                   $    10,881  $     2,149  $     8,732
    In-place leases                         16,933        3,734       13,199
    Tenant relationships                    31,139        2,864       28,275
    Above-market existing leases            14,905        2,090       12,815
                                       --------------------------------------
                                       $    73,858  $    10,837  $    63,021
                                       --------------------------------------
                                       --------------------------------------


    7) NOTES RECEIVABLE

    One component of the business acquisition discussed in Note 4 is the
acquisition of three demand non-interest bearing promissory notes from ECL in
the amounts of $39,600, $2,518 and $20,564. Payments on the first note of
$39,600 are being received as funding is required for a capital expenditure
program relating to eight commercial properties over the period from 2006 to
2010. Payment on the second note of $2,518 was received as funding was
required to pay taxes on transfers of five commercial properties within
Crombie. Payments on the third note of $20,564 are being received on a monthly
basis to reduce the effective interest rate to 5.54% on certain assumed
mortgages with an average term to maturity of approximately 4.5 years.

    The balance of each note is as follows:

                                                       December     December
                                                       31, 2007     31, 2006
                                                  ---------------------------
    Capital expenditure program                    $      6,817  $    21,224
    Tax on property transfer                                  -        2,518
    Interest rate subsidy                                14,151       17,717
                                                  ---------------------------
                                                   $     20,968  $    41,459
                                                  ---------------------------
                                                  ---------------------------

    8) OTHER ASSETS

                                                       December     December
                                                       31, 2007     31, 2006
                                                  ---------------------------
    Accounts receivable                            $      5,463  $     7,438
    Deposit on property                                       -          750
    Accrued straight-line rent receivable                 5,844        4,649
    Prepaid expenses                                      8,634        6,270
    Deferred financing charges                                -        1,578
    Restricted cash                                         790          677
                                                  ---------------------------
                                                   $     20,731  $    21,362
                                                  ---------------------------
                                                  ---------------------------

    9) COMMERCIAL PROPERTY DEBT

                                            Weighted    Weighted
                                             average     average
                                            interest     term to    December
                                   Range        rate    maturity    31, 2007
                              -----------------------------------------------
    Fixed rate mortgages       5.15-6.44%       5.46%  7.4 years $   431,906
    Deferred financing charges                                        (2,228)
    Floating rate revolving
     credit facility                5.50%       5.50%  2.6 years      70,900
                                                                   ----------
                                                                 $   500,578
                                                                   ----------
                                                                   ----------

                                            Weighted    Weighted
                                             average     average
                                            interest     term to    December
                                   Range        rate    maturity    31, 2006
                              -----------------------------------------------
    Fixed rate mortgages       5.15-6.39%       5.50%  7.3 years $   350,063
    Floating rate revolving
     credit facility                5.49%       5.49%  2.2 years      82,900
                                                                   ----------
                                                                 $   432,963
                                                                   ----------
                                                                   ----------

    As of December 31, 2007, debt retirements for the next 5 years are:

                                            Floating   Financing
                              Fixed Rate        Rate       Costs       Total
                              -----------------------------------------------
    2008                      $   28,267  $      Nil  $      Nil  $   28,267
    2009                          14,201           -           -      14,201
    2010                         116,793      70,900           -     187,693
    2011                          22,143           -           -      22,143
    2012                          11,084           -           -      11,084
    Thereafter                   224,962           -           -     224,962
                              -----------------------------------------------
                                 417,450      70,900           -     488,350
    Deferred financing charges         -           -      (2,228)     (2,228)
    Fair value debt adjustment    14,456           -           -      14,456
                              -----------------------------------------------
                              $  431,906  $   70,900  $   (2,228) $  500,578
                              -----------------------------------------------
                              -----------------------------------------------

    The floating rate revolving credit facility has a maximum principal amount
of $150,000 and is used by Crombie for working capital purposes and to provide
financing for future acquisitions. It is secured by a pool of first and second
mortgages and negative pledges on certain properties. As at December 31, 2007,
based on the security granted by Crombie, approximately $118,923 is available
for draw down, of which $70,900 is drawn down on the facility.
    During 2007, the maturity date of the floating rate revolving credit
facility was extended to June 30, 2010.
    Crombie has entered into a fixed interest rate swap agreement which
expires on July 2, 2010 for a portion of the revolving credit facility.
Interest on $50,000 is paid at a fixed rate of 5.54% and is received at a
floating rate based on the 90-day bankers' acceptance rate, resulting in an
overall 5.50% current interest rate.
    On April 23, 2007, Crombie completed the refinancing of an existing
mortgage on the Burlington, Ontario property. The new fixed rate mortgage of
$9,925 provided funds of $3,573 (net of fees and the payment of the existing
mortgage). The interest rate was reduced from 6.39% to 5.32% with a maturity
date of May 2019.
    On September 7, 2007, Crombie completed the refinancing of an existing
mortgage on the Niagara Plaza, Ontario property. The new fixed rate mortgage
of $8,100 provided funds of $2,886 (net of fees and the payment of the
existing mortgage). The interest rate on the new mortgage is 5.65% with a
maturity date of September 2027.
    On December 7, 2007, Crombie entered into a second mortgage to provide an
additional $51,000 of financing on the portfolio of office and mixed-use
properties known as Halifax Developments Properties. The interest rate is
5.29% with a maturity date of February 1, 2010.

    10) PAYABLES AND ACCRUALS

                                                    December 31, December 31,
                                                           2007         2006
                                                   --------------------------
    Tenant improvements and capital expenditures   $      9,828  $     7,134
    Property operating costs                             21,801       28,845
    Interest on commercial property debt                  1,761        1,453
    Interest rate swap agreements                         5,784            -
                                                   --------------------------
                                                   $     39,174  $    37,432
                                                   --------------------------
                                                   --------------------------

    11) INTANGIBLE LIABILITIES

                                                  December 31, 2007
                                       --------------------------------------
                                                    Accumulated
                                                         Amorti-         Net
                                              Cost       zation   Book Value
                                       --------------------------------------
    Below-market existing leases       $    23,947  $     7,385  $    16,562
                                       --------------------------------------
                                       --------------------------------------

                                                  December 31, 2006
                                       --------------------------------------
                                                    Accumulated
                                                         Amorti-         Net
                                              Cost       zation   Book Value
                                       --------------------------------------
    Below-market existing leases       $    20,577  $     2,896  $    17,681
                                       --------------------------------------
                                       --------------------------------------

    12) NON-CONTROLLING INTEREST

                                               Accumu-
                                                lated
                                                Other
                                               Compre-
                                      Contri- hensive
               Class B       Net       buted   Income       Distri-
              LP Units    Income     Surplus    (Loss)     butions     Total
              ---------------------------------------------------------------
    Non-
     controlling
     interest,
     January
     1, 2007  $191,302  $  8,787  $      Nil  $    Nil  $  (12,440) $187,649
    Transition
     adjustment
     (Note 3)        -         -           -      (148)          -      (148)
    Net income       -     9,891           -         -           -     9,891
    Distributions    -         -           -         -     (16,837)  (16,837)
    Other
     compre-
     hensive
     loss            -         -           -    (2,636)          -    (2,636)
              ---------------------------------------------------------------
    Non-
     controlling
     interest,
     December
     31, 2007 $191,302  $ 18,678  $      Nil  $ (2,784) $  (29,277) $177,919
              ---------------------------------------------------------------
              ---------------------------------------------------------------


                                               Accumu-
                                                lated
                                                Other
                                               Compre-
                                      Contri- hensive
               Class B       Net       buted   Income       Distri-
              LP Units    Income     Surplus    (Loss)     butions     Total
              ---------------------------------------------------------------
    Non-
     controlling
     interest,
     March 23,
     2006     $    Nil  $    Nil  $      Nil  $   Nil   $      Nil  $    Nil
    Unit
     issue
     proceeds,
     net of
     costs of
     $9,493    191,302         -           -        -            -   191,302
    Net income       -     8,787           -        -            -     8,787
    Distributions    -         -           -        -      (12,440)  (12,440)
              ---------------------------------------------------------------
    Non-
     controlling
     interest,
     December
     31, 2006 $191,302  $  8,787  $      Nil  $   Nil   $  (12,440) $187,649
              ---------------------------------------------------------------
              ---------------------------------------------------------------

    13) UNITS OUTSTANDING

                                      Crombie REIT
                                   Special Voting Units
               Crombie REIT Units  and Class B LP Units          Total
               ------------------  --------------------    ------------------
                Number                Number                Number
              of Units    Amount    of Units    Amount    of Units    Amount
            -----------------------------------------------------------------
    Balance,
     January
     1,
     2007   21,633,225  $204,831  20,079,576  $191,302  41,712,801  $396,133
    Units
     issued
     under
     EUPP       15,760       215           -         -      15,760       215
    Units
     released
     under
     EUPP            -        52           -         -           -        52
    Net
     change
     in EUPP
     loans
     receivable      -       175           -         -           -       175
            -----------------------------------------------------------------
    Balance,
     December
     31,
     2007   21,648,985  $205,273  20,079,576  $191,302  41,728,561  $396,575
            -----------------------------------------------------------------
            -----------------------------------------------------------------


                                      Crombie REIT
                                   Special Voting Units
               Crombie REIT Units  and Class B LP Units          Total
               ------------------  --------------------    ------------------
                Number                Number                Number
              of Units    Amount    of Units    Amount    of Units    Amount
            -----------------------------------------------------------------
    Balance,
     March
     23,
     2006            -  $    Nil           -  $    Nil           -  $    Nil
    Capital
     contri-
     bution 21,509,485   215,095  20,079,576   200,795  41,589,061   415,890
    Costs of
     issuance        -   (10,274)          -    (9,493)          -   (19,767)
            -----------------------------------------------------------------
    Net unit
     issue
     proceeds        -   204,821           -   191,302           -   396,123
    Units
     issued
     under
     EUPP      123,740     1,261           -         -     123,740     1,261
    Loans
     receivable
     EUPP            -    (1,251)          -         -           -    (1,251)
            -----------------------------------------------------------------
    Balance,
     December
     31,
     2006   21,633,225  $204,831  20,079,576  $191,302  41,712,801  $396,133
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    Crombie REIT Units

    Crombie is authorized to issue an unlimited number of units ("Units") and
an unlimited number of Special Voting Units. Issued and outstanding Units may
be subdivided or consolidated from time to time by the Trustees without the
approval of the Unitholders. Units are redeemable at any time on demand by the
holders at a price per Unit equal to the lesser of: (i) 90% of the weighted
average price per Crombie Unit during the period of the last 10 days during
which Crombie's Units traded; and (ii) an amount equal to the price of
Crombie's Units on the date of redemption, as defined in the Declaration of
Trust.
    The aggregate redemption price payable by Crombie in respect of any Units
surrendered for redemption during any calendar month will be satisfied by way
of a cash payment in Canadian dollars within 30 days after the end of the
calendar month in which the Units were tendered for redemption, provided that
the entitlement of Unitholders to receive cash upon the redemption of their
Units is subject to the limitation that:

    i.   the total amount payable by Crombie in respect of such Units and all
         other Units tendered for redemption, in the same calendar month must
         not exceed $50 (provided that such limitation may be waived at the
         discretion of the Trustees);

    ii.  at the time such Units are tendered for redemption, the outstanding
         Units must be listed for trading on the TSX or traded or quoted on
         any other stock exchange or market which the Trustees consider, in
         their sole discretion, provides representative fair market value
         prices for the Units;

    iii. the normal trading of Units is not suspended or halted on any stock
         exchange on which the Units are listed (or if not listed on a stock
         exchange, in any market where the Units are quoted for trading) on
         the Redemption Date or for more than five trading day during the
         ten-day trading period commencing immediately after the Redemption
         Date.

    Crombie REIT Special Voting Units and Class B LP Units

    The Declaration of Trust and the Exchange Agreement provide for the
issuance of voting non-participating Units (the "Special Voting Units") to the
holders of Class B LP Units used solely for providing voting rights
proportionate to the votes of Crombie's Units. The Special Voting Units are
not transferable separately from the Class B LP Units to which they are
attached and will be automatically transferred upon the transfer of such Class
B LP Unit. If the Class B LP Units are purchased in accordance with the
Exchange Agreement, a like number of Special Voting Units will be redeemed and
cancelled for no consideration by Crombie.
    The Class B LP Units issued by a subsidiary of Crombie to ECL have
economic and voting rights equivalent, in all material aspects, to Crombie's
Units. They are indirectly exchangeable on a one-for-one basis for Crombie's
Units at the option of the holder, under the terms of the Exchange Agreement.
    Each Class B LP Unit entitles the holder to receive distributions from
Crombie, pro rata with distributions made by Crombie on Units.
    The Class B LP Units are accounted for as non-controlling interest.

    Employee Unit Purchase Plan ("EUPP")

    Crombie provides for unit purchase entitlements under the EUPP for certain
senior executives. Awards made under the EUPP will allow executives to
purchase units from treasury at the average daily high and low board lot
trading prices per unit on the Toronto Stock Exchange for the five trading
days preceding the issuance. Executives are provided non-recourse loans at 3%
annual interest by Crombie for the purpose of acquiring Units from treasury
and the Units purchased are held as collateral for the loan. The loan is
repaid through the application of the after-tax amounts of all distributions
received on the Units, as well as the after-tax portion of any Long-Term
Incentive Plan ("LTIP") cash awards received, as payments on interest and
principal. As at December 31, 2007, there are loans receivable from executives
of $1,087 under Crombie's EUPP, representing 105,045 Units, which are
classified as a reduction of Unitholders' Equity. Loan repayments will result
in a corresponding increase in Unit Capital. Market value of the Units at
December 31, 2007 was $1,169
    The compensation expense related to the EUPP during the year ended
December 31, 2007 was $37 (period from March 23, 2006 to December 31, 2006 -
$27).

    Earnings per Unit Computations

    Basic net earnings per Unit is computed by dividing net earnings by the
weighted average number of Units outstanding during the period. Diluted
earnings per Unit is calculated on the assumption that all EUPP loans were
repaid at the beginning of the period. For all periods, the assumed exchange
of all Class B LP Units would not be dilutive. As at December 31, 2007, there
are no other dilutive items.

    14) PROPERTY REVENUE

                                                                 Period from
                                                                    March 23,
                                                     Year Ended      2006 to
                                                    December 31, December 31,
                                                           2007         2006
                                                   --------------------------
                                                                     (Note 1)
    Rental revenue contractually due from tenants  $    140,904  $    98,441
    Straight-line rent recognition                        1,195          702
    Below-market lease amortization                       4,489        2,896
    Above-market lease amortization                      (2,982)      (2,090)
                                                   --------------------------
                                                   $    143,606  $    99,949
                                                   --------------------------
                                                   --------------------------

    15) FUTURE INCOME TAXES

    On June 22, 2007, tax legislation Bill C-52, the Budget Implementation
Act, 2007 (the "Act") was passed into law. The Act related to the federal
income taxation of publicly traded income trusts and partnerships. The Act
subjects all existing income trusts, or specified investment flow-through
entities ("SIFTs"), to corporate tax rates beginning in 2011, subject to an
exemption for real estate investment trusts ("REITs"). A trust that satisfies
the criteria of a REIT throughout its taxation year will not be subject to
income tax in respect of distributions to its unitholders or be subject to the
restrictions on its growth that would apply to SIFTs.
    During the fourth quarter of 2007, Crombie's management and their advisors
underwent an extensive review of Crombie's organizational structure and
operations to support Crombie's assertion that, at January 1, 2008, it meets
the REIT technical tests contained in the Act. The relevant tests apply
throughout the taxation year of Crombie and, as such, the actual status of
Crombie for any particular taxation year can only be ascertained at the end of
the year.
    On December 20, 2007, the Department of Finance (Canada) issued proposed
amendments to provide further clarity to these technical tests. While Crombie
did not rely on these proposed amendments, they do provide further certainty
that Crombie qualifies as a REIT.
    As a result of the above, Crombie has reversed the impact of $1,850 to
future income taxes that were booked during the second and third quarters of
2007. The future income tax liability of the wholly-owned corporate subsidiary
which is subject to income taxes consists of the following:

                                                    December 31, December 31,
                                                           2007         2006
                                                   --------------------------
    Tax liabilities relating to difference in
     tax and book value                             $    86,655  $    81,521
    Tax asset relating to non-capital loss
     carry-forward                                       (5,154)      (1,050)
                                                   --------------------------
    Future income tax liability                     $    81,501  $    80,471
                                                   --------------------------
                                                   --------------------------

    The future income tax expense consists of the following:

                                                                 Period from
                                                                    March 23,
                                                     Year Ended      2006 to
                                                    December 31, December 31,
                                                           2007         2006
                                                   --------------------------
                                                                     (Note 1)
    Provision for income taxes at the
     expected rate                                  $     7,553  $     6,100
    Tax effect of income attribution to
     Crombie's unitholders                               (4,986)      (6,863)
    Decrease in income tax resulting from a
     change in expected rate                             (1,537)           -
                                                   --------------------------
    Income tax expense (recovery)                   $     1,030  $      (763)
                                                   --------------------------
                                                   --------------------------

    16) SUPPLEMENTAL CASH FLOW INFORMATION

    (a) Change in other non-cash operating items

                                                                 Period from
                                                                    March 23,
                                                     Year Ended      2006 to
                                                    December 31, December 31,
                                                           2007         2006
                                                   --------------------------
    Cash provided by (used in):                                      (Note 1)
      Receivables                                   $     1,975  $    (3,067)
      Prepaid expenses and other assets                  (1,727)      (1,239)
      Payables and other liabilities                     (3,648)      25,581
                                                   --------------------------
                                                    $    (3,400) $    21,275
                                                   --------------------------
                                                   --------------------------

    (b) Interest
                                                                 Period from
                                                                    March 23,
                                                     Year Ended      2006 to
                                                    December 31, December 31,
                                                           2007         2006
                                                   --------------------------
                                                                     (Note 1)
    Interest paid                                   $    28,122  $    18,669
                                                   --------------------------
                                                   --------------------------

    17) COMMITMENTS AND CONTINGENCIES

    There are various claims and litigation, which Crombie is involved with,
arising out of the ordinary course of business operations. In the opinion of
management, any liability that would arise from such contingencies would not
have a significant adverse effect on these financial statements.
    Crombie has agreed to indemnify, in certain circumstances, the trustees
and officers of Crombie.
    Crombie has entered into a management cost sharing agreement with a
subsidiary of Empire Company Limited. Details of this agreement are described
in Note 18.
    Crombie has land leases on certain properties. These leases have annual
payments of $501 per year over the next five years.

    18) RELATED PARTY TRANSACTIONS

    As at December 31, 2007, Empire Company Limited, through its wholly-owned
subsidiary ECL, holds a 48.1% indirect interest in Crombie.
    For a period of five years commencing March 23, 2006, certain executive
management individuals and other employees of Crombie will provide general
management, financial, leasing, administrative, and other administration
support services to certain real estate subsidiaries of Empire Company Limited
on a cost recovery basis. The expense recoveries during year ended
December 31, 2007 was $1,505 (period from March 23, 2006 to December 31, 2006
- $850) and were netted against general and administrative expenses.
    For a period of five years, certain on-site maintenance and management
employees of Crombie will provide property management services to certain real
estate subsidiaries of Empire Company Limited on a cost recovery basis. In
addition, for various periods, ECL has an obligation to provide rental income,
large federal corporation tax and interest rate subsidies. The cost recoveries
during the year ended December 31, 2007 was $2,408 (the period from March 23,
2006 to December 31, 2006 - $1,764) and were netted against property expenses.
The rental income subsidy during the year ended December 31, 2007 was $37
(period from March 23, 2006 to December 31, 2006 - $461) and the head lease
subsidy during the year ended December 31, 2007 was $2,124 (period from March
23, 2006 to December 31, 2006 $1,123).
    Crombie also earned property revenue of $23,722 for the year ended
December 31, 2007 (period from March 23, 2006 to December 31, 2006 - $16,427)
from Sobeys Inc., Empire Theatres Limited and ASC Commercial Leasing Limited.
These companies are all subsidiaries of Empire Company Limited.

