Crombie Reit announces fourth quarter and fiscal 2008 results



    STELLARTON, NS, Feb. 26 /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, 2008.
    Funds from Operations (FFO) for the fourth quarter increased by 43.2%
(16.1% per unit) to $18.7 million ($0.36 per unit) from $13.1 million ($0.31
per unit) in the fourth quarter of 2007. Year-to-date FFO increased by 37.5%
(16.4% per unit) to $69.9 million ($1.42 per unit) from $50.8 million ($1.22
per unit) for the same period of 2007. The improvement for both the quarter
and year-to-date periods was due to the portfolio acquisition of 61 retail
properties from subsidiaries of Empire Company Limited (the "Portfolio
Acquisition") on April 22, 2008, the impact of the individual property
acquisitions and improved same-asset net operating income.
    Adjusted Funds from Operations (AFFO) for the fourth quarter of 2008 was
$14.4 million ($0.28 per unit) compared to $7.6 million ($0.18 per unit) for
the fourth quarter of 2007. Year-to-date AFFO was $46.2 million ($0.94 per
unit) compared to $34.8 million ($0.84 per unit) for the same period of 2007.
Growth in AFFO during the fourth quarter and year-to-date was primarily due to
the improved FFO results. The full year AFFO payout ratio for 2008 was 95.3%
which approximated the target payout ratio of 95%.
    Total property net operating income (NOI) for the fourth quarter of 2008
increased by 48.9% to $32.6 million from $21.9 million in the fourth quarter
of 2007. Total property NOI for the year ended December 31, 2008 was $116.8
million, representing a 40.4% increase over the NOI of $83.2 million for the
same period of 2007. The improvement in the annual NOI again resulted from the
Portfolio Acquisition, the results from the individual property acquisitions
and improved same-asset NOI.
    Net income for the fourth quarter of 2008 was $5.4 million ($0.20 per
unit) compared to $4.1 million ($0.19 per unit) for the fourth quarter of
2007. Net income for the year ended December 31, 2008 was $14.6 million ($0.57
per unit) compared to $10.7 million ($0.49 per unit) for the same period of
2007.
    Commenting on the annual results, J. Stuart Blair, President and Chief
Executive Officer stated: "We are pleased with the results for the 2008 fiscal
year and the success in achieving a large portfolio acquisition and the
resulting accretion. In these uncertain economic times, while we remain
cautious for our outlook to 2009, we will continue to focus on achieving
predictable, steady growth from our current portfolio. We continue to pursue
alternatives in order to complete the replacement of the remaining bridge loan
with suitable long term financing."

    
    2008 Highlights

    - Crombie completed the acquisition of 61 commercial properties from
      Empire Subsidiaries on April 22, 2008 for a price of $428.5 million,
      excluding closing and transaction fees. In order to partially fund the
      purchase, Crombie also completed a public offering of units, raising
      gross proceeds of $63 million and placed $30 million of convertible
      debentures.
    - Crombie completed leasing activity on 104.8% of its 2008 expiring
      leases as at December 31, 2008, increasing average net rent per square
      foot to $12.46 from the expiring rent per square foot of $12.05, an
      increase of 3.4%.
    - Occupancy for the properties (excluding the Portfolio Acquisition) at
      December 31, 2008 was 92.9% compared with 93.2% at September 30, 2008.
      Overall occupancy at December 31, 2008 was 94.9%.
    - Property revenue for the year ended December 31, 2008 increased by
      $46.9 million, or 33.2%, to $188.1 million compared to $141.2 million
      for the year ended December 31, 2007. The improvement was due to the
      Portfolio Acquisition, increased same-asset property results and the
      six individual property acquisitions.
    - Same-asset NOI of $82.1 increased by $2.3 million or 2.8%, compared to
      $79.9 for the year ended December 31, 2007 due primarily to an
      increased average net rent per square foot ($12.26 in 2008 versus
      $12.10 in 2007).
    - The FFO payout ratio for the year ended December 31, 2008 was 63.1%
      which was below the target annual payout ratio of 70.0% and below the
      payout ratio of 68.9% for the same period of 2007.
    - The AFFO payout ratio for the year ended December 31, 2008 was 95.3%
      which approximated the target annual AFFO payout ratio of 95.0% and was
      below the payout ratio for the same period of 2007 of 100.4%.
    - Debt to gross book value increased to 54.5% at December 31, 2008
      compared to 48.0% at December 31, 2007 due primarily to the Portfolio
      Acquisition.
    - Crombie's interest service coverage ratio for the year ended December
      31, 2008 was 2.74 times EBITDA and debt service coverage ratio was 2.00
      times EBITDA, compared to 3.00 times EBITDA and 2.03 times EBITDA,
      respectively, for the same period in 2007.

    The table below presents a summary of the financial performance for the
quarter and year ending December 31, 2008 compared to the same periods in
fiscal 2007.

    -------------------------------------------------------------------------
                             Quarter      Quarter         Year         Year
    (In millions of            ended        ended        ended        ended
     dollars,except where    Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,
     otherwise noted)           2008         2007         2008         2007
    -------------------------------------------------------------------------
    Property revenue         $52.522      $36.455     $188.142     $141.235
    Property expenses         19.883       14.536       71.299       58.016
    -------------------------------------------------------------------------
    Property NOI              32.639       21.919      116.843       83.219
    -------------------------------------------------------------------------
    NOI margin percentage       62.1%        60.1%        62.1%        58.9%
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative          2.701        2.492        8.636        8.177
      Interest                11.318        6.577       39.232       24.913
      Depreciation and
       amortization           12.265        8.152       42.857       28.943
    -------------------------------------------------------------------------
                              26.284       17.221       90.725       62.033
    -------------------------------------------------------------------------
    Income from continuing
     operations before
     other items, income
     taxes and
     non-controlling
     interest                  6.355        4.698       26.118       21.186
    Other items                0.055            -        0.179            -
    -------------------------------------------------------------------------
    Income from continuing
     operations before
     income taxes and
     non-controlling
     interest                  6.410        4.698       26.297       21.186
    Income taxes - Future     (3.450)      (2.994)      (1.490)       1.030
    -------------------------------------------------------------------------
    Income from continuing
     operations before
     non-controlling
     interest                  9.860        7.692       27.787       20.156
    Gain on sale of
     discontinued operations   0.487            -       (0.408)           -
    Income from discontinued
     operations                0.024        0.132        0.649        0.394
    -------------------------------------------------------------------------
    Income before
     non-controlling
     interest                 10.371        7.824       28.028       20.550
    Non-controlling
     interest                  4.968        3.766       13.440        9.891
    -------------------------------------------------------------------------
    Net income                $5.403       $4.058      $14.588      $10.659
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Basic and diluted net
     income per unit           $0.20        $0.19        $0.57        $0.49
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Property NOI

    Fourth quarter and year-to-date property NOI for 2008 increased to $32.6
million (48.9%) and $116.8 million (40.4%) respectively from the same periods
in 2007 due to the Portfolio Acquisition, improved same-asset property results
for the year-to-date and the individual property acquisitions completed since
January 1, 2007.

    Same-Asset Property NOI

    -------------------------------------------------------------------------
                             Quarter      Quarter         Year         Year
                               ended        ended        ended        ended
    (In millions of          Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,
     dollars)                   2008         2007         2008         2007
    -------------------------------------------------------------------------
    Same-asset property
     revenue                 $37.727      $36.137     $141.211     $136.543
    Same-asset property
     expenses                 15.736       14.453       59.078       56.665
    -------------------------------------------------------------------------
    Same-asset property NOI  $21.991      $21.684      $82.133      $79.878
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Same-asset NOI margin %     58.3%        60.0%        58.2%        58.5%
    -------------------------------------------------------------------------

    Same-asset property revenue of $37.7 million in the fourth quarter of 2008
and $141.2 million for year-to-date 2008 was 4.4% higher than the fourth
quarter in 2007 and 3.4% higher than the year-to-date 2007 due primarily to
increased average rent per square foot results and increased recoverable
common area expenses.
    Same-asset property expenses of $15.7 million in the fourth quarter of
2008 and $59.1 million for year-to-date 2008 were 8.9% higher than the $14.5
million for the fourth quarter of 2007 and 4.3% higher than the $56.7 million
for the year-to-date results for 2007. The increased property expenses were
due to increased recoverable common area expenses primarily from increased
utility, snow removal and property taxes as well as increased non-recoverable
maintenance costs.
    Same-asset NOI for the fourth quarter of 2008 increased by 1.4% compared
to the same period in 2007 while 2008 year-to-date same-asset NOI grew by 2.8%
over the year-to-date results for 2007. As some expenses are not incurred
evenly throughout the year, the NOI and NOI margin are subject to some
volatility on a quarterly basis.

    Acquisition Property NOI

    The Portfolio Acquisition and the individual property acquisitions
completed since January 1, 2007 provided the following results:

    -------------------------------------------------------------------------
                             Quarter      Quarter         Year         Year
                               ended        ended        ended        ended
    (In millions of          Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,
     dollars)                   2008         2007         2008         2007
    -------------------------------------------------------------------------
    Acquisition property
     revenue                 $14.795       $0.318      $46.931       $4.692
    Acquisition property
     expense                   4.147        0.083       12.221        1.351
    -------------------------------------------------------------------------
    Acquisition property
     NOI                     $10.648       $0.235      $34.710       $3.341
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Acquisition NOI margin %    72.0%        73.9%        74.0%        71.2%
    -------------------------------------------------------------------------

    General and Administrative Expenses

    General and administrative expenses increased by 8.4% during the fourth
quarter of 2008 to $2.7 million from $2.5 million in 2007 due to increased
professional fees and salaries and benefits costs, offset in part by reduced
rent and occupancy costs as a result of the negotiation of more favourable
lease terms at the head office. General and administrative costs increased by
5.6% for the year ended December 31, 2008 to $8.6 million from the same period
in the prior year due to higher salaries and benefits costs and increased
professional fees, offset in part by lower rent and occupancy expenses.
General and administrative costs as a percentage of revenue have decreased to
5.1% in the fourth quarter of 2008 compared to 6.8% in 2007. General and
administrative costs as a percentage of revenue have decreased to 4.6% for the
year ended December 31, 2008 compared to 5.8% for the same period of 2007.

    Interest

    -------------------------------------------------------------------------
                             Quarter      Quarter         Year         Year
                               ended        ended        ended        ended
    (In millions of          Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,
     dollars)                   2008         2007         2008         2007
    -------------------------------------------------------------------------
    Same-asset interest
     expense                  $6.557       $6.420      $22.630      $23.648
    Acquisition interest
     expense                   4.761        0.157       16.602        1.265
    -------------------------------------------------------------------------
    Interest expense         $11.318       $6.577      $39.232      $24.913
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The increase in interest expense for both the fourth quarter and
year-to-date results of 2008 were due to the Portfolio Acquisition and the
individual property acquisitions completed since January 1, 2007. Same-asset
interest expense was higher in the fourth quarter of 2008 compared to 2007 due
to the amortization of payments made on interest rate swap agreements during
the fourth quarter, offset in part by the declining interest portion of debt
repayments. Same-asset interest expense was reduced for the annual results due
to the declining interest portion of debt repayments combined with reduced
interest rates on mortgages renegotiated since January 2007 and a decrease in
the effective interest rate on the revolving credit facility.

    Other Performance Measures

    -------------------------------------------------------------------------
                             Quarter      Quarter         Year         Year
    (In millions of            ended        ended        ended        ended
     dollars, except where   Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,
     otherwise noted)           2008         2007         2008         2007
    -------------------------------------------------------------------------
    FFO                      $18.699      $13.057      $69.855      $50.809
    AFFO                     $14.477       $7.561      $46.221      $34.842
    Distributions            $11.649       $8.867      $44.044      $34.983
    FFO payout ratio            62.3%        67.9%        63.1%        68.9%
    AFFO payout ratio           80.6%       117.3%        95.3%       100.4%
    -------------------------------------------------------------------------
                             Dec. 31,     Dec. 31,
                                2008         2007
                             ---------------------
    Debt to gross book value    54.5%        48.0%
    ----------------------------------------------

    The annual FFO payout ratio of 63.1% is below the anticipated annual
payout ratio of 70.0% while the AFFO payout ratio of 95.3% approximated the
target annual payout ratio of 95.0%. Growth in the annual FFO result was due
to higher property NOI as a result of the individual acquisitions, the
Portfolio Acquisition and the improved same-asset results, offset in part by
the increased interest expense related to the acquisitions. Growth in annual
AFFO was due to the improved FFO results, partially offset by higher
maintenance capital and tenant improvement costs combined with one months
worth of distributions made on the subscription receipts prior to the closing
of the Portfolio Acquisition. The increase in tenant improvement expenditures
relate to early renewals of leases scheduled to expire in 2009 which will
result in improved net rents on an ongoing basis.

    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 and
      convertible debentures.
    - 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.
    - 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 FFO adjusted for non-cash amounts affecting revenue
      and discontinued operations, less maintenance capital expenditures and
      maintenance 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 113 commercial properties in
seven provinces, comprising approximately 11.2 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 2008 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) the anticipated refinancing of the term loan facility.

    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 fourth quarter
results on a conference call to be held Friday, February 27, 2008, at 12:00
noon AST. To join this conference call you may dial (416) 644-3421 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 8, 2009, by dialling (416) 640-1917 or (877)
289-8525 and entering pass code 21298158 #, or on the Crombie website for 90
days after the meeting.

    
                     CROMBIE REAL ESTATE INVESTMENT TRUST
                      Consolidated Financial Statements
                              December 31, 2008


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

                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------
    Assets
      Commercial properties (Note 4)                $1,304,401     $898,938
      Intangible assets (Note 5)                       131,403       59,823
      Notes receivable (Note 6)                         11,323       20,968
      Other assets (Note 7)                             25,142       20,436
      Cash and cash equivalents                          4,028        2,708
      Asset related to discontinued operations
       (Note 21)                                         7,184       11,109
                                                  ---------------------------
                                                    $1,483,481   $1,013,982
                                                  ---------------------------
                                                  ---------------------------

    Liabilities and Unitholders' Equity
      Commercial property debt (Note 8)               $808,971     $493,945
      Convertible debentures (Note 9)                   28,968            -
      Payables and accruals (Note 10)                   94,682       38,555
      Intangible liabilities (Note 11)                  41,061       16,503
      Employee future benefits obligation (Note 23)      4,836        4,458
      Distributions payable                              3,883        2,956
      Future income tax liability (Note 16)             79,800       81,501
      Liabilities related to discontinued
       operations (Note 21)                              6,517        7,311
                                                  ---------------------------
                                                     1,068,718      645,229

    Non-controlling interest (Note 12)                 199,183      177,919

    Unitholders' equity                                215,580      190,834
                                                  ---------------------------
                                                    $1,483,481   $1,013,982
                                                  ---------------------------
                                                  ---------------------------
    Commitments and contingencies (Note 18)

    Subsequent events (Note 24)

       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)
    -------------------------------------------------------------------------

                                                    Year Ended   Year Ended
                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------
    Revenues
      Property revenue (Note 14)                      $188,142     $141,235
      Lease terminations                                   102            -
                                                  ---------------------------
                                                       188,244      141,235
                                                  ---------------------------
    Expenses
      Property expenses                                 71,299       58,016
      General and administrative expenses                8,636        8,177
      Interest expense (Note 15)                        39,232       24,913
      Depreciation of commercial properties             16,398       12,361
      Amortization of tenant improvements/lease costs    3,488        2,714
      Amortization of intangible assets                 22,971       13,868
                                                  ---------------------------
                                                       162,024      120,049
                                                  ---------------------------
    Income from continuing operations
     before other items                                 26,220       21,186
      Gain on disposition of land (Note 21)                 77            -
                                                  ---------------------------
    Income from continuing operations before
     income taxes and non-controlling interest          26,297       21,186

    Income tax (recovery) expense -
     Future (Note 16)                                   (1,490)       1,030
                                                  ---------------------------
    Income from continuing operations before
     non-controlling interest                           27,787       20,156
    Loss on sale of discontinued operations
     (Note 21)                                            (408)           -
    Income from discontinued operations,
     net of tax of $210 (Note 21)                          649          394
                                                  ---------------------------
    Income before non-controlling interest              28,028       20,550
    Non-controlling interest                            13,440        9,891
                                                  ---------------------------

    Net income                                         $14,588      $10,659
                                                  ---------------------------
                                                  ---------------------------
    Basic and diluted net income per unit
    Continuing operations                                $0.56        $0.47
    Discontinued operations                              $0.01        $0.02
                                                  ---------------------------
    Net income                                           $0.57        $0.49
                                                  ---------------------------
                                                  ---------------------------
    Weighted average number of units outstanding
      Basic                                         25,477,768   21,535,233
                                                  ---------------------------
                                                  ---------------------------
      Diluted                                       25,596,001   21,646,135
                                                  ---------------------------
                                                  ---------------------------

       See accompanying notes to the consolidated financial statements.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
           Consolidated Statements of Comprehensive (Loss) Income
                          (In thousands of dollars)
    -------------------------------------------------------------------------

                                                    Year Ended   Year Ended
                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------
    Net income                                         $14,588      $10,659
                                                  ---------------------------
      Losses on derivatives designated as
       cash flow hedges transferred to net
       income in the current year                           96            -
      Net change in derivatives designated as
       cash flow hedges                                (26,663)      (2,838)
                                                  ---------------------------
    Other comprehensive loss                           (26,567)      (2,838)
                                                  ---------------------------
    Comprehensive (loss) income                       $(11,979)      $7,821
                                                  ---------------------------
                                                  ---------------------------

       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      (Loss)    Distri-
               Units     Income    Surplus     Income    butions      Total
            -----------------------------------------------------------------
            (Note 13)
    Unit-
     holders'
     equity,
     Janu-
     ary 1,
     2008   $205,273    $20,064        $12    $(3,000)  $(31,515)  $190,834
    Units
     releas-
     ed
     under
     EUPP         20          -        (20)         -          -          -
    Units
     issued
     under
     EUPP        386          -          -          -          -        386
    Loans
     receiv-
     able
     under
     EUPP       (386)         -          -          -          -       (386)
    EUPP
     compen-
     sation        -          -         42          -          -         42
    Repayment
     of EUPP
     loans
     receiv-
     able        181          -          -          -          -        181
    Net
     income        -     14,588          -          -          -     14,588
    Distri-
     butions       -          -          -          -    (23,120)   (23,120)
    Other
     compre-
     hensive
     loss          -          -          -    (26,567)         -    (26,567)
    Unit
     issue
     proceeds,
     net of
     costs of
     $2,008   60,997          -          -          -          -     60,997
    Unit
     redemp-
     tion     (1,375)         -          -          -          -     (1,375)
            -----------------------------------------------------------------
    Unit-
     holders'
     equity,
     Decem-
     ber 31,
     2008   $265,096    $34,652        $34   $(29,567)  $(54,635)  $215,580
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    Unit-
     holders'
     equity,
     Janu-
     ary 1,
     2007   $204,831     $9,405        $27       $Nil   $(13,369)  $200,894
    Transi-
     tion
     adjust-
     ment          -          -          -       (162)         -       (162)
    Units
     releas-
     ed
     under
     EUPP         52          -        (52)         -          -          -
    Units
     issued
     under
     EUPP        215          -          -          -          -        215
    Loans
     receiv-
     able
     under
     EUPP       (215)         -          -          -          -       (215)
    EUPP
     compen-
     sation        -          -         37          -          -         37
    Repayment
     of EUPP
     loans
     receiv-
     able        390          -          -          -          -        390
    Net
     income        -     10,659          -          -          -     10,659
    Distri-
     butions       -          -          -          -    (18,146)   (18,146)
    Other
     compre-
     hensive
     loss          -          -          -     (2,838)         -     (2,838)
            -----------------------------------------------------------------
    Unit-
     holders'
     equity,
     Decem-
     ber 31,
     2007   $205,273    $20,064        $12    $(3,000)  $(31,515)  $190,834
            -----------------------------------------------------------------
            -----------------------------------------------------------------

       See accompanying notes to the consolidated financial statements.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
                    Consolidated Statements of Cash Flows
                          (In thousands of dollars)
    -------------------------------------------------------------------------
                                                    Year Ended   Year Ended
                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------
    Cash flows provided by (used in)

    Operating Activities
      Net income                                       $14,588      $10,659
      Items not affecting cash
        Non-controlling interest                        13,440        9,891
        Depreciation of commercial properties           16,456       12,499
        Amortization of tenant improvements/
         lease costs                                     3,511        2,747
        Amortization of deferred financing costs         1,349          415
        Amortization of swap settlements                   184            -
        Amortization of intangible assets               23,019       13,983
        Amortization of above market leases              3,087        2,982
        Amortization of below market leases             (7,297)      (4,489)
        Loss on disposal commercial property               331            -
        Accrued rental revenue                          (1,942)      (1,195)
        Unit based compensation                             42           37
        Future income taxes                             (1,490)       1,030
                                                  ---------------------------
                                                        65,278       48,559

    Additions to tenant improvements and
     lease costs                                       (11,419)     (11,223)
    Change in other non-cash operating items
     (Note 17)                                           6,187       (3,400)
                                                  ---------------------------
    Cash provided by operating activities               60,046       33,936
                                                  ---------------------------

    Financing Activities
    Issue of commercial property debt                  493,070       89,475
    Increase in deferred financing charges              (4,162)      (1,064)
    Settlement of interest rate swap agreements         (3,961)           -
    Issue of convertible debentures                     30,000            -
    Issue costs of convertible debentures               (1,214)           -
    Units issued                                        63,005            -
    Units and Class B LP Units issue costs              (3,790)           -
    Repayment of commercial property debt             (191,505)     (39,021)
    Decrease in liabilities related to discontinued
     operations                                            (25)           -
    Collection of notes receivable                       9,645       20,491
    Repayment of EUPP loan receivable                      181          390
    Unit redemption                                     (1,375)           -
    Payment of distributions                           (43,117)     (34,808)
                                                  ---------------------------
    Cash provided by financing activities              346,752       35,463
                                                  ---------------------------

    Investing Activities
    Additions to commercial properties                 (19,075)     (16,822)
    Assets related to discontinued operations           (7,250)           -
    Decrease in assets related to discontinued
     operations                                             66            -
    Proceeds of disposal of commercial property,
     net of closing costs                               10,186            -
    Acquisition of commercial properties (Note 4)     (389,405)     (51,049)
                                                  ---------------------------
    Cash used in investing activities                 (405,478)     (67,871)
                                                  ---------------------------
    Increase in cash and cash equivalents
     during the year                                     1,320        1,528
    Cash and cash equivalents, beginning of year         2,708        1,180
                                                  ---------------------------
    Cash and cash equivalents, end of year              $4,028       $2,708
                                                  ---------------------------
                                                  ---------------------------

       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, 2008
    -------------------------------------------------------------------------
    

    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. 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
Canadian 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 are 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(t).
    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(t).

    (f) Deferred financing charges

    Amortization of deferred financing charges is calculated using the
effective interest rate method over the terms of related debt.

    (g) 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.

    (h) Cash and cash equivalents

    Cash and cash equivalents are defined as cash on hand and cash in bank.

    (i) 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.

    (j) Financial instruments

    Crombie 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 (loss) income. Financial instruments classified as held
for trading are measured at fair value using the settlement date, with
unrealized gains and losses recognized in net income. Impairment write-downs
are recognized in net income.

    (k) Hedges

    Crombie has cash flow hedges which are used to manage exposures to
increases in variable interest rates. Cash flow hedges are recognized on the
balance sheet at fair value with the effective portion of the hedging
relationship recognized in other comprehensive (loss) income. Any ineffective
portion of the cash flow hedge is recognized in net income. Amounts recognized
in accumulated other comprehensive (loss) 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.
    Crombie has fixed interest rate swap agreements and a number of delayed
interest rate swap agreements designated as cash flow hedges. Crombie has
identified these hedges against increases in benchmark interest rates 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.

    (l)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 on initial recognition, and they are amortized using the
effective interest rate method.

    (m) Employee future benefits obligation

    The cost of pension benefits for the defined contribution plans is
expensed as contributions are paid. The cost of the defined benefit pension
plan and post-retirement benefit plan 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 plan and post-retirement
benefit plan 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.

    (n) 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.

    (o) Use of estimates

    The preparation of consolidated financial statements in conformity with
GAAP 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 and amortization;
    - Employee future benefit obligation;
    - Future income taxes;
    - Allocation of purchase price on property acquisitions; and
    - Fair value of commercial property debt, convertible debentures and
      assets and liabilities related to discontinued operations.
    

