Crombie REIT announces second quarter 2008 results and commitments to refinance $100 million of bridge loan



    STELLARTON, NS, Aug. 8 /CNW/ - Crombie Real Estate Investment Trust
("Crombie") (TSX: CRR.UN) is pleased to report its results for the second
quarter and six months ended June 30, 2008.
    Funds from Operations (FFO) for the second quarter increased by 48.0% to
$18.6 million ($0.37 per unit) from $12.6 million ($0.30 per unit) in the
second quarter of 2007. Year-to-date FFO increased by 25.6% to $32.2 million
($0.70 per unit) from $25.6 million ($0.61 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 "Acquisition") on April 22, 2008, the impact of the
individual property acquisitions since January 1, 2007 and increased
same-asset net operating income (NOI).
    Adjusted Funds from Operations (AFFO) for the second quarter of 2008 was
$11.7 million ($0.23 per unit) compared to $10.3 million ($0.25 per unit) for
the second quarter of 2007. Year-to-date AFFO was $19.6 million ($0.43 per
unit) compared to $21.2 million ($0.51 per unit) for the same period of 2007.
Growth in AFFO during the second quarter was due to the improved FFO results,
partially offset by higher maintenance capital and tenant improvement costs
combined with one month 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.
    Total property NOI for the second quarter of 2008 increased by 46.6% to
$30.3 million from $20.7 million in the second quarter of 2007. Total property
NOI for the six months ended June 30, 2008 was $52.0 million, representing a
26.6% increase over the NOI of $41.1 million for the same period of 2007. The
improvement in the NOI again resulted from the portfolio Acquisition, the
results from the individual property acquisitions and improved same-asset NOI,
due to higher average rent per square foot results.
    Net income for the second quarter of 2008 was $3.8 million ($0.15 per
unit) compared to $1.3 million ($0.06 per unit) for the second quarter of
2007. Net income for the six months ended June 30, 2008 was $6.6 million
($0.28 per unit) compared to $4.6 million ($0.21 per unit) for the same period
of 2007.
    Subsequent to the end of the second quarter, Crombie signed commitment
letters with Halifax Bank of Scotland ("HBOS") to refinance $100 million of
the bridge loan used to partially finance the portfolio Acquisition with fixed
rate mortgages. The commitments have a weighted average 7.7 year term and
interest rates based on the prevailing amortizing swap rates for the loan
terms plus a basis point spread which management anticipates will result in an
overall weighted average interest rate which will approximate the 6.35% rate
used to model the pro forma accretion of the portfolio Acquisition, subject to
final rate lock.
    Commenting on the year-to-date results, J. Stuart Blair, President and
Chief Executive Officer stated: "Overall, Crombie has had an extremely busy
and productive 2008 thus far. I am extremely pleased that we completed the
acquisition of the portfolio from Empire during the second quarter. I also
continue to be satisfied to see continuing growth of NOI in our same-asset
properties. As well, we were able to complete our first acquisition west of
Ontario in June and complete leasing activity on 85% of the 2008 lease
expiries half way through the year. Finally, the progress made in replacing a
major portion of our bridge loan with suitable long term financing, even in
this difficult credit environment, is very encouraging."

    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 its first acquisition west of Ontario, purchasing
      River City Centre in Saskatoon, Saskatchewan on June 12, 2008 for
      $27.2 million excluding closing and transaction costs.
    - Crombie completed leasing activity on 85.0% of its 2008 expiring leases
      as at June 30, 2008, increasing average net rent per square foot to
      $12.78 from the expiring rent per square foot of $12.05, an increase of
      6.1%.
    - Occupancy for the properties (excluding the portfolio Acquisition at
      June 30, 2008) increased to 93.3% compared with March 31, 2008 at
      92.9%. Overall occupancy at June 30, 2008 was 94.9%.
    - Property revenue for the quarter ended June 30, 2008 increased by
      $12.7 million, or 36.6%, to $47.3 million compared to $34.6 million for
      the quarter ended June 30, 2007. The improvement was due to the
      portfolio Acquisition, increased same-asset property results and the
      four individual property acquisitions completed since June 30, 2007.
    - Same-asset NOI of $21.6 million increased by $0.9 million or 4.6%,
      compared to $20.7 million for the quarter ended June 30, 2007 due
      primarily to an increased average rent per square foot ($12.39 in 2008
      versus $12.02 in 2007).
    - The FFO payout ratio for the six months ended June 30, 2008 was 61.6%
      which was below the target annual payout ratio of 70.0% and below the
      payout ratio of 66.6% for the same period of 2007.
    - The AFFO payout ratio for the six months ended June 30, 2008 was 101.4%
      which was above the target annual AFFO payout ratio of 95.0% and the
      payout ratio for 2007 of 80.5%. The year-to-date fluctuation was
      primarily due to tenant improvement costs incurred in 2008 for leases
      that were set to expire in 2009, which will result in higher net rent
      per square foot on an ongoing basis, combined with one month of
      distributions made on the subscription receipts prior to the closing of
      the portfolio Acquisition. Crombie anticipates that the annual AFFO
      payout ratio will approximate the target payout ratio by the end of
      fiscal 2008.
    - Debt to gross book value increased to 55.1% at June 30, 2008 compared
      to 48.2% at March 31, 2008 as a result of the financing for the
      portfolio Acquisition.
    - Crombie's debt service coverage ratio for the first six months of 2008
      was 1.88 times EBITDA and interest service coverage ratio was 2.92
      times EBITDA, compared to 1.92 times EBITDA and 3.12 times EBITDA,
      respectively, for the same period in 2007.
    - Subsequent to the end of the second quarter of 2008, Crombie signed
      commitment letters to refinance $100 million of the bridge loan with
      fixed rate mortgages.

    The table below presents a summary of the financial performance for the
quarter and six months ending June 30, 2008 compared to the same periods in
fiscal 2007.

    -------------------------------------------------------------------------
                                                             Six         Six
                                 Quarter     Quarter      months      months
    (In millions of dollars,       ended       ended       ended       ended
     except where otherwise      Jun. 30,    Jun. 30,    Jun. 30,    Jun. 30,
     noted)                         2008        2007        2008        2007
    -------------------------------------------------------------------------
    Property revenue             $47.315     $34.636     $84.576     $69.712
    Property expenses             17.009      13.958      32.549      28.605
    -------------------------------------------------------------------------
    Property NOI                  30.306      20.678      52.027      41.107
    -------------------------------------------------------------------------
    NOI margin percentage           64.1%       59.7%       61.5%       59.0%
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative              1.979       2.224       3.931       3.842
      Interest                     9.965       6.080      16.465      11.921
      Depreciation and
       amortization               10.524       7.085      18.290      13.407
    -------------------------------------------------------------------------
                                  22.468      15.389      38.686      29.170
    -------------------------------------------------------------------------
    Income from continuing
     operations before
     other items, income
     taxes and non-
     controlling interest          7.838       5.289      13.341      11.937
    Other items                    0.097           -       0.097           -
    -------------------------------------------------------------------------
    Income from continuing
     operations before
     income taxes and non-
     controlling interest          7.935       5.289      13.438      11.937
    Income taxes - Future          0.701       2.978       1.101       3.306
    -------------------------------------------------------------------------
    Income from continuing
     operations before non-
     controlling interest          7.234       2.311      12.337       8.631
    Discontinued operations        0.136       0.108       0.399       0.150
    -------------------------------------------------------------------------
    Income before non-
     controlling interest          7.370       2.419      12.736       8.781
    Non-controlling interest       3.531       1.164       6.114       4.226
    -------------------------------------------------------------------------
    Net income                    $3.839      $1.255      $6.622      $4.555
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Basic and diluted net
     income per unit               $0.15       $0.06       $0.28       $0.21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Property NOI

    Second quarter and year-to-date property NOI for 2008 increased to
$30.3 million (46.6%) and $52.0 million (26.6%) respectively from the same
periods in 2007 due to the portfolio Acquisition, improved same-asset property
results and the individual property acquisitions completed since January 1,
2007.

    Same-Asset Property NOI

    -------------------------------------------------------------------------
                                                             Six         Six
                                 Quarter     Quarter      months      months
                                   ended       ended       ended       ended
                                 Jun. 30,    Jun. 30,    Jun. 30,    Jun. 30,
    (In millions of dollars)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Same-asset property
     revenue                     $36.151     $34.636     $70.241     $68.348
    Same-asset property
     expenses                     14.528      13.958      28.922      28.201
    -------------------------------------------------------------------------
    Same-asset property NOI      $21.623     $20.678     $41.319     $40.147
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Same-asset NOI margin %         59.8%       59.7%       58.8%       58.7%
    -------------------------------------------------------------------------


    Same-asset property revenue of $36.2 million in the second quarter of 2008
and $70.2 million for year-to-date 2008 was 4.4% higher than the second
quarter in 2007 and 2.8% higher than the same period results for 2007 due
primarily to increased average rent per square foot results.
    Same-asset property expenses of $14.5 million in the second quarter of
2008 and $28.9 million for year-to-date 2008 were 4.1% higher than the
$14.0 million for the second quarter of 2007 and 2.6% higher than the
$28.2 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 and snow removal costs.
    Same-asset NOI for the second quarter of 2008 grew by 4.6% over the same
period in 2007 while 2008 year-to-date same-asset NOI grew by 2.9% over the
year-to-date results for 2007.

    Acquisition Property NOI

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

    -------------------------------------------------------------------------
                                                             Six         Six
                                 Quarter     Quarter      months      months
                                   ended       ended       ended       ended
                                 Jun. 30,    Jun. 30,    Jun. 30,    Jun. 30,
    (In millions of dollars)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Acquisition property
     revenue                     $11.164          $-     $14.335      $1.364
    Acquisition property
     expense                       2.481           -       3.627       0.404
    -------------------------------------------------------------------------
    Acquisition property
     NOI                          $8.683          $-     $10.708      $0.960
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Acquisition NOI margin %        77.8%          -%       74.7%       70.4%
    -------------------------------------------------------------------------


    General and Administrative Expenses

    General and administrative expenses decreased by 11.0% during the second
quarter of 2008 to $2.0 million due to 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 2.3% for the six months ended
June 30, 2008 to $3.9 million from the same period in the prior year due to
higher salaries and benefits costs, offset in part by lower rent and occupancy
expenses.

    Interest

    -------------------------------------------------------------------------
                                                             Six         Six
                                 Quarter     Quarter      months      months
                                   ended       ended       ended       ended
                                 Jun. 30,    Jun. 30,    Jun. 30,    Jun. 30,
    (In millions of dollars)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Same-asset interest
     expense                      $5.760      $6.080     $10.938     $11.526
    Acquisition interest
     expense                       4.205           -       5.527       0.395
    -------------------------------------------------------------------------
    Interest expense              $9.965      $6.080     $16.465     $11.921
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The increase in interest expense for both the second 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 reduced for both the quarter and year-to-date 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

    -------------------------------------------------------------------------
                                                             Six         Six
                                 Quarter     Quarter      months      months
    (In millions of dollars,       ended       ended       ended       ended
    except where otherwise       Jun. 30,    Jun. 30,    Jun. 30,    Jun. 30,
    noted)                          2008        2007        2008        2007
    -------------------------------------------------------------------------
    FFO                          $18.579     $12.553     $32.189     $25.635
    AFFO                         $11.683     $10.330     $19.550     $21.201
    Distributions                $10.952      $8.727     $19.819     $17.074
    FFO payout ratio                58.9%       69.5%       61.6%       66.6%
    AFFO payout ratio               93.7%       84.5%      101.4%       80.5%
    -------------------------------------------------------------------------
                                 Jun. 30,    Jun. 30,
                                    2008        2007
                             ------------------------
    Debt to gross book value        55.1%       47.0%
    -------------------------------------------------


    The year-to-date FFO payout ratio of 61.6% is below the anticipated annual
payout ratio of 70.0% while the AFFO payout ratio of 101.4% is higher than the
target annual payout ratio of 95.0%. Growth in AFFO was due to the improved
FFO results, partially offset by higher maintenance capital and tenant
improvement costs combined with one month 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.
    Crombie anticipates that the annual payout ratio will approximate the
target payout ratio by the end of fiscal 2008.

    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
      additions to tenant improvements and lease costs.

    About Crombie

    Crombie is an open-ended real estate investment trust established under,
and governed by, the laws of the Province of Ontario. The trust invests in
income-producing retail, office and mixed-use properties in Canada, with a
future growth strategy focused primarily on the acquisition of retail
properties. Crombie currently owns a portfolio of 113 commercial properties in
seven provinces, comprising approximately 11.1 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) anticipated or target distributions and payout ratios, which could be
    impacted by seasonality of capital expenditures, results of operations
    and capital resource allocation decisions.

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

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

    Conference Call Invitation

    Crombie will provide additional details concerning its second quarter
results on a conference call to be held Friday, August 8, 2008, at 12:00 p.m.
ADT. To join this conference call you may dial (800) 762-8932. 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 August 15, 2008, by dialling (416) 640-1917 or (877) 289-8525 and
entering pass code 21279307#, or on the Crombie website for 90 days after the
meeting.