    19) FINANCIAL INSTRUMENTS

    In the normal course of business, Crombie is exposed to a number of
financial risks that can affect its operating performance. These risks, and
the action taken to manage them, are as follows:

    Credit risk

    Credit risk arises from the possibility that tenants may experience
financial difficulty and be unable to fulfill their lease commitments.
Crombie's credit risk is limited to the recorded amount of tenant receivables.
An allowance for doubtful accounts is taken for all anticipated problem
accounts.

    Interest rate risk

    From time to time, Crombie may enter into interest rate swap transactions
to modify the interest rate profile of its current or future debts without an
exchange of the underlying principal amount.
    As part of this interest rate management program, Crombie has entered into
a fixed interest rate swap to fix the amount of interest to be paid on $50,000
of the revolving credit facility. The remainder of the revolving credit
facility is at variable interest rates. The fair value of the fixed interest
rate swap at December 31, 2007, had an unfavourable difference of $173
(December 31, 2006 - unfavourable $310) compared to its face value. The change
in this amount has been recognized in other comprehensive income at December
31, 2007.
    In addition to the fixed interest rate swap during 2007, Crombie has
entered into a number of delayed interest rate swap agreements of a notional
amount of $118,689 with an effective date between June 1, 2008 and June 1,
2011, maturing between June 1, 2018 and July 2, 2021 to mitigate the exposure
to interest rate increases for mortgages maturing between 2008 and 2011. The
fair value of Crombie's delayed interest rate swap agreements had an
unfavourable difference of $5,611 compared to the face value on December 31,
2007. The change in these amounts has been recognized in other comprehensive
income at December 31, 2007.

    Fair value of financial instruments

    The book value of cash and cash equivalents, restricted cash, receivables,
payables and accruals approximate fair values due to their short term
maturity. The total fair value of commercial property debt is estimated to be
$496,333.

    20) EMPLOYEE FUTURE BENEFITS

    Crombie has a number of defined benefit and defined contribution plans
providing pension and other retirement benefits to most of its employees.

    Defined contribution pension plans

    The contributions required by the employee and the employer are specified.
The employee's pension depends on what level of retirement income (for
example, annuity purchase) that can be achieved with the combined total of
employee and employer contributions and investment income over the period of
plan membership, and the annuity purchase rates at the time of the employee's
retirement.

    Defined benefit pension plans

    The ultimate retirement benefit is defined by a formula that provides a
unit of benefit for each year of service. Employee contributions, if required,
pay for part of the cost of the benefit, and the employer contributions fund
the balance. The employer contributions are not specified or defined within
the plan text. They are based on the result of actuarial valuations which
determine the level of funding required to meet the total obligation as
estimated at the time of the valuation.
    Crombie uses December 31 as a measurement date for accounting purposes for
its defined benefit pension plans.

                                                           Most         Next
                                                         recent     required
                                                      valuation    valuation
                                                           date         date
                                                   --------------------------
    Retirement Pension Plan                         May 1, 2006  May 1, 2009
    Senior Management Pension Plan                  May 1, 2007  May 1, 2010

    Defined benefit plans

    Information about Crombie's defined benefit plans, in aggregate, is as
    follows:

                                   December 31, 2007       December 31, 2006
                              -----------------------------------------------
                                 Pension       Other     Pension       Other
                                 Benefit     Benefit     Benefit     Benefit
    Accrued benefit obligation     Plans       Plans       Plans       Plans
                              -----------------------------------------------
    Balance, January 1, 2007  $      940  $    3,356  $      841  $    2,904
    Impact of assumption
     changes                          10        (523)          -           -
    Current service cost              50         148          35         130
    Interest cost                     50         149          34         120
    Actuarial losses(gains)          (99)       (189)         30         202
                              -----------------------------------------------
    Balance, December 31, 2007       951       2,941         940       3,356

    Funded status
    Unamortized actuarial gains
     (losses)                         59         507         (30)       (202)
                              -----------------------------------------------
    Accrued benefit
     obligation               $    1,010  $    3,448  $      910  $    3,154
                              -----------------------------------------------
                              -----------------------------------------------

    Net expense
    Current service cost      $       50  $      148  $       35  $      130
    Interest cost                     50         149          34         120
    Actuarial losses(gains)          (99)       (189)         30         202
                              -----------------------------------------------
    Expense before adjustments         1         108          99         452
    Recognized vs. actual
     actuarial losses(gains)          98         187         (30)       (202)
                              -----------------------------------------------
    Net expense               $       99  $      295  $       69  $      250
                              -----------------------------------------------
                              -----------------------------------------------

    The significant actuarial assumptions adopted in measuring the Company's
accrued benefit obligations are as follows (weighted-average assumptions as of
May 1, 2007):

                                                        Pension        Other
                                                        Benefit      Benefit
                                                          Plans        Plans
                                                   --------------------------
    Discount rate                                          5.25%        5.25%
    Rate of compensation increase                          4.00%         N/A

    For measurement purposes, a 10% fiscal 2007 annual rate of increase in the
per capita cost of covered health care benefits was assumed. The cumulative
rate expectation to 2016 is 5%. The expected average remaining service period
for the active employees covered by the pension benefit plans is 3 years at
year end. The expected average remaining service period of the active
employees covered by the other benefit plans is 10 years at year end.
    The table below outlines the sensitivity of the fiscal 2007 key economic
assumptions used in measuring the accrued benefit plan obligations and related
expenses of Crombie's pension and other benefit plans. The sensitivity of each
key assumption has been calculated independently. Changes to more than one
assumption simultaneously may amplify or reduce impact on the accrued benefit
obligation or benefit plan expenses.


                               Pension Benefit Plans     Other Benefit Plans
                              -----------------------------------------------
                                 Benefit                 Benefit
                                    Obli-    Benefit        Obli-    Benefit
                                 gations      Cost(1)    gations      Cost(1)
                              -----------------------------------------------
    Discount Rate                   5.25%       5.25%       5.25%       5.25%
    Impact of:   1% increase  $     (114) $       (2) $     (650) $      (50)

                 1% decrease  $      130  $        1  $      834  $       57
    Growth rate
     of health
     costs(2)                                                9.0%        9.0%
    Impact of:   1% increase                          $      732  $       86
                 1% decrease                          $     (556) $      (64)


    (1) Reflects the impact on the current service costs, the interest cost
        and the expected return on assets.
    (2) Gradually decreasing to 5.0% in 2016 and remaining at that level
        thereafter.

    For fiscal 2007, the net defined contribution pension plans expense was
$394 (2006 $284).

    21) EFFECT OF NEW ACCOUNTING STANDARDS NOT YET IMPLEMENTED

    Financial instruments - Disclosures

    In December 2006, CICA issued Section 3862, "Financial instruments -
Disclosures". This Section applies to fiscal years beginning on or after
October 1, 2007. It describes the required disclosures related to the
significance of financial instruments on the entity's financial position and
performance and the nature and extent of risks arising for financial
instruments to which the entity is exposed and how the entity manages those
risks. This Section complements the principles of recognition, measurement and
presentation of financial instruments of Sections 3855, "Financial instruments
- Recognition and measurement", 3863, "Financial instruments - Presentation"
and 3865, "Hedges". Crombie is currently evaluating the impact of the adoption
of this new Section on the consolidated financial statements.

    Financial instruments - Presentation

    In December 2006, CICA issued Section 3863, "Financial instruments -
Presentation". This Section applies to fiscal years beginning on or after
October 1, 2007. It establishes standards for presentation of financial
instruments and non-financial derivatives. It complements standards of Section
3861, "Financial instruments - Disclosure and Presentation". Crombie is
currently evaluating the impact of the adoption of this new Section on the
consolidated financial statements.

    Capital disclosures

    In December 2006, CICA issued Section 1535, "Capital disclosures". This
Section applies to fiscal years beginning on or after October 1, 2007. It
establishes standards for disclosing information about entity's capital and
how it is managed to enable users of financial statements to evaluate the
entity's objectives, policies and procedures for managing capital. Crombie is
currently evaluating the impact of the adoption of this new Section on the
consolidated financial statements.

    22) SUBSEQUENT EVENTS

    a) On January 22, 2008, Crombie declared distributions of 7.083 cents per
       unit for the period from January 1, 2008 to, and including,
       January 31, 2008. The distribution will be payable on February 15,
       2008 to Unitholders of record as at January 31, 2008.

    b) On February 18, 2008, Crombie declared distributions of 7.083 cents
       per unit for the period from February 1, 2008 to, and including,
       February 29, 2008. The distribution will be payable on March 17, 2008
       to Unitholders of record as at February 29, 2008.

    c) On February 25, 2008, Crombie announced that it has entered into
       agreements with subsidiaries of Empire Company Limited to acquire a
       portfolio of 61 retail properties (the "Acquisition") representing
       approximately 3.3 million square feet of gross leaseable area. The
       cost of the Acquisition to Crombie is approximately $441,500,
       including approximately $13,000 of closing and transaction costs. The
       closing of the Acquisition is expected on or about April 21, 2008.

       Financing for the Acquisition is expected to include approximately
       $18,000 from the revolving credit facility, an 18 month bridge
       financing of $278,500, the issuance of $30,000 convertible extendible
       unsecured subordinated debentures, the issuance of $55,000 of Class B
       LP units of Crombie Limited Partnership to Empire Company Limited, and
       the issuance of $60,005 subscription receipts at a price of $11.00 per
       subscription receipt. On closing of the Acquisition, each subscription
       receipt will convert into one REIT unit. Crombie will be filing a
       preliminary prospectus in relation to the extendable convertible
       unsecured subordinated debentures and the subscription receipts on
       February 29, 2008.

       The Acquisition must be approved by the affirmation vote of a majority
       of Unitholders (excluding Empire Company Limited and certain of its
       affiliates and insiders) at a Unitholders meeting to be held on
       April 14, 2008.

    23) COMPARATIVE FIGURES

    Comparative figures have been reclassified, where necessary, to reflect
the current period's presentation.


    Management Discussion and Analysis

    (In thousands of dollars, except per unit amounts)

    The following is Management's Discussion and Analysis ("MD&A") of the
consolidated financial condition and results of operations of Crombie Real
Estate Investment Trust ("Crombie") for the year and quarter ended
December 31, 2007, with a comparison to the financial condition and results of
operations for the comparable period in 2006. The 2006 annual results were
estimated by using actual results for the quarters ended June 30, 2006,
September 30, 2006 and December 31, 2006 and pro-rating the nine-day operating
period of March 23, 2006 to March 31, 2006.
    This discussion and analysis should be read in conjunction with Crombie's
audited consolidated financial statements and accompanying notes for the year
ended December 31, 2007, and the audited consolidated financial statements and
accompanying notes for the period March 23, 2006 to December 31, 2006.
Information about Crombie can be found on SEDAR at www.sedar.com.

    FORWARD-LOOKING INFORMATION

    This MD&A contains forward-looking statements that reflect the current
expectations of management of Crombie about Crombie's future results,
performance, achievements, prospects and opportunities. Wherever possible,
words such as "may", "will", "estimate", "anticipate", "believe", "expect",
"intend" and similar expressions have been used to identify these
forward-looking statements. These statements reflect current beliefs and are
based on information currently available to management of Crombie.
Forward-looking statements necessarily involve known and unknown risks and
uncertainties. A number of factors, including those discussed under "Risk
Management" on pages 29 to 33, could cause actual results, performance,
achievements, prospects or opportunities to differ materially from the results
discussed or implied in the forward-looking statements. These factors should
be considered carefully and a reader should not place undue reliance on the
forward-looking statements. There can be no assurance that the expectations of
management of Crombie will prove to be correct.
    In particular, certain statements in this document discuss Crombie's
anticipated outlook of future events. These statements include, but are not
limited to:

    (i) the development of new properties under a development agreement, which
development activities are undertaken by a related party and thus are not
under the direct control of Crombie and whose activities could be impacted by
real estate market cycles, the availability of labour and general economic
conditions;

    (ii) the acquisition of accretive properties and the anticipated extent of
the accretion of any acquisitions, which could be impacted by demand for
properties and the effect that demand has on acquisition capitalization rates
and changes in interest rates;

    (iii) making improvements to the properties, which could be impacted by
the availability of labour and capital resource allocation decisions;

    (iv) generating improved rental income and occupancy levels, which could
be impacted by changes in demand for Crombie's properties, tenant
bankruptcies, the effects of general economic conditions and competitive
supply of retail or office locations in proximity to Crombie locations;

    (v) overall indebtedness levels, which could be impacted by the level of
acquisition activity Crombie is able to achieve and future financing
opportunities;

    (vi) tax exempt status, which can be impacted by regulatory changes
enacted by governmental authorities;

    (vii) anticipated subsidy payments from ECL Developments Limited ("ECL"),
which are dependent on tenant leasing and construction activity;

    (viii) anticipated distributions and payout ratios, which could be
impacted by seasonality of capital expenditures, results of operations and
capital resource allocation decisions; and

    (ix) anticipated accretion levels and debt to gross book value ratios
relating to a portfolio acquisition, which are dependent on financing risks.

    Readers are cautioned that such forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from these statements. Crombie can give no assurance that actual
results will be consistent with these forward-looking statements.

    NON-GAAP FINANCIAL MEASURES

    There are financial measures included in this MD&A that do not have a
standardized meaning under Canadian generally accepted accounting principles
("GAAP") as prescribed by the Canadian Institute of Chartered Accountants.
These measures are property net operating income ("NOI") (page 9),
distributable income (page 13), adjusted funds from operations ("AFFO") (page
14), debt to gross book value (page 19), funds from operations ("FFO") (page
14) and earnings before interest, taxes, depreciation and amortization
("EBITDA")(page 19). Management includes these measures because it believes
certain investors use these measures as a means of assessing relative
financial performance.

    Introduction

    Financial and Operational Summary

    -------------------------------------------------------------------------
                                              Period
                                                from
                                           March  23,    Quarter     Quarter
    (in thousands of dollars, Year Ended     2006 to       Ended       Ended
     except per unit amounts    December    December    December    December
     and as otherwise noted)    31, 2007    31, 2006    31, 2007    31, 2006
    -------------------------------------------------------------------------
    Property revenue          $  143,606  $   99,949  $   37,059  $   33,717
    Net income                $   10,659  $    9,405  $    4,058  $    3,217
    Basic and diluted net
     income per unit          $     0.49  $     0.44  $     0.19  $     0.15
    -------------------------------------------------------------------------
    Distributable income      $   45,340  $   33,288  $   11,515  $    9,815
    Distributable income
     per unit(1)              $     1.09  $     0.80  $     0.28  $     0.24
    Distributable income
     payout ratio (%)               77.2%       77.5%       77.0%       85.0%
    FFO                       $   50,809  $   35,237  $   13,057  $   10,699
    FFO per unit(1)           $     1.22  $     0.85  $     0.31  $     0.26
    AFFO                      $   34,842  $   25,912  $    7,561  $    8,263
    AFFO per unit(1)          $     0.84  $     0.62  $     0.18  $     0.20
    AFFO payout ratio (%)          100.4%       99.6%      117.3%      101.0%
    -------------------------------------------------------------------------
                                December    December
                                31, 2007    31, 2006
    -------------------------------------------------------------------------
    Debt to gross book
     value(2)                       48.1%       44.8%
    Total assets              $1,013,982  $  963,935
    Total commercial
     property debt            $  500,578  $  432,963
    -------------------------------------------------------------------------
    (1) Distributable income, FFO and AFFO per unit are calculated by
        distributable income, FFO or AFFO, as the case may be, divided by the
        diluted weighted average of the total Units and Special Voting Units
        outstanding of 41,728,561 for the quarter ended December 31, 2007,
        41,712,801 for the quarter ended December 31, 2006, 41,725,711 for
        the year ended December 31, 2007 or 41,578,171 for the period from
        March 23, 2006 to December 31, 2006.
    (2) See page 19 for detailed calculation.

    Overview of the Business

    Crombie is an unincorporated, open-ended real estate investment trust
established pursuant to a Declaration of Trust dated January 1, 2006, as
amended and restated (the "Declaration of Trust") under, and governed by, the
laws of the Province of Ontario. The units of Crombie trade on the Toronto
Stock Exchange under the symbol CRR.UN.
    Crombie completed its IPO of 20,485,224 units ("Units") on March 23, 2006
for gross proceeds of $204,852. Concurrent with the initial public offering
("IPO"), Crombie acquired 44 commercial properties in six provinces, totalling
approximately 7,161,000 square feet (the "Business Acquisition") from certain
affiliates of Empire Company Limited ("Empire Subsidiaries").
    Crombie invests in income-producing retail, office and mixed-use
properties in Canada, with a future growth strategy focused primarily on the
acquisition of retail properties. At December 31, 2007, Crombie owned a
portfolio of 52 commercial properties in six provinces, comprising
approximately 8.0 million square feet of gross leaseable area ("GLA").

    Business Strategy and Outlook

    The objectives of Crombie are threefold:

    1. Generate reliable and growing cash distributions;

    2. Enhance the value of Crombie's assets and maximize long-term unit
       value through active management; and

    3. Expand the asset base of Crombie and increase its cash available for
       distribution through accretive acquisitions.

    Generate reliable and growing cash distributions: Management focuses on
improving both the same-asset results while expanding the asset base with
accretive acquisitions to grow the cash distributions to unitholders. As at
December 31, 2007, after just over 21 months of operations, Crombie has been
able to increase its distributions twice for a total increase of 6.25%.
Crombie has achieved these distribution increases while maintaining the 100%
AFFO payout ratio target for both 2006 and 2007.

    Enhance value of Crombie's assets: In addition to the four commercial
properties either redeveloped or in the process of redevelopment, for which
the costs will be covered by the non-interest-bearing demand notes from ECL,
Crombie anticipates reinvesting approximately 3% to 5% of its property revenue
each year into its properties to maintain their productive capacity and thus
overall value.
    Crombie's internal growth strategy focuses on generating greater rental
income from its existing properties. Crombie plans to achieve this by
strengthening its asset base through judicious expansion and improvement of
existing properties, leasing vacant space at competitive market rates with the
lowest possible transaction costs, and maintaining good relations with
tenants. Management will continue to conduct regular reviews of properties
and, based on its experience and market knowledge, will assess ongoing
opportunities within the portfolio.