    (p) Payment of distributions

    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, 2008 $44,044 (year ended December 31, 2007 - $34,983)
in cash distributions were declared payable by the Board of Trustees to
Crombie Unitholders and Crombie Limited Partnership Unitholders (the "Class B
LP Units").

    (q) Comprehensive (loss) income

    Comprehensive (loss) income is the change in Unitholders' equity during a
period from transactions and other events and circumstances from non-owner
sources. Crombie reports a consolidated statement of comprehensive (loss)
income, comprising net income and other comprehensive (loss) income for the
period. Accumulated other comprehensive (loss) income, has been added to the
consolidated statements of unitholders' equity.

    (r) Convertible debentures

    Debentures with conversion features are assessed at inception as to the
value of both their equity component and their debt component. Based on the
assessment, Crombie has determined to date that no amount should be attributed
to equity and thus its convertible debentures have been classified as
liabilities. Distributions to debenture holders are presented as interest
expense. Issue costs on convertible debentures are netted against the
convertible debentures and amortized over the original life of the convertible
debentures using the effective interest rate method.

    (s) Discontinued operations

    Crombie classifies properties that meet certain criteria as held for sale
and separately discloses any net income and gain (loss) on disposal for
current and prior periods as discontinued operations. A property is classified
as held for sale at the point in time when it is available for immediate sale,
management has committed to a plan to sell the property and is actively
locating a purchaser for the property at a sales price that is reasonable in
relation to the current estimated fair market value of the property, and the
sale is expected to be completed within a one year period. Properties held for
sale are carried at the lower of their carrying values and estimated fair
value less costs to sell. In addition, assets held for sale are no longer
depreciated. A property that is subsequently reclassified as held in use is
measured at the lower of its carrying value amount before it was classed as
held for sale, adjusted for an amortization expense that would have been
recognized had it been continuously classified as held and in use, and its
estimated fair value at the date of the subsequent decision not to sell.

    (t) 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 AND ESTIMATES

    Effective January 1, 2008 Crombie has adopted three new accounting
standards that were issued by the CICA in 2006. These accounting policy
changes have been adopted in accordance with their transitional provisions of
the respective standard.
    The new standards and accounting policy changes are as follows:

    Capital Disclosures

    Effective January 1, 2008, the CICA's new accounting standard "Handbook
Section 1535, Capital Disclosures" was adopted, which requires the disclosure
of both qualitative and quantitative information to enable users of financial
statements to evaluate the entity's objectives, policies and processes for
managing capital. The new standard did not have any impact on the financial
position or earnings of Crombie and was applied on a prospective basis. Refer
to Note 22.

    Financial Instruments Disclosures and Presentation

    Effective January 1, 2008, the accounting and disclosure requirements of
the CICA's two new accounting standards were adopted: "Handbook Section 3862,
Financial Instruments - Disclosures" and "Handbook Section 3863, Financial
Instruments - Presentation." The new standards did not have any impact on the
financial position or earnings of Crombie and were applied on a prospective
basis. Refer to Note 20.

    Change in estimate

    During the year, the weighted average tax rate used to calculate the
future income tax liability was revised as a result of an assessment of the
anticipated period of the reversal of timing differences. This change in
estimate resulted in a decrease in the future income tax liability and future
income tax expense of $6,072 for the year ended December 31, 2008 (see Note
16).
    Effect of New Accounting Standards not yet Implemented

    Goodwill and Intangible Assets

    In February 2008, the CICA issued a new Section 3064 "Goodwill and
Intangible Assets" replacing Section 3062 "Goodwill and Other Intangible
Assets" as well as Section 3450 "Research and Development Costs". As a result
of these new sections, section 1000 "Financial Statements Concepts" has been
modified. The new Section 3064 states that intangible assets may be recognized
as assets only if they meet the definition of an intangible asset. Section
3064 also provides further information on the recognition of internally
generated intangible assets (including research and development costs). As for
subsequent measurement of intangible assets, goodwill, and disclosure, Section
3064 carries forward the requirements of the old Section 3062. The new Section
applies to annual and interim financial statements relating to fiscal years
beginning on or after October 1, 2008.
    Common practice in the real estate industry has been to defer and
amortize deferred tenant charges. Under the amended section 1000 these
deferred tenant charges would no longer qualify as a deferred asset.
    Management has reviewed the impact of this amendment and anticipates a
reclassification among asset classes without material change to unitholders'
equity or net income.

    International Financial Reporting Standards

    On February 13 2008, the Accounting Standards Board of Canada announced
that GAAP for publicly accountable enterprises will be replaced by
International Financial Reporting Standards (IFRS). IFRS must be adopted for
interim and annual financial statements related to fiscal years beginning on
or after January 1, 2011, with retroactive adoption and restatement of the
comparative fiscal year ended December 31, 2010. Accordingly, the conversion
from Canadian GAAP to IFRS will be applicable to Crombie's reporting for the
first quarter of fiscal 2011 for which the current and comparative information
will be prepared under IFRS.
    Crombie, with the assistance of its external advisors, have launched an
internal initiative to govern the conversion process and is currently
evaluating the potential impact of the conversion to IFRS on its financial
statements. At this time, the impact on Crombie's future financial position
and results of operations is not reasonably determinable or estimatable.
Crombie expects the transition to IFRS to impact accounting, financial
reporting, internal control over financial reporting, information systems and
business processes.
    Crombie has developed a formal project governance structure, and is
providing regular progress reports to senior management and the audit
committee. Crombie has also completed a diagnostic impact assessment, which
involved a high level review of the major differences between current GAAP and
IFRS, as well as establishing an implementation guideline. In accordance with
this guideline Crombie has established a staff training program and is in the
process of completing analysis of the key decision areas and making
recommendations on the same.
    Crombie will continue to assess the impact of the transition to IFRS and
to review all of the proposed and ongoing projects of the International
Accounting Standards Board to determine their impact on Crombie. Additionally
Crombie will continue to invest in training and resources throughout the
transition period to facilitate a timely conversion.

    
    4) COMMERCIAL PROPERTIES
                                                   December 31, 2008
                                      ---------------------------------------
                                                   Accumulated
                                                         Depre-         Net
                                             Cost      ciation   Book Value
                                      ---------------------------------------
    Land                                 $288,566         $Nil     $288,566
    Buildings                           1,029,990       37,276      992,714
    Tenant improvements and leasing
     costs                                 29,754        6,633       23,121
                                      ---------------------------------------
                                       $1,348,310      $43,909   $1,304,401
                                      ---------------------------------------
                                      ---------------------------------------

                                                   December 31, 2007
                                      ---------------------------------------
                                                   Accumulated
                                                         Depre-         Net
                                             Cost      ciation   Book Value
                                      ---------------------------------------
    Land                                 $180,938         $Nil     $180,938
    Buildings                             723,673       20,878      702,795
    Tenant improvements and leasing
     costs                                 18,350        3,145       15,205
                                      ---------------------------------------
                                         $922,961      $24,023     $898,938
                                      ---------------------------------------
                                      ---------------------------------------

    Property Acquisitions

    The operating results of the acquired properties are included from the
respective date of acquisition.

    2008
    ----

    On April 22, 2008, Crombie acquired 61 properties in Atlantic Canada,
Quebec and Ontario from subsidiaries of Empire Company Limited, representing a
3,288,000 square foot increase to the portfolio, for $428,500 plus additional
closing costs. The acquisition was financed through a $280,000 term facility,
the issuance of $30,000 convertible debentures, the issuance of $55,000 of
Class B LP units of Crombie Limited Partnership to affiliates of Empire, the
issuance of $63,005 of REIT units (5,727,750 units at a price of $11.00 per
unit), and a draw on Crombie's revolving credit facility.
    On June 12, 2008, Crombie acquired a property in Saskatoon, Saskatchewan,
representing a 160,000 square foot increase to the portfolio, for $27,200 plus
additional closing costs, from an unrelated third party. The acquisition was
financed through an assumption of an existing mortgage of $16,517 at a fixed
rate of 5.35% and a term of three years with the balance of the purchase price
paid using funds from the revolving credit facility.

    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 revolving credit
facility. On April 27, 2007, a mortgage of $7,850 at a fixed rate of 5.18% and
a term of twelve 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 revolving credit facility. On April 20,
2007, a mortgage of $12,600 at a fixed rate of 5.43% and a term of fifteen
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 $11,400 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 $3,400 at a fixed
rate of 6.44% and a term of seventeen 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 a 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 4 years with the balance of the
purchase price paid in cash using funds from the revolving credit facility.

    The allocation of the total cost of the acquisitions is as follows:

                                                    Year Ended   Year Ended
                                                   December 31, December 31,
    Commercial property acquired, net:                    2008         2007
    -------------------------------------------------------------------------
    Land                                              $107,826      $15,102
    Buildings                                          287,154       44,281
    Intangible assets:
      Lease origination costs                           40,233        3,473
      Tenant relationships                              21,622        4,806
      Above market leases                                  370        1,086
      In-place leases                                   35,384        5,059
    Intangible liabilities:
      Below market leases                              (31,848)      (3,370)
    -------------------------------------------------------------------------
    Net purchase price                                 460,741       70,437
    Assumed mortgages                                  (16,517)     (19,063)
    Fair value debt adjustment on assumed mortgages        181         (325)
    -------------------------------------------------------------------------
                                                      $444,405      $51,049
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration funded by:
    Revolving credit facility                          $16,000      $26,449
    Mortgage financing                                       -       20,450
    Term facility                                      280,000            -
    Units                                               63,005            -
    Convertible debentures                              30,000            -
    Application of deposit                                 400        4,150
    -------------------------------------------------------------------------
    Cash paid                                          389,405       51,049
    Class B LP Units (non-controlling interest) paid    55,000            -
    -------------------------------------------------------------------------
    Total consideration paid                          $444,405      $51,049
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    5) INTANGIBLE ASSETS

                                                   December 31, 2008
                                      ---------------------------------------
                                                   Accumulated
                                                        Amorti-         Net
                                             Cost       zation   Book Value
                                      ---------------------------------------
    Origination costs for existing
     leases                               $54,419      $11,680      $42,739
    In-place leases                        57,376       19,072       38,304
    Tenant relationships                   57,098       14,746       42,352
    Above market existing leases           16,015        8,007        8,008
                                      ---------------------------------------
                                         $184,908      $53,505     $131,403
                                      ---------------------------------------
                                      ---------------------------------------


                                                   December 31, 2007
                                      ---------------------------------------
                                                   Accumulated
                                                        Amorti-         Net
                                             Cost       zation   Book Value
                                      ---------------------------------------
    Origination costs for existing
     leases                               $14,186       $5,468       $8,718
    In-place leases                        21,992        9,628       12,364
    Tenant relationships                   35,476        7,431       28,045
    Above market existing leases           15,645        4,949       10,696
                                      ---------------------------------------
                                          $87,299      $27,476      $59,823
                                      ---------------------------------------
                                      ---------------------------------------

    6) NOTES RECEIVABLE

    On March 23, 2006, Crombie acquired 44 properties from Empire Company
Limited's subsidiary, ECL Properties Limited ("ECL") and certain affiliates,
resulting in ECL issuing two demand non-interest bearing promissory notes in
the amounts of $39,600 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.
Payments on the second 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 3.25 years.

    The balance of each note is as follows:
                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------
    Capital expenditure program                           $505       $6,817
    Interest rate subsidy                               10,818       14,151
                                                  ---------------------------
                                                       $11,323      $20,968
                                                  ---------------------------
                                                  ---------------------------

    7) OTHER ASSETS
                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------
    Gross accounts receivable                           $7,248       $5,943
    Provision for doubtful accounts                       (250)        (504)
                                                  ---------------------------
    Net accounts receivable                              6,998        5,439
    Accrued straight-line rent receivable                7,786        5,728
    Prepaid expenses and deferred tenant charges         9,420        8,479
    Restricted cash                                        938          790
                                                  ---------------------------
                                                       $25,142      $20,436
                                                  ---------------------------
                                                  ---------------------------

    8) COMMERCIAL PROPERTY DEBT

                                          Average      Average
                                         interest      term to  December 31,
                               Range         rate     maturity         2008
                         ----------------------------------------------------
    Fixed rate mortgages   5.15-6.44%        5.42%   6.9 years     $531,970
    Floating rate term
     facility                                4.87%   0.8 years      178,824
    Floating rate
     revolving credit
     facility                                4.37%   2.5 years       93,400
    Floating rate
     demand credit
     facility                                3.50%      Demand       10,000
    Deferred financing
     charges                                                         (5,223)
                                                                -------------
                                                                   $808,971
                                                                -------------
                                                                -------------

                                          Average      Average
                                         interest      term to  December 31,
                               Range         rate     maturity         2007
                         ----------------------------------------------------
    Fixed rate mortgages   5.15-6.44%        5.46%   7.4 years     $425,273
    Floating rate
     revolving credit
     facility                                5.50%   2.6 years       70,900
    Deferred financing charges                                       (2,228)
                                                                -------------
                                                                   $493,945
                                                                -------------
                                                                -------------

    As December 31, 2008, debt retirements for the next 5 years are:

                               Fixed     Floating    Financing
                                Rate         Rate        Costs        Total
                         ----------------------------------------------------
    Twelve months ended
     Dec. 31, 2009           $17,234     $188,824         $Nil     $206,058
    Twelve months ended
     Dec. 31, 2010           120,004            -            -      120,004
    Twelve months ended
     Dec. 31, 2011            40,535       93,400            -      133,935
    Twelve months ended
     Dec. 31, 2012            14,226            -            -       14,226
    Twelve months ended
     Dec. 31, 2013            44,978            -            -       44,978
    Thereafter               284,072            -            -      284,072
                         ----------------------------------------------------
                             521,049      282,224            -      803,273
    Deferred financing
     charges                       -            -       (5,223)      (5,223)
    Fair value debt
     adjustment               10,921            -            -       10,921
                         ----------------------------------------------------
                            $531,970     $282,224      $(5,223)    $808,971
                         ----------------------------------------------------
                         ----------------------------------------------------

    On April 22, 2008, Crombie entered into an 18 month floating rate term
facility of $280,000 to partially finance the acquisition of 61 properties
from subsidiaries of Empire Company Limited. The floating interest rate is
based on a specified margin over prime rate or the bankers acceptance rate,
which margin increases over time. As security for the floating rate term
facility, Crombie provided an unconditional guarantee and shall at any time on
or after the 90th day following the closing of the acquisition, the lender may
require Crombie to grant a charge on all or certain of the acquired properties
together with an assignment of leases. On October 14, 2008, the lender did
request that Crombie provide such security for the floating rate term
facility. The floating rate term facility contains financial and non-financial
covenants that are customary for a credit facility of this nature and which
mirror the covenants set forth in the revolving credit facility.
    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. The floating interest
rate is based on specific margins over prime rate or bankers acceptance rates.
The specified margin increases as Crombie's overall debt leverage increases.
As at December 31, 2008, $93,400 is drawn on the facility. During the second
quarter of 2008, the maturity date of the floating rate credit facility was
extended to June 30, 2011.
    During the fourth quarter of 2008, Crombie secured a $20,000 floating rate
demand credit facility with Empire Company Limited on substantially the same
terms and conditions that govern the floating rate revolving credit facility.
At December 31, 2008, Crombie had $10,000 drawn against the floating rate
demand credit facility (December 31, 2007 - $Nil). Subsequent to December 31,
2008, the entire $10,000 floating rate demand credit facility was repaid. Upon
completion of mortgage financings to refinance the $39,000 of the floating
rate term facility subsequent to December 31, 2008, $6,200 was drawn on the
floating rate demand credit facility to fund fixed rate second mortgages (see
Note 24).
    On August 28, 2008, Crombie completed the refinancing of an existing
mortgage on the freestanding store at 318 Ontario Street in Ontario. The new
fixed rate mortgage of $4,600 provided funds of $4,584 (net of fees). The
interest rate on the new mortgage is 5.73% with a maturity date of September
2013.
    On September 10, 2008, Crombie completed the refinancing of an existing
mortgage on the South Pelham Market Plaza in Ontario. The new fixed rate
mortgage of $5,610 provided funds of $5,576 (net of fees). The interest rate
on the new mortgage is 5.64% with a maturity date of October 2013.
    On September 30, 2008, Crombie completed mortgage financing to refinance
$100,000 of the floating rate term facility. The fixed rate mortgages have a
weighted average 7.7 year term, with a 25 year amortization, and a weighted
average interest rate of 5.91%.
    On November 3, 2008, Crombie completed the refinancing of an existing
mortgage on the Amherst Plaza in Nova Scotia. The new fixed rate mortgage of
$6,000 provided funds of $5,985 (net of fees). The interest rate on the new
mortgage is 5.50% with a maturity date of November 2013.
    On November 6, 2008, Crombie completed the refinancing of an existing
mortgage on the Port Colborne Mall in Ontario. The new fixed rate mortgage of
$6,175 provided funds of $6,096 (net of fees). The interest rate on the new
mortgage is 6.0% with a maturity date of November 2013.

    9) CONVERTIBLE DEBENTURES
                                                          Trans-    December
    Convertible       Maturity   Interest                action           31,
      debenture           date       rate   Principal     costs         2008
    ------------------------------------------------------------------------
       Series A       March 20,         7%    $30,000   $(1,032)     $28,968
                          2013
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------
    

    Series A convertible debentures
    -------------------------------

    On March 20, 2008, Crombie issued $30,000 in unsecured convertible
debentures related to the agreements to acquire a portfolio of 61 retail
properties from subsidiaries of Empire Company Limited.
    Each convertible debenture will be convertible into units of Crombie at
the option of the debenture holder up to the maturity date of March 20, 2013
at a conversion price of $13 per unit.
    The convertible debentures bear interest at an annual fixed rate of 7%,
payable semi-annually on June 30, and December 31 in each year commencing on
June 30, 2008. The convertible debentures are not redeemable prior to March
20, 2011. From March 20, 2011 to March 20, 2012, the convertible debentures
may be redeemed, in whole or in part, on not more than 60 days' and not less
than 30 days' prior notice, at a redemption price equal to the principal
amount thereof plus accrued and unpaid interest, provided that the
volume-weighted average trading price of the units on the TSX for the 20
consecutive trading days ending on the fifth trading day preceding the date on
which notice on redemption is given exceeds 125% of the conversion price.
After March 20, 2012, and prior to March 20, 2013, the convertible debentures
may be redeemed, in whole or in part, at anytime at the redemption price equal
to the principal amount thereof plus accrued and unpaid interest. Provided
that there is not a current event of default, Crombie will have the option to
satisfy its obligation to pay the principal amount of the convertible
debentures at maturity or upon redemption, in whole or in part, by issuing the
number of units equal to the principal amount of the convertible debentures
then outstanding divided by 95% of the volume-weighted average trading price
of the units for a stipulated period prior to the date of redemption or
maturity, as applicable. Upon change of control of Crombie, debenture holders
have the right to put the convertible debentures to Crombie at a price equal
to 101% of the principal amount plus accrued and unpaid interest.
    Crombie will also have an option to pay interest on any interest payment
date by selling units and applying the proceeds to satisfy its interest
obligation.
    Transaction costs related to the convertible debentures have been
deferred and are being amortized into interest expense over the term of the
convertible debentures using the effective interest rate method.

    10) PAYABLES AND ACCRUALS

    
                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------
    Tenant improvements and capital expenditures       $13,384       $9,828
    Property operating costs                            20,386       18,520
    Advance rents                                        5,364        2,692
    Interest on commercial property debt and
     debentures                                          2,504        1,731
    Fair value of interest rate swap agreements         53,044        5,784
                                                  ---------------------------
                                                       $94,682      $38,555
                                                  ---------------------------
                                                  ---------------------------

    11) INTANGIBLE LIABILITIES

                                                   December 31, 2008
                                      ---------------------------------------
                                                   Accumulated
                                                        Amorti-         Net
                                             Cost       zation   Book Value
                                      ---------------------------------------
    Below market existing leases          $55,703      $14,642      $41,061
                                      ---------------------------------------
                                      ---------------------------------------

                                                   December 31, 2007
                                      ---------------------------------------
                                                   Accumulated
                                                        Amorti-         Net
                                             Cost       zation   Book Value
                                      ---------------------------------------
    Below market existing leases          $23,855       $7,352      $16,503
                                      ---------------------------------------
                                      ---------------------------------------

    12) NON-CONTROLLING INTEREST

                                                                              
                                             Accumu-
                                               lated
                                               Other
                                              Compre-
                                   Contri-    hensive
             Class B      Net      buted      (Loss)     Distri-
            LP Units     Income    Surplus    Income     butions      Total
           ------------------------------------------------------------------
    Balance,
     Janu-
     ary 1,
     2008   $191,302    $18,678       $Nil    $(2,784)  $(29,277)  $177,919
    Net
     income        -     13,440          -          -          -     13,440
    Distri-
     butions       -          -          -          -    (20,924)   (20,924)
    Other
     compre-
     hensive
     (loss)
     income        -          -          -    (24,470)         -    (24,470)
    Unit
     issue
     proceeds,
     net of
     costs of
     $1,782   53,218          -          -          -          -     53,218
           ------------------------------------------------------------------
    Balance,
     Decem-
     ber
     31,
     2008   $244,520    $32,118       $Nil   $(27,254)  $(50,201)  $199,183
           ------------------------------------------------------------------
           ------------------------------------------------------------------


                                               Accumu-
                                                lated
                                                Other
                                               Compre-
                                    Contri-   hensive
             Class B        Net      buted     (Loss)     Distri-
            LP Units     Income    Surplus     Income     butions      Total
           ------------------------------------------------------------------
    Balance,
     Janu-
     ary 1,
     2007   $191,302     $8,787       $Nil       $Nil   $(12,440)  $187,649
    Tran-
     sition
     adjust-
     ment          -          -          -       (148)         -       (148)
    Net
     income        -      9,891          -          -          -      9,891
    Distri-
     butions       -          -          -          -    (16,837)   (16,837)
    Other
     compre-
     hensive
     (loss)
     income        -          -          -     (2,636)         -     (2,636)
           ------------------------------------------------------------------
    Balance,
     Decem-
     ber 31,
     2007   $191,302    $18,678       $Nil    $(2,784)  $(29,277)  $177,919
           ------------------------------------------------------------------
           ------------------------------------------------------------------

    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,
     Janu-
     ary
     1,
     2008  21,648,985  $205,273  20,079,576  $191,302  41,728,561  $396,575
    Units
     issu-
     ed     5,727,750    63,005   5,000,000    55,000  10,727,750   118,005
    Cost
     of
     issu-
     ance           -    (2,008)          -    (1,782)          -    (3,790)
           ------------------------------------------------------------------
    Net
     Unit
     issue
     pro-
     ceeds 27,376,735   266,270  25,079,576   244,520  52,456,311   510,790
    Units
     issu-
     ed
     under
     EUPP      34,053       386           -         -      34,053       386
    Units
     releas-
     ed
     under
     EUPP           -        20           -         -           -        20
    Net
     change
     in
     EUPP
     loans
     receiv-
     able           -      (205)          -         -           -      (205)
    Unit
     redemp-
     tion    (138,900)   (1,375)          -         -    (138,900)   (1,375)
           ------------------------------------------------------------------
    Balance,
     Decem-
     ber
     31,
     2008  27,271,888  $265,096  25,079,576  $244,520  52,351,464  $509,616
           ------------------------------------------------------------------
           ------------------------------------------------------------------


                                       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,
     Janu-
     ary
     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
     releas-
     ed
     under
     EUPP           -        52           -         -           -        52
    Net
     change
     in
     EUPP
     loans
     receiv-
     able           -       175           -         -           -       175
           ------------------------------------------------------------------
    Balance,
     Decem
     ber
     31,
     2007  21,648,985  $205,273  20,079,576  $191,302  41,728,561  $396,575
          ------------------------------------------------------------------
          ------------------------------------------------------------------

    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 ten 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. During the second quarter of 2008, Crombie redeemed 138,900 Units at a
value of $1,375.
    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 days 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 exchanged 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 TSX 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, 2008, there are loans receivable from executives of $1,291 under
Crombie's EUPP, representing 124,508 Units, which are classified as a
reduction of Unitholders' Equity. Loan repayments will result in a
corresponding increase in Unitholders' Equity. Market value of the Units at
December 31, 2008 was $966.
    The compensation expense related to the EUPP during the year ended
December 31, 2008 was $42 (year ended December 31, 2007 - $37).

    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. The convertible debentures are
anti-dilutive and have not been included in diluted net earnings per unit or
diluted weighted average number of units outstanding. As at December 31, 2008,
there are no other dilutive items.