                     CROMBIE REAL ESTATE INVESTMENT TRUST
                  Interim Consolidated Financial Statements
                                  Unaudited
                                June 30, 2008

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

                                                         June 30,   December
                                                            2008    31, 2007
                                                     ------------------------
    Assets
      Commercial properties (Note 4)                  $1,300,825    $898,938
      Intangible assets (Note 5)                         146,454      59,823
      Notes receivable (Note 6)                           16,552      20,968
      Other assets (Note 7)                               26,896      20,436
      Cash and cash equivalents                                -       2,708
      Assets held for sale (Note 20)                      10,951      11,109
                                                     ------------------------
                                                      $1,501,678  $1,013,982
                                                     ------------------------
                                                     ------------------------

    Liabilities and Unitholders' Equity
      Commercial property debt (Note 8)                 $812,016    $493,945
      Convertible debentures (Note 9)                     28,847           -
      Payables and accruals (Note 10)                     48,980      38,555
      Intangible liabilities (Note 11)                    45,351      16,503
      Employee future benefits obligation                  4,649       4,458
      Distributions payable                                3,883       2,956
      Future income tax liability (Note 15)               82,602      81,501
      Liabilities related to assets held for
       sale (Note 20)                                      7,007       7,311
                                                     ------------------------
                                                       1,033,335     645,229

    Non-controlling interest (Note 12)                   224,871     177,919

    Unitholders' equity                                  243,472     190,834
                                                     ------------------------
                                                      $1,501,678  $1,013,982
                                                     ------------------------
                                                     ------------------------

    Commitments and contingencies (Note 17)

    See accompanying notes to the interim consolidated financial statements.

                     CROMBIE REAL ESTATE INVESTMENT TRUST
                      Consolidated Statements of Income
             (In thousands of dollars, except per unit amounts)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                   Three       Three         Six         Six
                                  Months      Months      Months      Months
                                   Ended       Ended       Ended       Ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                             ------------------------------------------------
    Revenues

      Property revenue
       (Note 14)                 $47,315     $34,636     $84,576     $69,712
      Lease terminations              20           -          20           -
                             ------------------------------------------------
                                  47,335      34,636      84,596      69,712
                             ------------------------------------------------

    Expenses
      Property expenses           17,009      13,958      32,549      28,605
    General and
     administrative expenses       1,979       2,224       3,931       3,842
      Interest expense             9,965       6,080      16,465      11,921
      Depreciation of
       commercial properties       4,185       3,030       7,359       5,971
      Amortization of tenant
       improvements/lease
       costs                         700         647       1,468       1,005
      Amortization of
       intangible assets           5,639       3,408       9,463       6,431
                             ------------------------------------------------
                                  39,477      29,347      71,235      57,775
                             ------------------------------------------------
                             ------------------------------------------------
    Income from continuing
     operations before
     other items                   7,858       5,289      13,361      11,937
    Gain on disposition of
     land                             77           -          77           -
                             ------------------------------------------------
    Income from continuing
     operations before
     income taxes and non-
     controlling interest          7,935       5,289      13,438      11,937

    Income tax expense -
     Future (Note 15)                701       2,978       1,101       3,306
                             ------------------------------------------------

    Income from continuing
     operations before non-
     controlling interest          7,234       2,311      12,337       8,631
    Income from
     discontinued operation
     (Note 20)                       136         108         399         150
                             ------------------------------------------------
    Income before non-
     controlling interest          7,370       2,419      12,736       8,781
    Non-controlling
     interest                      3,531       1,164       6,114       4,226
                             ------------------------------------------------
    Net income                    $3,839      $1,255      $6,622      $4,555
                             ------------------------------------------------
                             ------------------------------------------------

    Basic and diluted net
     income per unit
    Continuing operations          $0.14       $0.05       $0.26       $0.20
    Discontinued operations        $0.01       $0.01       $0.02       $0.01
                             ------------------------------------------------
    Net income                     $0.15       $0.06       $0.28       $0.21
                             ------------------------------------------------
                             ------------------------------------------------
    Weighted average number
    of units outstanding
      Basic                   25,909,792  21,538,422  23,726,866  21,526,382
                             ------------------------------------------------
                             ------------------------------------------------
      Diluted                 26,028,526  21,648,985  23,838,755  21,643,238
                             ------------------------------------------------
                             ------------------------------------------------

    See accompanying notes to the interim consolidated financial statements.

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

                                   Three       Three         Six         Six
                                  Months      Months      Months      Months
                                   Ended       Ended       Ended       Ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                             ------------------------------------------------
    Net income                    $3,839      $1,255      $6,622      $4,555
      Net change in
       derivatives
       designated as cash
       flow hedges                 1,487        (460)     (2,807)       (401)
                             ------------------------------------------------

    Other comprehensive
     income (loss)                 1,487        (460)     (2,807)       (401)
                             ------------------------------------------------
    Comprehensive income          $5,326        $795      $3,815      $4,154
                             ------------------------------------------------
                             ------------------------------------------------

    See accompanying notes to the interim consolidated financial statements.

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

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

    Unitholders'
     equity,
     January
     1,
     2008     $205,273   $20,064        $12   $(3,000)   $(31,515)  $190,834
    Units
     released
     under
     EUPP           20         -        (20)        -           -          -
    Units
     issued
     under
     EUPP          386         -          -         -           -        386
    Loans
     receivable
     under
     EUPP         (386)        -          -         -           -       (386)
    EUPP
     compen-
     sation          -         -         20         -           -         20
    Repayment
     of EUPP
     loans
     recei-
     vable         164         -          -         -           -        164
    Net
     income          -     6,622          -         -           -      6,622
    Distri-
     butions         -         -          -         -     (10,983)   (10,983)
    Other
     comprehensive
     loss            -         -          -    (2,807)          -     (2,807)
    Unit issue
     proceeds,
     net of
     costs of
     $2,008     60,997         -          -         -           -     60,997
    Unit
     redemp-
     tion       (1,375)        -          -         -           -     (1,375)
           ------------------------------------------------------------------
    Unitholders'
     equity,
     June
     30,
     2008     $265,079   $26,686        $12   $(5,807)   $(42,498)  $243,472
           ------------------------------------------------------------------
           ------------------------------------------------------------------

    Unitholders'
     equity,
     January
     1,
     2007     $204,831    $9,405        $27      $Nil    $(13,369)  $200,894
    Transition
     adjust-
     ment            -         -          -      (162)          -       (162)
    Units
     released
     under
     EUPP           52         -        (52)        -           -          -
    Units
     issued
     under
     EUPP          215         -          -         -           -        215
    Loans
     receivable
     under
     EUPP         (215)        -          -         -           -       (215)
    EUPP
     compen-
     sation          -         -         18         -           -         18
    Repayment
     of EUPP
     loans
     recei-
     vable         375         -          -         -           -        375
    Net
     income          -     4,555          -         -           -      4,555
    Distri-
     butions         -         -          -         -      (8,947)    (8,947)
    Other
     compre-
     hensive
     loss            -         -          -      (401)          -       (401)
           ------------------------------------------------------------------
    Unitholders'
     equity,
     June
     30,
     2007     $205,258   $13,960        $(7)    $(563)   $(22,316)  $196,332
           ------------------------------------------------------------------
           ------------------------------------------------------------------

    See accompanying notes to the interim consolidated financial statements.

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

                                   Three       Three         Six         Six
                                  Months      Months      Months      Months
                                   Ended       Ended       Ended       Ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                             ------------------------------------------------
    Cash flows provided by
    (used in)

    Operating Activities
      Net income                  $3,839      $1,255      $6,622      $4,555
      Items not affecting
       cash
        Non-controlling
         interest                  3,531       1,164       6,114       4,226
        Depreciation of
         commercial
         properties                4,208       3,063       7,417       6,038
        Amortization of
         tenant
         improvements/
         lease costs                 709         656       1,491       1,021
        Amortization of
         deferred
         financing costs             323         108         477         200
        Amortization of
         intangible assets         5,668       3,437       9,521       6,489
        Amortization of
         above market
         leases                      779         752       1,549       1,449
        Amortization of
         below market
         leases                   (1,819)     (1,111)     (3,009)     (2,098)
        Gain on disposal
          of land                    (77)          -         (77)          -
        Accrued rental
         revenue                    (703)       (399)     (1,021)       (706)
        Unit based
         compensation                 11           9          20          18
        Future income
         taxes                       701       2,978       1,101       3,306
                             ------------------------------------------------
                             ------------------------------------------------
                                  17,170      11,912      30,205      24,498
    Additions to tenant
     improvements and
     lease costs                  (3,771)     (1,828)     (8,328)     (2,909)
    Change in other
     non-cash operating
     items (Note 16)               3,008      (7,777)       (487)    (17,000)
                             ------------------------------------------------
                             ------------------------------------------------
    Cash provided by
     operating activities         16,407       2,307      21,390       4,589
                             ------------------------------------------------
                             ------------------------------------------------

    Financing Activities
    Issue of commercial
     property debt               350,575      24,023     350,575      55,941
    Issue costs of
     commercial property
     debt                         (3,653)       (320)     (3,592)       (385)
    Issue of convertible
     debentures                        -           -      30,000           -
    Issue costs of
     convertible
     debentures                        -           -      (1,214)          -
    Units issued                  63,005           -      63,005           -
    Units and Class B LP
     Units issue costs            (3,790)          -      (3,790)          -
    Repayment of
     commercial property
     debt                        (18,355)    (17,647)    (45,735)    (21,273)
    Collection of notes
     receivable                    3,002       4,651       4,416      13,006
    Repayment of EUPP
     loan receivable                 157         188         164         375
    Unit redemption               (1,375)          -      (1,375)          -
    Payment of
     distributions               (10,952)     (8,727)    (19,819)    (17,074)
                             ------------------------------------------------
                             ------------------------------------------------
    Cash provided by
     financing activities        378,614       2,168     372,635      30,590
                             ------------------------------------------------
                             ------------------------------------------------

    Investing Activities
    Additions to commercial
     properties                   (5,803)     (3,834)     (7,515)     (5,501)
    Proceeds of disposal
     of land, net of
     closing costs (Note 4)          187           -         187           -
    Acquisition of
     commercial properties
     (Note 4)                   (389,405)          -    (389,405)    (30,217)
                             ------------------------------------------------
                             ------------------------------------------------
    Cash used in investing
     activities                 (395,021)     (3,834)   (396,733)    (35,718)
                             ------------------------------------------------
                             ------------------------------------------------

    Increase (decrease) in
     cash and cash
     equivalents during
     the period                      Nil         641      (2,708)       (539)
    Cash and cash
     equivalents, beginning
     of period                       Nil           -       2,708       1,180
                             ------------------------------------------------
                             ------------------------------------------------
    Cash and cash
     equivalents, end of
     period                         $Nil        $641        $Nil        $641
                             ------------------------------------------------
                             ------------------------------------------------

    See accompanying notes to the interim consolidated financial statements.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
                 Notes to Consolidated Financial Statements
             (In thousands of dollars, except per unit amounts)
                                 (Unaudited)
                                June 30, 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 interim consolidated financial statements are prepared in accordance
with generally accepted accounting principles ("GAAP") as prescribed by the
Canadian Institute of Chartered Accountants ("CICA"). These interim
consolidated financial statements do not include all of the disclosures
contained in Crombie's annual consolidated financial statements. Accordingly,
these interim consolidated financial statements should be read in conjunction
with the consolidated financial statements for the year ended December 31,
2007 as set out in the 2007 Annual Report.
    The accounting policies used in preparation of these interim consolidated
financial statements conform with those used in the 2007 annual consolidated
financial statements, except as described in Note 3.

    (b) 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.

    (c) 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.

    (d) 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.

    (e) Employee future benefits obligation

    The cost of pension benefits for defined contribution plans are expensed
as contributions are paid. The cost of defined benefit pension plans and other
benefit plans is accrued based on actuarial valuations, which are determined
using the projected benefit method pro-rated on service and management's best
estimate of the expected long-term rate of return on plan assets, salary
escalation, retirement ages and expected growth rate of health care costs. The
defined benefit plans are unfunded.
    The impact of changes in plan amendments is amortized on a straight-line
basis over the expected average remaining service life ("EARSL") of active
members. For the supplementary executive retirement plan, the impacts of
changes in the plan provisions are amortized over five years.
    During the second quarter and year to date fiscal 2008, the net defined
benefit pension plans and other benefit plans expense was $95 and $191 (2007 -
$116 and $231).

    (f) Use of estimates

    The preparation of consolidated financial statements in conformity with
Canadian 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;
    - Allocation of purchase price on property acquisitions; and
    - Fair value of mortgages.

    (g) Cash flow statements

    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
six month period ended June 30, 2008, $20,746 (six month period ended June 30,
2007 - $17,249) in cash distributions were declared payable by the Board of
Trustees to Crombie Unitholders and Crombie Limited Partnership Unitholders
(the "Class B LP Units").

    (h) 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 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.

    (i) Discontinued operations

    Crombie classifies properties that meet certain criteria as held for sale
and separately discloses any net income (loss) 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.

    3) CHANGES IN ACCOUNTING POLICIES

    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 on a prospective basis.

    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. Refer to Note 21.

    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. Refer to Note 19.

    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". The new
Section 3064 states that upon their initial identification, intangible assets
are to be recognized as assets only if they meet the definition of an
intangible asset and the recognition criteria. 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. Crombie is currently evaluating the
effect of these new standards on its results and financial position.

    International Financial Reporting Standards

    On February 13, 2008, the Accounting Standards Board confirmed the date of
changeover from GAAP to International Financial Reporting Standards ("IFRS").
Canadian publicly accountable enterprises must adopt IFRS for their interim
and annual financial statements relating to fiscal years beginning on or after
January 1, 2011. Crombie is currently developing its IFRS conversion plan and
evaluating the effect of the new standards on its consolidated financial
statements.