    Expand asset base with accretive acquisitions: The three property
acquisitions completed in 2006, combined with the five additional acquisitions
during 2007, are anticipated to add approximately four to six cents per unit
in cash available for distribution over their first full years of operation.
While the investment market continues to remain competitive, Crombie intends
to continue to pursue acquisitions which can be made at values which are
accretive to Crombie.
    Crombie's external growth strategy focuses primarily on accretive
acquisitions of income-producing retail properties. Crombie pursues two
sources of accretive acquisitions which include 3rd party acquisitions and our
relationship with ECL. Each of these two sources of acquisitions has provided
four acquisitions to date. The relationship with ECL includes currently owned
and future development properties, as well as opportunities through the rights
of first refusal ("ROFR's") that one of Empire's subsidiaries have negotiated
in many of their leases. Crombie will seek to identify future property
acquisitions using investment criteria that focus on the strength of anchor
tenancies, market demographics, terms of tenancies, proportion of revenue from
national tenants, opportunities for expansion, security of cash flow,
potential for capital appreciation and potential for increasing value through
more efficient management of the assets being acquired, including expansion
and repositioning. In addition, Crombie will seek to leverage its close
relationship with the Empire Subsidiaries to access acquisition opportunities
that satisfy the foregoing criteria.
    Crombie plans to work closely with the Empire Subsidiaries to identify
development opportunities that further Crombie's external growth strategy. The
relationship is governed by a development agreement described in the Material
Contracts section of Crombie's Annual Information Form for the year ended
December 31, 2007. Through this relationship, Crombie expects to have the
benefits associated with development while limiting its exposure to the
inherent risks, such as real estate market cycles, cost overruns, labour
disputes, construction delays and unpredictable general economic conditions.
The development agreement will also enable Crombie to avoid the uncertainties
associated with property development, including paying the carrying costs of
land, securing construction financing, obtaining development approvals,
managing construction projects, marketing in advance of and during
construction and earning no return during the construction period.
    The development agreement provides Crombie with a preferential right to
acquire retail properties developed by ECL, subject to approval by the
independent trustees. The history of the relationship between Crombie and
Empire Subsidiaries continues to provide promising opportunities for growth
through future development opportunities on both new and existing sites in
Crombie's portfolio.
    This relationship has allowed for both the completed and ongoing
development of County Fair Mall in Summerside, Prince Edward Island,
Fredericton Mall and Prospect Street Plaza in Fredericton, New Brunswick,
Greenfield Park Centre in Longueuil, Quebec and Highland Square Mall in
New Glasgow, Nova Scotia, along with providing two of the first eight
acquisitions in Brampton and Oshawa, Ontario.
    ECL currently owns approximately one million square feet of development
property that can be offered to Crombie on a preferential right through the
development agreement when the properties are sufficiently developed to meet
Crombie's acquisition criteria. These properties are anticipated to be made
available to Crombie over the next one to three years.
    On February 25, 2008, Crombie announced that it has entered into
agreements with Empire Company Limited (and certain of its wholly-owned
subsidiaries) to acquire a portfolio of 61 retail properties representing
approximately 3.3 million square feet of GLA. The cost of the acquisition to
Crombie is expected to be approximately $441,500, including approximately
$13,000 in closing and transaction costs. The portfolio consists of 40
single-use freestanding Sobeys grocery stores of various Sobeys banners and 21
Sobeys anchored retail strip centres. The GLA of the portfolio is as follows:
Atlantic Canada - 78%; Quebec - 7%; and Ontario - 15%.
    In order to partially finance the acquisition, Crombie has agreed to sell,
on a bought-deal basis, $60,005 of subscription receipts at a price of $11.00
per subscription receipt and $30,000 of convertible extendible unsecured
subordinated debentures (the "Debentures") to a syndicate of underwriters led
by CIBC World Markets Inc. and TD Securities Inc. Crombie has also granted the
underwriters an over-allotment option to purchase up to an additional 5%
subscription receipts at the same offering price, exercisable up to 30 days
after the closing of the offering. Crombie will be filing a preliminary
prospectus on or before February 29, 2008 in relation to this financing.
    On closing of the acquisition, each subscription receipt will convert into
one unit of Crombie. The Debentures have an initial maturity date of May 16,
2008, which will be extended to March 20, 2013 upon closing of the
acquisition. The Debentures have a coupon of 7.00% per annum and will pay
interest semi-annually in arrears on June 30 and December 31 in each year
commencing on June 30, 2008. Each $1,000 principal amount of Debenture is
convertible into approximately 76.9 units of Crombie, at any time, at the
option of the holder, representing a conversion price of $13.00 per unit.
    Empire Company Limited has agreed to take $55,000 of the purchase price in
Class B LP Units of Crombie Limited Partnership at the $11.00 offering price.
Following the closing of the acquisition, Empire Company Limited will continue
to hold a 48.1% economic and voting interest in Crombie.
    The remainder of the purchase price will be satisfied with a $278,500, 18
month bridge financing from the Bank of Nova Scotia and a draw of
approximately $18,000 on Crombie's revolving credit facility. It is Crombie's
intention to replace the bridge financing by suitable long term debt financing
following the closing of the acquisition.
    Crombie expects that the transaction will have a positive impact to AFFO
per unit and FFO per unit will remain at a consistent level as for the year
ended December 31, 2007. Debt to gross book value will increase from 48.1% as
at December 31, 2007 to 54.7% excluding Debentures, which is within Crombie's
target ratio of 50-55%, and 56.8% including Debentures. Both ratios remain
under the maximum allowable ratio as per Crombie's Declaration of Trust of
65%.
    Because the transaction is with a related party to Crombie, Crombie will
require approval by a majority of its unitholders (excluding Empire Company
Limited and certain of its affiliates and insiders) at a meeting to be held
April 14, 2008.
    The following table summarizes the key performance measures and balance
sheet changes as a result of the acquisition:

    -------------------------------------------------------------------------
                                                                     Crombie
                                                      Pro Forma    Pro Forma
                                     Crombie as at       Effect   Annualized
                                       December 31,      of SLP      for SLP
                                              2007    Portfolio    Portfolio
    -------------------------------------------------------------------------
    Commercial properties              $   909,095  $   411,262  $ 1,320,357
    Commercial property debt           $   500,578  $   294,775  $   795,353
    -------------------------------------------------------------------------
    Property revenue                   $   143,606  $    51,274  $   194,880
    Property NOI                       $    84,261  $    34,848  $   119,109
    -------------------------------------------------------------------------
    Units outstanding                   21,648,985    5,455,000   27,103,985
    Class B LP units outstanding        20,079,576    5,000,000   25,079,576
    -------------------------------------------------------------------------
    FFO                                $    50,809  $    13,072  $    63,881
    FFO/unit                           $      1.22  $      1.25  $      1.22
    AFFO                               $    34,842  $    12,170  $    47,012
    AFFO/unit                          $      0.84  $      1.16  $      0.90
    Debt to gross book value                  48.1%           -         54.7%
    -------------------------------------------------------------------------

    Business Environment

    During the latter half of 2007, reducing credit availability continued to
be a major risk to the interest-rate sensitive Real Estate Investment Trust
("REIT") business environment. Widening credit spreads due to higher risk
premiums resulting from lenders apprehension of their exposure to real estate,
largely resulting from the issues faced in the residential sub-prime mortgage
market in the United States, have more than offset the decline in Canadian
bond yields. This risk aversion has resulted in reduced credit availability as
some avenues of debt financing, such as CMBS financing, are difficult to
access while other lenders have become more restrictive with capital, applying
more stringent due diligence and loan covenant requirements. This trend has
negatively impacted the unit prices of most REIT's as well as begun to reduce
the acquisition prices the real estate market is willing to pay for assets due
to the higher cost of capital.

    While it is impossible to predict when the current risk aversion concerns
may pass, Crombie believes that it is in a strong position to withstand the
current conditions:

    - Crombie has minimal exposure to floating rate debt at December 31, 2007
      (4.2% of total commercial property debt);
    - Crombie has only 3.0% ($14,539) of its debt maturing in 2008 with four
      mortgages requiring to be refinanced. In 2009, Crombie currently has no
      debt maturing;
    - AFFO payout ratio continues to meet our intended target of 100% and is
      thus considered sustainable;
    - Crombie's debt service coverage ratio ("DSCR") and interest service
      coverage ratio ("ISCR") are strong at 1.86 times EBITDA and 3.00 times
      EBITDA respectively;
    - Weighted average debt maturity term of 7.4 years provides long-term
      stability; and
    - Crombie has undertaken a number of steps to hedge its exposure to
      interest rate risk, which are outlined in the Risk Management section
      of the MD&A.

    The real estate investment market continues to remain competitive.
However, as previously discussed, there now appears to be signs that yields
have begun to modestly increase in light of the widening credit spread
environment. In addition, investor interest in real estate has moderated from
early 2007, which has resulted in an expansion in cap rates. Crombie intends
to continue to pursue acquisitions that can be made at values which are
accretive and provide an acceptable return. It is anticipated that a number of
these acquisitions may result from the relationship between Crombie and the
Empire Subsidiaries.
    In terms of occupancy rates, in both the retail and office markets where
Crombie has a prominent presence, the business environment continues to be
stable. Retail markets have continued to be steady, supported by low
unemployment and higher wage growth. In Atlantic Canada, sustained consumer
spending continues to attract retailers which has allowed the occupancy levels
to remain relatively stable. The office sector, especially in the Halifax
region, continues to experience single-digit vacancy rates. However, there
remain concerns regarding the impact that a slowing U.S. economy may have for
Canada's economic growth prospects. One offsetting factor to these potential
concerns is that many of Crombie's retail locations are anchored by food
stores, which typically are less affected by swings in consumer spending.
    Finally, the federal government's issuance of proposed technical
amendments on December 20, 2007 provided further clarity to the tax rules and
criteria that were part of Bill C-52 and applicable to Crombie. These
technical amendments provided more certainty that Crombie qualifies as a REIT.

    2007 HIGHLIGHTS

    - Crombie acquired five properties in 2007 increasing GLA by
      403,000 square feet for a combined purchase price of $68,900.

    - Crombie completed leasing activity on 99% of its 2007 expiring leases,
      increasing average net rent per square foot to $11.57 from the expiring
      rent per square foot of $9.97.

    - Overall occupancy at December 31, 2007 remained consistent with
      December 31, 2006 at 93.6%.

    - Property revenue for the year ended December 31, 2007 increased by
      $14,200, or 11.0%, to $143,606 compared to $129,406 for the estimated
      year ended December 31, 2006. The improvement was due to increased
      same-asset property results and the eight property acquisitions
      completed to date.

    - Same-asset NOI of $77,130 increased by $3,552 or 4.8%, compared to
      $73,578 for the estimated prior year due primarily to an increased
      average rent per square foot ($11.79 in 2007 versus $11.37 in 2006).

    - The AFFO payout ratio was 100.4% which was consistent with the
      anticipated annual AFFO payout ratio of 100% and the payout ratio for
      2006 of 99.6%.

    - Debt to gross book value remained unchanged at 48.1% at December 31,
      2007 compared to 48.1% at September 30, 2007.

    - Crombie's debt service coverage ratio in 2007 was 1.86 times EBITDA and
      interest service coverage ratio was 3.00 times EBITDA, compared to
      1.91 times EBITDA and 3.10 times EBITDA, respectively, for 2006.

    - During the fourth quarter of 2007 Crombie's management and their
      advisors underwent an extensive review of Crombie's organizational
      structure and operations to support Crombie's assertion that it meets
      the REIT criteria at January 1, 2008.

    OVERVIEW OF THE PROPERTY PORTFOLIO

    Property Profile

    The net book value of the property portfolio represents 90% of the total
assets as at December 31, 2007. At December 31, 2007 the property portfolio
consisted of 52 commercial properties that contain approximately 8.0 million
square feet of GLA. The properties are located in six provinces: Nova Scotia,
New Brunswick, Newfoundland and Labrador, Prince Edward Island, Ontario and
Quebec.

    As at December 31, 2007, the portfolio distribution of the GLA by province
was as follows:

    -------------------------------------------------------------------------
                                                     % of Annual
                   Number of         GLA        % of     Minimum   Occupancy
    Province      Properties    (sq. ft.)        GLA        Rent          (1)
    -------------------------------------------------------------------------
    Nova Scotia           21   4,130,000        51.9%       46.2%       94.9%
    Ontario               16   1,306,000        16.4%       18.3%       94.1%
    New Brunswick          8   1,140,000        14.3%       11.4%       90.4%
    Newfoundland
     and Labrador          4     885,000        11.2%       17.4%       90.6%
    Prince Edward
     Island                1     301,000         3.8%        3.5%       92.7%
    Quebec                 2     192,000         2.4%        3.2%       96.4%
    -------------------------------------------------------------------------
    Total                 52   7,954,000       100.0%      100.0%       93.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For purposes of calculating occupancy percentage, Crombie considers
        GLA covered by the head lease agreement in favour of ECL as occupied
        as there is head lease revenue being earned on the GLA

    Crombie continues to diversify its geographic composition through growth
opportunities, as indicated by the seven acquisitions in Ontario and one
acquisition in Quebec. As well, the properties are located in rural and urban
locations, which Crombie believes adds stability and future growth potential,
while reducing vulnerability to economic fluctuations that may affect any
particular region.

    Largest Tenants

    The following table illustrates the 10 largest tenants in Crombie's
portfolio of income-producing properties as measured by their percentage
contribution to total annual minimum base rent as at December 31, 2007.

    -------------------------------------------------------------------------
                                       % of Annual   Total Area
                                           Minimum       Leased    Number of
    Tenant                                    Rent     (sq. ft.) Locations(1)
    -------------------------------------------------------------------------
    Sobeys(2)                                 15.9%   1,225,000           28
    Shoppers Drug Mart                         3.2%     160,000           13
    Empire Theatres                            3.0%     242,000            8
    Zellers                                    3.0%     569,000            6
    Nova Scotia Power/Emera                    2.8%     188,000            2
    CIBC                                       2.2%     162,000           13
    Province of Nova Scotia                    2.2%     141,000           11
    Bell (Aliant)                              2.1%     153,000           14
    Public Works Canada                        1.8%      72,000            6
    Best Buy Canada Ltd                        1.6%      89,000            3
    -------------------------------------------------------------------------
    Total                                     37.8%   3,001,000          104
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Each location is represented by a separate lease.
    (2) Excludes Lawtons.

    Crombie's portfolio is leased to a wide variety of tenants. Other than
Sobeys, which account for 15.9% of the annual minimum rent, no other tenant
accounts for more than 3.2% of Crombie's minimum rent.
    On January 15, 2008, SAAN Stores Ltd. obtained protection under the
Companies' Creditors Arrangement Act ("CCAA") to implement a restructuring
plan. As at that date, Crombie had four locations leased to SAAN totalling
116,156 square feet of GLA, representing 1.5% of Crombie's total GLA as at
December 31, 2007. Total annual rental revenue from the locations is
approximately $185, representing 0.1% of Crombie's total property revenue
($1.59 net rent per square foot). Should SAAN not emerge as a viable entity
from CCAA, Crombie will seek to lease the GLA at more favourable per square
foot rents.

    Lease Maturities

    The following table sets out as of December 31, 2007 the number of leases
relating to the properties subject to lease maturities during the periods
indicated (assuming tenants do not holdover on a month-to-month basis or
exercise renewal options or termination rights), the renewal area, the
percentage of the total GLA of the properties represented by such maturities
and the estimated average net rent per square foot at the time of expiry. The
weighted average remaining term of all leases is approximately 7.7 years.

    -------------------------------------------------------------------------
                                                                 Average Net
                                                                    Rent per
                               Number of        Area        % of  Sq. Ft. at
    Year                          Leases    (sq. ft.)  Total GLA   Expiry ($)
    -------------------------------------------------------------------------
    2008                             210     771,000         9.7%     $11.06
    2009                             185     817,000        10.3%     $13.58
    2010                             173     737,000         9.3%     $12.19
    2011                             181     993,000        12.5%     $13.53
    2012                             131     767,000         9.6%     $11.45
    Thereafter                       230   3,358,000        42.2%     $12.53
    -------------------------------------------------------------------------
    Total                          1,110   7,443,000        93.6%     $12.48
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    2007 Portfolio Lease Expiries and Leasing Activity

    As at December 31, 2007, portfolio lease expiries and leasing activity
were as follows:

    -------------------------------------------------------------------------
                   Quarter   Quarter   Quarter   Quarter      Year
                    ending    ending    ending    ending    ending
                   Mar. 31,  Jun. 30,  Sep. 30,  Dec. 31,  Dec. 31,   As a %
                      2007      2007      2007      2007      2007    of GLA
    -------------------------------------------------------------------------
    Expiries
     (sq. ft.)     272,000   170,000   116,000   133,000   691,000       8.7%
    Average net
     rent per
     sq. ft.      $   9.90  $   7.55  $  11.81  $  11.61   $  9.97
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Committed
     renewals
     (sq. ft.)     168,000   122,000    80,000    53,000   423,000       5.3%
    Average net
     rent per
     sq. ft.      $   9.83  $   6.42  $  12.81  $  12.71  $   9.77
    New leasing
     (sq. ft.)      30,000    78,000    74,000    76,000   258,000       3.2%
    Average net
     rent per
     sq. ft.      $  13.84  $  14.62  $  12.79  $  16.44  $  14.54
    -------------------------------------------------------------------------
    Total
     renewals and
     new leasing
     (sq. ft.)     198,000   200,000   154,000   129,000   681,000     8.6%
    Total average
     net rent
     per sq. ft.  $  10.44  $   9.60  $  12.80  $  14.91  $  11.57
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During the year ended December 31, 2007, Crombie had renewals or entered
into new leases in respect of approximately 681,000 square feet at an average
net rent of $11.57 per square foot, compared with expiries of approximately
691,000 square feet at an average net rent of $9.97 per square foot. Crombie
completed leasing activity in the fourth quarter of 81,000 square feet. Of the
691,000 square feet of expiries, approximately 139,000 square feet involve
tenants that are still paying property revenues on a holdover basis.
    Fluctuations in the average net rent per square foot figures occur on a
quarterly basis due primarily to fluctuations in the mix between new and
renewal leasing. New leasing generally requires larger tenant inducement
spending when compared to renewals. As a result, new lease deals also
generally command a higher net rent per square foot. During the fourth
quarter, the leasing activity resulted in the mix of new leasing versus
renewal leasing contracted as follows:

    -------------------------------------------------------------------------
                                 Quarter     Quarter     Quarter     Quarter
                                  ending      ending      ending      ending
                                 Mar. 31,    Jun. 30,    Sep. 30,    Dec. 31,
                                    2007        2007        2007        2007
    -------------------------------------------------------------------------
    New leasing                       15%         39%         48%         59%
    Renewal leasing                   85%         61%         52%         41%
    -------------------------------------------------------------------------
    Total                            100%        100%        100%        100%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The high level of renewal deals during the first two quarters of 2007
resulted in the lower net rent per square foot figures. In particular, a
number of the renewals completed during the first two quarters of 2007 had
specific major tenants whose leases contained favourable renewal terms
negotiated in previous years. The leasing activity in the last two quarters of
2007 showed increased net rent as a result of the new leasing activity which
increased the average net rent per square foot on an annual basis to $11.57,
or a 16.0% increase over the expiring average net rent.

    Sector Information

    As at December 31, 2007, the portfolio distribution of the GLA by asset
type was as follows:

    -------------------------------------------------------------------------
                                                             % of
                                                           Annual
                   Number of         GLA        % of      Minimum  Occupancy
    Asset Type    Properties    (sq. ft.)        GLA         Rent         (1)
    -------------------------------------------------------------------------
    Retail                38   4,998,000        62.8%        66.1%      93.8%
    Office                 5   1,027,000        12.9%        12.6%      91.1%
    Mixed-Use              9   1,929,000        24.3%        21.3%      94.4%
    -------------------------------------------------------------------------
    Total                 52   7,954,000       100.0%       100.0%      93.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For purposes of calculating occupancy percentage, Crombie considers
        GLA covered by the head lease agreement in favour of ECL as occupied

    The following table sets out as of December 31, 2007, the square feet
under lease subject to lease maturities during the periods indicated.