    14) PROPERTY REVENUE

                                                    Year Ended   Year Ended
                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------
    Rental revenue contractually due from tenants     $181,978     $138,462
    Straight-line rent recognition                       1,932        1,215
    Below market lease amortization                      7,290        4,471
    Above market lease amortization                     (3,058)      (2,913)
                                                  ---------------------------
                                                      $188,142     $141,235
                                                  ---------------------------
                                                  ---------------------------

    15) INTEREST

                                                    Year Ended   Year Ended
                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------
    Fixed rate mortgages                               $25,136      $19,081
    Floating rate term, revolving and demand
     facilities                                         12,459        5,832
    Convertible debentures                               1,637            -
                                                  ---------------------------
    Interest expense                                    39,232       24,913
    Amortization of fair value debt adjustment           3,353        3,587
    Interest paid on discontinued operations               337          362
    Change in accrued interest                            (743)        (326)
    Amortization of hedges                                (184)           -
    Amortization of deferred financing charges          (1,349)        (414)
                                                  ---------------------------
    Interest paid                                      $40,646      $28,122
                                                  ---------------------------
                                                  ---------------------------

    16) FUTURE INCOME TAXES

    On September 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.
    Crombie's management and their advisors have completed an extensive review
of Crombie's organizational structure and operations to support Crombie's
assertion at January 1, 2008, and throughout the 2008 fiscal year, that 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.
    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,
                                                          2008         2007
                                                  ---------------------------
    Tax liabilities relating to difference in tax
     and book value                                    $86,060      $86,655
    Tax asset relating to non-capital loss
     carry-forward                                      (6,260)      (5,154)
                                                  ---------------------------
    Future income tax liability                        $79,800      $81,501
                                                  ---------------------------
                                                  ---------------------------


    The future income tax expense consists of the following:

                                                    Year Ended   Year Ended
                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------
    Provision for income taxes at the expected
     rate                                               $9,023       $7,553
    Tax effect of income attribution to Crombie's
     unitholders                                        (4,441)      (4,986)
    Decreased income tax resulting from a change
     in expected rate                                   (6,072)      (1,537)
                                                  ---------------------------
    Income tax (recovery) expense                      $(1,490)      $1,030
                                                  ---------------------------
                                                  ---------------------------

    17) CHANGE IN OTHER NON-CASH OPERATING ITEMS

                                                    Year Ended   Year Ended
                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------
    Cash provided by (used in):
      Receivables                                      $(1,535)      $1,975
      Prepaid expenses and other assets                   (934)      (1,727)
      Payables and other liabilities                     8,656       (3,648)
                                                  ---------------------------
                                                        $6,187      $(3,400)
                                                  ---------------------------
                                                  ---------------------------

    18) 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 19.
    Crombie has land leases on certain properties. These leases have annual
payments of $969 per year over the next five years. The land leases have terms
of between 12 and 76 years remaining, including renewal options.
    Crombie obtains letters of credit to support our obligations with respect
to construction work on our commercial properties and defeasing commercial
property debt. In connection with the defeasance of the discontinued
operations commercial property debt, Crombie has issued a standby letter of
credit in the amount of $1,715 in favour of the mortgage lender. In addition,
Crombie has $145 in standby letters of credit for construction work that is
being performed on its commercial properties. Crombie does not believe that
any of these standby letters of credit are likely to be drawn upon.

    19) RELATED PARTY TRANSACTIONS

    As at December 31, 2008, Empire Company Limited, through its wholly-owned
subsidiary ECL, holds a 47.9% indirect interest in Crombie. Crombie uses the
exchange amount as the measurement basis for the related party transactions.
    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 sharing basis. The costs assumed by Empire Company Limited pursuant
to the agreement during the year ended December 31, 2008 were $1,393 (year
ended December 31, 2007 - $1,505) and were netted against general and
administrative expenses owing by Crombie to Empire Company Limited.
    For a period of five years, commencing March 23, 2006, 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 sharing basis. In addition, for various periods, ECL has an
obligation to provide rental income and interest rate subsidies. The costs
assumed by Empire Company Limited pursuant to the agreement during the year
ended December 31, 2008 were $2,013 (year ended December 31, 2007 - $2,408)
and was netted against property expenses owing by Crombie to Empire Company
Limited. The rental income subsidy during the year ended December 31, 2008 was
$Nil (year ended December 31, 2007 - $37) and the head lease subsidy during
the year ended December 31, 2008 was $897 (year ended December 31, 2007 -
$2,124).
    Crombie also earned rental revenue of $50,483 for the year ended December
31, 2008 (year ended December 31, 2007 - $23,722) from Sobeys Inc., Empire
Theatres and ASC Commercial Leasing Limited ("ASC"). These companies were all
subsidiaries of Empire Company Limited until September 8, 2008 when ASC was
sold. Property revenue from ASC is included in this note disclosure until the
sale date.
    On April 22, 2008, Crombie acquired 61 properties from a related party
(see Note 4).
    Empire Company Limited has provided Crombie with a $20,000 floating rate
demand credit facility on substantially the same terms and conditions that
govern the floating rate revolving credit facility. The amount borrowed under
this floating rate demand facility at December 31, 2008 was $10,000.
Subsequent to December 31, 2008, the entire $10,000 of the floating rate
demand credit facility was repaid. Subsequent to December 31, 2008, (see Note
24) Crombie completed $39,000 of additional fixed rate mortgage financings for
eight of the properties acquired in the 61 property portfolio acquisition in
order to refinance the floating rate term facility. A third party provided
$32,800 of fixed rate first mortgage financing, while $6,200 of fixed rate
second mortgage financing was provided by Empire Company Limited. As a result
of this financing, the maximum amount available under the Empire Company
Limited floating rate demand credit facility was reduced from $20,000 to
$13,800.

    20) FINANCIAL INSTRUMENTS

    a) Fair value of financial instruments

    The fair value of a financial instrument is the estimated amount that
Crombie would receive or pay to settle the financial assets and financial
liabilities as at the reporting date.
    Crombie has classified its financial instruments in the following
categories:

    i.   Held for trading - Restricted cash and cash and cash equivalents

    ii.  Held to maturity investments - assets related to discontinued
         operations

    iii. Loans and receivables - Notes receivable and accounts receivable

    iv.  Other financial liabilities - Commercial property debt, liability
         related to discontinued operations, convertible debentures, tenant
         improvements and capital expenditures payable, property operating
         costs payable and interest payable

    The book value of cash and cash equivalents, restricted cash, receivables,
payables and accruals approximate fair values at the balance sheet date.
    The fair value of other financial instruments is based upon discounted
future cash flows using discount rates that reflect current market conditions
for instruments with similar terms and risks. Such fair value estimates are
not necessarily indicative of the amounts Crombie might pay or receive in
actual market transactions.
    The following table summarizes the carrying value (excluding deferred
financing charges) and fair value of those financial instruments which have a
fair value different from their book value at the balance sheet date.

                              December 31, 2008         December 31, 2007
    -------------------------------------------------------------------------
                            Carrying         Fair     Carrying         Fair
                               Value        Value        Value        Value
                         ----------------------------------------------------
    Assets related to
     discontinued
     operations               $7,184       $7,477         $Nil         $Nil
                         ----------------------------------------------------
                         ----------------------------------------------------
    Commercial property
      debt                  $814,194     $812,488     $496,173     $489,756
                         ----------------------------------------------------
                         ----------------------------------------------------
    Convertible
     debentures              $30,000      $25,950         $Nil         $Nil
                         ----------------------------------------------------
                         ----------------------------------------------------
    Liability related
     to discontinued
     operations               $6,487       $6,599       $6,633       $6,577
                         ----------------------------------------------------
                         ----------------------------------------------------

    The following summarizes the significant methods and assumptions used in
estimating the fair values of the financial instruments reflected in the above
table:

    Assets related to discontinued operations: The fair value of the bonds and
treasury bills are based on market trading prices at the reporting date.

    Commercial property debt and liability related to discontinued operations:
The fair value of Crombie's commercial property debt and liability related to
discontinued operations is estimated based on the present value of future
payments, discounted at the yield on a Government of Canada bond with the
nearest maturity date to the underlying debt, plus an estimated credit spread
at the reporting date.

    Convertible debentures: The fair value of the convertible debentures is
estimated based on the market trading prices, at the reporting date, of the
convertible debentures.

    b) Risk management

    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 (see Note 7).
    Crombie mitigates credit risk by geographical diversification, utilizing
staggered lease maturities, diversifying both its tenant mix and asset mix and
conducting credit assessments for new and renewing tenants. As at December 31,
2008;

    - Excluding Sobeys (which accounts for 33.0% of Crombie's minimum rent),
      no other tenant accounts for more than 2.2% of Crombie's minimum rent,
      and

    - Over the next five years, no more than 10.1% of the gross leaseable
      area of Crombie will expire in any one year.

    As outlined in Note 19, Crombie earned rental revenue of $50,483 for the
year ended December 31, 2008 (year ended December 31, 2007 - $23,722) from
subsidiaries of Empire Company Limited.

    Interest rate risk

    Interest rate risk is the potential for financial loss arising from
increases in interest rates. Crombie mitigates interest rate risk by utilizing
staggered debt maturities, limiting the use of permanent floating rate debt
and utilizing interest rate swap agreements. As at December 31, 2008:

    - Crombie's average term to maturity of the fixed rate mortgages was
      6.9 years, and

    - Crombie's exposure to floating rate debt, including the impact of the
      fixed rate swap agreements discussed below, was 21.3% of the total
      commercial property debt. Excluding the floating rate term facility,
      which is to be replaced with permanent fixed rate financing during the
      next twelve months, the exposure to floating rate debt is 6.9%.

    From time to time, Crombie has entered into interest rate swap agreements
to manage the interest rate profile of its current or future debts without an
exchange of the underlying principal amount. Recent turmoil in the financial
markets has materially affected interest swap rates. This effect was
especially pronounced during the fourth quarter of 2008. The interest swap
rates are based on Canadian bond yields, plus a premium, called the swap
spread, which reflects the risk of trading with a private counterparty as
opposed to the Canadian government. During the fourth quarter, the swap spread
turned negative. The effect of the negative swap spreads, combined with the
decline in the Canadian bond yields to levels not seen since the late 1940's,
has resulted in a significant deterioration of the mark-to-market values for
the interest rate swap agreements during the final quarter of 2008. At
December 31, 2008, the mark-to-market exposure on the interest rate swap
agreements was approximately $53,044. There is no immediate cash impact from
the mark-to-market adjustment. The unfavourable difference in the
mark-to-market amount of these interest rate swap agreements is reflected in
other comprehensive (loss) income rather than net income as the swaps are all
designated and effective hedges. The breakdown of the swaps in place as part
of the interest rate management program, and their associated unfavourable
differences are as follows:

    - 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. In
      addition, Crombie has entered into a fixed interest rate swap agreement
      of a notional amount of $50,000 to fix a portion of the interest on the
      floating rate term facility. The fair value of the fixed interest rate
      swaps at December 31, 2008, had an unfavourable mark-to-market exposure
      of $4,024 (December 31, 2007 - unfavourable $173) compared to its face
      value. The change in this amount has been recognized in other
      comprehensive (loss) income. The mark-to-market amount of fixed
      interest rate swaps reduce to $Nil upon maturity of the swaps

    - Crombie has entered into a number of delayed interest rate swap
      agreements of a notional amount of $100,334 with an effective date
      between February 1, 2010 and July 2, 2011, maturing between February 1,
      2019 and July 2, 2021 to mitigate exposure to interest rate increases
      for mortgages maturing in 2010 and 2011. The fair value of these
      delayed interest rate swap agreements had an unfavourable mark-to-
      market exposure of $20,901 compared to the face value December 31, 2008
      (December 31, 2007 - unfavourable $5,611). The change in these amounts
      has been recognized in other comprehensive (loss) income.

    - In relation to the acquisition of a portfolio of 61 retail properties
      from subsidiaries of Empire Company Limited, Crombie has entered into a
      number of delayed interest rate swap agreements of a notional amount of
      $180,000 to mitigate exposure to interest rate increases prior to
      replacing the 18 month floating rate term facility with long-term
      financing. The fair value of these agreements had an unfavourable mark-
      to-market exposure of $28,119 compared to their face value on
      December 31, 2008 (December 31, 2007 - $Nil). The change in these
      amounts has been recognized in other comprehensive (loss) income.

    During the year ended December 31, 2008, Crombie settled four interest
rate swap agreements related to a notional amount of $18,355 that had an
unfavourable mark-to-market difference of $3,745. This amount has been
recognized in other comprehensive (loss) income since the inception of the
interest rate swap agreements. This loss will be reclassified to interest
expense using the effective interest rate method.
    Crombie estimates that $1,855 of other comprehensive (loss) income will be
reclassified to interest expense during fiscal 2009.
    A fluctuation in interest rates would have an impact on Crombie's net
earnings and other comprehensive (loss) income items. Based on the previous
year's rate changes, a 0.5% interest rate change would reasonably be
considered possible. The changes would have had the following impact:

                                  Year ended                Year ended
                              December 31, 2008         December 31, 2007
                         ----------------------------------------------------
                                 0.5%         0.5%         0.5%         0.5%
                            increase     decrease     increase     decrease
    -------------------------------------------------------------------------
    Impact on net income
     of interest rate
     changes on the
     floating rate
     revolving credit
     facility                $(1,231)      $1,231        $(416)        $416
    -------------------------------------------------------------------------


                              December 31, 2008          December 31, 2007
                         ----------------------------------------------------
                                 0.5%         0.5%         0.5%         0.5%
                            increase     decrease     increase     decrease
    -------------------------------------------------------------------------
    Impact on other
     comprehensive income
     and non-controlling
     interest items due
     to changes in fair
     value of derivatives
     designated as a cash
     flow hedge              $10,678     $(11,288)      $4,657      $(4,931)
    -------------------------------------------------------------------------

    Crombie does not enter into these interest rate swap transactions on a
speculative basis. Crombie is prohibited by its Declaration of Trust in
purchasing, selling or trading in interest rate future contracts other than
for hedging purposes.

    Liquidity risk

    The real estate industry is highly capital intensive. Liquidity risk is
the risk that Crombie may not have access to sufficient debt and equity
capital to fund the growth program and/or refinance the debt obligations as
they mature.
    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 improvement costs and make distributions
to Unitholders. Debt repayment requirements are primarily funded from
refinancing Crombie's maturing debt obligations. Property acquisition funding
requirements are funded through a combination of accessing the debt and equity
capital markets.
    There is a risk that the debt capital markets may not refinance maturing
debt on terms and conditions acceptable to Crombie or at any terms at all.
These risks have heightened during the fourth quarter of 2008 due to the
turmoil in the financial markets. Crombie seeks to mitigate this risk by
staggering the debt maturity dates (see Note 8). There is also a risk that the
equity capital markets may not be receptive to an equity issue from Crombie
with financial terms acceptable to Crombie. As discussed in Note 22, Crombie
mitigates its exposure to liquidity risk utilizing a conservative approach to
capital management.
    Access to the revolving credit facility is also limited to the amount
utilized under the facility, plus any negative mark-to-market position on the
interest rate swap agreements may not exceed the security provided by Crombie.
During the fourth quarter of 2008, the mark-to-market adjustment on the
interest rate swap agreements reached an out-of-the-money position of
approximately $53,044 at December 31, 2008. The deterioration in the
mark-to-market position had the impact of reducing Crombie's available credit
in the revolving credit facility.
    During the fourth quarter of 2008, Crombie secured a $20,000 floating rate
demand credit facility with Empire Company Limited under essentially the same
terms and conditions that govern the revolving credit facility. This demand
facility has been put in place to ensure Crombie maintains adequate liquidity
in order to fund its daily operating activities while the volatility in the
financial markets continues, while also mitigating the risk of Crombie not
being in compliance with covenants under the revolving credit facility.
    Crombie has no mortgages maturing in fiscal 2009. During 2008, Crombie was
able to extend its revolving credit facility until June 30, 2011. In regard to
the floating rate term facility that expires in October, 2009, Crombie has
successfully refinanced $100,000 during the third quarter of 2008, along with
$39,000 subsequent to December 31, 2008 (see Note 24), and continues to have
positive discussions with a number of lenders to refinance the remaining
balance. While management can provide no assurances of refinancing, and while
the current credit market remains very challenging, management remains
confident it will refinance the remaining floating rate term facility prior to
it maturity.

    21) ASSET HELD FOR SALE AND DISCONTINUED OPERATIONS

    (a) On May 21, 2008, land attached to a commercial property was sold to
        an unrelated third party, resulting in a gain of $77.

    (b) During the second quarter of 2008, Crombie and a potential purchaser
        signed a purchase and sale agreement for a commercial property. The
        purchase and sale agreement closed on October 24, 2008. During the
        year ended December 31, of 2008, the asset held for sale was written
        down to estimate the property's fair value resulting in a charge of
        $408 (net of taxes $210).

    (c) During the forth quarter of 2008, Crombie defeased the $6,512
        mortgage associated with the discontinued operations. The transaction
        did not qualify for defeasance accounting, therefore the defeased
        loan and related asset have not been removed from the balance sheet.
        The defeased loan is payable in monthly payments of $42 and bears
        interest at 5.46%, was originally amortized over 25 years and is due
        April 1, 2014. Crombie purchased Government of Canada bonds and
        treasury bills and Canada mortgage bonds in the amount of $7,250 and
        pledged them as security to the mortgage company. The bonds mature
        between January 22, 2009 and September 15, 2013, have a weighted
        average interest rate of 3.56% and have been placed in escrow. The
        assets related to discontinued operations and liability related to
        discontinued operations are measured at amortized cost using the
        effective interest rate method, until April 1, 2014 at which time the
        debt will be extinguished.
    

    The following tables set forth the balance sheets associated with the
income property classified as held for sale as at December 31, 2008 and
December 31, 2007 and the statements of income for the property held for sale
for the year ended December 31, 2008 and December 31, 2007.

    
    Balance Sheets
                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------
    Assets
      Commercial property                                   $-      $10,025
      Deferred leasing costs                                 -          132
      Amounts receivable, prepaid expenses                   -          295
      Intangible assets                                      -          657
      Asset related to discontinued operations           7,184            -
                                                  ---------------------------
                                                         7,184       11,109
                                                  ---------------------------
    Liabilities
      Term mortgages                                         -        6,633
      Accounts payable and accrued liabilities              30          619
      Intangible liabilities                                 -           59
      Liabilities related to discontinued
       operations                                        6,487            -
                                                  ---------------------------
                                                         6,517        7,311
                                                  ---------------------------

    Net investment in asset held for sale                 $667       $3,798
                                                  ---------------------------
                                                  ---------------------------

    Statements of Income
                                                    Year Ended   Year Ended
                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------
    Property revenue
      Rental revenue contractually due from
       tenants                                          $2,214       $2,442
      Straight-line rent recognition                        10          (20)
      Below market lease amortization                        7           18
      Above market lease amortization                      (29)         (69)
                                                  ---------------------------
                                                         2,202        2,371
                                                  ---------------------------

    Expenses
      Property expenses                                  1,087        1,329
      Interest                                             337          362
      Depreciation of commercial properties                 58          138
      Amortization of tenant improvements/lease
       costs                                                23           33
      Amortization of intangible assets                     48          115
                                                  ---------------------------
                                                         1,553        1,977
                                                  ---------------------------

    Income from discontinued operation                    $649         $394
                                                  ---------------------------
                                                  ---------------------------

    22) CAPITAL MANAGEMENT

    Crombie's objective when managing capital on a long-term basis is to
maintain overall indebtedness in the range of 50% to 55% of gross book value
(as defined in the credit facility agreement), utilize staggered debt
maturities, minimize long-term exposure to floating rate debt, maintain
conservative payout ratios and maximize long-term unit value. Crombie's
capital structure consists of the following:

                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------

    Commercial property debt                          $808,971     $493,945
    Convertible debentures                              28,968            -
    Non-controlling interest                           199,183      177,919
    Unitholders' equity                                215,580      190,834
                                                  ---------------------------
                                                    $1,252,702     $862,698
                                                  ---------------------------
                                                  ---------------------------

    At a minimum, Crombie's capital structure is managed to ensure that it
complies with the limitation pursuant to Crombie's Declaration of Trust, the
criteria contained in the Income Tax Act (Canada) in regard to the definition
of a REIT and existing debt covenants. Some of the restrictions pursuant to
Crombie's Declaration of Trust would include, among other items:

    - A limitation that Crombie shall not incur indebtedness (other than by
      the assumption of existing indebtedness) where the indebtedness would
      exceed 75% of the market value of the individual property; and

    - A limitation that Crombie shall not incur indebtedness of more than 60%
      of Gross Book Value (65% including any convertible debentures)

    Crombie's debt to gross book ratio as defined in Crombie's Declaration of
Trust is as follows:

                                                   December 31, December 31,
                                                          2008         2007
                                                  ---------------------------
    Mortgages payable                                 $531,970     $425,273
    Convertible debentures                              30,000            -
    Term facility                                      178,824            -
    Revolving credit facility                           93,400       70,900
    Floating rate demand credit facility                10,000            -
                                                  ---------------------------
    Total debt outstanding                             844,194      496,173
    Less: Applicable fair value debt adjustment        (10,818)     (14,151)
                                                  ---------------------------
    Debt                                              $833,376     $482,022
                                                  ---------------------------
                                                  ---------------------------

    Total assets                                    $1,483,481   $1,013,982
    Add:
    Deferred financing charges                           6,255        2,228
    Accumulated depreciation of commercial
     properties                                         43,909       24,023
    Accumulated amortization of intangible assets       53,505       27,476
    Less:
    Assets held related to discontinued
     operations                                         (7,184)     (11,109)
    Interest rate subsidy                              (10,818)     (14,151)
    Fair value adjustment to future taxes              (39,245)     (39,245)
                                                  ---------------------------
    Gross book value                                $1,529,903   $1,003,204
                                                  ---------------------------
                                                  ---------------------------
    Debt to gross book value                              54.5%        48.0%
                                                  ---------------------------
                                                  ---------------------------

    Under the amended terms governing the revolving credit facility Crombie is
entitled to borrow a maximum of 70% of the fair market value of assets subject
to a first security position and 60% of the excess fair market value over
first mortgage financing of assets subject to a second security position or a
negative pledge. The terms of the revolving credit facility, also require that
Crombie must maintain certain covenants:

    - annualized net operating income for the prescribed properties must be a
      minimum of 1.4 times the coverage of the related annualized debt
      service requirements;

    - annualized net operating income on all properties must be a minimum of
      1.4 times the coverage of all annualized debt service requirements;

    - access to the revolving credit facility is limited by the amount
      utilized under the facility, and any negative mark-to-market position
      on the interest rate swap agreements, not to exceed the security
      provided by Crombie; and

    - distributions to Unitholders are limited to 100% of Distributable
      Income as defined in the revolving credit facility.

    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%.
    As at December 31, 2008, Crombie is in compliance with all externally
imposed capital requirements and all covenants relating to its debt
facilities.