    4) COMMERCIAL PROPERTIES

                                                    June 30, 2008
                                         ------------------------------------
                                                          Accumu-
                                                           lated
                                                           Depre-   Net Book
                                                Cost     ciation       Value
                                         ------------------------------------
    Land                                    $288,551        $Nil    $288,551
    Buildings                              1,018,446      28,237     990,209
    Tenant improvements and leasing
     costs                                    26,678       4,613      22,065
                                         ------------------------------------
                                          $1,333,675     $32,850  $1,300,825
                                         ------------------------------------
                                         ------------------------------------

                                                   December 31, 2007
                                         ------------------------------------
                                                          Accumu-
                                                           lated
                                                           Depre-   Net Book
                                                Cost     ciation       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 and Disposals

    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.
    On May 21, 2008, land attached to a commercial property was sold to an
unrelated third party for cash proceeds of $187, net of closing costs,
resulting in a gain of $77.

    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 12 years was established for the property.
    On March 7, 2007, Crombie acquired a property in Perth, Ontario
representing a 102,500 square foot increase to the portfolio, for $17,900 plus
additional closing costs, from an unrelated third party. The acquisition was
initially financed through Crombie's revolving credit facility. On April 20,
2007, a mortgage of $12,600 at a fixed rate of 5.43% and a term of 15 years
was established for the property.

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

                                   Three       Three         Six         Six
                                  Months      Months      Months      Months
                                   Ended       Ended       Ended       Ended
    Commercial property          June 30,    June 30,    June 30,    June 30,
    acquired, net:                  2008        2007        2008        2007
    -------------------------------------------------------------------------
    Land                        $107,826          $-    $107,826      $5,181
    Buildings                    287,154           -     287,154      20,330
    Intangible assets:
      Lease origination
       costs                      40,233           -      40,233         985
      Tenant relationships        21,622           -      21,622       2,244
      Above market leases            370           -         370         855
      In-place leases             35,384           -      35,384       2,182
    Intangible liabilities:
      Below market leases        (31,848)          -     (31,848)     (1,560)
    -------------------------------------------------------------------------
    Net purchase price           460,741           -     460,741      30,217
    Assumed mortgages            (16,517)          -     (16,517)          -
    Fair value debt
     adjustment on assumed
     mortgages                       181           -         181           -
    -------------------------------------------------------------------------
                                $444,405          $-    $444,405     $30,217
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Consideration funded by:

    Revolving credit
     facility                    $16,000          $-     $16,000      $9,017
    Mortgage financing                 -           -           -      20,450
    Term facility                280,000           -     280,000           -
    Units                         63,005           -      63,005           -
    Convertible debentures        30,000           -      30,000           -
    Application of deposit           400           -         400         750
    -------------------------------------------------------------------------
    Cash paid                    389,405           -     389,405      30,217
    Class B LP Units
     (non-controlling
     interest) paid               55,000           -      55,000           -
    -------------------------------------------------------------------------
    Total consideration
     paid                       $444,405          $-    $444,405     $30,217
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    5) INTANGIBLE ASSETS

                                                    June 30, 2008
                                         ------------------------------------
                                                          Accumu-
                                                           lated
                                                          Amorti-   Net Book
                                                Cost      zation       Value
                                         ------------------------------------
    Origination costs for existing
     leases                                  $54,419      $7,918     $46,501
    In-place leases                           57,376      13,559      43,817
    Tenant relationships                      57,098      10,513      46,585
    Above market existing leases              16,015       6,464       9,551
                                         ------------------------------------
                                            $184,908     $38,454    $146,454
                                         ------------------------------------
                                         ------------------------------------

                                                  December 31, 2007
                                         ------------------------------------
                                                          Accumu-
                                                           lated
                                                          Amorti-   Net Book
                                                Cost      zation       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 3.75 years.

    The balance of each note is as follows:

                                                         June 30,   December
                                                            2008    31, 2007
                                                     ------------------------
    Capital expenditure program                           $4,119      $6,817
    Interest rate subsidy                                 12,433      14,151
                                                     ------------------------
                                                         $16,552     $20,968
                                                     ------------------------
                                                     ------------------------
    7) OTHER ASSETS

                                                         June 30,   December
                                                            2008    31, 2007
                                                     ------------------------
    Accounts receivable                                   $6,357      $5,439
    Accrued straight-line rent receivable                  6,746       5,728
    Prepaid expenses                                      13,119       8,479
    Restricted cash                                          674         790
                                                     ------------------------
                                                         $26,896     $20,436
                                                     ------------------------
                                                     ------------------------

    8) COMMERCIAL PROPERTY DEBT

                                            Weighted    Weighted
                                             average     average
                                            interest     term to     June 30,
                                   Range        rate    maturity        2008
                             ------------------------------------------------
    Fixed rate mortgages       5.15-6.44%       5.45%  7.2 years    $425,945
    Floating rate term
     facility                                   5.00%  1.3 years     280,000
    Floating rate revolving
     credit facility                            4.97%  3.0 years     111,475
    Deferred financing
     charges                                                          (5,404)
                                                                 ------------
                                                                    $812,016
                                                                 ------------
                                                                 ------------

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

    As of June 30, 2008, debt retirements for the next 5 years are:

                                   Fixed    Floating   Financing
                                    Rate        Rate       Costs       Total
                             ------------------------------------------------
    Twelve months ended
     June 30, 2009               $21,580        $Nil        $Nil     $21,580
    Twelve months ended
     June 30, 2010               119,062     280,000           -     399,062
    Twelve months ended
     June 30, 2011                37,537     111,475           -     149,012
    Twelve months ended
     June 30, 2012                10,541           -           -      10,541
    Twelve months ended
     June 30, 2013                11,279           -           -      11,279
    Thereafter                   213,409           -           -     213,409
                             ------------------------------------------------
                                 413,408     391,475           -     804,883
    Deferred financing
     charges                           -           -      (5,404)     (5,404)
    Fair value debt
     adjustment                   12,537           -           -      12,537
                             ------------------------------------------------
                                $425,945    $391,475     $(5,404)   $812,016
                             ------------------------------------------------
                             ------------------------------------------------

    The floating rate revolving credit facility has a maximum principal amount
of $150,000 and is used by Crombie for working capital purposes and to provide
financing for future acquisitions. It is secured by a pool of first and second
mortgages and negative pledges on certain properties. As at June 30, 2008,
based on the security granted by Crombie, approximately $147,755 is available
for draw down, of which $111,475 is drawn down on the facility. During the
second quarter of 2008, the maturity date of the floating rate credit facility
was extended to June 30, 2011.
    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 margin over prime on the Banker Acceptance Rate, which margin
increases over time. As security for the term facility, Crombie provided an
unconditional guarantee and shall at any time on or after the 90th day
following the closing of the acquisition, if requested by the lender, grant a
charge on all or certain of the acquired properties together with an
assignment of leases. 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.
    Subsequent to the end of the second quarter, Crombie entered into a number
of commitments to refinance portions of the commercial property debt (see
Subsequent Events, Note 22).

    9) CONVERTIBLE DEBENTURES

    Convertible      Maturity   Interest             Transaction     June 30,
    debenture            date       rate  Principal        costs        2008
    -------------------------------------------------------------------------
    Series A   March 20, 2013          7%   $30,000      $(1,153)    $28,847
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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 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
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

                                                         June 30,   December
                                                            2008    31, 2007
                                                     ------------------------
    Tenant improvements and capital expenditures         $13,966      $9,828
    Property operating costs                              21,914      21,212
    Interest on commercial property debt and
     debentures                                            1,893       1,731
    Fair value of interest rate swap agreements           11,207       5,784
                                                     ------------------------
                                                         $48,980     $38,555
                                                     ------------------------
                                                     ------------------------

    11) INTANGIBLE LIABILITIES

                                                      June 30, 2008
                                         ------------------------------------
                                                          Accumu-
                                                           lated         Net
                                                          Amorti-       Book
                                                Cost      zation       Value
                                         ------------------------------------
    Below market existing leases             $55,703     $10,352     $45,351
                                         ------------------------------------
                                         ------------------------------------


                                                    December 31, 2007
                                         ------------------------------------
                                                          Accumu-
                                                           lated         Net
                                                          Amorti-       Book
                                                Cost      zation       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    Income      Distri-
              LP Units    Income    Surplus     (Loss)    butions      Total
           ------------------------------------------------------------------

    Balance,
     January
     1, 2008  $191,302   $18,678       $Nil   $(2,784)   $(29,277)  $177,919
    Net income       -     6,114          -         -           -      6,114
    Distribu-
     tions           -         -          -         -      (9,763)    (9,763)
    Other
     compre-
     hensive
     income
     (loss)          -         -          -    (2,617)          -     (2,617)
    Unit issue
     proceeds,
     net of
     costs of
     $1,782     53,218         -          -         -           -     53,218
           ------------------------------------------------------------------
    Balance,
     June 30,
     2008     $244,520   $24,792       $Nil   $(5,401)   $(39,040)  $224,871
           ------------------------------------------------------------------
           ------------------------------------------------------------------


                                               Accumu-
                                                lated
                                                Other
                                               Compre-
                                     Contri-  hensive
               Class B       Net      buted    Income      Distri-
              LP Units    Income    Surplus     (Loss)    butions      Total
           ------------------------------------------------------------------
    Balance,
     January
     1, 2007  $191,302    $8,787       $Nil      $Nil    $(12,440)  $187,649
    Transition
     adjustment      -         -          -      (148)          -       (148)
    Net income       -     4,226          -         -           -      4,226
    Distribu-
     tions           -         -          -         -      (8,302)    (8,302)
    Other
     compre-
     hensive
     income
     (loss)          -         -          -      (374)          -       (374)
           ------------------------------------------------------------------
    Balance,
     June 30,
     2007     $191,302   $13,013       $Nil     $(522)   $(20,742)  $183,051
           ------------------------------------------------------------------
           ------------------------------------------------------------------

    13) UNITS OUTSTANDING

                                 Crombie REIT Special
                                   Voting Units and
              Crombie REIT Units   Class B LP Units              Total
           ---------------------- --------------------- ---------------------
             Number of            Number of             Number of
                 Units    Amount      Units    Amount       Units     Amount
           ------------------------------------------------------------------
    Balance,
     January
     1,
     2008   21,648,985  $205,273 20,079,576  $191,302  41,728,561   $396,575
    Capital
     contri-
     bution  5,727,750    63,005  5,000,000    55,000  10,727,750    118,005
    Cost of
     issuance        -    (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
     issued
     under
     EUPP       34,053       386          -         -      34,053        386
    Units
     released
     under
     EUPP            -        20          -         -           -         20
    Net
     change
     in EUPP
     loans
     recei-
     vable           -      (222)         -         -           -       (222)
    Unit
     redemp-
     tion     (138,900)   (1,375)         -         -    (138,900)    (1,375)
           ------------------------------------------------------------------
    Balance,
     June
     30,
     2008   27,271,888  $265,079 25,079,576  $244,520  52,351,464   $509,599
           ------------------------------------------------------------------
           ------------------------------------------------------------------

                                 Crombie REIT Special
                                   Voting Units and
              Crombie REIT Units   Class B LP Units              Total
           ---------------------- --------------------- ---------------------
             Number of            Number of             Number of
                 Units    Amount      Units    Amount       Units     Amount
           ------------------------------------------------------------------
    Balance,
     January
     1,
     2007   21,633,225  $204,831 20,079,576  $191,302  41,712,801   $396,133
    Units
     issued
     under
     EUPP       15,760       215          -         -      15,760        215
    Units
     released
     under
     EUPP            -        52          -         -           -         52
    Net
     change
     in
     EUPP
     loans
     recei-
     vable           -       160          -         -           -        160
           ------------------------------------------------------------------
    Balance,
     June
     30,
     2007   21,648,985  $205,258 20,079,576  $191,302  41,728,561   $396,560
           ------------------------------------------------------------------
           ------------------------------------------------------------------

    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 purchased in accordance with the
Exchange Agreement, a like number of Special Voting Units will be redeemed and
cancelled for no consideration by Crombie.
    The Class B LP Units issued by a subsidiary of Crombie to ECL have
economic and voting rights equivalent, in all material aspects, to Crombie's
Units. They are indirectly exchangeable on a one-for-one basis for Crombie's
Units at the option of the holder, under the terms of the Exchange Agreement.
    Each Class B LP Unit entitles the holder to receive distributions from
Crombie, pro rata with distributions made by Crombie on Units.
    The Class B LP Units are accounted for as non-controlling interest.

    Employee Unit Purchase Plan ("EUPP")

    Crombie provides for unit purchase entitlements under the EUPP for certain
senior executives. Awards made under the EUPP will allow executives to
purchase units from treasury at the average daily high and low board lot
trading prices per unit on the Toronto Stock Exchange for the five trading
days preceding the issuance. Executives are provided non-recourse loans at 3%
annual interest by Crombie for the purpose of acquiring Units from treasury
and the Units purchased are held as collateral for the loan. The loan is
repaid through the application of the after-tax amounts of all distributions
received on the Units, as well as the after-tax portion of any Long-Term
Incentive Plan ("LTIP") cash awards received, as payments on interest and
principal. As at June 30, 2008, there are loans receivable from executives of
$1,309 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 Unit Capital. Market value of the Units at June 30,
2008 was $1,488.
    The compensation expense related to the EUPP during the three months ended
and six months ended June 30, 2008 was $11 and $20 respectively (three months
ended and six months ended June 30, 2007 - $9 and $18 respectively).

    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 June 30, 2008,
there are no other dilutive items.