    -------------------------------------------------------------------------
    Year           Retail         Office          Mixed-Use          Total
            (sq. ft.)   (%) (sq. ft.)   (%)   (sq. ft.)   (%)  (sq. ft.)  (%)
    -------------------------------------------------------------------------
    2008     351,000   7.0%  136,000  13.3%    284,000  14.8%   771,000  9.7%
    2009     353,000   7.1%  125,000  12.1%    339,000  17.6%   817,000 10.3%
    2010     279,000   5.6%   74,000   7.2%    384,000  19.9%   737,000  9.3%
    2011     324,000   6.5%  360,000  35.1%    309,000  16.0%   993,000 12.5%
    2012     374,000   7.5%  110,000  10.7%    283,000  14.7%   767,000  9.6%
    There-
     after 3,006,000  60.1%  131,000  12.7%    221,000  11.4% 3,358,000 42.2%
    -------------------------------------------------------------------------
    Total  4,687,000  93.8%  936,000  91.1%  1,820,000  94.4% 7,443,000 93.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The following table sets out the average net rent per square foot expiring
during the periods indicated.

    -------------------------------------------------------------------------
    Year                                    Retail       Office    Mixed-Use
    -------------------------------------------------------------------------
    2008                               $     12.53  $     10.92  $      9.31
    2009                               $     15.52  $     11.37  $     12.36
    2010                               $     16.04  $     11.65  $      9.50
    2011                               $     17.40  $     13.79  $      9.19
    2012                               $     13.77  $      9.43  $      9.16
    Thereafter                         $     12.50  $     11.16  $     13.67
    -------------------------------------------------------------------------
    Total                              $     13.42  $     12.00  $     10.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    2007 RESULTS OF OPERATIONS

    Acquisitions

    The following table outlines the acquisitions made which affected the
results of operations when compared to the previous year's results.

    -------------------------------------------------------------------------
                                                                       Owner-
                                                                Acqui-  ship
                                            Date      GLA      sition    Int-
    Property          Property Type     Acquired (sq. ft.)     Cost(1) erest
    -------------------------------------------------------------------------
    Brampton Plaza,
    Brampton,                          October 2,
    Ontario          Retail - Strip         2006   66,000  $   13,160   100%
    -------------------------------------------------------------------------
    Taunton & Wilson
    Plaza, Oshawa,                     October 2,
    Ontario          Retail - Strip         2006   83,000   $  18,725   100%
    -------------------------------------------------------------------------
    Burlington Plaza,
    Burlington,                      December 20,
    Ontario          Retail - Strip         2006   56,000   $  14,200   100%
    -------------------------------------------------------------------------
    The Mews of
    Carleton Place,
    Carleton Place,                   January 17,
    Ontario          Retail - Strip         2007   80,000   $  11,800   100%
    -------------------------------------------------------------------------
    Perth Mews
    Shopping Mall,                       March 7,
    Perth, Ontario   Retail - Strip         2007  103,000   $  17,900   100%
    -------------------------------------------------------------------------
    International
    Gateway Centre,
    Fort Erie,                           July 26,
    Ontario          Retail - Strip         2007   93,000   $  19,200   100%
    -------------------------------------------------------------------------
    Brossard-
    Lonqueuil,
    Brossard,          Freestanding    August 24,
    Quebec                    store         2007   39,000   $   7,300    100%
    -------------------------------------------------------------------------
    Town Centre,                      October 15,
    LaSalle, Ontario   Retail-Strip         2007   88,000   $  12,700    100%
    -------------------------------------------------------------------------
    Total                                         608,000   $ 114,985
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excluding additional closing costs.

    Comparison to Previous Year

    Results of operations for the year ended December 31, 2006 have been
estimated by using actual results for the quarters ended June 30, 2006,
September 30, 2006 and December 31, 2006 and pro-rating the results for the
nine days of operations from March 23, 2006 to March 31, 2006. It is believed
that this method of estimation of the results would be reflective of the
actual results of Crombie in all material respects had Crombie been in
operation for the entire period.

    -------------------------------------------------------------------------
                                                Year Ended
                                       -------------------------
    (In thousands of dollars,          December 31,  December 31,
     except where otherwise noted)            2007          2006    Variance
    -------------------------------------------------------------------------
    Property revenue                   $   143,606  $    129,406     $14,200
    Property expenses                       59,345        55,210      (4,135)
    -------------------------------------------------------------------------
    Property NOI                            84,261        74,196      10,065
    -------------------------------------------------------------------------
    NOI margin percentage                     58.7%         57.3%        1.4%
    -------------------------------------------------------------------------
    Expenses:
      General and administrative             8,177         7,052      (1,125)
      Interest                              25,275        21,262      (4,013)
      Depreciation and amortization         29,229        22,936      (6,293)
    -------------------------------------------------------------------------
                                            62,681        51,250     (11,431)
    -------------------------------------------------------------------------
    Income before income taxes and
     non-controlling interest               21,580        22,946      (1,366)
    Income taxes expense (recovery)
     - Future                                1,030          (763)     (1,793)
    -------------------------------------------------------------------------
    Income before non-controlling
     interest                               20,550        23,709      (3,159)
    Non-controlling interest                 9,891        11,512       1,621
    -------------------------------------------------------------------------
    Net income                         $    10,659  $     12,197  $   (1,538)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net income
     per Unit                          $      0.49  $       0.57  $    (0.08)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic weighted average Units
     outstanding (in 000's)                 21,535        21,445
    -------------------------------------------------------------
    -------------------------------------------------------------
    Diluted weighted average Units
     outstanding (in 000's)                 21,646        21,499
    -------------------------------------------------------------
    -------------------------------------------------------------

    Net income for the year ended December 31, 2007 of $10,659 decreased by
$1,538 from $12,197 for the estimated year ending December 31, 2006. The
decrease was due to:

    - higher interest and depreciation charges, due primarily to the eight
      property acquisitions to date, along with higher general and
      administrative costs incurred for ongoing compliance and professional
      fees; offset in part by

    - higher property NOI from the increased average rent per square foot of
      the same-asset properties, as well as the impact from the eight
      property acquisitions to date.

    Property Revenue and Property Expenses
    -------------------------------------------------------------------------
                                                Year Ended
                                       -------------------------
                                       December 31, December 31,
    (In thousands of dollars)                 2007         2006     Variance
    -------------------------------------------------------------------------
    Same-asset property revenue        $   133,570  $   128,641  $     4,929
    Acquisition property revenue            10,036          765        9,271
    -------------------------------------------------------------------------
    Property revenue                   $   143,606  $   129,406  $    14,200
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset property revenue of $133,570 for the year ended December 31,
2007 was 3.8% higher than the estimated year ended December 31, 2006 due
primarily to the increased average rent per square foot ($11.79 in 2007 and
$11.37 in 2006) and increased revenue from higher recoverable common area
expenses.

    -------------------------------------------------------------------------
                                                Year Ended
                                       -------------------------
                                       December 31, December 31,
    (In thousands of dollars)                 2007         2006     Variance
    -------------------------------------------------------------------------
    Same-asset property expenses       $    56,440  $    55,063  $    1, 377
    Acquisition property expenses            2,905          147        2,758
    -------------------------------------------------------------------------
    Property expenses                  $    59,345  $    55,210  $     4,135
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset property expenses of $56,440 for the year ended December 31,
2007 were 2.5% higher than the estimated year ended December 31, 2006 due to
increased recoverable common area expenses primarily from increased property
taxes.

    -------------------------------------------------------------------------
                                                Year Ended
                                       -------------------------
                                       December 31, December 31,
    (In thousands of dollars)                 2007         2006     Variance
    -------------------------------------------------------------------------
    Same-asset property NOI            $    77,130  $    73,578  $     3,552
    Acquisition property NOI                 7,131          618        6,513
    -------------------------------------------------------------------------
    Property NOI                       $    84,261  $    74,196  $    10,065
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset NOI for the year ended December 31, 2007 grew by 4.8% over the
estimated year ended December 31, 2006.

    Property NOI for the year ended December 31, 2007 by region was as
follows:

    -------------------------------------------------------------------------
                                   2007                       2006
    (In           ---------------------------------------
     thousands    Property  Property  Property  NOI % of  NOI % of
     of dollars)   Revenue  Expenses       NOI   revenue   revenue  Variance
    -------------------------------------------------------------------------
    Nova Scotia   $ 72,454  $ 33,009  $ 39,445      54.4%     53.9%     0.5 %
    Newfoundland
     and Labrador   23,177     8,142    15,035      64.9%     65.1%    (0.2)%
    New Brunswick   17,516     8,718     8,798      50.2%     51.2%    (1.0)%
    Ontario         22,802     7,479    15,323      67.2%     64.0%     3.2 %
    Prince Edward
     Island          4,225     1,157     3,068      72.6%     77.3%    (4.7)%
    Quebec           3,432       840     2,592      75.5%     78.9%    (3.4)%
    -------------------------------------------------------------------------
    Total         $143,606  $ 59,345  $ 84,261      58.7%     57.3%     1.4 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Ontario's growth in NOI % of revenue is attributable to the acquisition
activity in that province in 2006 and 2007. Prince Edward Island has only one
commercial property, and Quebec operated with one property in 2007 until the
addition of Brossard in the third quarter. Because of the fluctuations due to
maintenance costs in any given year, higher variances are not unusual on any
single property.

    General and Administrative Expenses

    General and administrative expenses increased by 16% for the year ended
December 31, 2007 to $8,177 from the estimated prior year due to higher
professional fees and other public entity compliance costs. During the fourth
quarter of 2007, there were additional professional fees incurred of
approximately $265 to ensure Crombie could comply with the REIT taxation
requirements (see "Future Income Taxes").

    Interest Expense

    -------------------------------------------------------------------------
                                                Year Ended
                                       -------------------------
    (In thousands                      December 31, December 31,
     of dollars)                              2007         2006     Variance
    -------------------------------------------------------------------------
    Same-asset interest expense        $    20,643  $    20,800  $      (157)
    Acquisition interest expense             4,632          462        4,170
    -------------------------------------------------------------------------
    Interest expense                   $    25,275  $    21,262  $     4,013
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset interest expense of $20,643 for the year ended December 31,
2007 decreased by 0.8% when compared to the estimated year ended December 31,
2006 due to the declining interest portion of debt repayments for the
same-assets, offset in part by the reallocation of the amortization of
deferred financing charges as a result of changes in accounting policies
adopted by Crombie effective January 1, 2007. The accounting policy change was
adopted on a prospective basis with no restatement of prior period financial
statements.
    There is an agreement between ECL and Crombie whereby ECL provides a
monthly interest rate subsidy to Crombie to reduce the effective interest
rates to 5.54% on certain mortgages that were assumed on closing of the
Business Acquisition for their remaining term. Over the term of this
agreement, management expects this subsidy to aggregate to the amount of
approximately $20,564. The amount of the interest rate subsidy recorded during
the year ended December 31, 2007 was $3,566 (period ending December 31, 2006
$2,847). The interest rate subsidy is received by Crombie through monthly
repayments by ECL of amounts due under one of the demand notes issued by ECL
to Crombie Developments Limited ("CDL") prior to the Business Acquisition.

    Depreciation and Amortization

    -------------------------------------------------------------------------
                                                Year Ended
                                       -------------------------
                                       December 31, December 31,
    (In thousands of dollars)                 2007         2006     Variance
    -------------------------------------------------------------------------
    Same-asset depreciation and
     amortization                      $    25,581  $    22,742  $     2,839
    Acquisition depreciation and
     amortization                            3,648          194        3,454
    -------------------------------------------------------------------------
    Depreciation and amortization      $    29,229  $    22,936  $     6,293
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset depreciation and amortization of $25,581 for the year ended
December 31, 2007 was 12.5% higher than the estimated year ended December 31,
2006 due primarily to amortization of tenant improvements and lease costs
incurred since June 30, 2006. Depreciation and amortization consists of:

    -------------------------------------------------------------------------
                                                Year Ended
                                       -------------------------
                                       December 31, December 31,
    (In thousands of dollars)                 2007         2006     Variance
    -------------------------------------------------------------------------
    Depreciation of commercial
     properties                        $    12,499  $    10,989  $     1,510
    Amortization of tenant
     improvements/lease costs                2,747          441        2,306
    Amortization of intangible
     assets                                 13,983       11,202        2,781
    Amortization of deferred financing
     charges                                     -          304         (304)
    -------------------------------------------------------------------------
    Depreciation and amortization      $    29,229  $    22,936  $     6,293
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As previously discussed, changes in accounting policies adopted by Crombie
have resulted in the reclassification of the amortization of the deferred
financing charges to interest expense during the first quarter of 2007.

    Future Income Taxes

    Crombie believes it has organized its assets and operations to permit
Crombie to satisfy the criteria contained in the Income Tax Act (Canada) in
regard to the definition of a REIT. The relevant tests apply throughout the
taxation year of Crombie and, as such, the actual status of Crombie for any
particular taxation year can only be ascertained at the end of the year.
    During the fourth quarter of 2007 Crombie's management and their advisors
underwent an extensive review of Crombie's organizational structure and
operations to support Crombie's assertion that it meets the REIT criteria at
January 1, 2008.
    In addition, the issuance of proposed technical amendments on December 20,
2007 provided further clarity to the tax rules and criteria that were part of
Bill C-52 and applicable to Crombie. These technical amendments provided more
certainty that Crombie qualifies as a REIT.
    A trust that satisfies the criteria of a REIT throughout its taxation year
will not be subject to income tax in respect of distributions to its
unitholders or be subject to the restrictions on its growth that would apply
to trusts classified as specified investment flow-through entities ("SIFTs").
    As a result of the above, Crombie has reversed the impact of $1,850 to
future income taxes that were booked during the second and third quarters of
2007. Income tax expense is higher in 2007 compared to 2006 due to increases
in timing differences between accounting value and tax value of assets during
the year.

    Sector Information

    Retail Properties

    -------------------------------------------------------------------------
    (In thousands            Year ended                 Year ended
     of dollars,         December 31, 2007          December 31, 2006
     except as    -----------------------------------------------------------
     otherwise        Same-    Acqui-               Same-    Acqui-
     noted)          Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $ 75,476  $ 10,036  $ 85,512  $ 73,286  $    765  $ 74,051
    Property
     expenses       26,777     2,905    29,682    26,644       147    26,791
    -------------------------------------------------------------------------
    Property NOI  $ 48,699  $  7,131  $ 55,830  $ 46,642  $    618  $ 47,260
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI Margin %      64.5%     71.1%     65.3%     63.6%     80.8%     63.8%
    -------------------------------------------------------------------------
    Occupancy %       93.6%     95.4%     93.8%     92.7%     97.0%     92.9%
    -------------------------------------------------------------------------

    The improvement in the annual property NOI was caused by the slight
increase in retail occupancy levels in the same-asset retail properties from
92.7% in 2006 to 93.6% in 2007 coupled with higher revenue due to the improved
average net rent per square foot figures achieved in the renewal and new
leasing activity.

    Office Properties

    -------------------------------------------------------------------------
    (In thousands            Year ended                 Year ended
     of dollars,         December 31, 2007          December 31, 2006
     except as    -----------------------------------------------------------
     otherwise        Same-    Acqui-               Same-    Acqui-
     noted)          Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $ 21,409  $      -  $ 21,409  $ 21,216  $      -  $ 21,216
    Property
     expenses       12,462         -    12,462    11,922         -    11,922
    -------------------------------------------------------------------------
    Property NOI  $  8,947  $      -  $  8,947  $  9,294  $      -  $  9,294
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI Margin %      41.8%        -%     41.8%     43.8%        -%     43.8%
    -------------------------------------------------------------------------
    Occupancy %       91.1%        -%     91.1%     92.7%        -%     92.7%
    -------------------------------------------------------------------------

    The improved occupancy levels and net rent per square foot at the Halifax
Developments properties in Halifax were more than offset by decreased
occupancy in Terminal Centres in Moncton, New Brunswick. These factors
resulted in the lower property NOI and NOI margin percent for the properties
in 2007 compared to the estimated year ended December 31, 2006.

    Mixed-Use Properties
    -------------------------------------------------------------------------
    (In thousands            Year ended                 Year ended
    of dollars,          December 31, 2007          December 31, 2006
    except as     -----------------------------------------------------------
    otherwise         Same-    Acqui                Same-    Acqui-
    noted)           Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $ 36,685  $      -  $ 36,685  $ 34,139  $      -  $ 34,139
    Property
     expenses       17,201         -    17,201    16,497         -    16,497
    -------------------------------------------------------------------------
    Property NOI  $ 19,484  $      -  $ 19,484  $ 17,642  $      -  $ 17,642
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI Margin %      53.1%        -%     53.1%     51.7%        -%     51.7%
    -------------------------------------------------------------------------
    Occupancy %       94.4%        -%     94.4%     95.8%        -%     95.8%
    -------------------------------------------------------------------------

    The slight decline in mixed-use occupancy levels from 95.8% in 2006 to
94.4% in 2007 was offset by improved average net rent per square foot from
leasing activity resulting in the improved year ended mixed-use property NOI
result when compared to the estimated prior year ended results.

    OTHER 2007 PERFORMANCE MEASURES

    Distributable income, AFFO and FFO are not measures recognized under GAAP
and do not have standardized meanings prescribed by GAAP. As such, these
non-GAAP financial measures should not be considered as an alternative to net
income, cash flow from operations or any other measure prescribed under GAAP.
Distributable income has historically been used by REIT's as an indicator of
financial performance and is a metric outlined in Crombie's Declaration of
Trust. AFFO is presented in this MD&A because management of Crombie believes
this non-GAAP measure is relevant to the ability of Crombie to earn and
distribute returns to unitholders. FFO represents a supplemental non-GAAP
industry-wide financial measure of a real estate organization's operating
performance. Distributable income, FFO and AFFO as computed by Crombie may
differ from similar computations as reported by other REIT's and, accordingly,
may not be comparable to other such issuers.
    While distributable income is a measure currently outlined in Crombie's
Declaration of Trust, the Board of Trustees of Crombie have proposed to
eliminate the term distributable income from the Declaration of Trust at the
upcoming Annual and Special Meeting of Unitholders to be held on May 8, 2008.
Although distributable income has been a term generally reported by Canadian
REIT's, there can be important differences in the definition from entity to
entity, and the Board of Trustees of Crombie is of the view that the
continuation of the use of a term lacking a common calculation is not helpful
to the investing public.
    As previously noted, the prior period comparative figures for
distributable income, FFO and AFFO reflect only the 284 days of operations
Crombie had in 2006. As a number of the components of the calculations cannot
reasonably be annualized, such as maintenance capital expenditures, cash
provided by operating activities, change in non-cash operating items and
additions to tenant improvements, no discussion of the variances between 2007
and 2006 for these performance measures has been included.

    Distributable income

    Distributable income is defined in Crombie's Declaration of Trust as net
income of Crombie, on a consolidated basis, as determined in accordance with
GAAP, adjusted by (i) adding back the following items: non-controlling
interest, depreciation of buildings and improvements (excluding amortization
of tenant inducements, leasing commissions and deferred financing costs) and
amortization of related intangibles (including amortization of value of tenant
rents for in-place lease agreements, amortization of differential between
original rent and above-market rents and amortization of customer
relationships), future income tax expense, losses on dispositions of assets
and amortization of any net discount on long-term debt assumed from vendors of
properties at rates of interest less than fair value; (ii) deducting the
following items: amortization of differential between original rents and
below-market rents, future income tax credits, gains on dispositions of assets
and amortization of any net premium on long-term debt assumed from vendors of
properties at rates of interest greater than fair value (except where such
amortization is funded); and (iii) adjusting for differences, if any,
resulting from recognizing rental revenues on a straight-line basis as opposed
to contractual rental amounts.