    23) 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. The defined benefit plans are
unfunded.
    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
                                                  ---------------------------
    Senior Management Pension Plan                 May 1, 2008  May 1, 2011
    Post-retirement Benefit Plans                  May 1, 2008  May 1, 2011


    Defined benefit plans

    Information about Crombie's defined benefit plans are as follows:

                              December 31, 2008         December 31, 2007
                         ----------------------------------------------------
                              Senior         Post-      Senior         Post-
    Accrued benefit       Management   Retirement   Management   Retirement
     obligation              Pension      Benefit      Pension      Benefit
                                Plan        Plans         Plan        Plans
                         ----------------------------------------------------
    Balance,
     January 1, 2008            $951       $2,941         $940       $3,356
    Impact of assumption
     changes                       -            -           10         (523)
    Current service cost          40          145           50          148
    Interest cost                 52          162           50          149
    Actuarial gains              (92)        (698)         (99)        (189)
    Benefits paid                  -           (5)           -            -
                         ----------------------------------------------------
    Balance,
     December 31,2008            951        2,545          951        2,941
                         ----------------------------------------------------
    Plan Assets
    Fair value at the
     beginning of the
     year                         $-           $-           $-           $-
    Employer
     contributions                 -            5            -            -
    Benefits paid                  -           (5)           -            -
                         ----------------------------------------------------
    Fair value at
     end of year                  $-           $-           $-           $-
                         ----------------------------------------------------
    Funded status -
     deficit                     951        2,545          951        2,941
    Unamortized
     actuarial gains             151        1,189           59          507
                         ----------------------------------------------------
    Accrued benefit
     obligation recorded
     as a liability           $1,102       $3,734       $1,010       $3,448
                         ----------------------------------------------------
                         ----------------------------------------------------

    Net expense
    Current service cost         $40         $145          $50         $148
    Interest cost                 52          162           50          149
    Actuarial gains              (92)        (698)         (99)        (189)
                         ----------------------------------------------------
    Expense before
     adjustments                   -         (391)           1          108
    Recognized vs.
     actual actuarial
     losses(gains)                92          682           98          187
                         ----------------------------------------------------
    Net expense                  $92         $291          $99         $295
                         ----------------------------------------------------
                         ----------------------------------------------------

    The significant actuarial assumptions adopted in measuring the Company's
accrued benefit obligations and pension cost are as follows:

                              December 31, 2008         December 31, 2007
                         ----------------------------------------------------
                              Senior         Post-      Senior         Post-
                          Management   Retirement   Management   Retirement
                             Pension      Benefit      Pension      Benefit
                                Plan        Plans         Plan        Plans
                         ----------------------------------------------------
    Discount rate -
     accrued benefit
     obligation                 6.25%        6.75%        5.25%        5.25%
    Discount rate -
     periodic cost              5.25%        5.25%        5.00%        5.00%
    Rate of compensation
     increase                   4.00%         N/A         4.00%         N/A

    For measurement purposes, a 9% fiscal 2008 annual rate of increase in the
per capita cost of covered health care benefits was assumed. The cumulative
rate expectation to 2018 is 5%. The EARSL for the active employees covered by
the pension benefit plans is 4 years at year end. The EARSL of the active
employees covered by the other benefit plans range from 10 to 13 years at year
end.
    The table below outlines the sensitivity of the fiscal 2008 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.

                                      Senior Management    Post-Retirement
                                         Pension Plan       Benefit Plans
                                     ----------------------------------------
                                      Benefit             Benefit
                                         Obli-  Benefit      Obli-  Benefit
                                      gations    Cost(1)  gations    Cost(1)
                                     ----------------------------------------
    Discount Rate                        6.25%     6.25%     6.75%     6.75%
    Impact of:       1% increase        $(104)     $(31)    $(492)     $(85)
                     1% decrease         $117       $15      $610      $101
    Growth rate
     of health
     costs(2)                                                 9.0%      9.0%
    Impact of:       1% increase                             $523       $68
                     1% decrease                            $(412)     $(53)

    (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 2018 and remaining at that level
        thereafter.

    For the year ended December 31, 2008, the net defined contribution pension
plans expense was $303 (year ended December 31, 2007 - $394).

    24) SUBSEQUENT EVENTS

    a) On January 22, 2009, Crombie declared distributions of 7.417 cents per
       unit for the period from January 1, 2009 to, and including,
       January 31, 2009. The distribution will be payable on February 16,
       2009 to Unitholders of record as at January 31, 2009.

    b) On February 12, 2009, Crombie completed mortgage financings to
       refinance $39,000 of the floating rate term facility used to partially
       finance the 61 property portfolio acquisition. First mortgages were
       placed with a third party for a total of $32,800 and these fixed rate
       mortgages have a five year term and a weighted average interest rate
       of 4.88%. In addition, $6,200 of fixed rate second mortgages with a
       five year term and a weighted average interest rate of 5.38% were
       provided by Empire Company Limited from the floating rate demand
       credit facility.

    c) On February 19, 2009, Crombie declared distributions of 7.417 cents
       per unit for the period from February 1, 2009 to, and including,
       February 28, 2009. The distribution will be payable on March 16, 2009
       to Unitholders of record as at February 28, 2009.

    25) SEGMENT DISCLOSURE

    Crombie owns and operates primarily retail real estate assets located in
Canada. Management, in measuring Crombie's performance or making operating
decisions, does not distinguish or group its operations on a geographical or
other basis. Accordingly, Crombie has a single reportable segment for
disclosure purposes in accordance with GAAP.

    26) 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, 2008, with a comparison to the financial condition and results of
operations for the comparable period in 2007 and 2006.
    This MD&A should be read in conjunction with Crombie's consolidated
financial statements and accompanying notes for the period ended December 31,
2008, and the audited consolidated financial statements and accompanying notes
for the year ended December 31, 2007 and the related MD&A and the audited
consolidated financial statements and accompanying notes for the period March
23, 2006 to December 31, 2006 and the related MD&A. 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" 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 competitive 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;

    (ix) anticipated accretion levels relating to portfolio acquisitions,
which are dependent on interest and liquidity risks. The accretion levels as
stated in the MD&A are based on the anticipated fixed rates of permanent
financing rather than the lower current floating interest rates being paid on
in-place term financing;

    (*) anticipated permanent placement of debt financing relating to a
portfolio acquisition which is dependent on liquidity risks;

    (xi) the effect that any contingencies would have on Crombie's financial
statements;

    (xii) the impact of new accounting policies relating to intangible assets
and anticipated reclassification among asset classes without material change
to unitholders' equity or net income; and

    (xiii) the continued investment in training and resources throughout the
international financial reporting standards transition.

    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"), adjusted funds from
operations ("AFFO"), debt to gross book value, funds from operations ("FFO")
and earnings before interest, taxes, depreciation and amortization ("EBITDA").
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

    -------------------------------------------------------------------------
    (in thousands of            Year         Year      Quarter      Quarter
     dollars, except per       Ended        Ended        Ended        Ended
     unit amounts and as    December     December     December     December
     otherwise noted)       31, 2008     31, 2007     31, 2008     31, 2007
    -------------------------------------------------------------------------
    Property revenue        $188,142     $141,235      $52,522      $36,455
    Net income               $14,588      $10,659       $5,403       $4,058
    Basic and diluted net
     income per unit           $0.57        $0.49        $0.20        $0.19
    -------------------------------------------------------------------------
    FFO                      $69,855      $50,809      $18,699      $13,057
    FFO per unit(1)            $1.42        $1.22        $0.36        $0.31
    FFO payout ratio (%)        63.1%        68.9%        62.3%        67.9%
    AFFO                     $46,221      $34,842      $14,447       $7,561
    AFFO per unit(1)           $0.94        $0.84        $0.28        $0.18
    AFFO payout ratio (%)       95.3%       100.4%        80.6%       117.3%
    -------------------------------------------------------------------------
                            December     December     December
                            31, 2008     31, 2007     31, 2006
    -------------------------------------------------------------------------
    Debt to gross
     book value(2)              54.5%        48.0%        44.6%
    Total assets          $1,483,481   $1,013,982     $952,789
    Total commercial
     property debt and
     convertible
     debentures             $837,939     $493,945     $426,191
    -------------------------------------------------------------------------
    (1) FFO and AFFO per unit are calculated by FFO or AFFO, as the case may
        be, divided by the diluted weighted average of the total Units and
        Special Voting Units outstanding of 49,172,845 for the year ended
        December 31, 2008, 41,725,711 for the year ended December 31, 2007,
        52,351,464 for the quarter ended December 31, 2008 and 41,728,561 for
        the quarter ended December 31, 2007.
    (2) See "Borrowing Capacity and Debt Covenants" 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 7.2 million square feet (the "Business Acquisition") from
certain affiliates of Empire Company Limited ("Empire Subsidiaries"). On April
22, 2008, Crombie purchased a portfolio of 61 retail properties in six
provinces, totalling approximately 3.3 million square feet from 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, 2008, Crombie owned a
portfolio of 113 commercial properties in seven provinces, comprising
approximately 11.2 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, 2008, after just under three years of operations, Crombie has
been able to increase its distributions three times for a total increase of
11.25%. Crombie has achieved these distribution increases while achieving its
annual AFFO payout ratio targets.

    Enhance value of Crombie's assets: 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: Crombie's external growth
strategy focuses primarily on accretive acquisitions of income-producing
retail properties. Crombie pursues two sources of accretive acquisitions which
are third party acquisitions and the relationship with ECL. All acquisitions
completed to date have been purchased at costs which ensure they will be
immediately accretive to cash available for distribution. The relationship
with ECL includes currently owned and future development properties, as well
as opportunities through the rights of first refusal that one of Empire's
subsidiaries has 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.
    Crombie plans to work closely with ECL 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, 2008. Through this relationship, Crombie expects to have the
benefits associated with development while limiting its exposure to the
inherent risks of development, 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 ECL
continues to provide promising opportunities for growth through future
development opportunities on both new and existing sites in Crombie's
portfolio.
    ECL currently owns approximately 1.4 million square feet in eighteen
development properties 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. The properties are primarily
retail plazas and approximately 60% of the GLA of the eighteen properties is
located outside of Atlantic Canada. These properties are anticipated to be
made available to Crombie over the next one to four years.
    On April 22, 2008, Crombie closed an acquisition of a 61 retail property
portfolio representing approximately 3.3 million square feet of GLA (the
"Portfolio Acquisition") from Empire Subsidiaries. The cost of the Portfolio
Acquisition to Crombie was $428,500, excluding closing and transaction costs.
The portfolio consists of 40 single-use freestanding Sobeys grocery stores of
various Sobeys banners, 20 Sobeys anchored retail strip centres and one Sobeys
anchored partially enclosed centre. The GLA of the portfolio is as follows:
Atlantic Canada - 78%; Quebec - 7%; and Ontario - 15%.
    Crombie received approval by a majority of its unitholders (excluding
Empire Subsidiaries and certain of its affiliates and insiders) to proceed
with the Portfolio Acquisition at a meeting held on April 14, 2008.
    In order to partially finance the Portfolio Acquisition, on March 20,
2008, Crombie completed a public offering of 5,727,750 subscription receipts,
including the over-allotment option, at a price of $11.00 per subscription
receipt (each subscription receipt converted into one Unit of Crombie upon
closing) 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. for aggregate gross proceeds of $93,005.
    Empire Subsidiaries took $55,000 of the purchase price in Class B LP Units
of Crombie Limited Partnership at the $11.00 offering price. Empire Company
Limited ("Empire") holds a 47.9% economic and voting interest in Crombie as of
December 31, 2008.
    The remainder of the purchase price was satisfied with a $280,000, 18
month floating rate term financing ("Term Facility") from the Bank of Nova
Scotia and a draw on Crombie's revolving credit facility. On September 30,
2008, Crombie completed a refinancing of $100,000 of the Term Facility with
fixed rate mortgages (see "Commercial Property Debt"). Subsequent to December
31, 2008, Crombie completed mortgage refinancing on an additional $39,000 of
the Term Facility (see "Subsequent Events"). It is Crombie's intention to
replace the remaining Term Facility by suitable long-term fixed-rate
financing.
    Crombie expects that the Portfolio Acquisition will have a positive impact
to AFFO per unit and FFO per unit will remain at a consistent level. Debt to
gross book value increased from 48.0% at December 31, 2007 to 52.6 % excluding
Debentures, which is within Crombie's target ratio of 50% to 55%, and 54.5%
including Debentures at December 31, 2008. Both ratios remain under the
maximum allowable ratio as per Crombie's Declaration of Trust.
    The following table summarizes the key performance measures and balance
sheet changes as a result of the Portfolio Acquisition:

    -------------------------------------------------------------------------
                                      Crombie for   Annualized      Crombie
                                         the year    Pro Forma    Pro Forma
                                            ended    Effect of   Annualized
                                         December        Acqui-   for Acqui-
                                         31, 2007       sition       sition
    -------------------------------------------------------------------------
    Commercial properties                $898,938     $411,262   $1,310,200
    Commercial property debt             $493,945     $291,775     $785,720
    -------------------------------------------------------------------------
    Property revenue                     $141,235      $51,274     $192,509
    Property NOI                          $83,219      $34,848     $118,067
    -------------------------------------------------------------------------
    Units outstanding                  21,648,985    5,727,750   27,376,735
    Class B LP units outstanding       20,079,576    5,000,000   25,079,576
    -------------------------------------------------------------------------
    FFO                                   $50,809      $13,413      $64,222
    FFO/unit                                $1.22        $1.25        $1.22
    AFFO                                  $34,842      $12,329      $47,171
    AFFO/unit                               $0.84        $1.15        $0.90
    -------------------------------------------------------------------------

    During the second, third and fourth quarters, the actual results of the
Portfolio Acquisition were aligned with management's expectations and no
events transpired that would give reason to believe that the results will
differ materially from the pro forma estimates on an annual basis.
    Crombie completed its first property acquisition west of Ontario by
purchasing River City Centre in Saskatoon, Saskatchewan on June 12, 2008 for
$27,200 excluding closing and transaction costs. The 160,000 square foot site
was 100% leased to 13 tenants at the time of purchase.
    On October 24, 2008, Crombie completed the sale of West End Mall in
Halifax, Nova Scotia. Under GAAP, the financial position and operating results
have been reclassified on the financial statements for Crombie as Assets and
Liabilities related to discontinued operations on a retroactive basis. The
leasing and operating results tables in this MD&A also reflect the sale of the
property on Crombie's results.

    Business Environment

    During 2008, credit markets experienced a dramatic reduction in liquidity.
As the credit crisis deepened during the second half of 2008, both the ability
and willingness of financial institutions to lend money was greatly reduced as
financial institutions became increasingly risk adverse. This reduced credit
availability continues to be a major risk to the capital intensive real estate
investment trust ("REIT") business environment. This reduction in available
credit, combined with overall volatility in North American stock markets, has
negatively impacted the unit price of many REITs.
    The turmoil in the financial markets also caused bond yields to materially
decline and reduced interest rate swap spreads to unprecedented levels during
the fourth quarter of 2008. This resulted in a significant deterioration of
the mark-to-market values during the final quarter of 2008 for the interest
rate swap agreements Crombie has entered into to hedge its exposure to
potential increases in Canadian bond yields associated with future debt
issuances. The impact is more fully explained under the "Borrowing Capacity
and Debt Covenants" and "Risk Management" sections of this MD&A.
    Interest in investing in the real estate market has begun to moderate from
2007 and thus capitalization rates have begun to expand in light of the
widening credit spreads, a limited liquidity credit environment and the recent
deterioration in the unit price of many REITs. While it may be very
challenging to source accretive acquisitions under these current market
conditions, Crombie still intends to continue to pursue acquisitions that
provide an acceptable return, including any acquisitions that may result from
the relationship between Crombie and ECL.
    In terms of occupancy rates, while both the retail and office markets
where Crombie has a prominent presence remain relatively stable, the business
environment outlook has become decidedly pessimistic, influenced by the
pronounced recession in the U.S. economy and the emerging recession in the
Canadian economy. One offsetting factor to the economic slowdown is that many
of Crombie's retail locations are anchored by food stores, which typically are
less affected by swings in consumer spending.

    2008 HIGHLIGHTS

    - Crombie completed the acquisition of 61 commercial properties from
      Empire Subsidiaries on April 22, 2008 for a price of $428,500,
      excluding closing and transaction fees. In order to partially fund the
      purchase, Crombie also completed a public offering of units, raising
      gross proceeds of $63,005 and placed $30,000 of Debentures.

    - Crombie completed leasing activity on 104.8% of its 2008 expiring
      leases as at December 31, 2008, increasing average net rent per square
      foot to $12.46 from the expiring rent per square foot of $12.05, an
      increase of 3.4%.

    - Occupancy for the properties (excluding the Portfolio Acquisition) at
      December 31, 2008 was 92.9% compared with 93.2% at September 30, 2008.
      Overall occupancy at December 31, 2008 was 94.9%.

    - Property revenue for the year ended December 31, 2008 increased by
      $46,907, or 33.2%, to $188,142 compared to $141,235 for the year ended
      December 31, 2007. The improvement was due to the Portfolio
      Acquisition, increased same-asset property results and the six
      individual property acquisitions.

    - Same-asset NOI of $82,133 increased by $2,255 or 2.8%, compared to
      $79,878 for the year ended December 31, 2007 due primarily to an
      increased average net rent per square foot ($12.26 in 2008 versus
      $12.10 in 2007).

    - The FFO payout ratio for the year ended December 31, 2008 was 63.1%
      which was below the target annual payout ratio of 70.0% and below the
      payout ratio of 68.9% for the same period of 2007.

    - The AFFO payout ratio for the year ended December 31, 2008 was 95.3%
      which approximated the target annual AFFO payout ratio of 95.0% and was
      below the payout ratio for the same period of 2007 of 100.4%.

    - Debt to gross book value increased to 54.5% at December 31, 2008
      compared to 48.0% at December 31, 2007 due primarily to the Portfolio
      Acquisition.

    - Crombie's interest service coverage ratio for the year ended December
      31, 2008 was 2.74 times EBITDA and debt service coverage ratio was
      2.00 times EBITDA, compared to 3.00 times EBITDA and 2.03 times EBITDA,
      respectively, for the same period in 2007.

    OVERVIEW OF THE PROPERTY PORTFOLIO

    Property Profile

    At December 31, 2008 the property portfolio consisted of 113 commercial
properties that contain approximately 11.2 million square feet of GLA. The
properties are located in seven provinces: Nova Scotia, New Brunswick,
Newfoundland and Labrador, Prince Edward Island, Ontario, Quebec and
Saskatchewan.
    As at December 31, 2008, the portfolio distribution of the GLA by province
was as follows:

    -------------------------------------------------------------------------
              Number of                            % of Annual
                 Proper-         GLA                   Minimum    Occupancy
    Province       ties     (sq. ft.)    % of GLA         Rent           (1)
    -------------------------------------------------------------------------
    Nova Scotia      41    5,062,000         45.3%        41.0%        94.4%
    Ontario          22    1,640,000         14.7%        16.8%        96.1%
    New Brunswick    20    1,647,000         14.7%        12.6%        92.0%
    Newfoundland
     and Labrador    13    1,465,000         13.1%        17.0%        95.1%
    Quebec           13      821,000          7.3%         7.9%        99.5%
    Prince Edward
     Island           3      385,000          3.5%         3.2%        96.9%
    Saskatchewan      1      160,000          1.4%         1.5%       100.0%
    -------------------------------------------------------------------------
    Total           113   11,180,000        100.0%       100.0%        94.9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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

    During the fourth quarter of 2008 there was an increase in GLA due to
expansion at two Sobeys locations in Newfoundland and Labrador, one Lawtons
location and one Sobeys location in Nova Scotia and a freestanding pad
expansion in Quebec.
    Crombie continues to diversify its geographic composition through growth
opportunities, as indicated by the seven acquisitions in Ontario, one
acquisition in Quebec and one acquisition in Saskatchewan, plus the Portfolio
Acquisition since the IPO. 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 ten 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, 2008.

    -------------------------------------------------------------------------
                                                                    Average
                                               % of Annual        Remaining
                                                   Minimum            Lease
    Tenant                                            Rent             Term
    -------------------------------------------------------------------------
    Sobeys (1)                                        33.0%      17.0 years
    Empire Theatres                                    2.2%       9.1 years
    Zellers                                            2.2%       9.0 years
    Shoppers Drug Mart                                 2.0%       7.3 years
    Nova Scotia Power Inc                              1.9%       2.3 years
    CIBC                                               1.6%      18.0 years
    Province of Nova Scotia                            1.5%       6.5 years
    Bell (Aliant)                                      1.4%       9.6 years
    Public Works Canada                                1.3%       2.4 years
    Sears Canada Inc.                                  1.2%      15.9 years
    -------------------------------------------------------------------------
    Total                                             48.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes Lawtons and Fast Fuel locations.

    Crombie's portfolio is leased to a wide variety of tenants. Other than
Sobeys, which accounts for 33.0% of the annual minimum rent, no other tenant
accounts for more than 2.2% of Crombie's minimum rent.
    Crombie had five locations leased to SAAN Stores Ltd. totalling 135,948
square feet of GLA, representing 1.2% of Crombie's total GLA as at December
31, 2008. During the second quarter SAAN ceased operations and came under
bankruptcy protection. Total annual rental revenue from the locations was
approximately $293, representing less than 0.16% of Crombie's total property
revenue ($2.16 net rent per square foot). As at December 31, 2008, two of the
leases had been taken over by the Bargain Shop and two had been taken over by
Hart Stores. The remaining location had been disclaimed by the trustee as at
December 31, 2008. Subsequent to year end, nine locations leased to Source by
Circuit City totalling 17,979 square feet of GLA, representing less than 0.2%
of Crombie's total GLA had come under bankruptcy protection.

    Lease Maturities

    The following table sets out as of December 31, 2008 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 10.6 years.

    -------------------------------------------------------------------------
                                                                Average Net
                                          Renewal                  Rent per
                              Number         Area         % of   Sq. Ft. at
    Year                   of Leases     (sq. ft.)   Total GLA    Expiry ($)
    -------------------------------------------------------------------------
    2009                         248      703,000          6.3%      $13.58
    2010                         199      784,000          7.0%      $12.32
    2011                         212    1,123,000         10.1%      $13.70
    2012                         155      781,000          7.0%      $12.19
    2013                         146      853,000          7.6%      $11.83
    Thereafter                   375    6,365,000         56.9%      $13.02
    -------------------------------------------------------------------------
    Total                      1,335   10,609,000         94.9%      $12.92
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    2008 Portfolio Lease Expiries and Leasing Activity

    The portfolio lease expiries and leasing activity, excluding the impact of
the 2008 acquisitions and disposals, for the year ending December 31, 2008
were as follows:

    -------------------------------------------------------------------------
            Retail -
                Free-  Retail -   Retail -                 Mixed-
            standing     Plazas   Enclosed     Office        use      Total
    -------------------------------------------------------------------------
    Expiries
     (sq. ft.)     -     79,000    247,000    136,000    219,000    681,000
    Average net
     rent per
     sq. ft.     $ -     $13.96     $13.32     $10.92     $10.63     $12.05
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Committed
     renewals
     (sq. ft.)     -     35,000    181,000     80,000    148,000    444,000
    Average net
     rent per
     sq. ft.     $ -     $16.60     $12.42     $10.97     $12.44     $12.49
    New leasing
     (sq. ft.)     -     99,000     93,000     54,000     24,000    270,000
    Average net
     rent per
     sq. ft.     $ -     $13.04     $10.17     $14.91     $12.83     $12.41
    -------------------------------------------------------------------------
    Total
     renewals/
     new leasing
     (sq. ft.)     -    134,000    274,000    134,000    172,000    714,000
    Total
     average net
     rent per
     sq. ft.     $ -     $13.96     $11.66     $12.56     $12.49     $12.46
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During the year ended December 31, 2008, Crombie had renewals or entered
into new leases in respect of approximately 714,000 square feet at an average
net rent of $12.46 per square foot, compared with expiries for 2008 of
approximately 681,000 square feet at an average net rent of $12.05 per square
foot. Of the 681,000 square feet of expiries, approximately 100,000 square
feet involve tenants that are still paying property revenues on a holdover
basis. Rent per square foot for the completed new leasing activity in retail
plaza properties is below the average expiry rate due to the leasing of space
during the fourth quarter of 2008 with limited access in smaller rural
locations. Rent per square foot for the completed new leasing activity in the
retail enclosed properties is below the average net rent per square foot of
total expiries in 2008 due primarily to four relatively larger leases in three
smaller rural locations that averaged $6.50 per square foot. Rent per square
foot for the renewals in the retail enclosed properties was lower than the
average expiry rate due to the renewal of a long term tenant at previously
negotiated terms favourable to the tenant. The reduction in new leasing
activity for retail enclosed properties compared to the third quarter of 2008
is due to the delayed opening of a Future Shop location at Highland Square in
New Glasgow, Nova Scotia from 2008 to Spring 2009. The reduction in new
leasing activity for the office properties is due to the reduced square feet
occupied by Keane Canada at Cogswell Tower in Halifax, Nova Scotia.

    Sector Information

    While Crombie does not distinguish or group its operations on a
geographical or other basis, Crombie provides the following sector information
as supplemental disclosure.
    As at December 31, 2008, the portfolio distribution of the GLA by asset
type was as follows:

    -------------------------------------------------------------------------
                 Number                            % of Annual
    Asset        of Pro-         GLA                   Minimum
     Type       perties     (sq. ft.)    % of GLA         Rent  Occupancy(1)
    -------------------------------------------------------------------------
    Retail -
     Freestanding    42    1,696,000         15.2%        15.7%       100.0%
    Retail -
     Plazas          44    3,974,000         35.5%        37.2%        96.7%
    Retail -
     Enclosed        14    2,756,000         24.6%        24.5%        90.4%
    Office            5    1,048,000          9.4%         9.0%        89.7%
    Mixed-Use         8    1,706,000         15.3%        13.6%        96.1%
    -------------------------------------------------------------------------
    Total           113   11,180,000        100.0%       100.0%        94.9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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, 2008, the square feet
under lease subject to lease maturities during the periods indicated.