    14) PROPERTY REVENUE
                                   Three       Three         Six         Six
                                  Months      Months      Months      Months
                                   Ended       Ended       Ended       Ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                             ------------------------------------------------
    Rental revenue
     contractually due from
     tenants                      $45,562    $33,869     $82,073     $68,332
    Straight-line rent
     recognition                     701         396       1,018         706
    Below market lease
     amortization                  1,814       1,106       3,000       2,089
    Above market lease
     amortization                   (762)       (735)     (1,515)     (1,415)
                             ------------------------------------------------
                                 $47,315     $34,636     $84,576     $69,712
                             ------------------------------------------------
                             ------------------------------------------------

    15) FUTURE INCOME TAXES

    On June 22, 2007, tax legislation Bill C-52, the Budget Implementation
Act, 2007 (the "Act") was passed into law. The Act related to the federal
income taxation of publicly traded income trusts and partnerships. The Act
subjects all existing income trusts, or specified investment flow-through
entities ("SIFTs"), to corporate tax rates beginning in 2011, subject to an
exemption for real estate investment trusts ("REITs"). A trust that satisfies
the criteria of a REIT throughout its taxation year will not be subject to
income tax in respect of distributions to its unitholders or be subject to the
restrictions on its growth that would apply to SIFTs.
    During 2007, Crombie's management and their advisors underwent an
extensive review of Crombie's organizational structure and operations to
support Crombie's assertion that, at January 1, 2008, it meets the REIT
technical tests contained in the Act. The relevant tests apply throughout the
taxation year of Crombie and, as such, the actual status of Crombie for any
particular taxation year can only be ascertained at the end of the year.
    On December 20, 2007, the Department of Finance (Canada) issued a press
release outlining the intended proposed amendments to provide further clarity
to these technical tests, and these proposed amendments were issued on
July 14, 2008. While Crombie did not rely on these proposed amendments, they
do provide further certainty that Crombie qualifies as a REIT.
    The future income tax liability of the wholly-owned corporate subsidiary
which is subject to income taxes consists of the following:

                                                         June 30,   December
                                                            2008    31, 2007
                                                     ------------------------
    Tax liabilities relating to difference in tax
     and book value                                      $89,413     $86,655
    Tax asset relating to non-capital loss
     carry-forward                                        (6,811)     (5,154)
                                                     ------------------------
    Future income tax liability                          $82,602     $81,501
                                                     ------------------------
                                                     ------------------------

    The future income tax expense consists of the following:

                                   Three       Three         Six         Six
                                  Months      Months      Months      Months
                                   Ended       Ended       Ended       Ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                             ------------------------------------------------
    Provision for income
     taxes at the expected
     rate                         $2,698      $1,835      $4,569      $4,110
    Tax effect of income
     attribution to
     Crombie's unitholders        (1,997)       (357)     (3,468)     (2,304)
    Tax effect from change
     in tax exempt status
     beginning in 2011                 -       1,500           -       1,500
                             ------------------------------------------------
    Income tax expense              $701      $2,978      $1,101      $3,306
                             ------------------------------------------------
                             ------------------------------------------------

    16) SUPPLEMENTAL CASH FLOW INFORMATION

    (a) Change in other non-cash operating items

                                   Three       Three         Six         Six
                                  Months      Months      Months      Months
                                   Ended       Ended       Ended       Ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                             ------------------------------------------------
    Cash provided by (used
     in):
      Receivables                $(1,247)    $(2,353)      $(920)     $2,094
      Prepaid expenses and
       other assets               (5,218)     (7,463)     (4,535)     (4,082)
      Payables and other
       liabilities                 9,473       2,039       4,968     (15,012)
                             ------------------------------------------------
                                  $3,008     $(7,777)      $(487)   $(17,000)
                             ------------------------------------------------
                             ------------------------------------------------

    (b) Interest

                                   Three       Three         Six         Six
                                  Months      Months      Months      Months
                                   Ended       Ended       Ended       Ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                             ------------------------------------------------
      Interest paid              $10,487      $6,864     $17,568     $13,511
                             ------------------------------------------------
                             ------------------------------------------------

    17) COMMITMENTS AND CONTINGENCIES

    There are various claims and litigation, which Crombie is involved with,
arising out of the ordinary course of business operations. In the opinion of
management, any liability that would arise from such contingencies would not
have a significant adverse effect on these financial statements.
    Crombie has agreed to indemnify, in certain circumstances, the trustees
and officers of Crombie.
    Crombie has entered into a management cost sharing agreement with a
subsidiary of Empire Company Limited. Details of this agreement are described
in Note 18.
    Crombie has land leases on certain properties. These leases have annual
payments of $503 per year over the next 5 years.

    18) RELATED PARTY TRANSACTIONS

    As at June 30, 2008, Empire Company Limited, through its wholly-owned
subsidiary ECL, holds a 47.9% indirect interest in Crombie.
    For a period of five years commencing March 23, 2006, certain executive
management individuals and other employees of Crombie will provide general
management, financial, leasing, administrative, and other administration
support services to certain real estate subsidiaries of Empire Company Limited
on a cost recovery basis. The expense recoveries during the three months ended
and six months ended June 30, 2008 were $386 and $841 respectively (three
months ended and six months ended June 30, 2007 - $412 and $714 respectively)
and were netted against general and administrative expenses.
    For a period of five years, certain on-site maintenance and management
employees of Crombie will provide property management services to certain real
estate subsidiaries of Empire on a cost recovery basis. In addition, for
various periods, ECL has an obligation to provide rental income and interest
rate subsidies. The cost recoveries during the three months ended and six
months ended June 30, 2008 were $484 and $1,173 respectively (three months
ended and six months ended June 30, 2007 - $504 and $1,198 respectively) and
was netted against property expenses. The rental income subsidy during the
three months ended and six months ended June 30, 2008 were $Nil and $Nil
respectively (three months ended and six months ended June 30, 2007 - $8 and
$16 respectively) and the head lease subsidy during three months ended and six
months ended June 30, 2008 were $231 and $629 respectively (three months ended
and six months ended June 30, 2007 - $260 and $515 respectively).
    Crombie also earned property revenue of $13,135 for the three months ended
June 30, 2008 and $19,497 for the six months ended June 30, 2008 (three months
ended and six months ended June 30, 2007 - $6,275 and $12,046 respectively)
from Sobeys Inc., Empire Theatres Limited and ASC Commercial Leasing Limited.
These companies are all subsidiaries of Empire Company Limited.
    On April 22, 2008, Crombie acquired 61 properties from a related party
(see Note 4).

    19) FINANCIAL INSTRUMENTS

    a) Fair value of financial instruments

    The book value of cash and cash equivalents, restricted cash, receivables,
payables and accruals approximate fair values due to their short term
maturity. The total fair value of commercial property debt is estimated to be
$826,140 and the total fair value of the convertible debentures is estimated
to be $32,316.
    Crombie has classified its financial instruments in the following
categories:

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

    ii.  Loans and receivables - Notes receivable and accounts receivable

    iii. Other financial liabilities - Commercial property debt, convertible
         debentures, tenant improvements and capital expenditures payable,
         property operating costs payable and interest payable

    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.
    Crombie mitigates credit risk by geographical diversification, utilizing
staggered lease maturities and diversifying both the tenant mix and asset mix.
As at June 30, 2008;

    - Excluding Sobeys (which accounts for 33.3% of Crombie's minimum rent),
      no other tenant accounts for more than 2.3% of Crombie's minimum rent,
      and
    - Over the next five years, no more than 10.3% of the gross leaseable
      area of Crombie will expire in any one year.

    Interest rate risk

    From time to time, Crombie may enter into interest rate swap transactions
to modify the interest rate profile of its current or future debts without an
exchange of the underlying principal amount.
    As part of this interest rate management program, Crombie has entered into
a fixed interest rate swap to fix the amount of interest to be paid on $50,000
of the revolving credit facility. The fair value of the fixed interest rate
swap at June 30, 2008, had an unfavourable difference of $957 (June 30, 2007 -
favourable $691) compared to its face value. The change in this amount has
been recognized in other comprehensive income (loss).
    In addition to the fixed interest rate swap, Crombie has entered into a
number of delayed interest rate swap agreements of a notional amount of
$118,689 with an effective date between August 1, 2008 and June 1, 2011,
maturing between August 1, 2018 and July 2, 2021 to mitigate the exposure to
interest rate increases for mortgages maturing between 2008 and 2011. The fair
value of these delayed interest rate swap agreements had an unfavourable
difference of $8,468 compared to the face value on June 30, 2008 (June 30,
2007 - unfavourable $1,776). The change in these amounts has been recognized
in other comprehensive income (loss).
    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 $280,000 to
mitigate the exposure to interest rate increases prior to replacing the
18 month floating rate term facility with long-term financing. 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 these agreements had an unfavourable difference of
$1,782 compared to their face value on June 30, 2008 (June 30, 2007 - $Nil).
The change in these amounts has been recognized in other comprehensive income
(loss).
    A fluctuation in interest rates would have an impact on Crombie's net
earnings and other comprehensive income (loss) 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:

                                  Three months ended      Three months ended
                                       June 30, 2008           June 30, 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                      $(340)       $340        $(65)        $65
    -------------------------------------------------------------------------


                                    Six months ended        Six months ended
                                       June 30, 2008           June 30, 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                      $(365)       $365       $(139)       $139
    -------------------------------------------------------------------------


                                    June 30, 2008           June 30, 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                  $13,129    $(13,735)     $4,247     $(4,512)
    -------------------------------------------------------------------------

    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.

    20) ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

    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 is subject to normal conditions and is expected to close
prior to the end of the third quarter of 2008.
    The following tables set forth the balance sheets associated with the
income property classified as held for sale as at June 30, 2008 and
December 31, 2007 and the statements of income for properties held for sale
for the three and six months ended June 30, 2008 and June 30, 2007.

    Balance Sheets
                                                         June 30,   December
                                                            2008    31, 2007
                                                     ------------------------
    Assets
      Commercial property                                 $9,966     $10,025
      Deferred leasing costs                                 109         132
      Amounts receivable, prepaid expenses                   311         295
      Intangible assets                                      565         657
                                                     ------------------------
                                                          10,951      11,109
                                                     ------------------------
    Liabilities
      Term mortgages                                       6,561       6,634
      Accounts payable and accrued liabilities               396         618
      Intangible liabilities                                  50          59
                                                     ------------------------
                                                           7,007       7,311
                                                     ------------------------

    Net investment in property held for sale              $3,944      $3,798
                                                     ------------------------
                                                     ------------------------


    Statements of Income
                                   Three       Three         Six         Six
                                  Months      Months      Months      Months
                                   Ended       Ended       Ended       Ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                             ------------------------------------------------
    Property revenue
      Rental revenue
       contractually due
       from tenants                 $608        $621      $1,417      $1,241
      Straight-line rent
       recognition                     2           3           3           -
      Below market lease
       amortization                    5           5           9           9
      Above market lease
       amortization                  (17)        (17)        (34)        (34)
                             ------------------------------------------------
                                     598         612       1,395       1,216
                             ------------------------------------------------

    Expenses
      Property expenses              312         342         679         741
      Interest                        89          91         178         184
      Depreciation of
       commercial properties          23          33          58          67
      Amortization of tenant
       improvements/lease
       costs                           9           9          23          16
      Amortization of
       intangible assets              29          29          58          58
                             ------------------------------------------------
                                     462         504         996       1,066
                             ------------------------------------------------

    Income from discontinued
     operations                     $136        $108        $399        $150
                             ------------------------------------------------
                             ------------------------------------------------

    21) 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,
utilize staggered debt maturities, minimize exposure to floating rate debt,
maintain conservative payout ratios and maximize long-term unit value.
Crombie's capital structure consists of the following:

                                                         June 30,   December
                                                            2008    31, 2007
                                                     ------------------------
    Commercial property debt                            $812,016    $493,945
    Convertible debentures                                28,847           -
    Non-controlling interest                             224,871     177,919
    Unitholders' equity                                  243,472     190,834
                                                     ------------------------
                                                      $1,309,206    $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 Real Estate Investment Trust 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 is as follows:

                                                         June 30,   December
                                                            2008    31, 2007
                                                     ------------------------
    Mortgages payable                                   $425,945    $425,273
    Convertible debentures                                30,000           -
    Term facility                                        280,000           -
    Revolving credit facility                            111,475      70,900
                                                     ------------------------
    Total debt outstanding                               847,420     496,173
    Less: Fair value debt adjustment                     (12,537)    (14,456)
                                                     ------------------------
    Debt                                                $834,883    $481,717
                                                     ------------------------
                                                     ------------------------

    Total assets                                      $1,501,678  $1,013,982
    Add:
    Deferred financing charges                             6,557       2,228
    Accumulated depreciation of commercial
     properties                                           32,850      24,023
    Accumulated amortization of intangible assets         38,454      27,476
    Less:
    Assets held for sale                                 (10,951)    (11,109)
    Fair value debt adjustment                           (12,537)    (14,456)
    Fair value adjustment to future taxes                (39,519)    (39,519)
                                                     ------------------------
    Gross book value                                  $1,516,532  $1,002,625
                                                     ------------------------
                                                     ------------------------
    Debt to gross book value                                55.1%       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 fair market value of assets
subject to a second security position or a negative pledge, subject to the
limitations on the ability of Crombie to incur indebtedness contained in the
Declaration of Trust. As part of the amended debt covenants attached to the
revolving credit facility, in addition to the maximum borrowing above, Crombie
must maintain certain debt ratios above prescribed levels:

    - Annualized NOI for the prescribed properties must be a minimum of
      1.4 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%.
    As at June 30, 2008, Crombie is in compliance with all externally imposed
capital requirements and all covenants relating to its debt facilities.