    -------------------------------------------------------------------------
                                                    Period from
                                                       March 23,
                                        Year Ended      2006 to
                                       December 31, December 31,
    (In thousands of dollars)                 2007         2006     Variance
    -------------------------------------------------------------------------
    Net income                         $    10,659  $     9,405  $     1,254
    Add back:
    Non-controlling interest                 9,891        8,787        1,104
    Depreciation and
     amortization(1)                        26,482       17,367        9,115
    Future income taxes                      1,030         (763)       1,793
    Above-market lease amortization          2,982        2,090          892
    Deduct:
    Below-market lease amortization         (4,489)      (2,896)      (1,593)
    Accrued rental revenue                  (1,195)        (702)        (493)
    Amortization of fair value
     debt premium                              (20)           -          (20)
    -------------------------------------------------------------------------
    Distributable income               $    45,340  $    33,288  $    12,052
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes amortization of deferred financing charges, tenant
        improvements and leasing commission costs.

    Pursuant to CSA Staff Notice 52-306 "(Revised) Non-GAAP Financial
Measures", non-GAAP measures such as distributable income should be reconciled
to the most directly comparable GAAP measure, which is interpreted to be the
cash flow from operating activities rather than net income. The reconciliation
is as follows:

    -------------------------------------------------------------------------
                                                    Period from
                                                       March 23,
                                        Year Ended      2006 to
                                       December 31, December 31,
    (In thousands of dollars)                 2007         2006     Variance
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                        $    33,936  $    47,997  $   (14,061)
    Add back (deduct):
    Additions to tenant improvements
     and lease costs                        11,223        7,302        3,921
    Change in non-cash operating items       3,400      (21,275)      24,675
    Unit-based compensation expense            (37)         (27)         (10)
    Amortization of deferred financing
     charges                                  (415)        (268)        (147)
    Amortization of tenant improvements
     and lease costs                        (2,747)        (441)      (2,306)
    Amortization of fair value debt
     premium                                   (20)           -          (20)
    -------------------------------------------------------------------------
    Distributable income               $    45,340  $    33,288  $    12,052
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Adjusted Funds from Operations

    Crombie considers AFFO to be a measure of its distribution-generating
ability. AFFO reflects distributable income after the provision for
maintenance capital expenditures and unamortized additions to tenant
improvements and lease costs.

    -------------------------------------------------------------------------
                                                    Period from
                                                       March 23,
                                        Year Ended      2006 to
                                       December 31, December 31,
    (In thousands of dollars)                 2007         2006     Variance
    -------------------------------------------------------------------------
    Distributable income               $    45,340  $    33,288  $    12,052
    Less capital adjustments:
    Maintenance capital expenditures
     (net of amounts recoverable
     from ECL)                              (5,395)      (2,223)      (3,172)
    Unamortized additions to tenant
     improvements and lease costs
     (net of amounts recoverable
     from ECL)                              (5,103)      (5,153)          50
    -------------------------------------------------------------------------
    AFFO                               $    34,842  $    25,912  $     8,930
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Funds from Operations

    Funds from operations ("FFO") represents a supplemental non-GAAP
industry-wide financial measure of a real estate organization's operating
performance. Crombie has calculated FFO in accordance with the recommendations
of the Real Property Association of Canada ("RealPAC") which defines FFO as
net income (computed in accordance with GAAP), excluding gains (or losses)
from sales of depreciable real estate and extraordinary items, plus
depreciation and amortization expense, plus future income taxes, and after
adjustments for equity-accounted entities and non-controlling interests.
Crombie's method of calculating FFO may differ from other issuers' methods and
accordingly may not be directly comparable to FFO reported by other issuers.
    A reconciliation of GAAP net income to FFO for the year ended December 31,
2007 is as follows:

    -------------------------------------------------------------------------
                                                    Period from
                                                       March 23,
                                        Year Ended      2006 to
                                       December 31, December 31,
    (In thousands of dollars)                 2007         2006     Variance
    -------------------------------------------------------------------------
    Net income                         $    10,659  $     9,405  $     1,254
    Add back:
    Non-controlling interest                 9,891        8,787        1,104
    Depreciation and amortization(1)        29,229       17,808       11,421
    Future income taxes                      1,030         (763)       1,793
    -------------------------------------------------------------------------
    Funds from operations              $    50,809  $    35,237  $    15,572
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes amortization of deferred financing charges.