                       Retail -
                   Freestanding       Retail - Plazas     Retail - Enclosed
    -------------------------------------------------------------------------
    Year       (sq. ft.)     (%)     (sq. ft.)     (%)     (sq. ft.)     (%)
    -------------------------------------------------------------------------
    2009              -       -       160,000     4.0%      220,000     8.0%
    2010              -       -       286,000     7.2%      103,000     3.7%
    2011          1,000     0.1%      325,000     8.2%      122,000     4.4%
    2012          5,000     0.3%      269,000     6.8%      145,000     5.3%
    2013              -      - %      384,000     9.7%      218,000     7.9%
    There-
     after    1,690,000    99.6%    2,417,000    60.8%    1,683,000    61.1%
    -------------------------------------------------------------------------
    Total     1,696,000   100.0%    3,841,000    96.7%    2,491,000    90.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Year               Office             Mixed-Use                Total
    -------------------------------------------------------------------------
               (sq. ft.)     (%)     (sq. ft.)     (%)     (sq. ft.)     (%)
    -------------------------------------------------------------------------
    2009        103,000     9.8%      220,000    12.9%      703,000     6.3%
    2010         75,000     7.1%      320,000    18.8%      784,000     7.0%
    2011        367,000    35.0%      308,000    18.0%    1,123,000    10.1%
    2012        110,000    10.5%      252,000    14.8%      781,000     7.0%
    2013         87,000     8.3%      164,000     9.6%      853,000     7.6%
    There-
     after      199,000    19.0%      376,000    22.0%    6,365,000    56.9%
    -------------------------------------------------------------------------
    Total       941,000    89.7%    1,640,000    96.1%   10,609,000    94.9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    -------------------------------------------------------------------------
               Retail -
                   Free-    Retail -     Retail -
    Year       standing       Plazas     Enclosed       Office    Mixed-Use
    -------------------------------------------------------------------------
    2009            $ -       $16.28       $13.97       $12.66       $11.64
    2010            $ -       $13.65       $19.66       $11.54        $8.96
    2011         $37.50       $14.22       $21.81       $14.12        $9.36
    2012         $25.00       $12.82       $19.21        $9.70        $8.32
    2013            $ -        $9.66       $14.47       $12.85       $12.89
    Thereafter   $13.32       $13.64       $11.62       $11.59       $14.48
    -------------------------------------------------------------------------
    Total        $13.38       $13.34       $13.38       $12.59       $10.95
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    2008 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. The
following acquisitions took place between January 2007 and December 2008.

    -------------------------------------------------------------------------
                                                                      Owner-
                                                               Acqui-  ship
                           Date    Property            GLA    sition   Inte-
    Property           Acquired    Type           (sq. ft.)   Cost(1)  rest
    -------------------------------------------------------------------------
    The Mews of
     Carleton Place,
     Carleton Place,    Jan. 17,   Retail -
     Ontario               2007    Plaza            80,000   $11,800    100%
    -------------------------------------------------------------------------
    Perth Mews
     Shopping Mall,      Mar. 7,   Retail -
     Perth, Ontario        2007    Plaza           103,000   $17,900    100%
    -------------------------------------------------------------------------
    International
     Gateway Centre,
     Fort Erie,         Jul. 26,   Retail -
     Ontario               2007    Plaza            93,000   $19,200    100%
    -------------------------------------------------------------------------
    Brossard-
     Longueuil,
     Brossard,          Aug. 24,   Retail -
     Quebec                2007    Freestanding     39,000    $7,300    100%
    -------------------------------------------------------------------------
    Town Centre,
     LaSalle,           Oct. 15,   Retail -
     Ontario               2007    Plaza            88,000   $12,700    100%
    -------------------------------------------------------------------------
    Portfolio           Apr. 22,   Retail -
     Acquisition           2008    Freestanding  1,589,000  $428,500    100%
                                   Retail -
                                   Plaza         1,571,000              100%
                                   Retail -
                                   Enclosed        128,000              100%
    -------------------------------------------------------------------------
    River City
     Centre,
     Saskatoon,         Jun. 12,   Retail -
     Saskatchewan          2008    Plaza           160,000   $27,200    100%
    -------------------------------------------------------------------------
    Total                                        3,851,000  $524,600
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excluding closing and transaction costs.

    Comparison to Previous Years

    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     December     December
     except where otherwise noted)       31, 2008     31, 2007     31, 2006
    -------------------------------------------------------------------------
    Property revenue                     $188,142     $141,235     $127,554
    Property expenses                      71,299       58,016       54,224
    -------------------------------------------------------------------------
    Property NOI                          116,843       83,219       73,330
    -------------------------------------------------------------------------
    NOI margin percentage                    62.1%        58.9%        57.5%
    -------------------------------------------------------------------------
    Expenses:
      General and administrative            8,636        8,177        7,052
      Interest                             39,232       24,913       20,969
      Depreciation and amortization        42,857       28,943       22,734
    -------------------------------------------------------------------------
                                           90,725       62,033       50,755
    -------------------------------------------------------------------------
    Income from continuing
     operations before other items,
     income taxes and non-controlling
     interest                              26,118       21,186       22,575
    Other items                               179            -            -
    -------------------------------------------------------------------------
    Income from continuing
     operations before income taxes
     and non-controlling interest          26,297       21,186       22,575
    Income taxes expense
     (recovery) - Future                   (1,490)       1,030         (763)
    -------------------------------------------------------------------------
    Income from continuing operations
     before non-controlling interest       27,787       20,156       23,338
    Loss on sale of discontinued
     operations                              (408)           -            -
    Income from discontinued
     operations                               649          394          371
    -------------------------------------------------------------------------
    Income before non-controlling
     interest                              28,028       20,550       23,709
    Non-controlling interest               13,440        9,891       11,512
    -------------------------------------------------------------------------
    Net income                            $14,588      $10,659      $12,197
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net income
     per Unit                               $0.57        $0.49        $0.57
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic weighted average Units
     outstanding (in 000's)                25,478       21,535       21,445
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted weighted average Units
     outstanding (in 000's)                25,596       21,646       21,499
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income for the year ended December 31, 2008 of $14,588 increased by
$3,929 from $10,659 for the year ended December 31, 2007. The increase was
primarily 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 individual
      property acquisitions after January 1, 2007 and the Portfolio
      Acquisition; offset in part by

    - higher interest and depreciation charges, due primarily to the
      individual property acquisitions after January 1, 2007 and the
      Portfolio Acquisition.

    Property Revenue and Property Expenses

    -------------------------------------------------------------------------
                                              Year Ended
                                       -------------------------
                                         December     December
    (In thousands of dollars)            31, 2008     31, 2007     Variance
    -------------------------------------------------------------------------
    Same-asset property revenue          $141,211     $136,543       $4,668
    Acquisition property revenue           46,931        4,692       42,239
    -------------------------------------------------------------------------
    Property revenue                     $188,142     $141,235      $46,907
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset property revenue of $141,211 for the year ended December 31,
2008 was 3.4% higher than the year ended December 31, 2007 due primarily to
the increased average rent per square foot ($12.26 in 2008 and $12.10 in 2007)
and increased revenue from higher recoverable common area expenses.

    -------------------------------------------------------------------------
                                              Year Ended
                                       -------------------------
                                         December     December
    (In thousands of dollars)            31, 2008     31, 2007     Variance
    -------------------------------------------------------------------------
    Same-asset property expenses          $59,078      $56,665       $2,413
    Acquisition property expenses          12,221        1,351       10,870
    -------------------------------------------------------------------------
    Property expenses                     $71,299      $58,016      $13,283
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset property expenses of $59,078 for the year ended December 31,
2008 were 4.3% higher than the year ended December 31, 2007 due to increased
recoverable common area expenses primarily from increased utility and snow
removal costs, and increased non-recoverable maintenance costs.

    -------------------------------------------------------------------------
                                              Year Ended
                                       -------------------------
                                         December     December
    (In thousands of dollars)            31, 2008     31, 2007     Variance
    -------------------------------------------------------------------------
    Same-asset property NOI               $82,133      $79,878       $2,255
    Acquisition property NOI               34,710        3,341       31,369
    -------------------------------------------------------------------------
    Property NOI                         $116,843      $83,219      $33,624
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset NOI for the year ended December 31, 2008 grew by 2.8% over the
year ended December 31, 2007.

    Property NOI for the year ended December 31, 2008 by region was as
follows:

    -------------------------------------------------------------------------
                                      2008                     2007
                  -----------------------------------------
                                                     NOI %    NOI %
    (In thousands  Property   Property   Property       of       of
     of dollars)    Revenue   Expenses        NOI  revenue  revenue Variance
    -------------------------------------------------------------------------
    Nova Scotia     $87,098    $36,995    $50,103    57.5%    54.8%     2.7%
    Newfoundland
     and Labrador    29,327      8,858     20,469    69.8%    64.9%     4.9%
    New Brunswick    23,083     10,264     12,819    55.5%    50.2%     5.3%
    Ontario          31,082     10,559     20,523    66.0%    67.2%    (1.2)%
    Prince Edward
     Island           4,623      1,368      3,255    70.4%    72.6%    (2.2)%
    Quebec           11,352      2,865      8,487    74.8%    75.5%    (0.7)%
    Saskatchewan      1,577        390      1,187    75.3%      - %      - %
    -------------------------------------------------------------------------
    Total          $188,142    $71,299   $116,843    62.1%    58.9%     3.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The overall 3.2% increase in NOI as a % of revenue, as well as specific
provincial increases in Nova Scotia and Newfoundland and Labrador, was
primarily due to the Portfolio Acquisition, as well as the growth in
same-asset NOI. Prince Edward Island's decrease in NOI % of revenue is
attributable to the increased non-recoverable paving repairs incurred in 2008
as compared to 2007, partially offset by the acquisition activity in that
province. New Brunswick's growth in NOI % of revenue includes the effect of
the Portfolio Acquisition, the completion of the redevelopment of Uptown
Centre in Fredericton, and the collection of previously allowed-for
receivables for SAAN stores that had undergone bankruptcy protection during
the first quarter of 2008.

    General and Administrative Expenses

    The following table outlines the major categories of general and
administrative expenses.

    -------------------------------------------------------------------------
                                              Year Ended
                                       -------------------------
                                         December     December
                                         31, 2008     31, 2007     Variance
    -------------------------------------------------------------------------
    Salaries and benefits                  $4,185       $3,931         $254
    Professional fees                       2,107        1,490          617
    Public company costs                      905          933          (28)
    Rent and occupancy                        687          985         (298)
    Other                                     752          838          (86)
    -------------------------------------------------------------------------
    General and administrative costs       $8,636       $8,177         $459
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    As a percentage of revenue                4.6%         5.8%        (1.2)%
    -------------------------------------------------------------------------

    General and administrative expenses increased by 5.6% for the year ended
December 31, 2008 to $8,636 compared to $8,177 for the year ended December 31,
2007. The increase in expenses was primarily due to additional staff hired for
ongoing acquisition activity and head office support functions, higher
performance incentives as well as increased legal and information technology
professional fees. Rent and occupancy costs have decreased as a result of the
negotiation of more favourable lease terms at the head office.

    Interest Expense

    -------------------------------------------------------------------------
                                              Year Ended
                                       -------------------------
                                         December     December
    (In thousands of dollars)            31, 2008     31, 2007     Variance
    -------------------------------------------------------------------------
    Same-asset interest expense           $22,630      $23,648      $(1,018)
    Acquisition interest expense           16,602        1,265       15,337
    -------------------------------------------------------------------------
    Interest expense                      $39,232      $24,913      $14,319
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset interest expense of $22,630 for the year ended December 31,
2008 decreased by 4.3% when compared to the year ended December 31, 2007 due
to the declining interest portion of debt repayments for the same-assets
combined with effects of reduced interest rates on some fixed rate mortgages
that have been renegotiated since December 31, 2007 and a decrease in the
effective interest rate on the revolving credit facility.
    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 received during
the year ended December 31, 2008 was $3,333 (year ended December 31, 2007 -
$3,566). 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     December
    (In thousands of dollars)            31, 2008     31, 2007     Variance
    -------------------------------------------------------------------------
    Same-asset depreciation
     and amortization                     $27,547      $27,069         $478
    Acquisition depreciation and
     amortization                          15,310        1,874       13,436
    -------------------------------------------------------------------------
    Depreciation and amortization         $42,857      $28,943      $13,914
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset depreciation and amortization of $27,547 for the year ended
December 31, 2008 was 1.8% higher than the year ended December 31, 2007 due
primarily to deprecation on fixed asset additions and amortization of tenant
improvements and leasing costs incurred since December 31, 2007. Depreciation
and amortization consists of:

    -------------------------------------------------------------------------
                                              Year Ended
                                       -------------------------
                                         December     December
    (In thousands of dollars)            31, 2008     31, 2007     Variance
    -------------------------------------------------------------------------
    Depreciation of commercial
     properties                           $16,398      $12,361       $4,037
    Amortization of tenant
     improvements/lease costs               3,488        2,714          774
    Amortization of intangible assets      22,971       13,868        9,103
    -------------------------------------------------------------------------
    Depreciation and amortization         $42,857      $28,943      $13,914
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Future Income Taxes

    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").
    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.
    Crombie's management and their advisors have completed 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 and throughout
the 2008 fiscal year.
    The future income tax expenses represent the future tax provision of the
wholly-owned corporate subsidiary which is subject to income taxes.
    The reduction in future income tax expense is primarily due to the
reduction in enacted effective income tax rates that will be applicable when
the timing differences are expected to reverse.
    During the fourth quarter of 2007, Crombie reversed future income tax
expense of $1,850 due to the reversal of previously recorded income tax
expense as a result of the extensive review Crombie's management and their
advisors underwent in the fourth quarter of 2007 to support Crombie's
assertion that it meets the REIT criteria.

    Sector Information

    While Crombie does not distinguish or group its operations on a
geographical or other basis, Crombie provides the following sector information
as supplemental disclosure.

    Retail Freestanding Properties
    -------------------------------------------------------------------------
    (In thousands          Year ended                    Year ended
     of dollars,        December 31, 2008             December 31, 2007
     except as    -----------------------------------------------------------
     otherwise       Same-    Acqui-               Same-    Acqui-
     noted)         Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue         $792   $18,435   $19,227      $690      $198      $888
    Property
     expenses          92     4,459     4,551        64         8        72
    -------------------------------------------------------------------------
    Property NOI     $700   $13,976   $14,676      $626      $190      $816
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI Margin %     88.4%     75.8%     76.3%     90.7%     96.0%     91.9%
    -------------------------------------------------------------------------
    Occupancy %     100.0%    100.0%    100.0%    100.0%    100.0%    100.0%
    -------------------------------------------------------------------------

    The improvement in the retail freestanding property NOI was caused by the
Portfolio Acquisition. The NOI % margin is lower in the acquisition properties
as a result of property tax expenses that are fully recoverable from the
tenant being included as both revenue and expense.

    Retail Plaza Properties
    -------------------------------------------------------------------------
    (In thousands          Year ended                    Year ended
     of dollars,        December 31, 2008             December 31, 2007
     except as    -----------------------------------------------------------
     otherwise       Same-    Acqui-               Same-    Acqui-
     noted)         Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $33,646   $27,301   $60,947   $34,517    $4,494   $39,011
    Property
     expenses      11,224     7,433    18,657    11,037     1,343    12,380
    -------------------------------------------------------------------------
    Property NOI  $22,422   $19,868   $42,290   $23,480    $3,151   $26,631
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI Margin %     66.6%     72.8%     69.4%     68.0%     70.1%     68.3%
    -------------------------------------------------------------------------
    Occupancy %      95.5%     97.7%     96.7%     95.1%     95.1%     95.1%
    -------------------------------------------------------------------------

    The improvement in the retail plaza property NOI was primarily caused by
the Portfolio Acquisition, partially offset by increased non-recoverable
maintenance costs in same-asset properties. Although occupancy in the
same-assets at December 31, 2008 is higher than as at December 31, 2007,
fluctuations in occupancy levels throughout the year are the primary cause of
decreased revenue overall compared to the prior year.

    Retail Enclosed Properties
    -------------------------------------------------------------------------
    (In thousands          Year ended                    Year ended
     of dollars,        December 31, 2008             December 31, 2007
     except as    -----------------------------------------------------------
     otherwise       Same-    Acqui-               Same-    Acqui-
     noted)         Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $47,511    $1,195   $48,706   $45,613       $ -   $45,613
    Property
     expenses      17,569       329    17,898    17,230         -    17,230
    -------------------------------------------------------------------------
    Property NOI  $29,942      $866   $30,808   $28,383       $ -   $28,383
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI Margin %     63.0%     72.5%     63.3%     62.2%        -%     62.2%
    -------------------------------------------------------------------------
    Occupancy %      90.2%     94.0%     90.4%     92.5%        -%     92.5%
    -------------------------------------------------------------------------

    The improvement in NOI was primarily caused by the improved results at
Avalon Mall in St. John's, Newfoundland and Labrador and the Portfolio
Acquisition. Same-asset occupancy is lower in 2008 as compared to 2007 as a
result of the vacancy caused by the loss of SAAN stores in two properties
totalling 60,500 square feet. The increase in average net rent per square foot
for the properties has increased the revenue compared to the same period of
2007.

    Office Properties
    -------------------------------------------------------------------------
    (In thousands          Year ended                    Year ended
     of dollars,        December 31, 2008             December 31, 2007
     except as    -----------------------------------------------------------
     otherwise       Same-    Acqui-               Same-    Acqui-
     noted)         Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $23,550       $ -   $23,550   $21,409       $ -   $21,409
    Property
     expenses      12,972         -    12,972    12,462         -    12,462
    -------------------------------------------------------------------------
    Property NOI  $10,578       $ -   $10,578    $8,947       $ -    $8,947
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI Margin %     44.9%        -%     44.9%     41.8%        -%     41.8%
    -------------------------------------------------------------------------
    Occupancy %      89.7%        -%     89.7%     91.1%        -%     91.1%
    -------------------------------------------------------------------------

    The improved occupancy levels at the Halifax Developments Properties were
offset by decreased occupancy in Terminal Centres in Moncton, New Brunswick.
Higher net rent per square foot at the Halifax Developments Properties
resulted in the higher property NOI and NOI margin % for the office properties
in 2008 compared to 2007.

    Mixed-Use Properties
    -------------------------------------------------------------------------
    (In thousands          Year ended                    Year ended
     of dollars,        December 31, 2008             December 31, 2007
     except as    -----------------------------------------------------------
     otherwise       Same-    Acqui-               Same-    Acqui-
     noted)         Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $35,712       $ -   $35,712   $34,314       $ -   $34,314
    Property
     expenses      17,221         -    17,221    15,872         -    15,872
    -------------------------------------------------------------------------
    Property NOI  $18,491       $ -   $18,491   $18,442       $ -   $18,442
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI Margin %     51.8%        -%     51.8%     53.7%        -%     53.7%
    -------------------------------------------------------------------------
    Occupancy %      96.1%        -%     96.1%     95.4%        -%     95.4%
    -------------------------------------------------------------------------

    The increase in mixed-use occupancy levels from 95.4% in 2007 to 96.1% in
2008 and improved average net rent per square foot from leasing activity were
partially offset by higher operating expenses, resulting in the slightly
higher NOI results for the year ended December 31, 2008 when compared to the
year ended December 31, 2007. The NOI margin has decreased as a result of
increased common area expenses which are partially recovered from tenants and
an increase in non-recoverable maintenance expenses in 2008 compared to 2007.

    Other 2008 Performance Measures

    FFO and AFFO 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. FFO represents a
supplemental non-GAAP industry-wide financial measure of a real estate
organization's operating performance. AFFO is presented in this MD&A because
management believes this non-GAAP measure is relevant to the ability of
Crombie to earn and distribute returns to unitholders. 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.

    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 calculation of FFO for the year ended December
31, 2008 and 2007 is as follows:

    -------------------------------------------------------------------------
                                       Year Ended   Year Ended
                                         December     December
    (In thousands of dollars)            31, 2008     31, 2007     Variance
    -------------------------------------------------------------------------
    Net income                            $14,588      $10,659       $3,929
    Add:
    Non-controlling interest               13,440        9,891        3,549
    Depreciation and amortization          42,857       28,943       13,914
    Depreciation and amortization on
     discontinued operations                  129          286         (157)
    Future income taxes                    (1,490)       1,030       (2,520)
    Loss on sale of discontinued
     operations                               408            -          408
    Less:
    Gain on disposition of land               (77)           -          (77)
    -------------------------------------------------------------------------
    FFO                                   $69,855      $50,809      $19,046
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The improvement in FFO for the year ended December 31, 2008 was primarily
due to higher property NOI as a result of the individual acquisitions, the
Portfolio Acquisition and the improved same-asset results, offset in part by
the increased interest expense related to the individual and Portfolio
acquisitions.

    Adjusted Funds from Operations

    Crombie considers AFFO to be a measure of its distribution-generating
ability. AFFO reflects cash available for distribution after the provision for
non-cash adjustments to revenue, maintenance capital expenditures and
maintenance tenant improvements ("TI") and leasing costs. The calculation of
AFFO for the year ended December 31, 2008 and 2007 is as follows:

    -------------------------------------------------------------------------
                                       Year Ended   Year Ended
                                         December     December
    (In thousands of dollars)            31, 2008     31, 2007     Variance
    -------------------------------------------------------------------------
    FFO                                   $69,855      $50,809      $19,046
    Add:
    Above market lease amortization         3,058        2,913          145
    Non-cash revenue impacts on
     discontinued operations                   12           71          (59)
    Less:
    Below market lease amortization        (7,290)      (4,471)      (2,819)
    Straight-line rent adjustment          (1,932)      (1,215)        (717)
    Amortization of fair value
     of debt premium                            -          (20)          20
    Maintenance capital expenditures       (8,647)      (5,395)      (3,252)
    Maintenance TI and leasing costs       (8,835)      (7,850)        (985)
    -------------------------------------------------------------------------
    AFFO                                  $46,221      $34,842      $11,379
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The AFFO result for the year ended December 31, 2008 was affected by the
increase in FFO for the period, partially offset by higher maintenance TI and
capital expenditures. Details of the maintenance TI and capital expenditures
are outlined in the "Tenant Improvement and Capital Expenditures" section of
the MD&A.
    Pursuant to CSA Staff Notice 52-306 "(Revised) Non-GAAP Financial
Measures", non-GAAP measures such as AFFO 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:

    -------------------------------------------------------------------------
                                       Year Ended   Year Ended
                                         December     December
    (In thousands of dollars)            31, 2008     31, 2007     Variance
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                           $60,046      $33,936      $26,110
    Add back (deduct):
    Recoverable/productive capacity
     enhancing TIs                          2,584        3,373         (789)
    Change in non-cash operating items     (6,187)       3,400       (9,587)
    Unit-based compensation expense           (42)         (37)          (5)
    Amortization of deferred
     financing charges                     (1,349)        (415)        (934)
    Amortization of fair value
     of debt premium                            -          (20)          20
    Amortization of swap settlements         (184)           -         (184)
    Maintenance capital expenditures       (8,647)      (5,395)      (3,252)
    -------------------------------------------------------------------------
    AFFO                                  $46,221      $34,842      $11,379
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liquidity and Capital Resources

    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 TI costs 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 $93,400 was drawn at December 31, 2008, a demand facility
with Empire Company Limited of $20,000, of which $10,000 was drawn at December
31, 2008, and the issue of new equity and mortgage debt, pursuant to the
Declaration of Trust.

    -------------------------------------------------------------------------
                                       Year Ended   Year Ended
                                         December     December
    (In thousands of dollars)            31, 2008     31, 2007     Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    - Operating activities                $60,046      $33,936      $26,110
    - Financing activities               $346,752      $35,463     $311,289
    - Investing activities              $(405,478)    $(67,871)   $(337,607)
    -------------------------------------------------------------------------

    Operating Activities
    --------------------

    -------------------------------------------------------------------------
                                       Year Ended   Year Ended
                                         December     December
    (In thousands of dollars)            31, 2008     31, 2007     Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Net income and non-cash items         $65,278      $48,559      $16,719
    Tenant improvements and
     leasing costs                        (11,419)     (11,223)        (196)
    Non-cash working capital                6,187       (3,400)       9,587
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                           $60,046      $33,936      $26,110
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Fluctuations in cash provided by operating activities are largely
influenced by the change in non-cash working capital which can be affected by
the timing of receipts and payments. Of the TI and leasing costs in 2008,
$2,133 was covered by the non-interest bearing demand notes from ECL ($3,373
in 2007). The details of the TI and leasing costs during the year ended 2008
is outlined in the "Tenant Improvements and Capital Expenditures" section of
the MD&A.