    22) SUBSEQUENT EVENTS

    a) On June 19, 2008, Crombie declared distributions of 7.417 cents per
       unit for the period from June 1, 2008 to, and including, June 30,
       2008. The distribution was paid on July 15, 2008 to Unitholders of
       record as at June 30, 2008.

    b) On July 18, 2008, Crombie signed a commitment letter to refinance a
       prior mortgage on the South Pelham Market Plaza in Ontario. The
       commitment was for $5,610 with a five year term and an interest rate
       based on a 250 basis point spread over the Government of Canada five
       year bond rate. The closing of the financing is anticipated to occur
       by the end of August 2008. Proceeds from the financing will be used to
       reduce the revolving credit facility.

    c) On July 18, 2008, Crombie signed a commitment letter to refinance a
       prior mortgage on the freestanding store at 318 Ontario Street in
       Ontario. The commitment was for $4,600 with a five year term and an
       interest rate based on a 247 basis point spread over the Government of
       Canada five year bond rate. The closing of the financing is
       anticipated to occur by the end of August 2008. Proceeds from the
        financing will be used to reduce the revolving credit facility.

    d) On July 22, 2008, Crombie declared distributions of 7.417 cents per
       unit for the period from July 1, 2008 to, and including, July 31,
       2008. The distribution will be payable on August 15, 2008 to
       Unitholders of record as at July 31, 2008.

    e) On August 1, 2008, Crombie signed commitment letters to refinance
       $100,000 of the floating rate term facility used to partially finance
       the 61 property acquisition from subsidiaries of Empire Company
       Limited with fixed rate mortgages. The commitments have a weighted
       average 7.7 year term and interest rates based on prevailing
       amortizing swap rates for the loan terms plus a basis point spread
       which management anticipates will result in an overall weighted
       average interest rate which will approximate the 6.35% rate used to
       model the pro-forma accretion of the 61 property acquisition, subject
       to the final rate lock. The closing of the financing is anticipated to
       occur prior to the end of the third quarter of 2008. Proceeds of the
       financing will be used to reduce the floating rate term facility.

    23) COMPARATIVE FIGURES

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


    Management Discussion and Analysis

    (In thousands of dollars, except per unit amounts)

    The following is Management's Discussion and Analysis ("MD&A") of the
consolidated financial condition and results of operations of Crombie Real
Estate Investment Trust ("Crombie") for the quarter and year-to-date ended
June 30, 2008, with a comparison to the financial condition and results of
operations for the comparable period in 2007.
    This discussion and analysis should be read in conjunction with Crombie's
consolidated financial statements and accompanying notes for the period ended
June 30, 2007 and the related MD&A, and the audited consolidated financial
statements and accompanying notes for the year ended December 31, 2007 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" of the 2007 Annual Report, could cause actual results,
performance, achievements, prospects or opportunities to differ materially
from the results discussed or implied in the forward-looking statements. These
factors should be considered carefully and a reader should not place undue
reliance on the forward-looking statements. There can be no assurance that the
expectations of management of Crombie will prove to be correct.
    In particular, certain statements in this document discuss Crombie's
anticipated outlook of future events. These statements include, but are not
limited to:

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

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

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

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

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

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

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

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

    (ix) anticipated accretion levels relating to portfolio acquisitions,
which are dependent on financing 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; and

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

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


    NON-GAAP FINANCIAL MEASURES

    There are financial measures included in this MD&A that do not have a
standardized meaning under Canadian generally accepted accounting principles
("GAAP") as prescribed by the Canadian Institute of Chartered Accountants.
These measures are property net operating income ("NOI"), 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

    -------------------------------------------------------------------------
                                 Quarter     Quarter  Six Months  Six Months
    (in thousands of dollars,      Ended       Ended       Ended       Ended
     except per unit amounts     June 30,    June 30,    June 30,    June 30,
     and as otherwise noted)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Property revenue             $47,315     $34,636     $84,576     $69,712
    Net income                    $3,839      $1,255      $6,622      $4,555
    Basic and diluted net
     income per unit               $0.15       $0.06       $0.28       $0.21
    -------------------------------------------------------------------------
    FFO                          $18,579     $12,553     $32,189     $25,635
    FFO per unit(1)                $0.37       $0.30       $0.70       $0.61
    FFO payout ratio (%)            58.9%       69.5%       61.6%       66.6%
    AFFO                         $11,683     $10,330     $19,550     $21,201
    AFFO per unit(1)               $0.23       $0.25       $0.43       $0.51
    AFFO payout ratio (%)           93.7%       84.5%      101.4%       80.5%
    -------------------------------------------------------------------------
                                 June 30,    June 30,
                                    2008        2007
    -------------------------------------------------------------------------
    Debt to gross book
     value(2)                       55.1%       47.0%
    Total assets              $1,501,678    $976,699
    Total commercial
     property debt and
     convertible debentures     $840,863    $459,164
    -------------------------------------------------------------------------
    (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 49,954,256 for the quarter ended
       June 30, 2008, 41,728,561 for the quarter ended June 30, 2007,
       45,841,408 for the six months ended June 30, 2008 and 41,722,814 for
       the six months ended June 30, 2007.

    (2)See page 20 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 June 30, 2008, Crombie owned a portfolio
of 113 commercial properties in seven provinces, comprising approximately
11.1 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
June 30, 2008, after just over two 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 maintaining the 100%
annual AFFO payout ratio target for both 2006 and 2007.

    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: All acquisitions completed
or proposed to date have been purchased at costs which ensure they will be
immediately accretive to cash available for distribution. While the investment
market continues to remain competitive, Crombie intends to continue to pursue
acquisitions which can be made at values which are accretive to Crombie.
    Crombie's external growth strategy focuses primarily on accretive
acquisitions of income-producing retail properties. Crombie pursues two
sources of accretive acquisitions which are third party acquisitions and the
relationship with ECL. The relationship with ECL includes currently owned and
future development properties, as well as opportunities through the rights of
first refusal ("ROFR's") that one of Empire's subsidiaries 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. In addition, Crombie will seek to leverage its close
relationship with the Empire Subsidiaries to access acquisition opportunities
that satisfy the foregoing criteria.
    Crombie plans to work closely with the Empire Subsidiaries to identify
development opportunities that further Crombie's external growth strategy. The
relationship is governed by a development agreement described in the Material
Contracts section of Crombie's Annual Information Form for the year ended
December 31, 2007. Through this relationship, Crombie expects to have the
benefits associated with development while limiting its exposure to the
inherent risks, such as real estate market cycles, cost overruns, labour
disputes, construction delays and unpredictable general economic conditions.
The development agreement will also enable Crombie to avoid the uncertainties
associated with property development, including paying the carrying costs of
land, securing construction financing, obtaining development approvals,
managing construction projects, marketing in advance of and during
construction and earning no return during the construction period.
    The development agreement provides Crombie with a preferential right to
acquire retail properties developed by ECL, subject to approval by the
independent trustees. The history of the relationship between Crombie and
Empire Subsidiaries continues to provide promising opportunities for growth
through future development opportunities on both new and existing sites in
Crombie's portfolio.
    ECL currently owns approximately 1.1 million square feet in ten
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 65% of the GLA of the ten 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 on a 61 retail property
portfolio representing approximately 3.3 million square feet of GLA (the
"Acquisition") from Empire Subsidiaries. The cost of the 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 Acquisition at a meeting held on April 14, 2008.
    In order to partially finance the 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 holds a
47.9% economic and voting interest in Crombie as of June 30, 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. Subsequent to the
end of the second quarter, Crombie signed commitment letters to refinance
$100,000 of the Term Facility with fixed rate mortgages (see "Subsequent
Events"). It is Crombie's intention to replace the Term Facility by suitable
long-term debt financing.
    Crombie expects that the 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 48.1% at December 31, 2007 to 53.1 % excluding
Debentures, which is within Crombie's target ratio of 50% to 55%, and 55.1%
including Debentures at June 30, 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 Acquisition:

    -------------------------------------------------------------------------
                                             Crombie  Annualized     Crombie
                                             for the   Pro Forma   Pro Forma
                                          year ended   Effect of  Annualized
                                         December 31,      Acqui-  for Acqui-
                                                2007      sition      sition
    -------------------------------------------------------------------------
    Commercial properties                   $909,095    $411,262  $1,320,357
    Commercial property debt                $500,578    $291,775    $792,353
    -------------------------------------------------------------------------
    Property revenue                        $143,606     $51,274    $194,880
    Property NOI                             $84,261     $34,848    $119,109
    -------------------------------------------------------------------------
    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 quarter, 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.
    During the second quarter of 2008, Crombie and a potential purchaser
signed a purchase and sale agreement for West End Mall in Halifax, Nova
Scotia. The purchase and sale is subject to normal conditions and is expected
to close prior to the end of the third quarter of 2008. Under GAAP, the
financial position and operating results have been reclassified on the
financial statements for Crombie as Assets Held for Sale and Discontinued
Operations on a retroactive basis. The leasing and operating results tables in
this MD&A reflect Crombie's results and leasing status as though the sale of
the property has already occurred.
    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.

    Business Environment

    During the first six months of 2008, reducing credit availability
continued to be a major risk to the interest-rate sensitive Real Estate
Investment Trust ("REIT") business environment. Widening credit spreads due to
higher risk premiums resulting from lenders apprehension of their exposure to
real estate, largely resulting from the issues faced in the residential
sub-prime mortgage market in the United States, have more than offset the
decline in Canadian bond yields. This risk aversion has resulted in reduced
credit availability as some avenues of debt financing, such as CMBS financing,
are difficult to access while other lenders have become more restrictive with
capital, applying more stringent due diligence and loan covenant requirements.
This trend has negatively impacted the unit prices of most REIT's as well as
begun to reduce the acquisition prices the real estate market is willing to
pay for assets due to the higher cost of capital.
    The real estate investment market continues to remain competitive.
However, as previously discussed, there now appears to be signs that yields
have begun to increase in light of the widening credit spread environment. In
addition, investor interest in real estate has moderated from early 2007,
which has resulted in an expansion in capitalization rates. Crombie intends to
continue to pursue acquisitions that can be made at values which are accretive
and provide an acceptable return. It is anticipated that a number of these
acquisitions may result from the relationship between Crombie and the Empire
Subsidiaries.
    In terms of occupancy rates, while both the retail and office markets
where Crombie has a prominent presence remain relatively stable, the business
environment outlook remains uncertain, partially influenced by the pronounced
slowdown in the U.S. economy while retail sales results rebounded in April
after a brief decline in February 2008. 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 SECOND QUARTER 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 convertible debentures.

    - Crombie completed its first acquisition west of Ontario, purchasing
      River City Centre in Saskatoon, Saskatchewan on June 12, 2008 for
      $27,200 excluding closing and transaction costs.

    - Crombie completed leasing activity on 85.0% of its 2008 expiring leases
      as at June 30, 2008, increasing average net rent per square foot to
      $12.78 from the expiring rent per square foot of $12.05, an increase of
      6.1%.

    - Occupancy for the properties (excluding the portfolio Acquisition at
      June 30, 2008) increased to 93.3% compared with March 31, 2008 at
      92.9%. Overall occupancy at June 30, 2008 was 94.9%.

    - Property revenue for the quarter ended June 30, 2008 increased by
      $12,679, or 36.6%, to $47,315 compared to $34,636 for the quarter ended
      June 30, 2007. The improvement was due to the portfolio Acquisition,
      increased same-asset property results and the four individual property
      acquisitions completed since June 30, 2007.

    - Same-asset NOI of $21,623 increased by $945 or 4.6%, compared to
      $20,678 for the quarter ended June 30, 2007 due primarily to an
      increased average rent per square foot ($12.39 in 2008 versus $12.02 in
      2007).

    - The FFO payout ratio for the six months ended June 30, 2008 was 61.6%
      which was below the target annual payout ratio of 70.0% and below the
      payout ratio of 66.6% for the same period of 2007.

    - The AFFO payout ratio for the six months ended June 30, 2008 was 101.4%
      which was above the target annual AFFO payout ratio of 95.0% and the
      payout ratio for 2007 of 80.5%. The year-to-date fluctuation was
      primarily due to tenant improvement costs incurred in 2008 for leases
      that were set to expire in 2009, which will result in higher net rent
      per square foot on an ongoing basis, combined with one month of
      distributions made on the subscription receipts prior to the closing of
      the portfolio Acquisition. Crombie anticipates that the annual AFFO
      payout ratio will approximate the target payout ratio by the end of
      fiscal 2008.

    - Debt to gross book value increased to 55.1% at June 30, 2008 compared
      to 48.2% at March 31, 2008 as a result of the financing for the
      portfolio Acquisition.

    - Crombie's debt service coverage ratio for the first six months of 2008
      was 1.88 times EBITDA and interest service coverage ratio was
      2.92 times EBITDA, compared to 1.92 times EBITDA and 3.12 times EBITDA,
      respectively, for the same period in 2007.

    - Subsequent to the end of the second quarter of 2008, Crombie signed
      commitment letters to refinance $100,000 of the bridge loan with fixed
      rate mortgages.

    OVERVIEW OF THE PROPERTY PORTFOLIO

    Property Profile

    At June 30, 2008, after the reclassification of the property held for
sale, the property portfolio consisted of 113 commercial properties that
contain approximately 11.1 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 June 30, 2008, the portfolio distribution of the GLA by province was
as follows:

    -------------------------------------------------------------------------
                                                    % of Annual
               Number of          GLA                   Minimum
    Province  Properties      (sq. ft.)   % of GLA         Rent  Occupancy(1)
    -------------------------------------------------------------------------
    Nova Scotia       41    5,047,000         45.3%        41.2%        95.0%
    Ontario           22    1,639,000         14.7%        17.1%        96.3%
    New Brunswick     20    1,646,000         14.8%        12.4%        92.8%
    Newfoundland
     and Labrador     13    1,447,000         13.0%        16.5%        91.9%
    Quebec            13      817,000          7.3%         8.0%        99.3%
    Prince Edward
     Island            3      385,000          3.5%         3.2%        97.7%
    Saskatchewan       1      160,000          1.4%         1.6%       100.0%
    -------------------------------------------------------------------------
    Total            113   11,141,000        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

    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 June 30, 2008.