    LIQUIDITY AND CAPITAL RE

SOURCES Sources and Uses of Funds Cash flow generated from operating the property portfolio represents the primary source of liquidity used to service the interest on debt, fund general and administrative expenses, reinvest into the portfolio through capital expenditures, as well as fund tenant improvements and distributions. In addition, Crombie has the following sources of financing available to finance future growth: secured short-term financing through an authorized $150,000 revolving credit facility, of which $70,900 was drawn at December 31, 2007, and the issue of new equity and mortgage debt, pursuant to the Declaration of Trust. ------------------------------------------------------------------------- Period from March 23, Year Ended 2006 to December 31, December 31, (In thousands of dollars) 2007 2006 Variance ------------------------------------------------------------------------- Cash provided by (used in): - Operating activities $ 33,936 $ 47,997 $ (14,061) - Financing activities $ 35,463 $ 283,638 (248,175) - Investing activities $ (67,871) $ (330,455) $ 262,584 ------------------------------------------------------------------------- Operating Activities -------------------- ------------------------------------------------------------------------- Period from March 23, Year Ended 2006 to December 31, December 31, (In thousands of dollars) 2007 2006 Variance ------------------------------------------------------------------------- Cash provided by (used in): Net income and non-cash items $ 48,559 $ 34,024 $ 14,535 Tenant improvements and leasing costs (11,223) (7,302) (3,921) Non-cash working capital (3,400) 21,275 (24,675) ------------------------------------------------------------------------- Increase in cash provided by operating activities $ 33,936 $ 47,997 $ (14,061) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Fluctuations in cash provided by operating activities is largely influenced by the quarterly change in non-cash working capital which can be affected by the timing of receipts and payments. Comparison to the previous year end results is not possible due to the fact that there were only 284 days of operations during the 2006 year and the annualized effect of items such as additions to tenant improvements as well as changes in non-cash working capital items cannot be reasonably estimated. Of the tenant improvements and leasing costs in 2007, $3,373 was covered by the non-interest bearing demand notes from ECL ($1,708 in 2006). Financing Activities -------------------- ------------------------------------------------------------------------- Period from March 23, Year Ended 2006 to December 31, December 31, (In thousands of dollars) 2007 2006 Variance ------------------------------------------------------------------------- Cash provided by (used in): Issue of commercial property debt $ 89,475 $ 113,200 $ (23,725) Repayment of commercial property debt (39,021) (20,304) (18,717) Collection of ECL notes receivable 20,491 21,223 (732) Units issued on initial public offering (net of costs) - 215,095 (215,095) Payment of distributions (34,808) (25,809) (8,999) Other items (net) (674) (19,767) 19,093 ------------------------------------------------------------------------- Increase in cash provided by (used in) financing activities $ 35,463 $ 283,638 $ (248,175) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash provided by financing activities for the year ended December 31, 2007 was $248,175 lower than the period ended December 31, 2006 primarily due to proceeds from the initial public offering completed in 2006. Investing Activities -------------------- Cash used in investing activities of $67,871 for the year ended December 31, 2007 included $51,049 which was used for the acquisition of five properties, net of assumed mortgages, and $16,822 used for additions to commercial properties. Of the cash used in additions to commercial properties, $7,669 was for the eight commercial properties covered by non-interest bearing demand notes from ECL. The cash used in investing activities for the year ended December 31, 2006 included $26,574 in additions made to commercial properties in addition to $263,542 for the original business acquisition as a result of the Crombie initial public offering in 2006 and $40,339 for the acquisition of the three properties in 2006. Of the additions made to commercial properties in 2006, $24,351 was covered by the non-interest bearing demand notes from ECL. Tenant Improvement and Capital Expenditures ------------------------------------------- There are two types of capital expenditures: - maintenance capital expenditures that maintain existing productive capacity and; - productive capacity enhancement expenditures. Maintenance capital expenditures are reinvestments into the portfolio to maintain the productive capacity of the existing assets. These costs are capitalized and depreciated over their useful lives and deducted when calculating AFFO. Productive capacity enhancement expenditures are costs incurred that increase the property level NOI by a minimum threshold and thus enhance the property's overall value. These costs are capitalized and depreciated over their useful lives, but not deducted when calculating AFFO as they are considered financeable rather than having to be funded from operations. Tenant improvement ("TI") expenditures can occur when renewing existing tenant leases or for new tenants occupying a new space. Typically, leasing costs for existing tenants are lower on a per square foot basis than for new tenants. However, new tenants may provide more overall cash flow to Crombie through higher rents or improved traffic to a property. The timing of such expenditures fluctuates depending on the satisfaction of contractual terms contained in the leases. In 2007, of the additions to commercial properties and TI costs, $11,042 is recoverable from ECL as part of its obligation at the time of the IPO. During the year ended December 31, 2007, Crombie incurred a total of $3,758 on productive capacity enhancements as follows: expanded site for a Shoppers Drug Mart at Rose City Plaza in Welland, Ontario; new pad site for a TD Bank at Brampton Plaza in Brampton, Ontario; and renovations to a satellite building at Avalon Mall in St. John's, Newfoundland and Labrador that allow for substantially higher net rents per square foot. ------------------------------------------------------------------------- Period from March 23, Year Ended 2006 to December 31, December 31, (In thousands of dollars) 2007 2006 ------------------------------------------------------------------------- Total additions to commercial properties $ 16,822 $ 26,574 Less: amounts recoverable from ECL (7,669) (24,351) ------------------------------------------------------------------------- Net additions to commercial properties 9,153 2,223 Less: productive capacity enhancements (3,758) - ------------------------------------------------------------------------- Maintenance capital expenditures $ 5,395 $ 2,223 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Period from March 23, Year Ended 2006 to December 31, December 31, (In thousands of dollars) 2007 2006 ------------------------------------------------------------------------- Total additions to tenant improvements and leasing costs $ 11,223 $ 7,302 Less: amounts recoverable from ECL (3,373) (1,708) ------------------------------------------------------------------------- Net additions to tenant improvements and leasing costs 7,850 5,594 Less: productive capacity enhancements - - ------------------------------------------------------------------------- Maintenance tenant improvements and leasing costs 7,850 5,594 Less: Tenant improvement and leasing costs amortization (2,747) (441) ------------------------------------------------------------------------- Unamortized additions to tenant improvements and leasing costs $ 5,103 $ 5,153 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Capital Structure ------------------------------------------------------------------------- (In thousands Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, of dollars) 2007 2007 2007 2007 2006 ------------------------------------------------------------------------- Commercial property debt $500,578 $493,232 $465,868 $459,704 $432,963 Non-controlling interest $177,919 $179,457 $183,051 $186,550 $187,649 Unitholders' equity $190,834 $192,477 $196,332 $199,903 $200,894 ------------------------------------------------------------------------- Commercial Property Debt ------------------------ As of December 31, 2007, Crombie had fixed rate mortgages outstanding of $417,450 ($431,906 after including the marked-to-market adjustment of $14,456), carrying a weighted average interest rate of 5.46% (after giving effect to a monthly interest rate subsidy from ECL under an omnibus subsidy agreement) and a weighted average term to maturity of 7.4 years. Crombie has in place an authorized floating rate revolving credit facility of $150,000, $70,900 of which was drawn upon as at December 31, 2007. The revolving credit facility is secured by a pool of first and second mortgages and negative pledges on certain assets. During the year 2007 Crombie finalized or assumed five new fixed-rate mortgage agreements as a result of the acquisitions made during the year, refinanced two existing fixed-rate mortgage agreements and finalized a second mortgage, which provided $96,972 of new funds. These funds were used to reduce the floating rate credit facility. ------------------------------------------------------------------------- New Net Mortgage Interest Property Proceeds Rate Term ------------------------------------------------------------------------- Perth Mews, Perth Ontario $ 12,600 5.43% 15 years Carleton Place Mews, Carleton, Ontario 7,850 5.18% 12 years Burlington Place, Burlington, Ontario 3,573 5.32% 12 years Fort Erie, Ontario 11,418 5.36% 8 years Brossard, Quebec 3,425 6.44% 17 years Town Centre, LaSalle, Ontario 4,220 6.00% 4 years Niagara Plaza, Ontario 2,886 5.65% 20 years Halifax Developments Properties, Nova Scotia 51,000 5.29% 2 years ------------------------------------------------------------------------- Total $ 96,972 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Crombie has entered into a fixed interest rate swap agreement which expires on July 2, 2010. Interest on $50,000 is paid at a fixed rate of 5.54%, after including the applicable stamping fee of 1.125%, and is received at a floating rate based on the 90-day bankers' acceptance rate. For the year ended December 31, 2007 the effect of the mark to market adjustment for the swap resulted in a loss of $173 which was recognized in the other comprehensive income of Crombie's financial statements. The effect of the fixed interest rate swap agreement is to limit Crombie's exposure to floating interest rates on the $50,000 revolving credit facility. Therefore, as at December 31, 2007, only $20,900, or 4.2%, of Crombie's total commercial property debt is exposed to floating interest rate risk ($32,900, or 7.6% at December 31, 2006). Principal repayments of the debt are scheduled as follows: ------------------------------------------------------------------------- Debt Maturing Revolving Payments of During Credit Total Year Principal Year Facility Maturity % of Total ------------------------------------------------------------------------- 2008 $ 13,728 $ 14,539 $ - $ 28,267 5.8% 2009 14,201 - - 14,201 2.9% 2010 10,714 106,079 70,900 187,693 38.4% 2011 10,641 11,502 - 22,143 4.5% 2012 11,084 - - 11,084 2.3% Thereafter 63,501 161,461 - 224,962 46.1% ------------------------------------------------------------------------- Total (1) $123,869 $293,581 $ 70,900 $488,350 100.0% ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Excludes marked-to-market adjustment due to interest rate subsidy and fair value debt adjustment of $14,456 and the deferred financing costs of $2,228. Unitholders' Equity ------------------------ In March 2007 there were 15,760 Units awarded as part of the Employee Unit Purchase Plan. Total Units outstanding at February 28, 2008 were as follows: ------------------------------------------------------------------------- Units 21,648,985 Special Voting Units(1) 20,079,576 ------------------------------------------------------------------------- (1) Crombie Limited Partnership, a subsidiary of Crombie, has also issued 20,079,576 Class B LP Units. These Class B LP units accompany the Special Voting Units, are the economic equivalent of a Unit, and are convertible into Units on a one-for-one basis. Borrowing Capacity and Debt Covenants Crombie has in place an authorized revolving credit facility of $150,000. The revolving credit facility is secured by a pool of first and second mortgages and negative pledges on certain assets. Under the terms governing the revolving credit facility, Crombie is entitled to borrow a maximum of 60% of the fair market value of assets subject to a first security position and 50% of the fair market value of assets subject to a second security position or a negative pledge, subject to the limitations on the ability of Crombie to incur indebtedness contained in the Declaration of Trust. The revolving credit facility provides Crombie with flexibility to add or remove properties from the security pool, subject to compliance with certain conditions. As part of the debt covenants attached to the revolving credit facility, in addition to the maximum borrowing above, Crombie must maintain certain debt ratios above prescribed levels: - Annualized NOI for the prescribed properties must be a minimum of 1.6 times the coverage of the related annualized debt service requirements; and - Annualized NOI on all properties must be a minimum of 1.5 times the coverage of all annualized debt service requirements,. The revolving credit facility also contains a covenant of Crombie that ECL must maintain a minimum 40% voting interest in Crombie. If ECL reduces its voting interest below this level, Crombie will be required to renegotiate the revolving credit facility or obtain alternative financing. Pursuant to an exchange agreement and while such covenant remains in place, ECL will be required to give Crombie at least six months' prior written notice of its intention to reduce its voting interest below 40%. Crombie remains in compliance with all debt covenant measures. The following is the remaining availability of the revolving credit facility: ------------------------------------------------------------------------- (In thousands Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, of dollars) 2007 2007 2007 2007 2006 ------------------------------------------------------------------------- Available for drawdown $118,923 $138,148 $136,810 $137,337 $136,141 Amount utilized 70,900 114,504 100,900 114,818 82,900 ------------------------------------------------------------------------- Remaining availability $ 48,023 $ 23,644 $ 35,910 $ 22,519 $53,241 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The reduction in drawdown availability and amount utilized at December 31, 2007 from September 30, 2007 is due primarily to the financing received on the Halifax Developments properties in the amount of $51,000. When calculating debt to gross book value, debt is defined as bank loans plus commercial property debt. Gross book value means, at any time, the book value of the assets of Crombie and its consolidated subsidiaries plus accumulated depreciation and amortization in respect of Crombie's properties (and related intangible assets) less (i) the amount of any receivable reflecting interest rate subsidies on any debt assumed by Crombie and (ii) the amount of future income tax liability arising out of the fair value adjustment in respect of the indirect acquisitions of certain properties. If approved by a majority of the independent trustees, the appraised value of the assets of Crombie and its consolidated subsidiaries may be used instead of book value. On January 1, 2007, as a result of the adoption of new accounting standards issued by the Canadian Institute of Chartered Accountants ("CICA"), deferred financing charges were reclassified from an asset to a reduction in commercial property debt. As a result, to allow for consistent calculations of gross book value, the deferred financing charges are added back to the asset base when calculating the debt to gross book value ratio. The debt to gross book value ratio remained at 48.1% at December 31, 2007 compared to 48.1% at September 30, 2007. This leverage ratio is still substantially below the maximum 60%, or 65% including convertible debentures, as outlined by Crombie's Declaration of Trust. On a long-term basis, Crombie intends to maintain overall indebtedness in the range of 50% to 55% of gross book value, depending upon Crombie's future acquisitions and financing opportunities. ------------------------------------------------------------------------- (In thousands of dollars, except as As at As at As at As at As at otherwise Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, noted) 2007 2007 2007 2007 2006 ------------------------------------------------------------------------- Mortgages payable $ 431,906 $ 380,420 $ 366,731 $ 346,437 $ 350,063 Revolving credit facility payable 70,900 114,504 100,900 114,818 82,900 ------------------------------------------------------------------------- Total debt outstanding 502,806 494,924 467,631 461,255 432,963 Less: Marked- to-market adjustment due to interest rate subsidy and fair value debt (14,456) (15,025) (15,913) (16,811) (17,717) ------------------------------------------------------------------------- Debt $ 488,350 $ 479,899 $ 451,718 $ 444,444 $ 415,246 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total assets $1,013,982 $1,007,337 $ 976,699 $ 972,737 $ 963,935 Add: Deferred financing charges 2,228 1,692 1,763 1,551 - Accumulated depreciation of commercial properties 24,307 20,057 16,120 12,401 9,061 Accumulated amortization of intangible assets 27,802 23,043 18,775 14,586 10,837 Less: Fair value debt adjustments (14,456) (15,025) (15,913) (16,811) (17,717) Fair value adjustment to future taxes (39,519) (39,519) (39,519) (39,519) (39,519) ------------------------------------------------------------------------- Gross book value $1,014,344 $ 997,585 $ 957,925 $ 944,945 $ 926,597 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Debt to gross book value 48.1% 48.1% 47.2% 47.0% 44.8% Maximum borrowing capacity(1) 60% 60% 60% 60% 60% ------------------------------------------------------------------------- (1) Maximum permitted by the Declaration of Trust Debt and Interest Service Coverage Ratios Crombie's interest and debt service coverage ratios for the year ended December 31, 2007 were 3.00 times EBITDA and 1.86 times EBITDA. This compares to 3.10 times EBITDA and 1.91 times EBITDA respectively for the period ended December 31, 2006. EBITDA should not be considered an alternative to net income, cash flow from operations or any other measure of operations or liquidity as prescribed by Canadian GAAP. EBITDA is not a GAAP financial measure; however Crombie believes it is an indicative measure of its ability to service debt requirements, fund capital projects and acquire properties. EBITDA may not be calculated in a comparable measure reported by other entities. ------------------------------------------------------------------------- Period from March 23, Year Ended 2006 to December 31, December 31, 2007 2006 ------------------------------------------------------------------------- Property revenue $ 143,606 $ 99,949 Amortization of above-market leases 2,982 2,090 Amortization of below-market leases (4,489) (2,896) ------------------------------------------------------------------------- Adjusted property revenue 142,099 99,143 ------------------------------------------------------------------------- Property expenses 59,345 42,214 General and administrative expenses 8,177 5,738 ------------------------------------------------------------------------- EBITDA (1) $ 74,577 $ 51,191 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest expense $ 25,275 $ 16,492 Amortization of deferred financing charges (415) - ------------------------------------------------------------------------- Adjusted interest expense (2) $ 24,860 $ 16,492 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Debt repayments $ 39,021 $ 20,304 Amortization of fair value debt premium (20) - Payments on revolving credit facility (12,000) (10,000) Balloon payments on refinanced mortgages (11,672) - ------------------------------------------------------------------------- Adjusted debt repayments (3) $ 15,329 $ 10,304 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest service coverage ratio ((1)/(2)) 3.00 3.10 ------------------------------------------------------------------------- Debt service coverage ratio ((1)/((2)+(3))) 1.86 1.91 ------------------------------------------------------------------------- Distributions and Distribution Payout Ratios Distribution Policy ------------------- Pursuant to Crombie's Declaration of Trust, it is required, at a minimum, to make distributions to Unitholders equal to the amount of net income, net realizable capital gains and net recapture income of Crombie as is necessary to ensure that Crombie will not be liable for income taxes. Crombie intends to make monthly cash distributions to Unitholders equal to approximately 80% of its distributable income and no more than 100% of its AFFO on an annual basis. Details of distributions to Unitholders are as follows: ------------------------------------------------------------------------- Period from March 23, Year Ended 2006 to (In thousands of dollars, except per unit December 31, December 31, amounts and as otherwise noted) 2007 2006 ------------------------------------------------------------------------- Distributions to Unitholders $ 18,146 $ 13,369 Distributions to Special Voting Unitholders 16,837 12,440 ------------------------------------------------------------------------- Total distributions $ 34,983 $ 25,809 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Number of diluted Units 21,646,135 21,498,595 Number of diluted Special Voting Units 20,079,576 20,079,576 ------------------------------------------------------------------------- Total diluted weighted average Units 41,725,711 41,578,171 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions per unit $ 0.84 $ 0.62 Distributable income payout ratio (target ratio equals 80%) 77.2% 77.5% AFFO payout ratio (target ratio equals 100%) 100.4% 99.6% ------------------------------------------------------------------------- Fourth Quarter Results Comparison to Previous Year ------------------------------------------------------------------------- Quarter Ended ------------------------ (In thousands of dollars, except December 31, December 31, where otherwise noted) 2007 2006 Variance ------------------------------------------------------------------------- Property revenue $ 37,059 $ 33,717 $ 3,342 Property expenses 14,843 15,091 248 ------------------------------------------------------------------------- Property NOI 22,216 18,626 3,590 ------------------------------------------------------------------------- NOI margin percentage 59.9% 55.2% 4.7% ------------------------------------------------------------------------- Expenses: General and administrative 2,492 2,293 (199) Interest 6,667 5,523 (1,144) Depreciation and amortization 8,227 6,270 (1,957) ------------------------------------------------------------------------- 17,386 14,086 (3,300) ------------------------------------------------------------------------- Income before income taxes and non-controlling interest 4,830 4,540 290 Income taxes expense (recovery) - Future (2,994) (1,663) 1,331 ------------------------------------------------------------------------- Income before non-controlling interest 7,824 6,203 1,621 Non-controlling interest 3,766 2,986 780 ------------------------------------------------------------------------- Net income $ 4,058 $ 3,217 $ 841 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted net income per Unit $ 0.19 $ 0.15 ------------------------------------------------------------ ------------------------------------------------------------ Basic weighted average Units outstanding (in 000's) 21,544 21,509 ------------------------------------------------------------ ------------------------------------------------------------ Diluted weighted average Units outstanding (in 000's) 21,649 21,633 ------------------------------------------------------------ ------------------------------------------------------------ Net income for the fourth quarter of 2007 of $4,058 increased by $841 from $3,217 for the fourth quarter of 2006. The increase was due to: - higher property NOI from the increased average rent per square foot of the same-asset properties, as well as the impact from the five property acquisitions since December 31, 2006; and - higher future income tax recovery due to the reversal of expenses recorded in the second and third quarters as a result of increased clarity surrounding REIT taxation rules (see "Future Income Taxes"); offset in part by - higher interest and depreciation charges, due primarily to the five property acquisitions since December 31, 2006, along with higher general and administrative costs incurred for ongoing compliance and professional fees. Property Revenue and Property Expenses ------------------------------------------------------------------------- Quarter Ended ------------------------ December 31, December 31, (In thousands of dollars) 2007 2006 Variance ------------------------------------------------------------------------- Same-asset property revenue $ 34,628 $ 33,717 $ 911 Acquisition property revenue 2,431 - 2,431 ------------------------------------------------------------------------- Property revenue $ 37,059 $ 33,717 $ 3,342 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Same-asset property revenue of $34,628 for the fourth quarter of 2007 was 2.7% higher than the same quarter in the previous year due primarily to the increased average rent per square foot ($11.88 in 2007 and $11.67 in 2006). ------------------------------------------------------------------------- Quarter Ended ------------------------ December 31, December 31, (In thousands of dollars) 2007 2006 Variance ------------------------------------------------------------------------- Same-asset property expenses $ 14,204 $ 15,091 $ (887) Acquisition property expenses 639 - 639 ------------------------------------------------------------------------- Property expenses $ 14,843 $ 15,091 $ (248) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Same-asset property expenses of $14,204 in the fourth quarter of 2007 were 5.9% lower than the fourth quarter of 2006 primarily due to decreased non-recoverable repair and maintenance projects in 2007 versus 2006. ------------------------------------------------------------------------- Quarter Ended ------------------------ December 31, December 31, (In thousands of dollars) 2007 2006 Variance ------------------------------------------------------------------------- Same-asset property NOI $ 20,424 $ 18,626 $ 1,798 Acquisition property NOI 1,792 - 1,792 ------------------------------------------------------------------------- Property NOI $ 22,216 $ 18,626 $ 3,590 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Same-asset NOI for the fourth quarter of 2007 grew by 9.7% over the same period in 2006. Property NOI by region was as follows: ------------------------------------------------------------------------- Quarter Ended December 31, 2007 Quarter -------------------------------------- Ended December (In 31, 2006 thousands Property Property Property NOI % of NOI % of of dollars) Revenue Expenses NOI revenue revenue Variance ------------------------------------------------------------------------- Nova Scotia $ 18,322 $ 8,106 $ 10,216 55.7% 50.8% 4.9% Newfoundland and Labrador 5,852 2,011 3,841 65.6% 63.8% 1.8% New Brunswick 4,360 2,250 2,110 48.4% 47.9% 0.5% Ontario 6,635 1,986 4,649 70.1% 64.0% 6.1% Prince Edward Island 1,121 330 791 70.6% 74.3% (3.7)% Quebec 769 160 609 79.2% 75.6% 3.6% ------------------------------------------------------------------------- Total $ 37,059 $ 14,843 $ 22,216 59.9% 55.2% 4.7% ------------------------------------------------------------------------- ------------------------------------------------------------------------- The increase in NOI % of revenue in Nova Scotia is due primarily to the timing of non-recoverable repair and maintenance projects in 2007 versus 2006. The Ontario and Quebec growth in NOI % of revenue is attributable to the acquisition activity in those provinces. Prince Edward Island has only one commercial property and because of the fluctuations due to maintenance costs in any given year, higher variances are not unusual on any single property. General and Administrative Expenses General and administrative expenses increased by 8.7% during the fourth quarter of 2007 to $2,492 due to higher professional fees and other public entity compliance costs. During the fourth quarter of 2007, there were additional professional fees incurred of approximately $265 to ensure Crombie could comply with the REIT taxation requirements. Interest Expense ------------------------------------------------------------------------- Quarter Ended ------------------------ December 31, December 31, (In thousands of dollars) 2007 2006 Variance ------------------------------------------------------------------------ Same-asset interest expense $ 5,533 $ 5,523 $ 10 Acquisition interest expense 1,134 - 1,134 ------------------------------------------------------------------------- Interest expense $ 6,667 $ 5,523 $ 1,144 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Same-asset interest expense of $5,533 for the fourth quarter of 2007 increased by 0.2% for same period in the prior year due to the declining interest portion of debt repayments for the same-assets, offset by the reallocation of the amortization of deferred financing charges as a result of changes in accounting policies adopted by Crombie effective January 1, 2007. The amount of the interest rate subsidy recorded during the fourth quarter of 2007 was $874 ($913 for the fourth quarter of 2006). Depreciation