    Financing Activities
    --------------------

    -------------------------------------------------------------------------
                                       Year Ended   Year Ended
                                         December     December
    (In thousands of dollars)            31, 2008     31, 2007     Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Net issue of commercial
     property debt                       $488,908      $88,411     $400,497
    Net issue of convertible debentures    28,786            -       28,786
    Net issue of public units              59,215            -       59,215
    Repayment of commercial
     property debt                       (191,505)     (39,021)    (152,484)
    Payment of distributions              (43,117)     (34,808)      (8,309)
    Other items (net)                       4,465       20,881      (16,416)
    -------------------------------------------------------------------------
    Cash provided by financing
     activities                          $346,752      $35,463     $311,289
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash provided by financing activities for the year ended December 31, 2008
was $311,289 higher than the year ended December 31, 2007 primarily due to
gross proceeds related to the financing of the Portfolio Acquisition: $280,000
of term financing; $30,000 of convertible debentures and the issuance of
$63,005 of Units of Crombie.

    Investing Activities
    --------------------

    Cash used in investing activities for the year ended December 31, 2008 was
$405,478. Of this, $389,405 was used for the Portfolio Acquisition and the
purchase of River City Centre in Saskatoon, Saskatchewan while $19,075 was
used for additions to commercial properties. Of the cash used in additions to
commercial properties, $3,796 was for the commercial properties covered by
non-interest bearing demand notes from ECL. Of cash used in investing
activities for the year ended December 31, 2007 $51,049 was used for
acquisition of five properties, net of assumed mortgages, and $16,822 was due
to additions to commercial properties. Included in the 2007 additions to
commercial properties is approximately $7,669 for the commercial properties
covered by non-interest bearing demand notes from ECL.

    Tenant Improvement and Capital Expenditures
    -------------------------------------------

    There are two types of TI and capital expenditures:

    - maintenance TI and capital expenditures that maintain existing
      productive capacity; and

    - productive capacity enhancement expenditures.

    Maintenance TI and capital expenditures are reinvestments in 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, or expand the GLA of a property by a minimum
threshold and thus enhance the property's overall value. These costs are then
evaluated to ensure they are fully financeable. Productive capacity
enhancement expenditures 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.
    Expenditures for TI's 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.

    -------------------------------------------------------------------------
                                                    Year Ended   Year Ended
                                                      December     December
    (In thousands of dollars)                         31, 2008     31, 2007
    -------------------------------------------------------------------------
    Total additions to commercial properties           $19,075      $16,822
    Less: amounts recoverable from ECL                  (3,796)      (7,669)
    -------------------------------------------------------------------------
    Net additions to commercial properties              15,279        9,153
    Less: productive capacity enhancements              (6,632)      (3,758)
    -------------------------------------------------------------------------
    Maintenance capital expenditures                    $8,647       $5,395
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                    Year Ended   Year Ended
                                                      December     December
    (In thousands of dollars)                         31, 2008     31, 2007
    -------------------------------------------------------------------------
    Total additions to TI and leasing costs            $11,419      $11,223
    Less: amounts recoverable from ECL                  (2,133)      (3,373)
    -------------------------------------------------------------------------
    Net additions to TI and leasing costs                9,286        7,850
    Less: productive capacity enhancements                (451)           -
    -------------------------------------------------------------------------
    Maintenance TI and leasing costs                    $8,835       $7,850
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The higher maintenance TI expenditures during the year was primarily due
to early renegotiation of lease renewals that were scheduled to expire in 2009
which will have higher average net rents per square foot on an ongoing basis.
At our Halifax Developments Properties offices in Halifax, Nova Scotia, a
total of 195,000 square feet of GLA was renewed with several tenants resulting
in an overall increase to minimum per square foot rent of 12.9% at a cost of
$2,823.
    Maintenance capital expenditures increased during the year ended December
31, 2008 compared to 2007 due to parking deck and structural repairs at Scotia
Parkade, scheduled roof repairs at Perth Mews and common area renovations at
Brunswick Place. As well, the portion of expenditures undertaken in the
productive capacity enhancement category that Crombie deems to be
non-financeable is included in the maintenance capital expenditure costs.
    Productive capacity enhancements during the year consisted of new pad
sites for Royal Bank at St. Romuald, Quebec, TD Bank at Brampton, Ontario, and
retail expansion at Mill Cove Plaza in Bedford, Nova Scotia, as well as three
liquor store expansions at Sobey stores at Conception Bay and Ropewalk Lane,
both in Newfoundland and Labrador and in Spryfield, Nova Scotia.

    Capital Structure

    -------------------------------------------------------------------------
    (In thousands   Dec. 31,    Sep. 30,    Jun. 30,    Mar. 31,    Dec. 31,
     of dollars)       2008        2008        2008        2008        2007
    -------------------------------------------------------------------------
    Commercial
     property
     debt          $808,971    $820,634    $811,845    $466,779    $493,945
    Convertible
     debentures     $28,968     $28,907     $28,847     $28,624         $ -
    Non-
     controlling
     interest      $199,183    $218,205    $224,871    $172,249    $177,919
    Unitholders'
     equity        $215,580    $236,241    $243,472    $184,740    $190,834
    -------------------------------------------------------------------------

    Bank Credit Facilities and Commercial Property Debt

    Crombie has in place an authorized floating rate revolving credit facility
of $150,000 (the "Revolving Credit Facility") $93,400 of which was drawn as at
December 31, 2008. The Revolving Credit Facility is secured by a pool of first
and second mortgages and negative pledges on certain properties. The floating
interest rate is based on specified margins over prime rate or bankers
acceptance rates. The specified margin increases as Crombie's overall debt
leverage increases. Funds available for drawdown pursuant to the Revolving
Credit Facility are determined with reference to the value of the mortgaged
properties relative to certain financial obligations of Crombie (see
"Borrowing Capacity and Debt Covenants"). As at December 31, 2008, $150,000 of
funds were available for drawdown pursuant to the Revolving Credit Facility.
During the second quarter of 2008, the maturity date of the Revolving Credit
Facility was extended to June 30, 2011.
    As of December 31, 2008, Crombie had fixed rate mortgages outstanding of
$521,049 ($531,970 after including the marked-to-market adjustment of
$10,921), carrying a weighted average interest rate of 5.42% (after giving
effect to a monthly interest rate subsidy from ECL under an omnibus subsidy
agreement) and an average term to maturity of 6.9 years. During fiscal 2008,
Crombie completed the refinancing of four existing mortgages on four
properties. The new fixed rate mortgages in the aggregate amount of $22,385
provided funds of $22,241 (net of fees). The weighted average interest rate on
the four new mortgages is 5.72% and all had five year terms. The funds
provided were used to reduce the Revolving Credit Facility.
    On April 22, 2008, Crombie entered into an 18 month floating rate Term
Facility of $280,000 to partially finance the Portfolio Acquisition. The
floating interest rate is based on a specified margin over prime rate or
bankers acceptance rate, which margin increases over time. As security for the
Term Facility, at any time on or after the 90th day following the closing of
the Portfolio Acquisition, the lender may require Crombie to grant a charge on
all or certain of the acquired properties together with an assignment of
leases. On October 14, 2008, the lender did request that Crombie provide such
security for the Term Facility. The terms of the Term Facility have otherwise
not changed. The Term Facility contains financial and non-financial covenants
that are customary for a credit facility of this nature and which mirror the
covenants set forth in the Revolving Credit Facility.
    On September 30, 2008, Crombie completed a mortgage financing on certain
of the properties acquired pursuant to the Portfolio Acquisition in order to
refinance $100,000 of the Term Facility. The fixed rate mortgages have a
weighted average term of 7.7 years, a 25 year amortization and a weighted
average interest rate of 5.91%. Factoring in the deferred financing costs and
cost of delayed interest rate swap hedges placed upon assumption of the Term
Facility, the overall weighted average interest rate is 6.21%. This overall
weighted average interest rate is 14 basis points lower than the 6.35% rate
used to model the pro forma accretion of the Portfolio Acquisition.
    During the fourth quarter of 2008, Crombie secured a $20,000 floating rate
demand credit facility with Empire (the "Empire Demand Facility") on
substantially the same terms and conditions that govern the Revolving Credit
Facility. This Empire Demand Facility was put in place to ensure that Crombie
maintains adequate liquidity in order to fund its daily operating activities
while volatility in the financial markets continues, and also to allow Crombie
to take advantage of strategic market opportunities that might arise, while
also mitigating the risk of Crombie not being in compliance with certain
covenants under the Revolving Credit Facility (see "Borrowing Capacity and
Debt Covenants"). Although it was not necessary to access the Empire Demand
Facility at year end in order for Crombie to remain in compliance with its
debt covenants, Crombie had $10,000 drawn against the Empire Demand Facility
as at December 31, 2008. Subsequent to December 31, 2008, the entire $10,000
drawn under the Empire Demand Facility was repaid.
    Subsequent to December 31, 2008 (See "Subsequent Events"), Crombie
completed $39,000 of additional fixed rate mortgage financings for eight of
the properties acquired pursuant to the Portfolio Acquisition in order to
refinance the Term Facility. A third party provided $32,800 of fixed rate
first mortgage financing, while $6,200 of fixed rate second mortgage financing
was provided by Empire. As a result of this financing, the maximum amount
available under the Empire Demand Facility was reduced from $20,000 to
$13,800.
    From time to time, Crombie has entered into interest rate swap agreements
to manage the interest rate profile of its current or future debts without an
exchange of the underlying principal amount (see "Risk Management").

    Principal repayments of the debt are scheduled as follows:

    -------------------------------------------------------------------------
                                       Fixed
                                   Rate Debt
                         Payments   Maturing
                               of     during   Floating      Total     % of
    Year                Principal       Year  Rate Debt   Maturity    Total
    -------------------------------------------------------------------------
    Year ended
     December 31, 2009    $17,234        $ -   $188,824   $206,058     25.7%
    Year ended
     December 31, 2010     13,925    106,079          -    120,004     14.9%
    Year ended
     December 31, 2011     13,749     26,786     93,400    133,935     16.7%
    Year ended
     December 31, 2012     14,226          -          -     14,226      1.8%
    Year ended
     December 31, 2013     14,936     30,042          -     44,978      5.6%
    Thereafter             58,431    225,641          -    284,072     35.3%
    -------------------------------------------------------------------------
    Total (1)            $132,501   $388,548   $282,224   $803,273    100.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes fair value debt adjustment of $10,921 and the deferred
        financing costs of $5,223

    Convertible debentures
    ----------------------

    On March 20, 2008, Crombie issued $30,000 in Debentures related to the
Portfolio Acquisition.
    Each Debenture will be convertible into units of Crombie at the option of
the Debenture holder up to the maturity date of March 20, 2013 at a conversion
price of $13 per unit.
    The Debentures bear interest at an annual fixed rate of 7%, payable
semi-annually on June 30, and December 31 in each year commencing on June 30,
2008. The Debentures are not redeemable prior to March 20, 2011. From March
20, 2011 to March 20, 2012, the Debentures may be redeemed, in whole or in
part, on not more than 60 days' and not less than 30 days' prior notice, at a
redemption price equal to the principal amount thereof plus accrued and unpaid
interest, provided that the volume-weighted average trading price of the Units
on the Toronto Stock Exchange for the 20 consecutive trading days ending on
the fifth trading day preceding the date on which notice on redemption is
given exceeds 125% of the conversion price. After March 20, 2012, and prior to
March 20, 2013, the Debentures may be redeemed, in whole or in part, at
anytime at the redemption price equal to the principal amount thereof plus
accrued and unpaid interest. Provided that there is not a current event of
default, Crombie will have the option to satisfy its obligation to pay the
principal amount of the Debentures at maturity or upon redemption, in whole or
in part, by issuing the number of units equal to the principal amount of the
Debentures then outstanding divided by 95% of the volume-weighted average
trading price of the units for a stipulated period prior to the date of
redemption or maturity, as applicable. Upon change of control of Crombie,
Debenture holders have the right to put the Debentures to Crombie at a price
equal to 101% of the principal amount plus accrued and unpaid interest.
    Crombie will also have an option to pay interest on any interest payment
date by selling units and applying the proceeds to satisfy its interest
obligation.
    Transaction costs related to the Debentures have been deferred and are
being amortized into interest expense over the term of the Debentures using
the effective interest rate method.

    Unitholders' Equity
    -------------------

    In April 2008 there were 34,053 Units awarded as part of the Employee Unit
Purchase Plan (March 2007 - 15,760). Also, as a result of the successful
completion of the Portfolio Acquisition on April 22, 2008, 5,727,750
subscription receipts issued in March 2008 were converted into Crombie Units
(including the over-allotment), as well as 5,000,000 Special Voting Units were
issued to Empire Subsidiaries. On April 29, 2008, 138,900 Units were redeemed
under provisions in the Declaration of Trust at an average price of $9.90.
Total units outstanding at February 26, 2009 were as follows:

    -------------------------------------------------------------------------
    Units                                                        27,271,888
    Special Voting Units (1)                                     25,079,576
    -------------------------------------------------------------------------
    (1) Crombie Limited Partnership, a subsidiary of Crombie, has also issued
        25,079,576 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.

    Taxation of Distributions

    Crombie, through its subsidiaries, has a large asset base that is
depreciable for Canadian income tax purposes. Consequently, certain of the
distributions from Crombie are treated as returns of capital and are not
taxable to Canadian resident unitholders for Canadian income tax purposes. The
composition for tax purposes of distributions from Crombie may change from
year to year, thus affecting the after-tax return to unitholders.
    The following table summarizes the history of the taxation of
distributions from Crombie:

    -------------------------------------------------------------------------
                                        Return of   Investment      Capital
    Taxation Year                         Capital       Income        Gains
    -------------------------------------------------------------------------
    2006 per $ of distribution                 40%          60%           -
    2007 per $ of distribution               25.5%        74.4%         0.1%
    -------------------------------------------------------------------------

    Borrowing Capacity and Debt Covenants

    Under the amended terms governing the Revolving Credit Facility, Crombie
is entitled to borrow a maximum of 70% of the fair market value of assets
subject to a first security position and 60% of the excess of fair market
value over first mortgage financing of assets subject to a second security
position or a negative pledge (the "Borrowing Base"). The Revolving Credit
Facility provides Crombie with flexibility to add or remove properties from
the Borrowing Base, subject to compliance with certain conditions. The terms
of the Revolving Credit Facility also require that Crombie must maintain
certain coverage ratios above prescribed levels:

    - annualized NOI for the prescribed properties must be a minimum of 1.4
      times the coverage of the related annualized debt service requirements;
      and

    - annualized NOI on all properties must be a minimum of 1.4 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%.
    The Revolving Credit Facility also contains a covenant limiting the amount
which may be utilized under the Revolving Credit Facility at any time. This
covenant provides that the aggregate of amounts drawn under the Revolving
Credit Facility plus any negative mark-to-market position on any interest rate
swap agreements or other hedging instruments may not exceed the security
provided by Crombie identified as the "Aggregate Coverage Amount" as defined
in the Revolving Credit Facility. In order to hedge its interest rate risk on
various debt commitments maturing through 2011, Crombie has entered into a
series of interest rate swap agreements on notional principal amounts
totalling approximately $380,334 at December 31, 2008 that have settlement
dates between January 2, 2009 and July 4, 2011. The unprecedented volatility
in the capital markets, especially during the fourth quarter of 2008, has
caused the mark-to-market adjustment on these interest rate swap agreements to
reach an out-of-the-money position of approximately $53,044 at December 31,
2008. There is no immediate cash impact from this mark-to-market adjustment.
The unfavourable difference in the mark-to-market amount of these interest
rate swap agreements is reflected in other comprehensive income (loss) rather
than net income as the swaps are all designated and effective hedges. However,
the deterioration in the mark-to-market position has the impact of reducing
Crombie's available credit pursuant to the Revolving Credit Facility.
    The following is the unutilized and available Revolving Credit Facility:

    -------------------------------------------------------------------------
    (In thousands   Dec. 31,    Sep. 30,    Jun. 30,    Mar. 31,    Dec. 31,
     of dollars)       2008        2008        2008        2008        2007
    -------------------------------------------------------------------------
    Available
     for
     drawdown      $150,000    $148,426    $147,755    $116,433    $118,923
    Amount
     utilized        93,400     121,585     111,475      48,038      70,900
    -------------------------------------------------------------------------
    Unutilized
     Revolving
     Credit
     Facility       $56,600     $26,841     $36,280     $68,395     $48,023
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    At December 31, 2008, and throughout the 2008 fiscal year, Crombie
remained in compliance with all debt covenants.
    As previously discussed, during the fourth quarter of 2008, Crombie
secured a $20,000 floating rate Empire Demand Facility. While Crombie has
reduced its third party acquisition program for 2009 until the financial
markets become more stabilized, Crombie believes ECL's development pipeline
may present opportunities in 2009 to acquire properties which provide an
acceptable return. The establishment of this Empire Demand Facility allows
Crombie to contemplate these potential transactions. The Empire Demand
Facility also ensures that Crombie maintains adequate liquidity in order to
fund its daily operating activities as the volatility in the financial markets
continues while also mitigating the risk of Crombie not being in compliance
with the Aggregate Coverage Amount. Although it was not necessary to access
the Empire Demand Facility at year end in order for Crombie to remain in
compliance with the Aggregate Coverage Amount, which had available capacity of
$18,974 at December 31, 2008, Crombie had $10,000 drawn against the Empire
Demand Facility at December 31, 2008. Subsequent to December 31, 2008, the
entire $10,000 of the Empire Demand Facility was repaid. Upon completion of
mortgage financings to refinance $39,000 of the Term Facility subsequent to
December 31, 2008 (see "Subsequent Events"), which included $6,200 of fixed
rate second mortgage financing provided by Empire, the maximum amount
available under the Empire Demand Facility was reduced from $20,000 to
$13,800.

    Debt to Gross Book Value Ratio

    When calculating debt to gross book value, debt is defined under the
terms of the Declaration of Trust 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 deferred financing charges, 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.
    The debt to gross book value ratio was 54.5% at December 31, 2008
compared to 48.0% at December 31, 2007. This leverage ratio is still 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)        2008         2008         2008         2008         2007
    -------------------------------------------------------------------------
    Mortgages
     payable   $531,970     $524,307     $425,945     $421,013     $425,273
    Convertible
     debentures  30,000       30,000       30,000       30,000            -
    Term
     financing  178,824      180,000      280,000            -            -
    Revolving
     credit
     facility
     payable     93,400      121,585      111,475       48,038       70,900
    Demand
     credit
     facility
     payable     10,000            -            -            -            -
    -------------------------------------------------------------------------
    Total
     debt
     outstan-
     ding       844,194      855,892      847,420      499,051      496,173
    Less:
     Applicable
     fair value
     debt
     adjustment (10,818)     (11,615)     (12,433)     (13,285)    (14,151)
    -------------------------------------------------------------------------
    Debt       $833,376     $844,277     $834,987     $485,766     $482,022
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total
     assets  $1,483,481   $1,501,214   $1,501,507   $1,006,625   $1,013,982
    Add:
    Deferred
     financing
     charges      6,255        6,351        6,728        3,648        2,228
    Accumulated
     depreciation
     of
     commercial
     properties  43,909       38,383       32,850       27,966       24,023
    Accumulated
     amortization
     of
     intangible
     assets      53,505       45,995       38,454       32,053       27,476
    Less:
    Assets
     related to
     discontinued
     operations  (7,184)      (9,673)     (10,951)     (10,983)     (11,109)
    Interest
     rate
     subsidy    (10,818)     (11,615)     (12,433)     (13,285)     (14,151)
    Fair
     value
     adjustment
     to future
     taxes      (39,245)     (39,245)     (39,245)     (39,245)     (39,245)
    -------------------------------------------------------------------------
    Gross
     book
     value   $1,529,903   $1,531,410   $1,516,910   $1,006,779   $1,003,204
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Debt to
     gross
     book
     value         54.5%        55.1%        55.0%        48.2%        48.0%
    Maximum
     borrowing
     capacity(1)     65%          65%          65%          65%          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, 2008 were 2.74 times EBITDA and 2.00 times EBITDA. This compares
to 3.00 times EBITDA and 2.03 times EBITDA respectively for the year ended
December 31, 2007. 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.

    -------------------------------------------------------------------------
                                                    Year Ended   Year Ended
                                                   December 31, December 31,
                                                          2008         2007
    -------------------------------------------------------------------------
    Property revenue                                  $188,142     $141,235
    Amortization of above-market leases                  3,058        2,913
    Amortization of below-market leases                 (7,290)      (4,471)
    -------------------------------------------------------------------------
    Adjusted property revenue                          183,910      139,677
    Property expenses                                  (71,299)     (58,016)
    General and administrative expenses                 (8,636)      (8,177)
    -------------------------------------------------------------------------
    EBITDA(1)                                         $103,975      $73,484
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Interest expense                                   $39,232      $24,913
    Amortization of deferred financing charges          (1,349)        (414)
    -------------------------------------------------------------------------
    Adjusted interest expense(2)                       $37,883      $24,499
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Debt repayments                                   $191,505      $39,021
    Debt repayments on discontinued operations            (121)        (138)
    Amortization of fair value debt premium                (21)         (21)
    Payments relating to interest rate subsidy          (3,333)      (3,566)
    Payments relating to Term Facility                (101,176)           -
    Payments relating to revolving credit facility     (58,185)     (12,000)
    Balloon payments on mortgages                      (14,447)     (11,672)
    -------------------------------------------------------------------------
    Adjusted debt repayments(3)                        $14,222      $11,624
    -------------------------------------------------------------------------
    Interest service coverage ratio((1)/(2))              2.74         3.00
    -------------------------------------------------------------------------
    Debt service coverage ratio((1)/((2)+(3)))            2.00         2.03
    -------------------------------------------------------------------------


    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. Within these
guidelines, Crombie has reduced its annual target payout ratios and intends to
make monthly cash distributions to Unitholders equal to approximately 70% of
its FFO and 95% of its AFFO on an annual basis. This reduction from a 100%
AFFO target payout ratio in 2007 is to provide increased stability to
Crombie's distributions.
    Details of distributions to Unitholders are as follows:

    -------------------------------------------------------------------------
                                                                Period from
                                                                   March 23,
    (In thousands of dollars,          Year Ended   Year Ended      2006 to
     except per unit amounts and      December 31, December 31, December 31,
     as otherwise noted)                     2008         2007         2006
    -------------------------------------------------------------------------
    Distributions to Unitholders          $23,120      $18,146      $13,369
    Distributions to Special Voting
     Unitholders                           20,924       16,837       12,440
    -------------------------------------------------------------------------
    Total distributions                   $44,044      $34,983      $25,809
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Number of diluted Units            25,596,001   21,646,135   21,498,595
    Number of diluted Special Voting
     Units                             23,576,844   20,079,576   20,079,576
    -------------------------------------------------------------------------
    Total diluted weighted average
     Units                             49,172,845   41,725,711   41,578,171
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions per unit                  $0.90        $0.84        $0.62
    FFO payout ratio
     (target ratio equals 70%)               63.1%        68.9%        73.2%
    AFFO payout ratio
     (target ratio equals 95%)               95.3%       100.4%        99.6%
    -------------------------------------------------------------------------

    The FFO payout ratio of 63.1% was below the target ratio as the improved
FFO reflected the stronger same-asset results as well as the individual
property acquisitions and the Portfolio Acquisition. The AFFO payout ratio of
95.3% approximated the target ratio as a result of the higher FFO which was
partially offset by higher TI and maintenance capital expenditures as
previously discussed, combined with one month of distributions made on the
subscription receipts prior to the closing of the Portfolio Acquisition.