    -------------------------------------------------------------------------
                                         % of Annual  Total Area      Number
                                             Minimum      Leased     of Loca-
    Tenant                                      Rent    (sq. ft.)    tions(1)
    -------------------------------------------------------------------------
    Sobeys(2)                                   33.3%  3,662,000          89
    Empire Theatres                              2.3%    261,000           9
    Zellers                                      2.2%    654,000           7
    Shoppers Drug Mart                           2.0%    144,000          12
    Nova Scotia Power/Emera                      2.0%    188,000           2
    CIBC                                         1.6%    166,000          14
    Province of Nova Scotia                      1.5%    140,000          10
    Bell (Aliant)                                1.4%    135,000          17
    Public Works Canada                          1.3%     75,000           7
    Lawton's Drug Stores Ltd.                    1.2%     81,000           7
    -------------------------------------------------------------------------
    Total                                       48.8%  5,506,000         174
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Each location is represented by a separate lease.
    (2) Excludes Lawtons and Fast Fuel locations.

    Crombie's portfolio is leased to a wide variety of tenants. Other than
Sobeys, which accounts for 33.3% of the annual minimum rent, no other tenant
accounts for more than 2.3% of Crombie's minimum rent.
    Crombie has five locations leased to SAAN Stores Ltd. totalling 135,948
square feet of GLA, representing 1.2% of Crombie's total GLA as at June 30,
2008. In the first quarter of 2008, one of the leases was disclaimed by the
trustee. 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 0.1% of Crombie's total property
revenue ($2.16 net rent per square foot). Should SAAN not emerge from
bankruptcy protection as a viable entity, Crombie will seek to lease the GLA
at more favourable per square foot rents.

    Lease Maturities

    The following table sets out as of June 30, 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 10.3 years.

    -------------------------------------------------------------------------
                                                                     Average
                                                                    Net Rent
                                             Renewal              per Sq. Ft.
                               Number of        Area        % of   at Expiry
    Year                          Leases    (sq. ft.)  Total GLA          ($)
    -------------------------------------------------------------------------
    2008                             112     394,000         3.6%      $9.57
    2009                             212     732,000         6.6%     $13.79
    2010                             198     772,000         6.9%     $12.26
    2011                             213   1,148,000        10.3%     $13.59
    2012                             154     785,000         7.0%     $12.01
    Thereafter                       439   6,745,000        60.5%     $12.83
    -------------------------------------------------------------------------
    Total                          1,328  10,576,000        94.9%     $12.75
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    2008 Portfolio Lease Expiries and Leasing Activity

    As at June 30, 2008, portfolio lease expiries and leasing activity,
excluding the impact of the 2008 acquisitions, for the year ending
December 31, 2008 were as follows:

    -------------------------------------------------------------------------
                Retail -
              Freestan-   Retail -   Retail -
                  ding    Plazas   Enclosed    Office   Mixed-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.)       -    25,000    118,000    76,000     135,000    354,000
    Average
     net rent
     per
     sq. ft.        $-    $16.15     $14.45    $10.37      $11.86     $12.69
    New
     leasing
     (sq. ft.)       -    66,000     85,000    35,000      39,000    225,000
    Average
     net rent
     per
    sq. ft.         $-    $15.24      $9.74    $16.73      $12.43     $12.91
    -------------------------------------------------------------------------
    Total
     renewals
     and new
     leasing
     (sq. ft.)       -    91,000    203,000   111,000     174,000    579,000
    Total
     average
     net rent
     per
     sq. ft.        $-    $15.49     $12.48    $12.38      $11.99     $12.78
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During the six months ended June 30, 2008, Crombie had renewals or entered
into new leases in respect of approximately 579,000 square feet at an average
net rent of $12.78 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 202,000 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 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. The rent per
square foot for the renewal activity in the office properties was less than
the average rent per square foot for expiries due to two leases at Terminal
Centres in Moncton, New Brunswick that averaged $6.42 per square foot.

    Sector Information

    As at June 30, 2008, the portfolio distribution of the GLA by asset type
was as follows:

    -------------------------------------------------------------------------
                                                    % of Annual
    Asset      Number of          GLA         % of      Minimum
     Type     Properties     (sq. ft.)         GLA         Rent  Occupancy(1)
    -------------------------------------------------------------------------
    Retail -
     Freestanding     42    1,675,000         15.1%        15.7%       100.0%
    Retail -
     Plazas           44    3,954,000         35.5%        36.8%        96.4%
    Retail -
     Enclosed         14    2,754,000         24.7%        24.8%        91.4%
    Office             5    1,028,000          9.2%         9.0%        90.9%
    Mixed-Use          8    1,730,000         15.5%        13.7%        94.7%
    -------------------------------------------------------------------------
    Total            113   11,141,000        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 June 30, 2008, the square feet under
lease subject to lease maturities during the periods indicated.

    Year   Retail - Freestanding      Retail - Plazas      Retail - Enclosed
    -------------------------------------------------------------------------
              (sq. ft.)       (%)  (sq. ft.)       (%)   (sq. ft.)        (%)
    -------------------------------------------------------------------------
    2008             -         -    209,000       5.3%     88,000        3.2%
    2009             -         -    189,000       4.8%    246,000        8.9%
    2010             -         -    275,000       7.0%    112,000        4.1%
    2011         1,000       0.1%   342,000       8.6%    128,000        4.6%
    2012         5,000       0.3%   268,000       6.8%    149,000        5.4%
    Thereaf-
     ter     1,669,000      99.6% 2,528,000      63.9%  1,794,000       65.2%
    -------------------------------------------------------------------------
    Total    1,675,000       100% 3,811,000      96.4%  2,517,000       91.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Year             Office             Mixed-Use               Total
    -------------------------------------------------------------------------
              (sq. ft.)       (%)  (sq. ft.)       (%)   (sq. ft.)        (%)
    -------------------------------------------------------------------------
    2008        25,000       2.4%    72,000       4.2%    394,000        3.6%
    2009       121,000      11.8%   176,000      10.2%    732,000        6.6%
    2010        74,000       7.2%   311,000      17.9%    772,000        6.9%
    2011       367,000      35.7%   310,000      17.9%  1,148,000       10.3%
    2012       110,000      10.7%   253,000      14.6%    785,000        7.0%
    Thereaf-
     ter       237,000      23.1%   517,000      29.9%  6,745,000       60.5%
    -------------------------------------------------------------------------
    Total      934,000      90.9% 1,639,000      94.7% 10,576,000       94.9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

    -------------------------------------------------------------------------
                Retail -     Retail -     Retail -
    Year    Freestanding       Plazas     Enclosed       Office    Mixed-Use
    -------------------------------------------------------------------------
    2008               -        $6.92       $14.47       $13.13       $10.14
    2009               -       $14.98       $14.70       $12.30       $12.17
    2010               -       $13.71       $18.54       $11.50        $8.91
    2011          $37.50       $13.92       $20.99       $14.14        $9.42
    2012          $25.00       $12.82       $18.04        $9.70        $8.32
    Thereaf-
     ter          $13.20       $13.51       $11.44       $11.29       $13.81
    -------------------------------------------------------------------------
    Total         $13.25       $13.22       $13.09       $12.40       $10.87
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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 June 2008.

    -------------------------------------------------------------------------
    Property        Date     Property          GLA  Acquisition    Ownership
                 Acquired         Type     (sq. ft.)      Cost(1)    Interest
    -------------------------------------------------------------------------
    The Mews of
     Carleton
     Place,
     Carleton
     Place,      Jan. 17,    Retail -
     Ontario        2007        Plaza       80,000      $11,800          100%
    -------------------------------------------------------------------------
    Perth Mews
     Shopping
     Mall,
     Perth,       Mar. 7,    Retail -
     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,              Retail -
     Brossard,    Aug. 4,    Freestan-
     Quebec         2007         ding       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     Freestan-
                                 ding    1,589,000     $428,500          100%
                             Retail -
                                Plaza    1,571,000                       100%
                             Retail -
                             Enclosed      128,000                       100%
    -------------------------------------------------------------------------
    River City
     Centre,
     Saskatoon,
     Saskat-     Jun. 12,    Retail -
     chewan         2008        Plaza      160,000      $27,200          100%
    -------------------------------------------------------------------------
    Total                                3,851,000     $524,600
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1)Excluding closing and transaction costs.


    Comparison to Previous Year

    -------------------------------------------------------------------------
                                             Six Months Ended
                                         ------------------------
    (In thousands of dollars, except         June 30,    June 30,
     where otherwise noted)                     2008        2007    Variance
    -------------------------------------------------------------------------
    Property revenue                         $84,576     $69,712     $14,864
    Property expenses                         32,549      28,605      (3,944)
    -------------------------------------------------------------------------
    Property NOI                              52,027      41,107      10,920
    -------------------------------------------------------------------------
    NOI margin percentage                       61.5%       59.0%        2.5%
    -------------------------------------------------------------------------
    Expenses:
      General and administrative               3,931       3,842         (89)
      Interest                                16,465      11,921      (4,544)
      Depreciation and amortization           18,290      13,407      (4,883)
    -------------------------------------------------------------------------
                                              38,686      29,170      (9,516)
    -------------------------------------------------------------------------
    Income from continuing operations
     before other items, income taxes
     and non-controlling interest             13,341      11,937       1,404
    Other items                                   97           -          97
    -------------------------------------------------------------------------
    Income from continuing operations
     before income taxes and
     non-controlling interest                 13,438      11,937       1,501
    Income taxes expense - Future              1,101       3,306       2,205
    -------------------------------------------------------------------------
    Income from continuing operations
     before non-controlling interest          12,337       8,631       3,706
    Income from discontinued operations          399         150         249
    -------------------------------------------------------------------------
    Income before non-controlling
     interest                                 12,736       8,781       3,955
    Non-controlling interest                   6,114       4,226      (1,888)
    -------------------------------------------------------------------------
    Net income                                $6,622      $4,555      $2,067
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted net income per
     Unit                                      $0.28       $0.21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic weighted average Units
     outstanding (in 000's)                   23,727      21,526
    -------------------------------------------------------------
    -------------------------------------------------------------
    Diluted weighted average Units
     outstanding (in 000's)                   23,839      21,643
    -------------------------------------------------------------
    -------------------------------------------------------------

    Net income for the six months ended June 30, 2008 of $6,622 increased by
$2,067 from $4,555 for the six months ended June 30, 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 June 30, 2007 and the portfolio
      Acquisition; offset in part by

    - higher interest and depreciation charges, due primarily to the
      individual property acquisitions since June 30, 2007 and the portfolio
      Acquisition.


    Property Revenue and Property Expenses

    -------------------------------------------------------------------------
                                             Six Months Ended
                                         ------------------------
                                             June 30,    June 30,
    (In thousands of dollars)                   2008        2007    Variance
    -------------------------------------------------------------------------
    Same-asset property revenue              $70,241     $68,348      $1,893
    Acquisition property revenue              14,335       1,364      12,971
    -------------------------------------------------------------------------
    Property revenue                         $84,576     $69,712     $14,864
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset property revenue of $70,241 for the six months ended June 30,
2008 was 2.8% higher than the six months ended June 30, 2007 due primarily to
the increased average rent per square foot ($12.25 in 2008 and $11.88 in 2007)
and increased revenue from higher recoverable common area expenses.

    -------------------------------------------------------------------------
                                             Six Months Ended
                                         ------------------------
                                             June 30,    June 30,
    (In thousands of dollars)                   2008        2007    Variance
    -------------------------------------------------------------------------
    Same-asset property expenses             $28,922     $28,201        $721
    Acquisition property expenses              3,627         404       3,223
    -------------------------------------------------------------------------
    Property expenses                        $32,549     $28,605      $3,944
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset property expenses of $28,922 for the six months ended June 30,
2008 were 2.6% higher than the six months ended June 30, 2007 due to increased
recoverable common area expenses primarily from increased utility and snow
removal costs.

    -------------------------------------------------------------------------
                                             Six Months Ended
                                         ------------------------
                                             June 30,    June 30,
    (In thousands of dollars)                   2008        2007    Variance
    -------------------------------------------------------------------------
    Same-asset property NOI                  $41,319     $40,147      $1,172
    Acquisition property NOI                  10,708         960       9,748
    -------------------------------------------------------------------------
    Property NOI                             $52,027     $41,107     $10,920
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset NOI for the six months ended June 30, 2008 grew by 2.9% over
the six months ended June 30, 2007.

    Property NOI for the six months ended June 30, 2008 by region was as
follows:

    -------------------------------------------------------------------------
                               2008                             2007
             -----------------------------------------
    (In thou-
     sands
     of       Property  Property   Property  NOI % of    NOI % of
     dollars)  Revenue  Expenses        NOI   revenue     revenue   Variance
    -------------------------------------------------------------------------
    Nova
     Scotia    $40,151   $16,719    $23,432      58.4%       55.7%       2.7%
    Newfound-
     land and
     Labrador   12,975     4,221      8,754      67.5%       64.2%       3.3%
    New
     Brunswick  10,585     4,984      5,601      52.9%       50.9%       2.0%
    Ontario     14,333     5,064      9,269      64.7%       65.7%     (1.0)%
    Prince
     Edward
     Island      2,430       612      1,818      74.8%       73.6%       1.2%
    Quebec       3,945       922      3,023      76.6%       73.4%       3.2%
    Saskat-
     chewan        157        27        130      82.8%          -%         -%
    -------------------------------------------------------------------------
    Total      $84,576   $32,549    $52,027      61.5%       59.0%       2.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The overall increase in NOI % of revenue, as well as specific provincial
increases in Nova Scotia, Quebec, New Brunswick and Newfoundland and Labrador,
was primarily due to the portfolio Acquisition, as well as the growth in
same-asset NOI. Ontario's decrease in NOI % of revenue is attributable to the
increased common area expenses incurred as a result of adverse weather
conditions in the region as compared to 2007, partially offset by the
acquisition activity in that province, while New Brunswick's growth in NOI %
of revenue was partially offset by ongoing vacancy issues at Terminal Centres
in Moncton.