and Amortization ------------------------------------------------------------------------- Quarter Ended ------------------------ (In thousands of dollars) December 31, December 31, 2007 2006 Variance ------------------------------------------------------------------------ Same-asset depreciation and amortization $ 6,923 $ 6,270 $ 653 Acquisition depreciation and amortization 1,304 - 1,304 ------------------------------------------------------------------------- Depreciation and amortization $ 8,227 $ 6,270 $ 1,957 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Same-asset depreciation and amortization of $6,923 for the fourth quarter of 2007 was 10.4% higher than the fourth quarter of 2006 due primarily to amortization of tenant improvements and lease costs incurred since June 30, 2006. Depreciation and amortization consists of: ------------------------------------------------------------------------- Quarter Ended ------------------------ (In thousands of dollars) December 31, December 31, 2007 2006 Variance ------------------------------------------------------------------------ Depreciation of commercial properties $ 3,346 $ 2,776 $ 570 Amortization of tenant improvements/lease costs 904 441 463 Amortization of intangible assets 3,977 2,942 1,035 Amortization of deferred financing charges - 111 (111) ------------------------------------------------------------------------- Depreciation and amortization $ 8,227 $ 6,270 $ 1,957 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Sector Information Retail Properties ------------------------------------------------------------------------- (In thousands Quarter Ended Quarter Ended of dollars, December 31, 2007 December 31, 2006 except as ----------------------------------------------------------- otherwise Same- Acqui- Same- Acqui- noted) Asset sitions Total Asset sitions Total ------------------------------------------------------------------------- Property revenue $ 19,830 $ 2,431 $ 22,261 $ 18,394 $ - $ 18,394 Property expenses 6,380 639 7,019 7,202 - 7,202 ------------------------------------------------------------------------- Property NOI $ 13,450 $ 1,792 $ 15,242 $ 11,192 $ - $ 11,192 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NOI Margin % 67.8% 73.7% 68.5% 60.8% -% 60.8% ------------------------------------------------------------------------- Occupancy % 93.6% 95.4% 93.8% 92.9% -% 92.9% ------------------------------------------------------------------------- The improvement in the fourth quarter retail property NOI was caused by the slight increase in retail occupancy levels in the same-asset retail properties from 92.9% in 2006 to 93.6% in 2007 coupled with higher revenue due to the improved average net rent per square foot figures achieved in the renewal and new leasing activity. Office Properties ------------------------------------------------------------------------- (In thousands Quarter Ended Quarter Ended of dollars, December 31, 2007 December 31, 2006 except as ----------------------------------------------------------- otherwise Same- Acqui- Same- Acqui- noted) Asset sitions Total Asset sitions Total ------------------------------------------------------------------------- Property revenue $ 5,342 $ - $ 5,342 $ 6,056 $ - $ 6,056 Property expenses 3,354 - 3,354 3,395 - 3,395 ------------------------------------------------------------------------- Property NOI $ 1,988 $ - $ 1,988 $ 2,661 $ - $ 2,661 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NOI Margin % 37.2% -% 37.2% 43.9% -% 43.9% ------------------------------------------------------------------------- Occupancy % 91.1% -% 91.1% 92.7% -% 92.7% ------------------------------------------------------------------------- The improved occupancy levels and net rent per square foot at the Halifax Developments properties in Halifax were more than offset by decreased occupancy in Terminal Centres in Moncton, New Brunswick. These factors resulted in the lower property NOI and NOI margin percent for the properties in the fourth quarter of 2007 compared to the fourth quarter of 2006. Mixed-Use Properties ------------------------------------------------------------------------- (In thousands Quarter Ended Quarter Ended of dollars, December 31, 2007 December 31, 2006 except as ----------------------------------------------------------- otherwise Same- Acqui- Same- Acqui noted) Asset sitions Total Asset sitions Total ------------------------------------------------------------------------- Property revenue $ 9,456 $ - $ 9,456 $ 9,267 $ - $ 9,267 Property expenses 4,470 - 4,470 4,494 - 4,494 ------------------------------------------------------------------------- Property NOI $ 4,986 $ - $ 4,986 $ 4,773 $ - $ 4,773 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NOI Margin % 52.7% -% 52.7% 51.5% -% 51.5% ------------------------------------------------------------------------- Occupancy % 94.4% -% 94.4% 95.8% -% 95.8% ------------------------------------------------------------------------- The slight decline in mixed-use occupancy levels from 95.8% in 2006 to 94.4% in 2007 was offset by improved average net rent per square foot from leasing activity. Cash Flow ------------------------------------------------------------------------- Quarter Quarter ended ended December 31, December 31, (In thousands of dollars) 2007 2006 Variance ------------------------------------------------------------------------- Cash provided by (used in): Operating activities $ 19,190 $ 24,717 $ (5,527) Financing activities $ (2,031) $ 23,240 $ (25,271) Investing activities $ (14,451) $ (46,777) $ 32,326 ------------------------------------------------------------------------- Operating Activities -------------------- Cash provided by operating activities during the quarter of $19,190 was generated by the income before non-controlling interest of $4,830, the adding back of non-cash expenses, primarily depreciation and amortization of $8,227 and the effect of non-cash operating items of $8,842. These items were partially offset by additions made to tenant improvements and leasing costs of $2,210. During the fourth quarter of 2006 of $24,717 was generated by the income before the non-controlling interest of $4,540, the adding back of non-cash expenses, primarily depreciation and amortization of $6,270 and the effect of non-cash working capital items of $15,836. The change in non-cash items in 2006 was primarily as a result of the finalization and collection of amounts due from ECL in addition to a holdback related to the acquisition of the Oshawa property. Financing Activities -------------------- Cash used by financing activities during the quarter of $2,031 was primarily due to the payments made on mortgages and distribution payments of $8,867 made during the quarter, offset in part by new mortgage proceeds (see "Commercial Property Debt"). In 2006, $23,240 of cash was provided from financing activities, primarily as a result of proceeds received from three mortgages related to the acquisitions made in the quarter and an increase in the revolving credit facility, also as a result of the three acquisitions. Investing Activities -------------------- Cash used in investing activities of $14,451 during the quarter was due primarily to the acquisition of Town Centre at LaSalle, Ontario. During the fourth quarter of 2006, cash of $46,777 was used primarily for the acquisition of the three properties in the quarter for $40,339. OTHER FOURTH QUARTER PERFORMANCE MEASURES Distributable Income Distributable income as defined in Crombie's Declaration of Trust is calculated as follows: ------------------------------------------------------------------------- Quarter Ended ------------------------ (In thousands of dollars) December 31, December 31, Variance 2007 2006 ------------------------------------------------------------------------- Net income $ 4,058 $ 3,217 $ 841 Add back: Non-controlling interest 3,766 2,986 780 Depreciation and amortization(1) 7,323 5,718 1,605 Future income taxes (2,994) (1,663) (1,331) Above-market lease amortization 782 697 85 Deduct: Below-market lease amortization (1,256) (962) (294) Accrued rental revenue (144) (178) 34 Amortization of fair value debt premium (20) - (20) ------------------------------------------------------------------------- Distributable income $ 11,515 $ 9,815 $ 1,700 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Excludes amortization of deferred financing charges, tenant improvements and leasing commission costs. The increase in distributable income for the fourth quarter of 2007 when compared to the fourth quarter of 2006 was due to increased NOI of $3,590 in 2007 as previously discussed, partially offset by increases in general and administrative costs of $199 and interest expense of $1,144. The interest rate increase is a result of the six additional properties acquired since the fourth quarter of 2006. Pursuant to CSA Staff Notice 52-306 "(Revised) Non-GAAP Financial Measures", non-GAAP measures such as distributable income should be reconciled to the most directly comparable GAAP measure, which is interpreted to be the cash flow from operating activities rather than net income. The reconciliation is as follows: ------------------------------------------------------------------------- Quarter Ended ------------------------ (In thousands of dollars) December 31, December 31, Variance 2007 2006 ------------------------------------------------------------------------- Cash provided by operating activities $ 19,190 $ 24,717 $ (5,527) Add back (deduct): Additions to tenant improvements and lease costs 2,210 1,513 697 Change in non-cash operating items (8,842) (15,836) 6,994 Unit-based compensation expense (9) (27) 18 Amortization of deferred financing charges (110) (111) 1 Amortization of tenant improvements and lease costs (904) (441) (463) Amortization of fair value debt premium (20) - (20) ------------------------------------------------------------------------- Distributable income $ 11,515 $ 9,815 $ 1,700 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Adjusted Funds from Operations As maintenance capital expenditures and tenant improvements are not incurred evenly throughout a fiscal year, there can be volatility in AFFO on a quarterly basis. The calculation of AFFO for the quarter ended is as follows: ------------------------------------------------------------------------- Quarter Ended ------------------------ (In thousands of dollars) December 31, December 31, Variance 2007 2006 ------------------------------------------------------------------------- Distributable income $ 11,515 $ 9,815 $ 1,700 Less capital adjustments: Maintenance capital expenditures (net of amount recoverable from ECL) (2,712) (933) (1,779) Unamortized additions to tenant improvements and lease costs (net of amount recoverable from ECL) (1,242) (619) (623) ------------------------------------------------------------------------- AFFO $ 7,561 $ 8,263 $ (702) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Funds from Operations The calculation of FFO for the quarter ended is as follows: ------------------------------------------------------------------------- Quarter Ended ------------------------ (In thousands of dollars) December 31, December 31, Variance 2007 2006 ------------------------------------------------------------------------- Net income $ 4,058 $ 3,217 $ 841 Add back: Non-controlling interest 3,766 2,986 780 Depreciation and amortization(1) 8,227 6,159 2,068 Future income taxes (2,994) (1,663) (1,331) ------------------------------------------------------------------------- Funds from operations $ 13,057 $ 10,699 $ 2,358 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Excludes amortization of deferred financing charges. The improvement in FFO for the fourth quarter of 2007 over the fourth quarter of 2006 was due to the improved property NOI, partially offset by higher interest expenses related to the acquisitions and higher general and administrative expenses as outlined previously. CHANGES IN ACCOUNTING POLICIES Effective January 1, 2007 Crombie adopted three new accounting standards that were issued by the CICA in 2005. These accounting policy changes were adopted on a retroactive basis with no restatement of prior period financial statements. The new standards and accounting policy changes are as follows: Financial Instruments - Recognition and Measurement (Section 3855) In accordance with this new standard, Crombie now classifies all financial instruments, including derivatives, as either held to maturity, available-for-sale, held for trading, loans and receivables or other financial liabilities. Financial assets held to maturity, loans and receivables, and financial liabilities other than those held for trading, are measured at amortized cost. Available-for-sale financial assets are measured at fair value with unrealized gains and losses recognized in other comprehensive income. Financial instruments classified as held for trading are measured at fair value with unrealized gains and losses recognized in the consolidated statement of income. Comprehensive Income (Section 1530) Comprehensive income is the change in unitholders' equity during a period from transactions and other events and circumstances from non-owner sources. In accordance with this new standard, Crombie now reports a consolidated statement of comprehensive income, comprising net income and other comprehensive income(loss) for the period. A new category, accumulated other comprehensive income(loss), has been added to the consolidated statement of unitholders' equity. Hedges (Section 3865) This new section establishes standards for when and how hedge accounting may be applied, as well as the disclosure requirements. Hedge accounting enables the recording of gains, losses, revenues and expenses from the derivative financial instruments in the same period as for those related to the hedged item. The new standard outlines the criteria for applying hedge accounting to cash flow hedges and fair value hedges. Cash flow hedges are recognized on the balance sheet at fair value with the effective portion of the hedging relationship recognized in other comprehensive income. Any ineffective portion of the cash flow hedge is recognized in net income. Amounts recognized in accumulated other comprehensive income are reclassified to net income in the same periods in which the hedged item is recognized in net income. Fair value hedges and the related hedge items are recognized on the balance sheet at fair value with any changes in fair value recognized in net income. To the extent the fair value hedge is effective, the changes in the fair value of the hedge and the hedged item will offset each other. In accordance with the provisions of these new standards, on January 1, 2007 Crombie recorded: i) an adjustment to reflect a reallocation on the consolidated balance sheet of $1,578 from deferred financing charges to commercial property debt for unamortized transaction costs previously incurred and accounted for separately; and ii) a transition adjustment to recognize the fair value of a derivative designated as a cash flow hedge. The fair value at January 1, 2007 was $(310), of which $(162) has been allocated to unitholders' equity and $(148) to non-controlling interest. The adoption of these new standards has been reflected on the Crombie's consolidated financial statements. The unrealized gains and losses included in ''accumulated other comprehensive income'' were recorded net of applicable taxes. Transaction costs Crombie adds transaction costs directly attributable to the acquisition or issue of a financial asset or financial liability, other than for those classified as held for trading, to the fair value of the financial asset or financial liability. Cash Flow Statements (Section 1540) Amendments to CICA Section 1540, Cash Flow Statements, require entities to disclose total cash distributions on financial instruments classified as equity in accordance with a contractual agreement and the extent to which total cash distributions are non-discretionary. This disclosure requirement is effective for annual financial statements for fiscal periods ending on or after March 31, 2007. The determination to declare and make payable distributions from Crombie are at the discretion of the Board of Trustees of Crombie and, until declared payable by the Board of Trustees of Crombie, Crombie has no contractual requirement to pay cash distributions to Unitholders' of Crombie. During the year ended December 31, 2007, $34,983 (period March 23, 2006 to December 31, 2006 - $25,809) in cash distributions were declared payable by the Board of Trustees to Crombie Unitholders and Crombie Limited Partnership Unitholders (the "Class B LP Units"). RELATED PARTY TRANSACTIONS As at December 31, 2007, Empire Company Limited, through its wholly-owned subsidiary ECL, holds a 48.1% indirect interest in Crombie. For a period of five years commencing March 23, 2006, certain executive management individuals and other employees of Crombie will provide general management, financial, leasing, administrative, and other administration support services to certain real estate subsidiaries of Empire Company Limited on a cost recovery basis. The expense recoveries during year ended December 31, 2007 was $1,505 (period from March 23, 2006 to December 31, 2006 - $850) and were netted against general and administrative expenses. For a period of five years, certain on-site maintenance and management employees of Crombie will provide property management services to certain real estate subsidiaries of Empire Company Limited on a cost recovery basis. In addition, for various periods, ECL has an obligation to provide rental income, large federal corporation tax and interest rate subsidies. The cost recoveries during the year ended December 31, 2007 was $2,408 (the period from March 23, 2006 to December 31, 2006 - $1,764) and were netted against property expenses. The rental income subsidy during the year ended December 31, 2007 was $37 (period from March 23, 2006 to December 31, 2006 - $461) and the head lease subsidy during the year ended December 31, 2007 was $2,124 (period from March 23, 2006 to December 31, 2006 $1,123). Crombie also earned property revenue of $23,722 for the year ended December 31, 2007 (period from March 23, 2006 to December 31, 2006 - $16,427) from Sobeys Inc., Empire Theatres Limited and ASC Commercial Leasing Limited. These companies are all subsidiaries of Empire Company Limited. CRITICAL ACCOUNTING ESTIMATES Property Acquisitions Upon acquisition of commercial properties, Crombie performs an assessment of the fair value of the properties' related tangible and intangible assets and liabilities (including land, buildings, origination costs, in-place leases, above and below-market leases, and any other assumed assets and liabilities), and allocates the purchase price to the acquired assets and liabilities. Crombie assesses and considers fair value based on cash flow projections that take into account relevant discount and capitalization rates and any other relevant sources of market information available. Estimates of future cash flow are based on factors that include historical operating results, if available, and anticipated trends, local markets and underlying economic conditions. Crombie allocates the purchase price based on the following: Land - The amount allocated to land is based on an appraisal estimate of its fair value. Buildings - Buildings are recorded at the fair value of the building on an "as-if-vacant" basis, which is based on the present value of the anticipated net cash flow of the building from vacant start up to full occupancy. Origination costs for existing leases - Origination costs are determined based on estimates of the costs that would be incurred to put the existing leases in place under the same terms and conditions. These costs include leasing commissions as well as foregone rent and operating cost recoveries during an assumed lease-up period. In-place leases - In-place lease values are determined based on estimated costs required for each lease that represents the net operating income lost during an estimated lease-up period that would be required to replace the existing leases at the time of purchase. Tenant relationships - Tenant relationship values are determined based on costs avoided if the respective tenants were to renew their leases at the end of the existing term, adjusted for the estimated probability that the tenants will renew. Above- and below-market existing leases - Values ascribed to above- and below-market existing leases are determined based on the present value of the difference between the rents payable under the terms of the respective leases and estimated future market rents. Fair value of debt - Values ascribed to fair value of debt is determined based on the differential between contractual and market interest rates on long term liabilities assumed at acquisition. Commercial properties Commercial properties include land, buildings and tenant improvements. Commercial properties are carried at cost less accumulated depreciation and are reviewed periodically for impairment. Depreciation of buildings is calculated using the straight-line method with reference to each property's cost, its estimated useful life (not exceeding 40 years) and its residual value. Amortization of tenant improvements is determined using the straight-line method over the terms of the tenant lease agreements and renewal periods where applicable. Repair and maintenance improvements that are not recoverable from tenants are either expensed as incurred or, in the case of a major item, capitalized to commercial properties and amortized on a straight-line basis over the expected useful life of the improvement. Revenue recognition Property revenue includes rents earned from tenants under lease agreements, percentage rent, realty tax and operating cost recoveries, and other incidental income. Certain leases have rental payments that change over their term due to changes in rates. Crombie records the rental revenue from these leases on a straight-line basis over the term of the lease. Accordingly, an accrued rent receivable/payable is recorded for the difference between the straight-line rent recorded as property revenue and the rent that is contractually due from the tenants. Percentage rents are recognized when tenants are obligated to pay such rent under the terms of the related lease agreements. The value of the differential between original and market rents for existing leases is amortized using the straight-line method over the terms of the tenant lease agreements. Realty tax and other operating cost recoveries, and other incidental income, are recognized on an accrual basis. Use of estimates The preparation of consolidated financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The significant areas of estimation and assumption include: - Impairment of assets; - Depreciation; - Allocation of purchase price on property acquisitions; - Fair value of mortgages. Impairment of long-lived assets Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. If it is determined that the net recoverable value of a long-lived asset is less than its carrying value, the long-lived asset is written down to its fair value. Net recoverable amount represents the undiscounted estimated future cash flow expected to be received from the long-lived asset. Assets reviewed under this policy include commercial properties and intangible assets. FUTURE CHANGES IN SIGNIFICANT ACCOUNTING POLICIES Financial instruments - Disclosures In December 2006, CICA issued Section 3862, "Financial instruments - Disclosures". This Section applies to fiscal years beginning on or after October 1, 2007. It describes the required disclosures related to the significance of financial instruments on the entity's financial position and performance and the nature and extent of risks arising for financial instruments to which the entity is exposed and how the entity manages those risks. This Section complements the principles of recognition, measurement and presentation of financial instruments of Sections 3855, "Financial instruments - Recognition and measurement", 3863, "Financial instruments - Presentation" and 3865, "Hedges". Crombie is currently evaluating the impact of the adoption of this new Section on the consolidated financial statements. Financial instruments - Presentation In December 2006, CICA issued Section 3863, "Financial instruments - Presentation". This Section applies to fiscal years beginning on or after October 1, 2007. It establishes standards for presentation of financial instruments and non-financial derivatives. It complements standards of Section 3861, "Financial instruments - Disclosure and Presentation". Crombie is currently evaluating the impact of the adoption of this new Section on the consolidated financial statements. Capital disclosures In December 2006, CICA issued Section 1535, "Capital disclosures". This Section applies to fiscal years beginning on or after October 1, 2007. It establishes standards for disclosing information about entity's capital and how it is managed to enable users of financial statements to evaluate the entity's objectives, policies and procedures for managing capital. Crombie is currently evaluating the impact of the adoption of this new Section on the consolidated financial statements. CONTINGENCIES There are various claims and litigation, involving Crombie, arising out of the ordinary course of business operations. In the opinion of management, any liability that would arise from such known claims and litigation would not have a significant adverse effect on the consolidated financial statements. Crombie has agreed to indemnify, in certain circumstances, the Trustees and officers of Crombie. RISK MANAGEMENT There are certain risks inherent in the activities of Crombie, including the following: Risk Factors Related to the Real Estate Industry Real Property Ownership and Tenant Risks All real property investments are subject to elements of risk. The value of real property and any improvements thereto depend on the credit and financial stability of tenants and upon the vacancy rates of the properties. In addition, certain significant expenditures, including property taxes, ground rent, mortgage payments, insurance costs and related charges must be made throughout the period of ownership of real property regardless of whether a property is producing any income. Cash available for distribution will be adversely affected if a significant number of tenants are unable to meet their obligations under their leases or if a significant amount of available space in the properties becomes vacant and cannot be leased on economically favourable lease terms. Upon the expiry of any lease, there can be no assurance that the lease will be renewed or the tenant replaced. The terms of any subsequent lease may be less favourable to Crombie than those of an existing lease. The ability to rent unleased space in the properties in which Crombie has an interest will be affected by many factors, including general economic conditions, local real estate markets, changing demographics, supply and demand for leased premises, competition from other available premises and various other factors. Management utilizes staggered lease maturities so that Crombie is not required to lease unusually large amounts of space in any given year. In addition, the diversification of our property portfolio by geographic location, tenant mix and asset type also help to mitigate this risk. Competition The real estate business is competitive. Numerous other developers, managers and owners of properties compete with Crombie in seeking tenants. Some of the properties located in the same markets as Crombie's properties are newer, better located, less levered or have stronger anchor tenants than Crombie's properties. Some property owners with properties located in the same markets as Crombie's properties may be better capitalized and may be stronger financially and hence better able to withstand an economic downturn. Competitive pressures in such markets could have a negative effect on Crombie's ability to lease space in its properties and on the rents charged or concessions granted. Risk Factors Related to the Business of Crombie Reliance on Anchor Tenants Crombie's anchor tenants are concentrated in a relatively small number of retail operators. Specifically, 15.9% of the annual minimum rent generated from Crombie's properties is derived from anchor tenants which are owned and/or operated by Sobeys. Therefore, Crombie is dependent on the sustainable operation by Sobeys in these locations. Retail and Geographic Concentration Crombie's portfolio of properties is heavily weighted in retail properties. Consequently, changes in the retail environment and general consumer spending could adversely impact Crombie's financial condition. Crombie's portfolio of properties is also heavily concentrated in Atlantic Canada. An economic downturn concentrated in the Atlantic Canada region could also adversely impact Crombie's financial condition. The geographic breakdown of properties and percentage of annual minimum rent of Crombie's properties for 2007 are as follows: 21 properties in Nova Scotia comprising 46.2%; 16 properties in Ontario comprising 18.3%; eight properties in New Brunswick comprising 11.4%; four properties in Newfoundland and Labrador comprising 17.4%; one property in Prince Edward Island comprising 3.5%; and two properties in Quebec comprising 3.2%. Crombie's growth strategy of expansion outside of Atlantic Canada is predicated on reducing the geographic concentration risk. Financing Risks Crombie has outstanding fixed rate mortgages of approximately $431,906 with an average term to maturity of 7.4 years and a weighted average interest rate of 5.46%. In addition, Crombie has a floating rate revolving credit facility of $70,900 at December 31, 2007 with a 2.6-year term to maturity. Crombie has entered into a $50,000 fixed interest rate swap agreement at 5.50% to reduce the exposure to floating interest rates. The real estate industry is highly capital intensive. Crombie will require access to capital to fund its growth strategy and refinance current obligations as they come due. As such, Crombie is subject to the risks associated with debt financing, including the risk that the