    FOURTH QUARTER RESULTS

    Comparison to Previous Year
    -------------------------------------------------------------------------
                                             Quarter Ended
                                      -------------------------
    (In thousands of dollars,         December 31, December 31,
     except where otherwise noted)           2008         2007     Variance
    -------------------------------------------------------------------------
    Property revenue                      $52,522      $36,455      $16,067
    Property expenses                      19,883       14,536       (5,347)
    -------------------------------------------------------------------------
    Property NOI                           32,639       21,919       10,720
    -------------------------------------------------------------------------
    NOI margin percentage                    62.1%        60.1%         2.0%
    -------------------------------------------------------------------------
    Expenses:
      General and administrative            2,701        2,492         (209)
      Interest                             11,318        6,577       (4,741)
      Depreciation and amortization        12,265        8,152       (4,113)
    -------------------------------------------------------------------------
                                           26,284       17,221       (9,063)
    -------------------------------------------------------------------------
    Income from continuing operations
     before other items, income taxes
     and non-controlling interest           6,355        4,698        1,657
    Other items                                55            -           55
    -------------------------------------------------------------------------
    Income from continuing operations
     before income taxes and
     non-controlling interest               6,410        4,698        1,712
    Income taxes expense (recovery) -
     Future                                (3,450)      (2,994)         456
    -------------------------------------------------------------------------
    Income from continuing operations
     before non-controlling interest        9,860        7,692        2,168
    Gain on sale of discontinued
     operations                               487            -          487
    Income from discontinued operations        24          132         (108)
    -------------------------------------------------------------------------
    Income before non-controlling
     interest                              10,371        7,824        2,547
    Non-controlling interest                4,968        3,766       (1,202)
    -------------------------------------------------------------------------
    Net income                             $5,403       $4,058       $1,345
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net income
     per Unit                               $0.20        $0.19
    -----------------------------------------------------------
    -----------------------------------------------------------
    Basic weighted average Units
     outstanding (in 000's)                27,147       21,544
    -----------------------------------------------------------
    -----------------------------------------------------------
    Diluted weighted average Units
     outstanding (in 000's)                27,272       21,649
    -----------------------------------------------------------
    -----------------------------------------------------------

    Net income for the quarter ended December 31, 2008 of $5,403 increased by
$1,345 from $4,058 for the quarter ended December 31, 2007. The increase was
primarily 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 individual
      property acquisitions since December 31, 2007 and the Portfolio
      Acquisition; offset in part by

    - higher interest and depreciation charges, due primarily to the
      individual property acquisitions since December 31, 2007 and the
      Portfolio Acquisition.

    Property Revenue and Property Expenses

    -------------------------------------------------------------------------
                                             Quarter Ended
                                      -------------------------
                                      December 31, December 31,
    (In thousands of dollars)                2008         2007     Variance
    -------------------------------------------------------------------------
    Same-asset property revenue           $37,727      $36,137       $1,590
    Acquisition property revenue           14,795          318       14,477
    -------------------------------------------------------------------------
    Property revenue                      $52,522      $36,455      $16,067
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset property revenue of $37,727 for the quarter ended December 31,
2008 was 4.4% higher than the quarter ended December 31, 2007 due primarily to
the increased average rent per square foot ($12.39 in 2008 and $12.38 in 2007)
and increased revenue from higher recoverable common area expenses.

    -------------------------------------------------------------------------
                                             Quarter Ended
                                      -------------------------
                                      December 31, December 31,
    (In thousands of dollars)                2008         2007     Variance
    -------------------------------------------------------------------------
    Same-asset property expenses          $15,736      $14,453       $1,283
    Acquisition property expenses           4,147           83        4,064
    -------------------------------------------------------------------------
    Property expenses                     $19,883      $14,536       $5,347
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset property expenses of $15,736 for the quarter ended December 31,
2008 were 8.9% higher than quarter ended December 31, 2007 due to increased
recoverable common area expenses primarily from increased property taxes.

    -------------------------------------------------------------------------
                                             Quarter Ended
                                      -------------------------
                                      December 31, December 31,
    (In thousands of dollars)                2008         2007     Variance
    -------------------------------------------------------------------------
    Same-asset property NOI               $21,991      $21,684         $307
    Acquisition property NOI               10,648          235       10,413
    -------------------------------------------------------------------------
    Property NOI                          $32,639      $21,919      $10,720
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset NOI for the quarter ended December 31, 2008 increased by 1.4%
compared to the quarter ended December 31, 2007.

    Property NOI for the quarter ended December 31, 2008 by region was as
follows:
    -------------------------------------------------------------------------
    (In                           2008                       2007
     thousands  ----------------------------------------
     of          Property  Property  Property  NOI % of  NOI % of
     dollars)     Revenue  Expenses       NOI   revenue   revenue  Variance
    -------------------------------------------------------------------------
    Nova Scotia   $23,351   $10,119   $13,232      56.7%     57.0%     (0.3)%
    Newfoundland
     and Labrador   8,986     2,333     6,653      74.0%     65.6%      8.4%
    New Brunswick   6,267     2,837     3,430      54.7%     48.4%      6.3%
    Ontario         8,432     3,058     5,374      63.7%     70.1%     (6.4)%
    Prince Edward
     Island           981       338       643      65.6%     70.6%     (5.0)%
    Quebec          3,797     1,021     2,776      73.1%     79.2%     (6.1)%
    Saskatchewan      708       177       531      75.0%        -%        -%
    -------------------------------------------------------------------------
    Total         $52,522   $19,883   $32,639      62.1%     60.1%      2.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The 2.0% overall increase in NOI % of revenue, as well as the specific
provincial increase in Newfoundland and Labrador, is due to the Portfolio
Acquisition. The provincial decreases in Nova Scotia, Ontario, Prince Edward
Island and Quebec are primarily a result of the increased recoverable property
taxes and non-recoverable maintenance costs in 2008 as compared to 2007. New
Brunswick's growth in NOI % of revenue includes the effect of the Portfolio
Acquisition, the completion of the redevelopment of Uptown Centre in
Fredericton, and the collection of previously allowed-for receivables for SAAN
stores that had undergone bankruptcy protection during the first quarter of
2008.

    General and Administrative Expenses

    The following table outlines the major categories of expenses.

    -------------------------------------------------------------------------
                                             Quarter Ended
                                      -------------------------
                                      December 31, December 31,
                                             2008         2007     Variance
    -------------------------------------------------------------------------
    Salaries and benefits                  $1,294       $1,088         $206
    Professional fees                         927          631          296
    Public company costs                      109          292         (183)
    Rent and occupancy                        173          233          (60)
    Other                                     198          248          (50)
    -------------------------------------------------------------------------
    General and administrative costs       $2,701       $2,492         $209
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    As a percentage of revenue                5.1%         6.8%        (1.7)%
    -------------------------------------------------------------------------

    General and administrative expenses increased by 8.4% for the quarter
ended December 31, 2008 to $2,701 compared to $2,492 for the quarter ended
December 31, 2007. The increase in expenses was primarily due to higher legal
and information technology professional fees and higher salaries expenses due
to additional staff and performance incentives. Rent and occupancy costs have
decreased as a result of the negotiation of more favourable lease terms at the
head office.

    Interest Expense

    -------------------------------------------------------------------------
                                             Quarter Ended
                                      -------------------------
                                      December 31, December 31,
    (In thousands of dollars)                2008         2007     Variance
    -------------------------------------------------------------------------
    Same-asset interest expense            $6,557       $6,420         $137
    Acquisition interest expense            4,761          157        4,604
    -------------------------------------------------------------------------
    Interest expense                      $11,318       $6,577       $4,741
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset interest expense of $6,557 for the quarter ended December 31,
2008 increased by 2.1% when compared to the quarter ended December 31, 2007
due to the amortization of payments made on the settlement of interest rate
swap agreements of $184, offset in part by the declining interest portion of
debt repayments for the same-assets combined with effects of reduced interest
rates on some fixed rate mortgages that have been renegotiated since December
31, 2007.
    The amount of the interest rate subsidy paid by ECL to reduce the
effective interest rates on certain mortgages to 5.54% for the quarter ended
December 31, 2008 was $797 (quarter ended December 31, 2007 - $874).

    Depreciation and Amortization

    -------------------------------------------------------------------------
                                             Quarter Ended
                                      -------------------------
                                      December 31, December 31,
    (In thousands of dollars)                2008         2007     Variance
    -------------------------------------------------------------------------
    Same-asset depreciation and
     amortization                          $7,809       $8,117        $(308)
    Acquisition depreciation and
     amortization                           4,456           35        4,421
    -------------------------------------------------------------------------
    Depreciation and amortization         $12,265       $8,152       $4,113
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset depreciation and amortization of $7,809 for the quarter ended
December 31, 2008 was 3.8% lower than the quarter ended December 31, 2007 due
primarily to the final allocation of costs between buildings and intangible
assets in the fourth quarter of 2007 increasing depreciation and amortization,
offset in part by depreciation on fixed asset additions incurred since
December 31, 2007. Depreciation and amortization consists of:

    -------------------------------------------------------------------------
                                             Quarter Ended
                                      -------------------------
                                      December 31, December 31,
    (In thousands of dollars)                2008         2007     Variance
    -------------------------------------------------------------------------
    Depreciation of commercial
     properties                            $4,495       $3,309       $1,186
    Amortization of tenant
     improvements/lease costs               1,031          895          136
    Amortization of intangible assets       6,739        3,948        2,791
    -------------------------------------------------------------------------
    Depreciation and amortization         $12,265       $8,152       $4,113
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Future Income Taxes

    The reduction in future income tax expense is primarily due to the
reduction in enacted effective income tax rates that will be applicable when
the timing differences are expected to reverse.
    During the fourth quarter of 2007, Crombie reversed future income tax
expense of $1,850 due to the reversal of previously recorded income tax
expense as a result of the extensive review Crombie's management and their
advisors underwent in the fourth quarter of 2007 to support Crombie's
assertion that it meets the REIT criteria.

    Sector Information

    While Crombie does not distinguish or group its operations on a
geographical or other basis, Crombie provides the following sector information
as supplemental disclosure.
    As some expenses are not incurred evenly throughout the year, nor are they
necessarily subject to comparable timing across comparable quarters, the NOI
and NOI margin are subject to volatility on a quarterly basis.

    Retail Freestanding Properties
    -------------------------------------------------------------------------
    (In thousands         Quarter ended                 Quarter ended
     of dollars,        December 31, 2008             December 31, 2007
     except as    -----------------------------------------------------------
     otherwise       Same-    Acqui-               Same-    Acqui-
     noted)         Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue         $372    $6,376    $6,748      $316       $ -      $316
    Property
     expenses          58     1,607     1,665        23         -        23
    -------------------------------------------------------------------------
    Property NOI     $314    $4,769    $5,083      $293       $ -      $293
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI Margin %     84.4%     74.8%     75.3%     92.7%        -%     92.7%
    -------------------------------------------------------------------------
    Occupancy
     %              100.0%    100.0%    100.0%    100.0%        -%    100.0%
    -------------------------------------------------------------------------

    The improvement in the retail freestanding property NOI was caused by the
Portfolio Acquisition. The NOI % margin is lower in the acquisition properties
as a result of property tax expenses that are fully recoverable from the
tenant being included as both revenue and expense.

    Retail Plaza Properties
    -------------------------------------------------------------------------
    (In thousands         Quarter ended                 Quarter ended
     of dollars,        December 31, 2008             December 31, 2007
     except as    -----------------------------------------------------------
     otherwise       Same-    Acqui-               Same-    Acqui-
     noted)         Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue       $9,613    $7,911   $17,524    $9,993      $318   $10,311
    Property
     expenses       3,447     2,360     5,807     2,487        83     2,570
    -------------------------------------------------------------------------
    Property NOI   $6,166    $5,551   $11,717    $7,506      $235    $7,741
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI Margin %     64.1%     70.2%     66.9%     75.1%     73.9%     75.1%
    -------------------------------------------------------------------------
    Occupancy %      95.4%     98.1%     96.7%     95.2%     91.8%     95.1%
    -------------------------------------------------------------------------

    The improvement in the retail plaza property NOI was caused primarily by
the Portfolio Acquisition, partially offset by the lower NOI in the same-asset
properties due to lower property revenue and higher non-recoverable
maintenance expenses in 2008 compared to 2007.

    Retail Enclosed Properties
    -------------------------------------------------------------------------
    (In thousands         Quarter ended                 Quarter ended
     of dollars,        December 31, 2008             December 31, 2007
     except as    -----------------------------------------------------------
     otherwise       Same-    Acqui-               Same-    Acqui-
     noted)         Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $12,534      $508   $13,042   $11,634       $ -   $11,634
    Property
     expenses       4,513       180     4,693     4,426         -     4,426
    -------------------------------------------------------------------------
    Property NOI   $8,021      $328    $8,349    $7,208       $ -    $7,208
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI Margin %     64.0%     64.6%     64.0%     62.0%        -%     62.0%
    -------------------------------------------------------------------------
    Occupancy %      90.2%     94.0%     90.4%     92.5%        -%     92.5%
    -------------------------------------------------------------------------

    The NOI has increased for retail enclosed properties due primarily to the
timing of non-recoverable maintenance in 2008 compared to the same period in
2007 and the Portfolio Acquisition. Occupancy is lower in 2008 as compared to
2007 as a result of the vacancy caused by the loss of SAAN stores in two
properties totalling 60,500 square feet. The increase in average net rent per
square foot for the properties has increased the revenue compared to the same
period of 2007.

    Office Properties
    -------------------------------------------------------------------------
    (In thousands         Quarter ended                 Quarter ended
     of dollars,        December 31, 2008             December 31, 2007
     except as    -----------------------------------------------------------
     otherwise       Same-    Acqui-               Same-    Acqui-
     noted)         Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue       $6,046       $ -    $6,046    $5,342       $ -    $5,342
    Property
     expenses       3,556         -     3,556     3,354         -     3,354
    -------------------------------------------------------------------------
    Property NOI   $2,490       $ -    $2,490    $1,988       $ -    $1,988
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI Margin %     41.2%        -%     41.2%     37.2%        -%     37.2%
    -------------------------------------------------------------------------
    Occupancy %      89.7%        -%     89.7%     91.1%        -%     91.1%
    -------------------------------------------------------------------------

    The improved occupancy level at the Halifax Developments properties in
Halifax was offset by the decreased occupancy in Terminal Centres in Moncton,
New Brunswick. Higher net rent per square foot at the Halifax Development
properties resulted in the higher property NOI and NOI margin percent for the
office properties in the fourth quarter 2008 compared to the fourth quarter of
2007.

    Mixed-Use Properties
    -------------------------------------------------------------------------
    (In thousands         Quarter ended                 Quarter ended
     of dollars,        December 31, 2008             December 31, 2007
     except as    -----------------------------------------------------------
     otherwise       Same-    Acqui-               Same-    Acqui-
     noted)         Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue       $9,162       $ -    $9,162    $8,852       $ -    $8,852
    Property
     expenses       4,162         -     4,162     4,163         -     4,163
    -------------------------------------------------------------------------
    Property NOI   $5,000       $ -    $5,000    $4,689       $ -    $4,689
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI Margin %     54.6%        -%     54.6%     53.0%        -%     53.0%
    -------------------------------------------------------------------------
    Occupancy %      96.1%        -%     96.1%     95.4%        -%     95.4%
    -------------------------------------------------------------------------

    The higher NOI results for the fourth quarter of 2008 when compared to the
fourth quarter of 2007 resulted primarily from the increase in mixed-use
occupancy levels from 95.4% in 2007 to 96.1% in 2008 and improved average net
rent per square foot from leasing activity.

    OTHER FOURTH QUARTER PERFORMANCE MEASURES

    Funds from Operations

    A calculation of FFO for the quarters ended December 31, 2008 and 2007 is
as follows:

    -------------------------------------------------------------------------
                                          Quarter      Quarter
                                            Ended        Ended
                                      December 31, December 31,
    (In thousands of dollars)                2008         2007     Variance
    -------------------------------------------------------------------------
    Net income                             $5,403       $4,058       $1,345
    Add back:
    Non-controlling interest                4,968        3,766        1,202
    Depreciation and amortization          12,265        8,152        4,113
    Depreciation and amortization on
     discontinued operations                    -           75          (75)
    Gain on sale of discontinued
     operations                              (487)           -         (487)
    Future income taxes                    (3,450)      (2,994)        (456)
    -------------------------------------------------------------------------
    FFO                                   $18,699      $13,057       $5,642
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The improvement in FFO for the fourth quarter of 2008 was primarily due to
higher property NOI as a result of the individual acquisitions and the
Portfolio Acquisition, offset in part by the decrease in same-asset NOI and
increased interest expense related to the acquisitions.

    Adjusted Funds from Operations

    The calculation of AFFO for the quarters ended December 31, 2008 and 2007
is as follows:

    -------------------------------------------------------------------------
                                          Quarter      Quarter
                                            Ended        Ended
                                      December 31, December 31,
    (In thousands of dollars)                2008         2007     Variance
    -------------------------------------------------------------------------
    FFO                                   $18,699      $13,057       $5,642
    Add back:
    Above market lease amortization           772          765            7
    Non-cash revenue impacts on
     discontinued operations                   (2)          10          (12)
    Less:
    Below market lease amortization        (2,145)      (1,252)        (893)
    Straight-line rent adjustment            (173)        (141)         (32)
    Amortization of fair value of debt
     adjustment                                 -          (20)          20
    Maintenance capital expenditures       (1,581)      (2,712)       1,131
    Maintenance to TI and leasing costs    (1,123)      (2,146)       1,023
    -------------------------------------------------------------------------
    AFFO                                  $14,447       $7,561       $6,886
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The improved AFFO result for the fourth quarter of 2008 when compared to
the same period in 2007 was primarily due to the improved FFO. As maintenance
capital expenditures and TI costs are not incurred evenly throughout the
fiscal year, there can be volatility in AFFO on a quarterly basis.

    Pursuant to CSA Staff Notice 52-306 "(Revised) Non-GAAP Financial
Measures", non-GAAP measures such as AFFO 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      Quarter
                                            Ended        Ended
                                      December 31, December 31,
    (In thousands of dollars)                2008         2007     Variance
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                           $24,760      $19,190       $5,570
    Add back (deduct):
    Recoverable/productive capacity
     enhancing TIs                            638           64          574
    Change in non-cash operating items     (8,652)      (8,842)         190
    Unit-based compensation expense           (11)          (9)          (2)
    Amortization of fair value of debt
     adjustment                                 -          (20)          20
    Amortization of deferred financing
     charges                                 (523)        (110)        (413)
    Amortization of swap settlements         (184)           -         (184)
    Maintenance capital expenditures       (1,581)      (2,712)       1,131
    -------------------------------------------------------------------------
    AFFO                                  $14,447       $7,561       $6,886
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Sources and Uses of Funds

    -------------------------------------------------------------------------
                                          Quarter      Quarter
                                            Ended        Ended
                                      December 31, December 31,
    (In thousands of dollars)                2008         2007     Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
      Operating activities                $24,760      $19,190       $5,570
      Financing activities               $(21,086)     $(2,031)    $(19,055)
      Investing activities                   $354     $(14,451)     $14,805
    -------------------------------------------------------------------------


    Operating Activities
    --------------------

    -------------------------------------------------------------------------
                                          Quarter      Quarter
                                            Ended        Ended
                                      December 31, December 31,
    (In thousands of dollars)                2008         2007     Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Net income and non-cash items         $17,869      $12,558       $5,311
    Tenant improvements and leasing
     costs                                 (1,761)      (2,210)         449
    Non-cash working capital                8,652        8,842         (190)
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                           $24,760      $19,190       $5,570
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The improvement in net income and non-cash items again reflects the higher
property NOI as a result of the individual acquisitions and the Portfolio
Acquisition, offset in part by the increased interest expense related to the
acquisitions. Of the TI and leasing costs in 2008 of $1,761, $638 was covered
by the non-interest bearing demand notes from ECL ($2,210 in 2007, $64 covered
by ECL notes).

    Financing Activities
    --------------------

    Cash used in financing activities during the quarter of $21,086 was
primarily due to the principal payments on commercial property debt and
distributions. In 2007, $2,031 of cash was used in financing activities,
primarily as a result of proceeds from commercial property debt issued, being
offset by principal payments on commercial property debt and distributions.

    Investing Activities
    --------------------

    Cash provided by investing activities of $354 during the quarter was due
primarily to the receipt of proceeds from the sale of West End Mall in
Halifax, Nova Scotia during the quarter, partially offset by additions to
commercial properties. During the fourth quarter of 2007, cash of $8,894 was
used for the acquisition of Town Centre in LaSalle, Ontario.

    Tenant Improvement and Capital Expenditures
    -------------------------------------------

    -------------------------------------------------------------------------
                                                       Quarter      Quarter
                                                         Ended        Ended
                                                   December 31, December 31,
    (In thousands of dollars)                             2008         2007
    -------------------------------------------------------------------------
    Total additions to commercial properties            $2,461       $5,557
    Less: amounts (recoverable from)/payable to ECL        145       (2,471)
    -------------------------------------------------------------------------
    Net additions to commercial properties               2,606        3,086
    Less: productive capacity enhancements              (1,025)       (374)
    -------------------------------------------------------------------------
    Maintenance capital expenditures                    $1,581      $2,712
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                       Quarter      Quarter
                                                         Ended        Ended
                                                   December 31, December 31,
    (In thousands of dollars)                             2008         2007
    -------------------------------------------------------------------------
    Total additions to TI and leasing costs             $1,761       $2,210
    Less: amounts recoverable from ECL                    (638)         (64)
    -------------------------------------------------------------------------
    Net additions to TI and leasing costs                1,123        2,146
    Less: productive capacity enhancements                   -            -
    -------------------------------------------------------------------------
    Maintenance TI and leasing costs                    $1,123       $2,146
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As maintenance TI and capital expenditures are not incurred evenly
throughout the fiscal year, there can be volatility on a quarterly basis. The
amount payable to ECL in the maintenance capital expenditures relates to a
capital cost incurred by Crombie that was deemed to not be subject to the
provisions of the capital expenditure program and was reimbursed. See the
"Sources and Uses of Funds" section for a discussion on the TI and capital
expenditures incurred for the year ended December 31, 2008.

    CHANGES IN ACCOUNTING POLICIES AND ESTIMATES

    Effective January 1, 2008 Crombie has adopted three new accounting
standards that were issued by the CICA in 2006. These accounting policy
changes have been adopted in accordance with their transitional provisions of
the respective standard.
    The new standards and accounting policy changes are as follows:

    Capital Disclosures
    -------------------

    Effective January 1, 2008, the CICA's new accounting standard "Handbook
Section 1535, Capital Disclosures" was adopted, which requires the disclosure
of both qualitative and quantitative information to enable users of financial
statements to evaluate the entity's objectives, policies and processes for
managing capital. The new standard did not have any impact on the financial
position or earnings of Crombie and was applied on a prospective basis.

    Financial Instruments Disclosures and Presentation
    --------------------------------------------------

    Effective January 1, 2008, the accounting and disclosure requirements of
the CICA's two new accounting standards were adopted: "Handbook Section 3862,
Financial Instruments - Disclosures" and "Handbook Section 3863, Financial
Instruments - Presentation." The new standards did not have any impact on the
financial position or earnings of Crombie and were applied on a prospective
basis.

    Change in estimate
    ------------------

    During the year, the weighted average tax rate used to calculate the
future income tax liability was revised as a result of an assessment of the
anticipated period of the reversal of timing differences. This change in
estimate resulted in a decrease in the future income tax liability and future
income tax expense of $6,072 for the year ended December 31, 2008.

    EFFECT OF NEW ACCOUNTING POLICIES NOT YET IMPLEMENTED

    Goodwill and Intangible Assets
    ------------------------------

    In February 2008, the CICA issued a new Section 3064 "Goodwill and
Intangible Assets" replacing Section 3062 "Goodwill and Other Intangible
Assets" as well as Section 3450 "Research and Development Costs". As a result
of these new sections, section 1000 "Financial Statements Concepts" has been
modified. The new Section 3064 states that intangible assets may be recognized
as assets only if they meet the definition of an intangible asset. Section
3064 also provides further information on the recognition of internally
generated intangible assets (including research and development costs). As for
subsequent measurement of intangible assets, goodwill, and disclosure, Section
3064 carries forward the requirements of the old Section 3062. The new Section
applies to annual and interim financial statements relating to fiscal years
beginning on or after October 1, 2008.
    Common practice in the real estate industry has been to defer and amortize
deferred tenant charges. Under the amended section 1000 these deferred tenant
charges would no longer qualify as a deferred asset.
    Management has reviewed the impact of this amendment and anticipates a
reclassification among asset classes without material change to unitholders'
equity or net income.