    General and Administrative Expenses

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

    -------------------------------------------------------------------------
                                             Six Months Ended
                                         ------------------------
                                             June 30,    June 30,
                                                2008        2007    Variance
    -------------------------------------------------------------------------
    Salaries and benefits                     $1,859      $1,714        $145
    Professional fees                            793         808         (15)
    Public company costs                         520         447          73
    Rent and occupancy                           350         509        (159)
    Other                                        409         364          45
    -------------------------------------------------------------------------
    General and administrative costs          $3,931      $3,842         $89
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    As a percentage of revenue                   4.6%        5.5%      (0.9)%
    -------------------------------------------------------------------------

    General and administrative expenses increased by 2.3% for the six months
ended June 30, 2008 to $3,931 compared to $3,842 for the six months ended
June 30, 2007. The increase in expenses was mainly due to additional staff
hired after the first quarter of 2007 for ongoing acquisition activity and
head office support functions, and increased travel costs related to potential
acquisition properties and leasing activity. Rent and occupancy costs have
decreased as a result of the negotiation of more favourable lease terms at the
head office.

    Interest Expense

    -------------------------------------------------------------------------
                                             Six Months Ended
                                         ------------------------
                                             June 30,    June 30,
    (In thousands of dollars)                   2008        2007    Variance
    -------------------------------------------------------------------------
    Same-asset interest expense              $10,938     $11,526       $(588)
    Acquisition interest expense               5,527         395       5,132
    -------------------------------------------------------------------------
    Interest expense                         $16,465     $11,921      $4,544
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset interest expense of $10,938 for the six months ended June 30,
2008 decreased by 5.1% when compared to the six months ended June 30, 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 June 30, 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 recorded during
the six months ended June 30, 2008 was $1,718 (six months ended June 30,
2007 - $1,804). 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

    -------------------------------------------------------------------------
                                             Six Months Ended
                                         ------------------------
                                             June 30,    June 30,
    (In thousands of dollars)                   2008        2007    Variance
    -------------------------------------------------------------------------
    Same-asset depreciation and
     amortization                            $13,529     $12,945        $584
    Acquisition depreciation and
     amortization                              4,761         462       4,299
    -------------------------------------------------------------------------
    Depreciation and amortization            $18,290     $13,407      $4,883
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset depreciation and amortization of $13,529 for the six months
ended June 30, 2008 was 4.5% higher than the six months ended June 30, 2007
due primarily to deprecation on fixed asset additions incurred since June 30,
2007. Depreciation and amortization consists of:

    -------------------------------------------------------------------------
                                             Six Months Ended
                                         ------------------------
                                             June 30,    June 30,
    (In thousands of dollars)                   2008        2007    Variance
    -------------------------------------------------------------------------
    Depreciation of commercial
     properties                               $7,359      $5,971      $1,388
    Amortization of tenant
     improvements/lease costs                  1,468       1,005         463
    Amortization of intangible assets          9,463       6,431       3,032
    -------------------------------------------------------------------------
    Depreciation and amortization            $18,290     $13,407      $4,883
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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.
    During 2007 Crombie's management and their advisors underwent an extensive
review of Crombie's organizational structure and operations to support
Crombie's assertion that it meets the REIT criteria at January 1, 2008.
    In addition, the issuance of proposed technical amendments on December 20,
2007 provided further clarity to the tax rules and criteria that were part of
Bill C-52 and applicable to Crombie. While Crombie did not rely on these
proposed technical amendments, they do provide more certainty that Crombie
qualifies as a REIT.
    The future income tax expenses represent the future tax provision of the
wholly-owned corporate subsidiary which is subject to income taxes.
    During 2007, Crombie recorded a future income tax expense of $1,500 as a
result of proposed tax legislation. As a result of the review of Crombie's
operations, this expense was reversed at year end and is the primary cause for
the favourable difference in 2008 of $2,205.

    Sector Information

    Retail Freestanding Properties
    -------------------------------------------------------------------------
    (In thousands of dollars,
    except as otherwise noted)
    -------------------------------------------------------------------------
             Six months ended June 30, 2008   Six months ended June 30, 2007
             ----------------------------------------------------------------
                  Same-    Acqui-                Same-      Acqui-
                 Asset   sitions      Total     Asset     sitions      Total
    -------------------------------------------------------------------------
    Property
     revenue      $345    $5,412     $5,757      $347          $-       $347
    Property
     expenses       29     1,164      1,193        28           -         28
    -------------------------------------------------------------------------
    Property
     NOI          $316    $4,248     $4,564      $319          $-       $319
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %     91.6%     78.5%      79.3%     91.9%          -%      91.9%
    -------------------------------------------------------------------------
    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.


    Retail Plaza Properties
    -------------------------------------------------------------------------
    (In thousands of dollars,
    except as otherwise noted)
    -------------------------------------------------------------------------
             Six months ended June 30, 2008   Six months ended June 30, 2007
             ----------------------------------------------------------------
                  Same-    Acqui-                Same-      Acqui-
                 Asset   sitions      Total     Asset     sitions      Total
    -------------------------------------------------------------------------
    Property
     revenue   $18,015    $8,619    $26,634   $15,428      $1,364    $16,792
    Property
     expenses    5,527     2,406      7,933     4,949         404      5,353
    -------------------------------------------------------------------------
    Property
     NOI       $12,488    $6,213    $18,701   $10,479        $960    $11,439
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %     69.3%     72.1%      70.2%     67.9%       70.4%      68.1%
    -------------------------------------------------------------------------
    Occupancy %   95.3%     97.4%      96.4%     95.1%       95.2%      95.1%
    -------------------------------------------------------------------------

    The improvement in the retail plaza property NOI was primarily caused by
the portfolio Acquisition, as well as higher NOI in the same-asset properties
due to the improved average net rent per square foot figures achieved in the
prior year renewal and new leasing activity.


    Retail Enclosed Properties
    -------------------------------------------------------------------------
    (In thousands of dollars,
    except as otherwise noted)
    -------------------------------------------------------------------------
             Six months ended June 30, 2008   Six months ended June 30, 2007
             ----------------------------------------------------------------
                  Same-    Acqui-                Same-      Acqui-
                 Asset   sitions      Total     Asset     sitions      Total
    -------------------------------------------------------------------------
    Property
     revenue   $22,865      $304    $23,169   $25,202          $-    $25,202
    Property
     expenses    8,831        57      8,888     9,833           -      9,833
    -------------------------------------------------------------------------
    Property
     NOI       $14,034      $247    $14,281   $15,369          $-    $15,369
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %     61.4%     81.3%      61.6%     61.0%          -%      61.0%
    -------------------------------------------------------------------------
    Occupancy %   91.3%     92.6%      91.4%     92.2%          -%      92.2%
    -------------------------------------------------------------------------

    The NOI has declined for retail enclosed properties due primarily to the
redevelopment of Uptown Centre in Fredericton, New Brunswick, which has been
reclassified to a retail plaza in 2008.

    Office Properties
    -------------------------------------------------------------------------
    (In thousands of dollars,
    except as otherwise noted)
    -------------------------------------------------------------------------
             Six months ended June 30, 2008   Six months ended June 30, 2007
             ----------------------------------------------------------------
                  Same-    Acqui-                Same-      Acqui-
                 Asset   sitions      Total     Asset     sitions      Total
    -------------------------------------------------------------------------
    Proper-
     ty re-
     venue     $11,365        $-    $11,365   $10,773          $-    $10,773
    Proper-
     ty ex-
     penses      6,145         -      6,145     5,740           -      5,740
    -------------------------------------------------------------------------
    Proper-
     ty NOI     $5,220        $-     $5,220    $5,033          $-     $5,033
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %     45.9%        -%      45.9%     46.7%          -%      46.7%
    -------------------------------------------------------------------------
    Occupancy %   90.9%        -%      90.9%     93.1%          -%      93.1%
    -------------------------------------------------------------------------

    The improved occupancy levels and net rent per square foot at the Halifax
Developments properties in Halifax were partially than offset by decreased
occupancy in Terminal Centres in Moncton, New Brunswick. These factors
resulted in the higher property NOI for the office properties in the first six
months of 2008 compared to the first six months of 2007. The lower NOI
margin % is a result of higher overall recoverable costs for the first six
months of 2008 compared to 2007.

    Mixed-Use Properties
    -------------------------------------------------------------------------
    (In thousands of dollars,
    except as otherwise noted)
    -------------------------------------------------------------------------
             Six months ended June 30, 2008   Six months ended June 30, 2007
             ----------------------------------------------------------------
                  Same-    Acqui-                Same-      Acqui-
                 Asset   sitions      Total     Asset     sitions      Total
    -------------------------------------------------------------------------
    Proper-
     ty re-
     venue     $17,651        $-    $17,651   $16,598          $-    $16,598
    Proper-
     ty ex-
     penses      8,390         -      8,390     7,651           -      7,651
    -------------------------------------------------------------------------
    Proper-
     ty NOI     $9,261        $-     $9,261    $8,947          $-     $8,947
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %     52.5%        -%      52.5%     53.9%          -%      53.9%
    -------------------------------------------------------------------------
    Occupancy %   94.7%        -%      94.7%     95.7%          -%      95.7%
    -------------------------------------------------------------------------

    The slight decline in mixed-use occupancy levels from 95.7% in 2007 to
94.7% in 2008 was offset by improved average net rent per square foot from
leasing activity, resulting in the improved NOI results for the six months
ended June 30, 2008 when compared to the six months ended June 30, 2007. The
NOI margin has decreased slightly as a result of increased common area
expenses which are partially recovered from tenants.


    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 six months ended
June 30, 2008 and 2007 is as follows:

    -------------------------------------------------------------------------
    (In thousands of dollars)             Six Months  Six Months
                                               Ended       Ended
                                             June 30,    June 30,
                                                2008        2007    Variance
    -------------------------------------------------------------------------
    Net income                                $6,622      $4,555      $2,067
    Add:
    Non-controlling interest                   6,114       4,226       1,888
    Depreciation and amortization             18,290      13,407       4,883
    Depreciation and amortization
     on discontinued operations                  139         141          (2)
    Future income taxes                        1,101       3,306      (2,205)
    Less:
    Gain on disposition of land                  (77)          -         (77)
    -------------------------------------------------------------------------
    FFO                                      $32,189     $25,635      $6,554
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The improvement in FFO for the six months ended June 30, 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 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
additions to tenant improvements ("TI") and lease costs. The calculation of
AFFO for the six months ended June 30, 2008 and 2007 is as follows:

    -------------------------------------------------------------------------
    (In thousands of dollars)             Six Months  Six Months
                                               Ended       Ended
                                             June 30,    June 30,
                                                2008        2007    Variance
    -------------------------------------------------------------------------
    FFO                                      $32,189     $25,635      $6,554
    Add:
    Above market lease amortization            1,515       1,415         100
    Non-cash revenue impacts on
     discontinued operations                      22          25          (3)
    Less:
    Below market lease amortization           (3,000)     (2,089)       (911)
    Straight-line rent adjustment             (1,018)       (706)       (312)
    Maintenance capital expenditures
    (net of amounts recoverable from ECL)     (3,665)     (1,059)     (2,606)
    Additions to TI and lease costs
    (net of amounts recoverable from ECL)     (6,493)     (2,020)     (4,473)
    -------------------------------------------------------------------------
    AFFO                                     $19,550     $21,201     $(1,651)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The AFFO result for the six months ended June 30, 2008 was affected by the
increase in FFO for the period, offset by higher TI and maintenance capital
expenditures. The higher TI expenditures during the first six months was
partially due to early renegotiation of lease renewals coming due in 2009 that
will have higher average net rents per square foot on an ongoing basis,
combined with a number of renewal leases with higher average net rents per
square foot during the renewal term. Details of the TI and maintenance 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:

    -------------------------------------------------------------------------
    (In thousands of dollars)             Six Months  Six Months
                                               Ended       Ended
                                             June 30,    June 30,
                                                2008        2007    Variance
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                              $21,390      $4,589     $16,801
    Add back (deduct):
    Recoverable/productive capacity
     enhancing TIs                             1,835         889         946
    Change in non-cash operating items           487      17,000     (16,513)
    Unit-based compensation expense              (20)        (18)         (2)
    Amortization of deferred financing
     charges                                    (477)       (200)       (277)
    Maintenance capital expenditures
    (net of amounts recoverable from ECL)     (3,665)     (1,059)     (2,606)
    -------------------------------------------------------------------------
    AFFO                                     $19,550     $21,201     $(1,651)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    LIQUIDITY AND CAPITAL RE