mortgages and banking facilities secured by Crombie's properties will not be able to be refinanced or that the terms of such refinancing will not be as favourable as the terms of existing indebtedness. In order to minimize this risk, Crombie attempts to diversify the term structure of its debt so that in no one year does a disproportionate amount of its debt mature. In addition Crombie attempts to limit the use of floating rate debt. Accordingly, after affecting for the $50,000 fixed interest rate swap agreement, only approximately 4.2% of Crombie's total indebtedness is variable rate debt. Crombie's credit facilities also contain covenants that require it to maintain certain financial ratios on a consolidated basis. If Crombie does not maintain such ratios, its ability to make distributions will be limited. The revolving credit facility contains a covenant of Crombie that ECL maintains a minimum 40% voting interest in Crombie. If ECL reduces its voting interest below this level, Crombie will be required to renegotiate the revolving credit facility or obtain alternative financing. Pursuant to an exchange agreement and while such covenant remains in place, ECL will be required to give Crombie at least six months' prior written notice of its intention to reduce its voting interest below 40%.There can be no assurance that Crombie would be able to renegotiate the revolving credit facility or obtain alternative financing. As part of Crombie's ongoing interest rate risk management strategy, during the second quarter of 2007, Crombie entered into delayed interest rate swap agreements of a notional amount of $118,689 for all mortgages maturing between June 2008 and June 2011. These delayed interest rate swap agreements have effectively established the interest rates that Crombie will pay in relation to the notional amount of the agreements once the mortgages come due for refinancing. In addition, as a result of on the completion of the refinancing of the Niagara Plaza mortgage discussed earlier, Crombie has finalized all debt maturities for fiscal 2007. Crombie also hedges a significant portion of the floating rates on the revolving credit facility through the use of the $50,000 fixed interest rate swap discussed in the "Indebtedness" section. In reference to the agreements with Empire to purchase the portfolio of 61 properties, Crombie believes that it will be able to obtain permanent financing as contemplated in the table outlining accretion levels to FFO and AFFO. Environmental Matters Environmental legislation and regulations have become increasingly important in recent years. As an owner of interests in real property in Canada, Crombie is subject to various Canadian federal, provincial and municipal laws relating to environmental matters. Such laws provide that Crombie could become liable for environmental harm, damage or costs, including with respect to the release of hazardous, toxic or other regulated substances into the environment, and the removal or other remediation of hazardous, toxic or other regulated substances that may be present at or under its properties. The failure to remove or otherwise address such substances or properties, if any, may adversely affect Crombie's ability to sell such property, realize the full value of such property or borrow using such property as collateral security, and could potentially result in claims against Crombie by public or private parties by way of civil action. Crombie's operating policy is to obtain a Phase I environmental site assessment, conducted by an independent and experienced environmental consultant, prior to acquiring a property and to have Phase II environmental site assessment work completed where recommended in a Phase I environmental site assessment. Crombie is not aware of any material non-compliance with environmental laws at any of its properties, and is not aware of any pending or threatened investigations or actions by environmental regulatory authorities in connection with any of its properties. Crombie will implement policies and procedures to assess, manage and monitor environmental conditions at its properties to manage exposure to liability. Potential Conflicts of Interest The trustees will, from time to time, in their individual capacities, deal with parties with whom Crombie may be dealing, or may be seeking investments similar to those desired by Crombie. The interests of these persons could conflict with those of Crombie. The Declaration of Trust contains conflict of interest provisions requiring the trustees to disclose their interests in certain contracts and transactions and to refrain from voting on those matters. In addition, certain decisions regarding matters that may give rise to a conflict of interest must be made by a majority of independent trustees only. Conflicts may exist due to the fact that certain trustees, senior officers and employees of Crombie are directors and/or senior officers of ECL and/or its affiliates or will provide management or other services to ECL and its affiliates. ECL and its affiliates are engaged in a wide variety of real estate and other business activities. Crombie may become involved in transactions that conflict with the interests of the foregoing. The interests of these persons could conflict with those of Crombie. To mitigate these potential conflicts, Crombie and ECL have entered into a number of agreements to outline how potential conflicts of interest will be dealt with including a Non-Competition Agreement, Management Cost Sharing Agreement and Development Agreement. As well, the Declaration of Trust contains a number of provisions to manage potential conflicts of interest including setting limits to the number of ECL appointees to the Board, "conflict of interest" guidelines, as well as outlining which matters require the approval of a majority of the independent trustees such as any property acquisitions or dispositions between Crombie and ECL or another related party. Reliance on Key Personnel The management of Crombie depends on the services of certain key personnel. The loss of the services of any key personnel could have an adverse effect on Crombie and adversely impact Crombie's financial condition. Crombie does not have key-man insurance on any of its key employees. Reliance on ECL and Other Empire Affiliates ECL has agreed to support Crombie under an omnibus subsidy agreement and to pay ongoing rent pursuant to a head lease and a ground lease. Crombie's ability to acquire new development properties is dependent upon ECL and the successful operation of the Development Agreement. In addition, a significant portion of Crombie's rental income will be received from tenants that are affiliates of Empire. There is no certainty that ECL will be able to perform its obligations to Crombie in connection with these agreements. ECL has not provided any security to guarantee these obligations. If ECL, Empire or such affiliates are unable or otherwise fail to fulfill their obligations to Crombie, such failure could adversely impact Crombie's financial condition. Prior Commercial Operations Crombie Limited Partnership ("Crombie LP") acquired from ECL all of the outstanding shares of CDL. CDL is the company resulting from the amalgamation of predecessor companies which began their operations in 1964 and have since been involved in various commercial activities in the real estate sector. In addition, the share capital of CDL and its predecessors has been subject to various transfers, redemptions and other modifications. Pursuant to the Business Acquisition, ECL made certain representations and warranties to Crombie with respect to CDL, including with respect to the structure of its share capital and the scope and amount of its existing and contingent liabilities. ECL also provided an indemnity to Crombie under the Business Acquisition which provides, subject to certain conditions and thresholds, that ECL will indemnify Crombie for breaches of such representations and warranties. There can be no assurance that Crombie will be fully protected in the event of a breach of such representations and warranties or that ECL will be in a position to indemnify Crombie if any such breach occurs. ECL has not provided any security for its obligations and is not required to maintain any cash within ECL for this purpose. Risk Factors Related to the Units Cash Distributions Are Not Guaranteed There can be no assurance regarding the amount of income to be generated by Crombie's properties. The ability of Crombie to make cash distributions and the actual amount distributed are entirely dependent on the operations and assets of Crombie and its subsidiaries, and are subject to various factors including financial performance, obligations under applicable credit facilities, the sustainability of income derived from anchor tenants and capital expenditure requirements. Cash available to Crombie to fund distributions may be limited from time to time because of items such as principal repayments, tenant allowances, leasing commissions, capital expenditures and redemptions of Units, if any. Crombie may be required to use part of its debt capacity or to reduce distributions in order to accommodate such items. The market value of the Units will deteriorate if Crombie is unable to maintain its distribution in the future, and that deterioration may be significant. In addition, the composition of cash distributions for tax purposes may change over time and may affect the after-tax return for investors. Restrictions on Redemptions It is anticipated that the redemption of Units will not be the primary mechanism for holders of Units to liquidate their investments. The entitlement of Unitholders to receive cash upon the redemption of their Units is subject to the following limitations: (i) the total amount payable by Crombie in respect of such Units and all other Units tendered for redemption in the same calendar month must not exceed $50 (provided that such limitation may be waived at the discretion of the Trustees); (ii) at the time such Units are tendered for redemption, the outstanding Units must be listed for trading on a stock exchange or traded or quoted on another market which the Trustees consider, in their sole discretion, provides fair market value prices for the Units; and (iii) the trading of Units is not suspended or halted on any stock exchange on which the Units are listed (or, if not listed on a stock exchange, on any market on which the Units are quoted for trading) on the redemption date for more than five trading days during the 10-day trading period commencing immediately after the redemption date. Potential Volatility of Unit Prices One of the factors that may influence the market price of the Units is the annual yield on the Units. An increase in market interest rates may lead purchasers of Units to demand a higher annual yield, which accordingly could adversely affect the market price of the Units. In addition, the market price of the Units may be affected by changes in general market conditions, fluctuations in the markets for equity securities and numerous other factors beyond the control of Crombie. Tax-Related Risk Factors The Declaration of Trust of Crombie provides that a sufficient amount of Crombie's net income and net realized capital gains will be distributed each year to Unitholders or otherwise in order to eliminate Crombie's liability for tax under Part I of the Tax Act. Where the amount of net income and net realized capital gains of Crombie in a taxation year exceeds the cash available for distribution in the year, such excess net income and net realized capital gains will be distributed to Unitholders in the form of additional Units. Unitholders will generally be required to include an amount equal to the fair market value of those Units in their taxable income, notwithstanding that they do not directly receive a cash distribution. Income fund or REIT structures in which there is a significant corporate subsidiary such as CDL generally involve a significant amount of inter-company or similar debt, generating substantial interest expense, which reduces earnings and therefore income tax payable. Management believes that the interest expense inherent in the structure of Crombie is supportable and reasonable in the circumstances; however, there can be no assurance that taxation authorities will not seek to challenge the amount of interest expense deducted on the debt owing by CDL to Crombie LP. If such a challenge were to succeed, it could adversely affect the amount of cash available for distribution. The cost amount for taxation purposes of various properties of CDL will be lower than their fair market value, generally resulting in correspondingly lower deductions for taxation purposes and higher recapture of depreciation or capital gains on their disposition. In addition, CDL (unlike Crombie) may not reduce its taxable income through cash distributions. If CDL should become subject to corporate income tax, the cash available for distribution to Unitholders would likely be reduced. On June 22, 2007, tax legislation Bill C-52, the Budget Implementation Act, 2007 (the "Act") was passed into law. The Act related to the federal income taxation of publicly traded income trusts and partnerships. The Act subjects all existing income trusts, or specified investment flow-through entities ("SIFTs"), to corporate tax rates, beginning in 2011, subject to an exemption for real estate investment trusts ("REITs"). The exemption for REITs was provided to "recognize the unique history and role of collective real estate investment vehicles," which are well-established structures throughout the world. A trust that satisfies the criteria of a REIT throughout its taxation year will not be subject to income tax in respect of distributions to its unitholders or be subject to the restrictions on its growth that would apply to SIFTs. While REITs were exempted from the SIFT taxation, the Act proposed a number of technical tests to determine which entities would qualify as a REIT. These technical tests did not fully accommodate the business structures used by many Canadian REITs. During the fourth quarter of 2007 Crombie's management and their advisors underwent an extensive review of Crombie's organizational structure and operations to support Crombie's assertion that, at January 1, 2008, it meets the REIT technical tests contained in the Act. The relevant tests apply throughout the taxation year of Crombie and, as such, the actual status of Crombie for any particular taxation year can only be ascertained at the end of the year. On December 20, 2007, the Department of Finance (Canada) issued proposed amendments to provide further clarity to these technical tests. While Crombie did not rely on these proposed amendments, they do provide further certainty that Crombie qualifies as a REIT. Notwithstanding that Crombie may meet the criteria for a REIT under the Act and thus be exempt from the distribution tax, there can be no assurance that the Department of Finance (Canada) or other governmental authority will not undertake initiatives which have an adverse impact on Crombie or its unitholders. Indirect Ownership of Units by Empire ECL holds a 48.1% economic interest in Crombie through the ownership of Class B LP Units. Pursuant to the Exchange Agreement, each Class B LP Unit will be exchangeable at the option of the holder for one Unit of Crombie and will be attached to a Special Voting Unit of Crombie, providing for voting rights in Crombie. Furthermore, pursuant to the Declaration of Trust, ECL is entitled to appoint a certain number of Trustees based on the percentage of Units held by it. Thus, Empire is in a position to exercise a certain influence with respect to the affairs of Crombie. If Empire sells substantial amounts of its Class B LP Units or exchanges such units for Units and sells these Units in the public market, the market price of the Units could fall. The perception among the public that these sales will occur could also produce such effect. SUBSEQUENT EVENTS On January 22, 2008, Crombie declared distributions of 7.083 cents per unit for the period from January 1, 2008 to, and including, January 31, 2008. The distribution will be payable on February 15, 2008 to Unitholders of record as at January 31, 2008. On February 18, 2008, Crombie declared distributions of 7.083 cents per unit for the period from February 1, 2008 to, and including, February 29, 2008. The distribution will be payable on March 17, 2008 to Unitholders of record as at February 29, 2008. On February 25, 2008, Crombie announced that it has entered into agreements with subsidiaries of Empire Company Limited to acquire a portfolio of 61 retail properties representing approximately 3.3 million square feet of gross leaseable area. The cost of the acquisition to Crombie is approximately $441,500, including approximately $13,000 of closing and transaction costs. The closing of the acquisition is expected on or about April 21, 2008. Financing for the acquisition is expected to include approximately $18,000 from the revolving credit facility, an 18 month bridge financing of $278,500, the issuance of $30,000 extendible convertible unsecured subordinated debentures, the issuance of $55,000 of Class B LP units of Crombie Limited Partnership to Empire Company Limited, and the issuance of $60,005 subscription receipts at a price of $11.00 per subscription receipt. On closing of the acquisition, each subscription receipt will convert into one REIT unit. Crombie will be filing a preliminary prospectus in relation to the extendible convertible unsecured subordinated debentures and the subscription receipts on February 29, 2008. The acquisition must be approved by the affirmation vote of a majority of Unitholders (excluding Empire Company Limited and certain of its affiliates and insiders) at a Unitholders meeting to be held on April 14, 2008. INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Chief Executive Officer and the Chief Financial Officer have evaluated whether there were changes to internal control over financial reporting for the year ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting. No such changes were identified through their evaluation. Based on an evaluation of Crombie's disclosure controls and procedures, Crombie's Chief Executive Officer and Chief Financial Officer have concluded as of December 31, 2007 that these controls and procedures were designed and operated effectively. Crombie's Chief Executive Officer and Chief Financial Officer also evaluated Crombie's internal controls over financial reporting at December 31, 2007 and concluded that these controls are appropriately designed. QUARTERLY INFORMATION The following table shows information for revenues, net income, distributable income, AFFO, FFO, distributions and per unit amounts for the seven most recently completed quarters. ------------------------------------------------ Quarter Ending ------------------------------------------------------------------------- (In thousands of dollars, Dec. 31, Sep. 30, Jun. 30, Mar. 31, except per unit amounts) 2007 2007 2007 2007 ------------------------------------------------------------------------- Property revenue $ 37,059 $ 35,619 $ 35,248 $ 35,680 Property expenses 14,843 15,156 14,300 15,046 ------------------------------------------------------------------------- Property net operating income 22,216 20,463 20,948 20,634 ------------------------------------------------------------------------- Expenses: General and administrative 2,492 1,843 2,224 1,618 Interest 6,667 6,503 6,171 5,934 Depreciation and amortization 8,227 7,454 7,156 6,392 ------------------------------------------------------------------------- 17,386 15,800 15,551 13,944 ------------------------------------------------------------------------- Income before income taxes and non-controlling interest 4,830 4,663 5,397 6,690 ------------------------------------------------------------------------- Income taxes: Current - - - - Future (2,994) 718 2,978 328 ------------------------------------------------------------------------- (2,994) 718 2,978 328 ------------------------------------------------------------------------- Income before non-controlling interest 7,824 3,945 2,419 6,362 Non-controlling interest 3,766 1,899 1,164 3,062 ------------------------------------------------------------------------- Net income $ 4,058 $ 2,046 $ 1,255 $ 3,300 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted net income per unit $ 0.19 $ 0.10 $ 0.06 $ 0.15 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Quarter ending ------------------------------------------------------------------------- (In thousands of dollars, Dec. 31, Sep. 30, Jun. 30, Mar. 31, except per unit amounts) 2007 2007 2007 2007 ------------------------------------------------------------------------- Distributable income $ 11,515 $ 10,566 $ 11,139 $ 12,120 Less: Maintenance capital expenditures (2,712) (1,624) (311) (748) Additions to tenant improvements and lease costs (net of amounts recoverable from ECL) (1,242) (2,862) (498) (501) ------------------------------------------------------------------------- AFFO $ 7,561 $ 6,080 $ 10,330 $ 10,871 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FFO $ 13,057 $ 12,117 $ 12,553 $ 13,082 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions $ 8,867 $ 8,867 $ 8,798 $ 8,451 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributable income per unit(2) $ 0.28 $ 0.25 $ 0.27 $ 0.29 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AFFO per unit(2) $ 0.18 $ 0.15 $ 0.25 $ 0.26 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FFO per unit(2) $ 0.31 $ 0.29 $ 0.30 $ 0.31 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions per unit(2) $ 0.21 $ 0.21 $ 0.21 $ 0.20 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) The first quarter ended March 31, 2006 was for a nine-day period only due to Crombie's beginning of operations on March 23, 2006. As such, that period has not been included in the above table due to a lack of comparability. (2) Distributable income, FFO, AFFO and distributions per unit are calculated by distributable income, FFO, AFFO or distributions, as the case may be, divided by the diluted weighted average of the total Units and Special Voting Units outstanding of 41,728,561 for the quarter ended December 31, 2007 41,728,561 for the quarter ended September 30, 2007, 41,728,561 for the quarter ended June 30, 2007, 41,712,801 for the quarter ended March 31, 2007, 41,589,061 for the quarter ended December 31, 2006, 41,589,061 for the quarter ended September 30, 2006 and 41,487,760 for the quarter ended June 30, 2006. ------------------------------------------------ Quarter Ending ------------------------------------------------------------------------- (In thousands of dollars, Dec. 31, Sep. 30, Jun. 30, except per unit amounts) 2006 2006 2006 ------------------------------------------------------------------------- Property revenue $ 33,717 $ 31,201 $ 31,758 Property expenses 15,091 13,053 12,626 ------------------------------------------------------------------------- Property net operating income 18,626 18,148 19,132 ------------------------------------------------------------------------- Expenses: General and administrative 2,293 1,612 1,687 Interest 5,523 5,165 5,274 Depreciation and amortization 6,270 5,635 5,631 ------------------------------------------------------------------------- 14,086 12,412 12,592 ------------------------------------------------------------------------- Income before income taxes and non-controlling interest 4,540 5,736 6,540 ------------------------------------------------------------------------- Income taxes: Current - - (9) Future (1,663) 450 410 ------------------------------------------------------------------------- (1,663) 450 401 ------------------------------------------------------------------------- Income before non-controlling interest 6,203 5,286 6,139 Non-controlling interest 2,986 2,550 2,972 ------------------------------------------------------------------------- Net income $ 3,217 $ 2,736 $ 3,167 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted net income per unit $ 0.15 $ 0.13 $ 0.15 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Quarter ending ------------------------------------------------------------------------- Distributable income $ 9,815 $ 10,880 $ 11,509 Less: Maintenance capital expenditures (933) (1,090) (200) Additions to tenant improvements and lease costs (net of amounts recoverable from ECL) (619) (3,128) (1,406) ------------------------------------------------------------------------- AFFO $ 8,263 $ 6,662 $ 9,903 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FFO $ 10,699 $ 11,293 $ 12,106 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions $ 8,346 $ 8,338 $ 8,322 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributable income per unit(2) $ 0.24 $ 0.26 $ 0.28 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AFFO per unit(2) $ 0.20 $ 0.16 $ 0.24 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FFO per unit(2) $ 0.26 $ 0.27 $ 0.29 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions per unit(2) $ 0.20 $ 0.20 $ 0.20 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) The first quarter ended March 31, 2006 was for a nine-day period only due to Crombie's beginning of operations on March 23, 2006. As such, that period has not been included in the above table due to a lack of comparability. (2) Distributable income, FFO, AFFO and distributions per unit are calculated by distributable income, FFO, AFFO or distributions, as the case may be, divided by the diluted weighted average of the total Units and Special Voting Units outstanding of 41,728,561 for the quarter ended December 31, 2007 41,728,561 for the quarter ended September 30, 2007, 41,728,561 for the quarter ended June 30, 2007, 41,712,801 for the quarter ended March 31, 2007, 41,589,061 for the quarter ended December 31, 2006, 41,589,061 for the quarter ended September 30, 2006 and 41,487,760 for the quarter ended June 30, 2006. SCHEDULE OF THE PROPERTY PORTFOLIO AS AT DECEMBER 31, 2007 ------------------------------------------------------------------------- GLA Number of Property Description (sq. ft.) Leases Occupancy ------------------------------------------------------------------------- Nova Scotia Aberdeen Shopping Centre Mixed-use 394,000 34 97.1% Amherst Centre Retail - Enclosed 228,000 30 92.1% County Fair Mall Retail - Enclosed 269,000 50 97.1% Downsview Mall Retail - Strip 142,000 15 98.6% Downsview Plaza Retail - Strip 256,000 25 99.1% Evangeline Mall Retail - Enclosed 61,000 6 78.1% Fort Edward Mall Retail - Enclosed 141,000 15 91.0% Highland Square Mall Retail - Enclosed 246,000 50 93.3% New Minas Plaza Retail - Strip 52,000 9 77.0% Park Lane Mixed-use 267,000 67 88.4% Prince Street Plaza Retail - Strip 71,000 12 98.1% Sydney Shopping Centre Retail - Enclosed 250,000 33 95.1% West End Mall Mixed-use 201,000 45 86.1% Halifax Developments -------------------- properties ---------- Barrington Place Mixed-use 186,000 31 97.4% Barrington Tower Office 185,000 1 100.0% Brunswick Place Mixed-use 253,000 10 94.3% CIBC Building Office 207,000 30 95.5% Cogswell Tower Office 203,000 36 97.4% Duke Tower Office 232,000 31 96.4% Scotia Square Mall Mixed-use 286,000 55 99.7% Scotia Square Parkade Other - Parkade N/A N/A N/A ------------------ --------------------------------- Total Nova Scotia 4,130,000 585 94.9% ------------------ --------------------------------- Ontario 318 Ontario Street Freestanding Store 47,000 1 100.0% Brampton Plaza Retail - Strip 70,000 3 100.0% Burlington Plaza Retail - Strip 56,000 9 93.2% Carleton Place Mews Retail - Strip 80,000 14 94.2% Fort Erie - International Gateway Centre Retail - Strip 93,000 16 97.9% Niagara Plaza Retail - Strip 61,000 14 98.0% Perth Mews Retail - Strip 103,000 16 96.6% Port Colborne Mall Retail - Enclosed 136,000 8 91.4% Queensland Plaza Retail - Strip 48,000 8 96.0% Rose City Plaza Retail - Strip 126,000 14 77.2% Rymal Road Plaza Retail - Strip 65,000 10 97.3% South Pelham Market Plaza Retail - Strip 63,000 10 94.3% Taunton & Wilson Plaza Retail - Strip 87,000 11 93.4% Town Centre LaSalle Retail - Strip 88,000 16 91.8% Upper James Square Retail - Strip 114,000 23 98.4% Village Square Mall Retail - Strip 69,000 16 100.0% ------------------ --------------------------------- Total Ontario 1,306,000 189 94.1% ------------------ --------------------------------- New Brunswick Carleton Mall Retail - Enclosed 113,000 13 95.3% Charlotte Mall Retail - Enclosed 113,000 9 93.2% Elmwood Plaza Retail - Strip 31,000 9 80.9% Loch Lomond Place Mixed-use 191,000 17 95.6% Prospect Street Plaza Retail - Strip 21,000 2 100.0% Riverview Mall Mixed-use 151,000 23 94.0% Terminal Centres Office 200,000 16 65.9% Uptown Centre Retail - Enclosed 320,000 14 98.6% ------------------ --------------------------------- Total New Brunswick 1,140,000 103 90.4% ------------------ --------------------------------- Newfoundland and Labrador Avalon Mall Retail - Enclosed 565,000 138 94.1% Hamlyn Road Plaza Retail - Strip 43,000 13 82.3% Random Square Retail - Enclosed 113,000 20 98.8% Valley Mall Retail - Enclosed 164,000 21 75.1% ------------------ --------------------------------- Total Newfoundland and Labrador 885,000 192 90.6% ------------------ --------------------------------- Prince Edward Island County Fair Mall Retail - Enclosed 301,000 32 92.7% Quebec Brossard-Longueuil Freestanding store 39,000 1 100.0% Greenfield Park Centre Retail - Power Centre 153,000 8 95.2% ------------------ --------------------------------- Total Quebec 192,000 9 96.4% ------------------ --------------------------------- ------------------------------------------------------------------------- Total 7,954,000 1,110 93.6% ------------------------------------------------------------------------- ------------------------------------------------------------------------- Additional information relating to Crombie, including its latest Annual Information Form, can be found on the SEDAR web site for Canadian regulatory filings at www.sedar.com. Dated: February 28, 2008 Stellarton, Nova Scotia, Canada

For further information:

For further information: Scott Ball, C.A., Vice President, Chief
Financial Officer and Secretary, Crombie REIT, (902) 755-8100


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