    International Financial Reporting Standards
    -------------------------------------------

    On February 13 2008, the Accounting Standards Board of Canada announced
that GAAP for publicly accountable enterprises will be replaced by
International Financial Reporting Standards (IFRS). IFRS must be adopted for
interim and annual financial statements related to fiscal years beginning on
or after January 1, 2011, with retroactive adoption and restatement of the
comparative fiscal year ended December 31, 2010. Accordingly, the conversion
from Canadian GAAP to IFRS will be applicable to Crombie's reporting for the
first quarter of fiscal 2011 for which the current and comparative information
will be prepared under IFRS.
    Crombie, with the assistance of its external advisors, have launched an
internal initiative to govern the conversion process and is currently
evaluating the potential impact of the conversion to IFRS on its financial
statements. At this time, the impact on Crombie's future financial position
and results of operations is not reasonably determinable or estimatable.
Crombie expects the transition to IFRS to impact accounting, financial
reporting, internal control over financial reporting, information systems and
business processes.
    Crombie has developed a formal project governance structure, and is
providing regular progress reports to senior management and the audit
committee. Crombie has also completed a diagnostic impact assessment, which
involved a high level review of the major differences between current GAAP and
IFRS, as well as establishing an implementation guideline. In accordance with
this guideline Crombie has established a staff training program and is in the
process of completing analysis of the key decision areas and making
recommendations on the same.
    Crombie will continue to assess the impact of the transition to IFRS and
to review all of the proposed and ongoing projects of the International
Accounting Standards Board to determine their impact on Crombie. Additionally
Crombie will continue to invest in training and resources throughout the
transition period to facilitate a timely conversion.

    RELATED PARTY TRANSACTIONS

    As at December 31, 2008, Empire, through its wholly-owned subsidiary ECL,
holds a 47.9% indirect interest in Crombie. Crombie uses the exchange amount
as the measurement basis for the related party transactions.
    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 on a cost
sharing basis. The costs assumed by Empire pursuant to the arrangement during
the year ended December 31, 2008 were $1,393 (year ended December 31, 2007 -
$1,505) and were netted against general and administrative expenses owing by
Crombie to Empire.
    For a period of five years, commencing on March 23, 2006, certain on-site
maintenance and management employees of Crombie will provide property
management services to certain real estate subsidiaries of Empire on a cost
sharing basis. In addition, for various periods, ECL has an obligation to
provide rental income and interest rate subsidies. The costs assumed by Empire
pursuant to the arrangement during the year ended December 31, 2008 were
$2,013 (year ended December 31, 2007 - $2,408) and were netted against
property expenses owing by Crombie to Empire. The rental income subsidy during
the year ended December 31, 2008 was $Nil (year ended December 31, 2007 - $37)
and the head lease subsidy during the year ended December 31, 2008 was $897
(year ended December 31, 2007 - $2,124).
    Crombie also earned rental revenue of $50,483 for the year ended December
31, 2008 (year ended December 31, 2007 - $23,722) from Sobeys Inc., Empire
Theatres and ASC Commercial Leasing Limited ("ASC"). These companies were all
subsidiaries of Empire until September 8, 2008 when ASC was sold. Property
revenue from ASC is included in this note disclosure until the sale date.
    On April 22, 2008, Crombie acquired 61 properties from Empire
Subsidiaries, as discussed above under "Business Strategy and Outlook".
    Empire has provided Crombie with a $20,000 floating rate Empire Demand
Facility on substantially the same terms and conditions that govern the
Revolving Credit Facility. The amount borrowed under the Empire Demand
Facility at December 31, 2008 is $10,000. Subsequent to December 31, 2008, the
entire $10,000 Empire Demand Facility was repaid. Subsequent to December 31,
2008 (See "Subsequent Events"), Crombie completed $39,000 of additional fixed
rate mortgage financings for eight of the properties acquired pursuant to the
Portfolio Acquisition in order to refinance the Term Facility. A third party
provided $32,800 of fixed rate first mortgage financing, while $6,200 of fixed
rate second mortgage financing was provided by Empire. As a result of this
financing, the maximum amount available under the Empire Demand Facility was
reduced from $20,000 to $13,800.

    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
GAAP 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 and amortization;
    - Employee future benefits obligation;
    - Future income taxes;
    - Allocation of purchase price on property acquisitions; and
    - Fair value of commercial property debt, convertible debentures and
       assets and liabilities related to discontinued operations.

    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.

    Financial Instruments

    The fair value of a financial instrument is the estimated amount that
Crombie would receive or pay to settle the financial assets and financial
liabilities as at the reporting date.
    Crombie has classified its financial instruments in the following
categories:

    - Held for trading - Restricted cash and cash and cash equivalents
    - Held to maturity investments - assets related to discontinued
      operations
    - Loans and receivables - Notes receivable and accounts receivable
    - Other financial liabilities - Commercial property debt, liability
      related to discontinued operations, convertible debentures, tenant
      improvements and capital expenditures payable, property operating costs
      payable and interest payable

    The book values of cash and cash equivalents, restricted cash,
receivables, payables and accruals approximate fair values at the balance
sheet date.
    The fair value of other financial instruments is based upon discounted
future cash flows using discount rates that reflect current market conditions
for instruments with similar terms and risks. Such fair value estimates are
not necessarily indicative of the amounts Crombie might pay or receive in
actual market transactions.
    The following table summarizes the carrying value (excluding deferred
financing charges) and fair value of those financial instruments which have a
fair value different from their book value at the balance sheet date.

                                 Dec. 31, 2008             Dec. 31, 2007
    -------------------------------------------------------------------------
                            Carrying         Fair     Carrying         Fair
                               Value        Value        Value        Value
                            -------------------------------------------------
    Assets related to
     discontinued
     operations               $7,184       $7,477         $Nil         $Nil
                            -------------------------------------------------
                            -------------------------------------------------
    Commercial property
     debt                   $814,194     $812,488     $496,173     $489,756
                            -------------------------------------------------
                            -------------------------------------------------
    Convertible debentures   $30,000      $25,950         $Nil         $Nil
                            -------------------------------------------------
                            -------------------------------------------------
    Liability related to
     discontinued
     operations               $6,487       $6,599       $6,633       $6,577
                            -------------------------------------------------
                            -------------------------------------------------
    

    The following summarizes the significant methods and assumptions used in
estimating the fair values of the financial instruments reflected in the above
table:
    Assets related to discontinued operations: The fair value of the bonds
and treasury bills are based on market trading prices at the reporting date.
    Commercial property debt and liability related to discontinued
operations: The fair value of Crombie's commercial property debt and liability
related to discontinued operations is estimated based on the present value of
future payments, discounted at the yield on a Government of Canada bond with
the nearest maturity date to the underlying debt, plus an estimated credit
spread at the reporting date.
    Convertible debentures: The fair value of the convertible debentures is
estimated based on the market trading prices, at the reporting date, of the
convertible debentures.

    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.
    Crombie has land leases on certain properties. These leases have annual
payments of $969 per year over the next five years. The land leases have terms
of between 12 and 76 years remaining, including renewal options.
    Crombie obtains letters of credit to support our obligations with respect
to construction work on our commercial properties and defeasing commercial
property debt. In connection with the defeasance of the discontinued
operations commercial property debt, Crombie has issued a standby letter of
credit in the amount of $1,715 in favour of the mortgage lender. In addition,
Crombie has $145 in standby letters of credit for construction work that is
being performed on its commercial properties. Crombie does not believe that
any of these standby letters of credit are likely to be drawn upon.

    RISK MANAGEMENT

    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:

    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.

    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.
    Crombie mitigates credit risk by geographical diversification, utilizing
staggered lease maturities, diversifying both its tenant mix and asset mix and
conducting credit assessments for new and renewing tenants. As at December 31,
2008;

    
    - Excluding Sobeys (which accounts for 33.0% of Crombie's minimum rent),
      no other tenant accounts for more than 2.2% of Crombie's minimum rent,
      and
    - Over the next five years, no more than 10.1% of the gross leaseable
      area of Crombie will expire in any one year.

    As outlined in the Related Party Transactions disclosure, Crombie earned
rental revenue of $50,483 for the year ended December 31, 2008 (year ended
December 31, 2007 - $23,722) from subsidiaries of Empire.

    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

    Significant Relationship

    Crombie's anchor tenants are concentrated in a relatively small number of
retail operators. Specifically, 33.0% 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 reliant 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 2008 are as follows: 41 properties in Nova Scotia comprising 41.0%; 22
properties in Ontario comprising 16.8%; 20 properties in New Brunswick
comprising 12.6%; 13 properties in Newfoundland and Labrador comprising 17.0%;
three properties in Prince Edward Island comprising 3.2%; 13 properties in
Quebec comprising 7.9%; and one property in Saskatchewan comprising 1.5%.
Crombie's growth strategy of expansion outside of Atlantic Canada is
predicated on reducing the geographic concentration risk.

    Interest rate risk

    Interest rate risk is the potential for financial loss arising from
potential increases in interest rates. Crombie mitigates interest rate risk by
utilizing staggered debt maturities, minimizing long-term exposure to floating
rate debt and utilizing interest rate swap agreements. As at December 31,
2008:
    - Crombie's average term to maturity of the fixed rate mortgages was
      6.9 years, and
    - Crombie's exposure to floating rate debt, including the impact of the
      fixed rate swap agreements discussed below, was 21.3% of the total
      commercial property debt. Excluding the floating rate term facility,
      which is to be replaced with permanent fixed rate financing during the
      next twelve months, the exposure to floating rate debt is 6.9%.

    From time to time, Crombie has entered into interest rate swap agreements
to manage the interest rate profile of its current or future debts without an
exchange of the underlying principal amount. Recent turmoil in financial
markets has materially affected interest swap rates. This effect was
especially pronounced during the fourth quarter of 2008. The interest swap
rates are based on Canadian bond yields, plus a premium, called the swap
spread, which reflects the risk of trading with a private counterparty as
opposed to the Canadian government. During the fourth quarter of 2008, the
swap spread turned negative. The effect of the negative swap spreads, combined
with the decline in the Canadian bond yields to levels not seen since the late
1940's, has resulted in a significant deterioration of the mark-to-market
values for the interest rate swap agreements during the final quarter of 2008.
At December 31, 2008 the mark-to-market exposure on the interest rate swap
agreements was approximately $53,044. There is no immediate cash impact from
this mark-to-market adjustment. The unfavourable difference in the
mark-to-market amount of these interest rate swap agreements is reflected in
other comprehensive income (loss) rather than net income as the swaps are all
designated and effective hedges.
    The breakdown of the swaps in place as part of the interest rate
management program, and their associated unfavourable differences are as
follows:

    - 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. In
      addition, Crombie has entered into a fixed interest rate swap agreement
      of a notional amount of $50,000 to fix a portion of the interest on the
      floating rate Term Facility. The fair value of the fixed interest rate
      swaps at December 31, 2008, had an unfavourable mark-to-market exposure
      of $4,024 (December 31, 2007 - unfavourable $173) compared to its face
      value. The change in this amount has been recognized in other
      comprehensive (loss) income. The mark-to-market amount of fixed
      interest rate swaps reduce to $Nil upon maturity of the swaps.

    - Crombie has entered into a number of delayed interest rate swap
      agreements of a notional amount of $100,334 with an effective date
      between February 1, 2010 and July 2, 2011, maturing between February 1,
      2019 and July 2, 2021 to mitigate exposure to interest rate increases
      for mortgages maturing in 2010 and 2011. The fair value of these
      delayed interest rate swap agreements had an unfavourable mark-to-
      market exposure of $20,901 compared to the face value on December 31,
      2008 (December 31, 2007 - unfavourable $5,611). The change in these
      amounts has been recognized in other comprehensive (loss) income.

    - In relation to the acquisition of a portfolio of 61 retail properties
      from subsidiaries of Empire, Crombie has entered into a number of
      delayed interest rate swap agreements of a notional amount of $180,000
      to mitigate exposure to interest rate increases prior to replacing the
      18 month floating rate Term Facility with long-term financing. The fair
      value of these agreements had an unfavourable mark-to-market exposure
      of $28,119 compared to their face value on December 31, 2008
      (December 31, 2007 - $Nil). The change in these amounts has been
      recognized in other comprehensive (loss) income.


    During the year ended December 31, 2008, Crombie settled three interest
rate swap agreements related to a notional amount of $18,355 that had an
unfavourable mark-to-market exposure of $3,745. This amount has been
recognized in other comprehensive (loss) income since the inception of the
interest rate swap agreements. This loss will be reclassified to interest
expense using the effective interest rate method which amortizes the loss over
the term of the replacement long-term debt.
    A fluctuation in interest rates would have an impact on Crombie's net
earnings and other comprehensive (loss) income items. Based on the previous
year's rate changes, a 0.5% interest rate change would reasonably be
considered possible. The changes would have had the following impact:

    -------------------------------------------------------------------------
                                   Year ended                Year ended
                                 Dec. 31, 2008             Dec. 31, 2007
                            -------------------------------------------------
                                0.5%         0.5%         0.5%         0.5%
                            increase     decrease     increase     decrease
    -------------------------------------------------------------------------
    Impact on net income of
     interest rate changes
     the floating rate
     Revolving Credit
     Facility                $(1,231)      $1,231        $(416)        $416
    -------------------------------------------------------------------------

                                 Dec. 31, 2008             Dec. 31, 2007
                            -------------------------------------------------
                                0.5%         0.5%         0.5%         0.5%
                            increase     decrease     increase     decrease
    -------------------------------------------------------------------------
    Impact on other
     comprehensive income
     and non-controlling
     interest items due
     to changes in fair
     value of derivatives
     designated as a cash
     flow hedge              $10,678     $(11,288)      $4,657      $(4,931)
    -------------------------------------------------------------------------

    Crombie does not enter into these interest rate swap transactions on a
speculative basis. Crombie is prohibited by its Declaration of Trust in
purchasing, selling or trading in interest rate future contracts other than
for hedging purposes.

    Liquidity risk

    The real estate industry is highly capital intensive. Liquidity risk is
the risk that Crombie may not have access to sufficient debt and equity
capital to fund the growth program and/or refinance the debt obligations as
they mature.
    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 improvement costs and make distributions
to Unitholders. Debt repayment requirements are primarily funded from
refinancing Crombie's maturing debt obligations. Property acquisition funding
requirements are funded through a combination of accessing the debt and equity
capital markets.
    There is a risk that the debt capital markets may not refinance maturing
debt on terms and conditions acceptable to Crombie or at any terms at all.
These risks have heightened during the fourth quarter of 2008 due to the
turmoil in the financial markets. Crombie seeks to mitigate this risk by
staggering the debt maturity dates. There is also a risk that the equity
capital markets may not be receptive to an equity issue from Crombie with
financial terms acceptable to Crombie.
    Under the amended terms governing the Revolving Credit Facility, Crombie
is entitled to borrow a maximum of 70% of the fair market value of assets
subject to a first security position and 60% of the excess of fair market
value over first mortgage financing of assets subject to a second security
position or a negative pledge. The terms of the Revolving Credit Facility also
require that Crombie must maintain certain covenants:

    - annualized NOI for the prescribed properties must be a minimum of
      1.4 times the coverage of the related annualized debt service
      requirements;
    - annualized NOI on all properties must be a minimum of 1.4 times the
      coverage of all annualized debt service requirements;
    - access to the Revolving Credit Facility is limited by the amount
      utilized under the facility, and any negative mark-to-market position
      on the interest rate swap agreements, not to exceed the security
      provided by Crombie; and
    - distributions to Unitholders are limited to 100% of Distributable
      Income as defined in the Revolving Credit Facility.
    

    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%.
    As at December 31, 2008, and throughout the 2008 fiscal year, Crombie is
in compliance with all externally imposed capital requirements and all
covenants relating to its debt facilities.
    As outlined above, access to the Revolving Credit Facility is limited
such that the amount utilized under the facility, plus any negative
mark-to-market position may not exceed the security provided by Crombie
identified as the "Aggregate Coverage Amount" as defined in the Revolving
Credit Facility. During the fourth quarter of 2008 as previously discussed,
the mark-to-market adjustment on the interest rate swap agreements reached an
out-of-the-money position of approximately $53,044 at December 31, 2008. The
deterioration in the mark-to-market position had the impact of reducing
Crombie's available credit in the Revolving Credit Facility.
    During the fourth quarter of 2008, Crombie secured the Empire Demand
Facility to help ensure that Crombie maintains adequate liquidity in order to
fund its daily operating activities while volatility in the financial markets
continues while also mitigating the risk of Crombie not being in compliance
with covenants under the Revolving Credit Facility.
    Crombie has no mortgages maturing in fiscal 2009. During 2008, Crombie
was able to extend its Revolving Credit Facility until June 30, 2011. In
regard to the Term Facility that expires in October, 2009, Crombie has
successfully refinanced $100,000 during the third quarter of 2008, along with
$39,000 subsequent to December 31, 2008 (see "Subsequent Events"), and
continues to have positive discussions with a number of lenders to refinance
the remaining balance. While management can provide no assurances of
refinancing, and while the current credit market remains very challenging,
management remains confident it will refinance the remaining Term Facility
prior to its maturity.

    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 has implemented 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.
    Crombie LP acquired from ECL directly and indirectly 61 properties as
discussed in "Business Strategy and Outlook". Pursuant to the Portfolio
Acquisition, ECL made certain representations and warranties to Crombie with
respect to the properties, including with respect to the scope and amount of
its existing and contingent liabilities. ECL also provided an indemnity to
Crombie under the Portfolio 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.
    Crombie and their advisors underwent an extensive review of Crombie's
organizational structure and operations to support Crombie's assertion that,
at January 1, 2008 and throughout the 2008 fiscal year, 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.
    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 47.9% 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 21, 2009, Crombie declared distributions of 7.417 cents per
unit for the period from January 1, 2009 to, and including, January 31, 2009.
The distribution will be payable on February 16, 2009 to Unitholders of record
as at January 31, 2009.
    On February 12, 2009, Crombie completed mortgage financings to refinance
$39,000 of the Term Facility used to partially finance the Portfolio
Acquisition. First mortgages were placed with a third party for a total of
$32,800 and these fixed rate mortgages have a five year term and a weighted
average interest rate of 4.88%. In addition, $6,200 of fixed rate second
mortgages with a five year term and a weighted average interest rate of 5.38%
were provided by the Empire Demand Facility. Factoring in the cost of settling
the delayed interest rate swap placed upon assumption of the Term Facility,
the overall weighted average interest rate is 7.46%.
    On February 19, 2009, Crombie declared distributions of 7.417 cents per
unit for the period from February 1, 2009 to, and including, February 28,
2009. The distribution will be payable on March 16, 2009 to Unitholders of
record as at February 28, 2009.

    INTERNAL CONTROL OVER FINANCIAL REPORTING

    Management is responsible for establishing and maintaining adequate
control over financial reporting ("ICFR") to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP. The
control framework Management used to design ICFR is COSO, which is the
Committee of Sponsoring Organizations of the Treadway Commission. The Chief
Executive Officer and Chief Financial Officer have evaluated the effectiveness
of Crombie's ICFR and have concluded as at December 31, 2008 that Crombie's
ICFR were designed and operated effectively, and that there are no material
weaknesses relating to the design or operation of Crombie's ICFR. There were
no changes to Crombie's ICFR for the quarter ended December 31 2008 that have
materially affected, or are reasonably likely to materially affect Crombie's
ICFR.

    DISCLOSURE CONTROLS AND PROCEDURES

    Management is responsible for establishing and maintaining disclosure
controls and procedures ("DC&P") to provide reasonable assurance that material
information relating to Crombie is made known to Management by others,
particularly during the period in which the annual filings are being prepared,
and that information required to be disclosed by Crombie in its annual
filings, interim filings or other reports filed or submitted by it under
securities legislation is recorded, processed, summarized and reported with
the time periods specified in securities legislation. The Chief Executive
Officer and Chief Financial Officer have evaluated the effectiveness of
Crombie's DC&P and have concluded as at December 31, 2008 that these DC&P were
designed and operated effectively, and that there are no material weaknesses
relating to the design or operation of Crombie's DC&P.

    QUARTERLY INFORMATION

    The following table shows information for revenues, net income, AFFO,
FFO, distributions and per unit amounts for the eight most recently completed
quarters.

    
                            -------------------------------------------------
                                             Quarter Ended
    -------------------------------------------------------------------------
    (In thousands of dollars,
     except per unit         Dec. 31,     Sep. 30,     Jun. 30,     Mar. 31,
     amounts)                   2008         2008         2008         2008
    -------------------------------------------------------------------------
    Property revenue         $52,522      $51,044      $47,315      $37,261
    Property expenses         19,883       18,867       17,009       15,540
    -------------------------------------------------------------------------
    Property net operating
     income                   32,639       32,177       30,306       21,721
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative          2,701        2,004        1,979        1,952
      Interest                11,318       11,449        9,965        6,500
      Depreciation and
       amortization           12,265       12,302       10,524        7,766
    -------------------------------------------------------------------------
                              26,284       25,755       22,468       16,218
    -------------------------------------------------------------------------

    Income from continuing
     operations before other
     items, income taxes and
     non-controlling
     interest                  6,355        6,422        7,838        5,503
    Other items                   55           27           97            -
    -------------------------------------------------------------------------
    Income from continuing
     operations before
     income taxes and
     non-controlling
     interest                  6,410        6,449        7,935        5,503
    Income taxes expense
     - Future                 (3,450)         859          701          400
    -------------------------------------------------------------------------
    Income from continuing
     operations before
     non-controlling
     interest                  9,860        5,590        7,234        5,103
    Gain/(loss) on sale of
     discontinued
     operations                  487         (895)           -            -
    Income from
     discontinued
     operations                   24          226          136          263
    -------------------------------------------------------------------------
    Income before
     non-controlling
     interest                 10,371        4,921        7,370        5,366
    Non-controlling
     interest                  4,968        2,358        3,531        2,583
    -------------------------------------------------------------------------
    Net income                $5,403       $2,563       $3,839       $2,783
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net
     income per unit           $0.20        $0.09        $0.15        $0.13
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                              Quarter Ended
    -------------------------------------------------------------------------
    (In thousands of dollars,
     except per unit         Dec. 31,     Sep. 30,     Jun. 30,     Mar. 31,
     amounts)                   2008         2008         2008         2008
    -------------------------------------------------------------------------
    AFFO                     $14,447      $12,224      $11,683       $7,867
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO                      $18,699      $18,967      $18,579      $13,610
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions            $11,649      $11,649      $11,879       $8,867
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    AFFO per unit(1)           $0.28        $0.23        $0.23        $0.19
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO per unit(1)            $0.36        $0.36        $0.37        $0.33
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions per
     unit(1)                   $0.22        $0.22        $0.23        $0.21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                            -------------------------------------------------
                                             Quarter Ended
    -------------------------------------------------------------------------
    (In thousands of dollars,
     except per unit         Dec. 31,     Sep. 30,     Jun. 30,     Mar. 31,
     amounts)                   2007         2007         2007         2007
    -------------------------------------------------------------------------
    Property revenue         $36,455      $35,068      $34,636      $35,076
    Property expenses         14,536       14,875       13,958       14,647
    -------------------------------------------------------------------------
    Property net operating
     income                   21,919       20,193       20,678       20,429
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative          2,492        1,843        2,224        1,618
      Interest                 6,577        6,413        6,080        5,843
      Depreciation and
       amortization            8,152        7,382        7,085        6,324
    -------------------------------------------------------------------------
                              17,221       15,638       15,389       13,785
    -------------------------------------------------------------------------

    Income from continuing
     operations before other
     items, income taxes and
     non-controlling
     interest                  4,698        4,555        5,289        6,644
    Other items                    -            -            -            -
    -------------------------------------------------------------------------
    Income from continuing
     operations before
     income taxes and
     non-controlling
     interest                  4,698        4,555        5,289        6,644
    Income taxes expense
     - Future                 (2,994)         718        2,978          328
    -------------------------------------------------------------------------
    Income from continuing
     operations before
     non-controlling
     interest                  7,692        3,837        2,311        6,316
    Gain/(loss) on sale of
     discontinued
     operations                    -            -            -            -
    Income from
     discontinued
     operations                  132          108          108           46
    -------------------------------------------------------------------------
    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 Ended
    -------------------------------------------------------------------------
    (In thousands of dollars,
     except per unit         Dec. 31,     Sep. 30,     Jun. 30,     Mar. 31,
     amounts)                   2007         2007         2007         2007
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    AFFO per unit(1)           $0.18        $0.15        $0.25        $0.26
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO per unit(1)            $0.31        $0.29        $0.30        $0.31
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions per unit(1)  $0.21        $0.21        $0.21        $0.20
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) AFFO, FFO and distributions per unit are calculated by AFFO, FFO or
        distributions, as the case may be, divided by the diluted weighted
        average of the total Units and Special Voting Units outstanding of
        52,351,464 for the quarter ended December 31, 2008, 52,351,464 for
        the quarter ended September 30, 2008, 49,954,256 for the quarter
        ended June 30, 2008, 41,728,561 for the quarter ended March 31, 2008,
        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, 41,717,004 for the quarter ended March 31, 2007.
        The quarterly results of these calculations may not add to the annual
        calculations due to rounding.

    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 26, 2009
    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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