SOURCES Sources and Uses of Funds Cash flow generated from operating the property portfolio represents the primary source of liquidity used to service the interest on debt, fund general and administrative expenses, reinvest into the portfolio through capital expenditures, as well as fund 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 (available for drawdown at June 30, 2008 - $147,755), of which $111,475 was drawn at June 30, 2008, and the issue of new equity and mortgage debt, pursuant to the Declaration of Trust. ------------------------------------------------------------------------- (In thousands of dollars) Six Months Six Months Ended Ended June 30, June 30, 2008 2007 Variance ------------------------------------------------------------------------- Cash provided by (used in): - Operating activities $21,390 $4,589 $16,801 - Financing activities $372,635 $30,590 $ 342,045 - Investing activities $(396,733) $(35,718) $(361,015) ------------------------------------------------------------------------- Operating Activities -------------------- ------------------------------------------------------------------------- (In thousands of dollars) Six Months Six Months Ended Ended June 30, June 30, 2008 2007 Variance ------------------------------------------------------------------------- Cash provided by (used in): Net income and non-cash items $30,205 $24,498 $5,707 Tenant improvements and leasing costs (8,328) (2,909) (5,419) Non-cash working capital (487) (17,000) 16,513 ------------------------------------------------------------------------- Cash provided by operating activities $21,390 $4,589 $16,801 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Fluctuations in cash provided by operating activities are largely influenced by the quarterly change in non-cash working capital which can be affected by the timing of receipts and payments. The $17,000 decrease in non-cash working capital in 2007 was primarily due to payables and accruals associated with construction projects undertaken in 2006 that were substantially complete by June 2007. Of the TI and leasing costs in 2008, $1,384 was covered by the non-interest bearing demand notes from ECL ($889 in 2007). The increase in the TI and leasing costs in the first six months of 2008 is outlined in the "Tenant Improvements and Capital Expenditures" section of the MD&A. Financing Activities -------------------- ------------------------------------------------------------------------- (In thousands of dollars) Six Months Six Months Ended Ended June 30, June 30, 2008 2007 Variance ------------------------------------------------------------------------- Cash provided by (used in): Net issue of commercial property debt $346,983 $55,556 $291,427 Net issue of convertible debentures 28,786 - 28,786 Net issue of public units 60,997 - 60,997 Redemption of public units (1,375) - (1,375) Repayment of commercial property debt (45,735) (21,273) (24,462) Collection of ECL notes receivable 4,416 13,006 (8,590) Payment of distributions (19,819) (17,074) (2,745) Other items (net) (1,618) 375 (1,993) ------------------------------------------------------------------------- Cash provided by (used in) financing activities $372,635 $30,590 $342,045 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash provided by (used in) financing activities for the six months ended June 30, 2008 was $342,045 higher than the six months ended June 30, 2007 primarily due to the issue of 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 six months ended June 30, 2008 was $396,733. Of this, $389,405 was used for the portfolio Acquisition and the purchase of River City Centre in Saskatoon, Saskatchewan, and $7,515 was used for additions to commercial properties. Of the cash used in additions to commercial properties, $2,389 was for the eight commercial properties covered by non-interest bearing demand notes from ECL. The cash used in investing activities for the six months ended June 30, 2007 included $5,501 in additions made to commercial properties as well as the acquisition of two properties in the first quarter of 2007 for $30,217. Of the additions made to commercial properties in 2007, $3,295 was covered by the non-interest bearing demand notes from ECL. Tenant Improvement and Capital Expenditures ------------------------------------------- There are two types of capital expenditures: - maintenance capital expenditures that maintain existing productive capacity and; - productive capacity enhancement expenditures. Maintenance capital expenditures are reinvestments 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 by a minimum threshold and thus enhance the property's overall value. These costs are capitalized and depreciated over their useful lives, but not deducted when calculating AFFO as they are considered financeable rather than having to be funded from operations. 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. ------------------------------------------------------------------------- (In thousands of dollars) Six Months Six Months Ended Ended June 30, June 30, 2008 2007 ------------------------------------------------------------------------- Total additions to commercial properties $7,515 $5,501 Less: amounts recoverable from ECL (2,389) (3,295) ------------------------------------------------------------------------- Net additions to commercial properties 5,126 2,206 Less: productive capacity enhancements (1,461) (1,147) ------------------------------------------------------------------------- Maintenance capital expenditures $3,665 $1,059 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- (In thousands of dollars) Six Months Six Months Ended Ended June 30, June 30, 2008 2007 ------------------------------------------------------------------------- Total additions to TI and leasing costs $8,328 $2,909 Less: amounts recoverable from ECL (1,384) (889) ------------------------------------------------------------------------- Net additions to TI and leasing costs 6,944 2,020 Less: productive capacity enhancements (451) - ------------------------------------------------------------------------- Maintenance TI and leasing costs $6,493 $2,020 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The higher TI expenditures during the first six months 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 HDL offices in Halifax, Nova Scotia, a total of 195,000 square feet of GLA set to expire in 2009 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. Crombie also entered into a new lease at Aberdeen Business Centre in New Glasgow, Nova Scotia to fill previously vacant space of 16,000 square feet at a cost of $596 that will increase minimum rent by $177 per year at that location. Maintenance capital expenditures increased during the first six months of 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. Productive capacity enhancements during the first six months 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. Capital Structure ------------------------------------------------------------------------- (In thousands of dollars) Jun. Mar. Dec. Sep. Jun. 30, 31, 31, 30, 30, 2008 2008 2007 2007 2007 ------------------------------------------------------------------------- Commercial property debt $812,016 $466,977 $493,945 $486,563 $459,164 Convertible debentures $28,847 $28,624 $- $- $- Non- controlling interest $224,871 $172,249 $177,919 $179,457 $183,051 Unit- holders' equity $243,472 $184,740 $190,834 $192,477 $196,332 ------------------------------------------------------------------------- Commercial Property Debt ------------------------ As of June 30, 2008, Crombie had fixed rate mortgages outstanding of $413,408 ($425,945 after including the marked-to-market adjustment of $12,537), carrying a weighted average interest rate of 5.45% (after giving effect to a monthly interest rate subsidy from ECL under an omnibus subsidy agreement) and a weighted average term to maturity of 7.2 years. 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 margin over prime on the Banker Acceptance Rate, which margin increases over time. As security for the Term Facility, Crombie provided an unconditional guarantee and shall at any time on or after the 90th day following the closing of the acquisition, if requested by the lender, grant a charge on all or certain of the acquired properties together with an assignment of leases. 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. Subsequent to the end of the second quarter, Crombie entered into a number of commitments to refinance portions of the commercial property debt (see "Subsequent Events"). Crombie has in place an authorized floating rate revolving credit facility of $150,000 (available for drawdown at June 30, 2008 - $147,755), $111,475 of which was drawn upon as at June 30, 2008. The revolving credit facility is secured by a pool of first and second mortgages and negative pledges on certain assets. During the second quarter of 2008, the maturity date of the floating rate revolving credit facility was extended to June 30, 2011. To reduce exposure to floating interest rates on the revolving credit facility, Crombie has entered into a fixed interest rate swap agreement which expires on June 30, 2011. Interest on $50,000 is paid at a fixed rate of 4.97%, after including the applicable stamping fee of 1.25%, and is received at a floating rate based on the 90-day bankers' acceptance rate. For the six months ended June 30, 2008 the effect of the mark to market adjustment for the swap resulted in a loss of $957 which was recognized in the other comprehensive income of Crombie's financial statements. Principal repayments of the debt are scheduled as follows: ------------------------------------------------------------------------- Fixed Payments Rate Debt of Maturing Floating Total % of Year Principal during Year Rate Debt Maturity Total ------------------------------------------------------------------------- Twelve months ending June 30, 2009 $14,005 $7,575 $Nil $21,580 2.7% Twelve months ending June 30, 2010 12,983 $106,079 280,000 399,062 49.6% Twelve months ending June 30, 2011 10,751 26,786 111,475 149,012 18.5% Twelve months ending June 30, 2012 10,541 - - 10,541 1.3% Twelve months ending June 30, 2013 11,279 - - 11,279 1.4% Thereafter 57,509 155,900 - 213,409 26.5% ------------------------------------------------------------------------- Total(1) $117,068 $296,340 $391,475 $804,883 100.0% ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1)Excludes marked-to-market adjustment due to interest rate subsidy and fair value debt adjustment of $12,537 and the deferred financing costs of $5,404. Convertible debentures ------------------------ On March 20, 2008, Crombie issued $30,000 in unsecured convertible debentures related to the portfolio Acquisition. 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 Toronto Stock Exchange for the 20 consecutive trading days ending on the fifth trading day preceding the date one 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. 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 July 31, 2008 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. Borrowing Capacity and Debt Covenants Crombie has in place an authorized revolving credit facility of $150,000, of which $147,755 is available for drawdown at June 30, 2008. The revolving credit facility is secured by a pool of first and second mortgages and negative pledges on certain assets. 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 fair market value of assets subject to a second security position or a negative pledge, subject to the limitations on the ability of Crombie to incur indebtedness contained in the Declaration of Trust. The revolving credit facility provides Crombie with flexibility to add or remove properties from the security pool, subject to compliance with certain conditions. As part of the amended debt covenants attached to the revolving credit facility, in addition to the maximum borrowing above, Crombie must maintain certain debt ratios above prescribed levels: - Annualized NOI for the prescribed properties must be a minimum of 1.4 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%. Crombie remains in compliance with all debt covenant measures. The following is the remaining availability of the revolving credit facility: ------------------------------------------------------------------------- (In thousands Jun. Mar. Dec. Sep. Jun. of dollars) 30, 31, 31, 30, 30, 2008 2008 2007 2007 2007 ------------------------------------------------------------------------- Available for drawdown $147,755 $116,433 $118,923 $138,148 $136,810 Amount utilized 111,475 48,038 70,900 114,504 100,900 Remaining availa- bility $36,280 $68,395 $48,023 $23,644 $35,910 ------------------------------------------------------------------------- ------------------------------------------------------------------------- When calculating debt to gross book value, debt is defined as bank loans plus commercial property debt. Gross book value means, at any time, the book value of the assets of Crombie and its consolidated subsidiaries plus 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 55.1% at June 30, 2008 compared to 48.2% at March 31, 2008. 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 Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, noted) 2008 2008 2007 2007 2007 ------------------------------------------------------------------------- Mortgages payable $425,945 $421,013 $425,273 $373,751 $360,027 Convertible debentures 30,000 30,000 - - - Term financing 280,000 - - - - Revolving credit facility payable 111,475 48,038 70,900 114,504 100,900 ------------------------------------------------------------------------- Total debt outstanding 847,420 499,051 496,173 488,255 460,927 Less: Fair value debt adjustment (12,537) (13,578) (14,456) (15,025) (15,913) ------------------------------------------------------------------------- Debt $834,883 $485,473 $481,717 $473,230 $445,014 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total assets $1,501,678 $1,006,823 $1,013,982 $1,007,337 $976,699 Add: Deferred financing charges 6,557 3,450 2,228 1,692 1,763 Accumulated depreciation of commercial properties 32,850 27,966 24,023 19,820 15,925 Accumulated amortization of intangible assets 38,454 32,053 27,476 22,763 18,541 Less: Assets held for sale (10,951) (10,983) (11,109) (11,188) (11,091) Fair value debt adjustment (12,537) (13,578) (14,456) (15,025) (15,913) Fair value adjustment to future taxes (39,519) (39,519) (39,519) (39,519) (39,519) ------------------------------------------------------------------------- Gross book value $1,516,532 $1,006,212 $1,002,625 $985,880 $946,405 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Debt to gross book value 55.1% 48.2% 48.0% 48.0% 47.0% Maximum borrowing capacity(1) 65% 65% 60% 60% 60% ------------------------------------------------------------------------- (1)Maximum permitted by the Declaration of Trust Debt and Interest Service Coverage Ratios Crombie's interest and debt service coverage ratios for the six months ended June 30, 2008 were 2.92 times EBITDA and 1.88 times EBITDA. This compares to 3.12 times EBITDA and 1.92 times EBITDA respectively for the six months ended June 30, 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. ------------------------------------------------------------------------- Six Months Six Months Ended Ended June 30, June 30, 2008 2007 ------------------------------------------------------------------------- Property revenue $84,576 $69,712 Amortization of above-market leases 1,515 1,415 Amortization of below-market leases (3,000) (2,089) ------------------------------------------------------------------------- Adjusted property revenue 83,091 69,038 Property expenses (32,549) (28,605) General and administrative expenses (3,931) (3,842) ------------------------------------------------------------------------- EBITDA(1) $46,611 $36,591 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest expense $16,465 $11,921 Amortization of deferred financing charges (477) (200) ------------------------------------------------------------------------- Adjusted interest expense(2) $15,988 $11,721 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Debt repayments $45,735 $21,273 Amortization of fair value debt premium (20) - Payments relating to revolving credit facility (30,000) (13,918) Balloon payments on mortgages (6,922) - ------------------------------------------------------------------------- Adjusted debt repayments(3) $8,793 $7,355 ------------------------------------------------------------------------- Interest service coverage ratio((1)/(2)) 2.92 3.12 ------------------------------------------------------------------------- Debt service coverage ratio((1)/((2)+(3))) 1.88 1.92 ------------------------------------------------------------------------- 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 is to provide increased stability to Crombie's distributions. Details of distributions to Unitholders are as follows: ------------------------------------------------------------------------- Six Months Six Months (In thousands of dollars, Ended Ended except per unit amounts June 30, June 30, and as otherwise noted) 2008 2007 ------------------------------------------------------------------------- Distributions to Unitholders $10,494 $8,856 Distributions to Special Voting Unitholders 9,325 8,218 ------------------------------------------------------------------------- Total distributions $19,819 $17,074 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Number of diluted Units 23,838,755 21,643,238 Number of diluted Special Voting Units 22,002,653 20,079,576 ------------------------------------------------------------------------- Total diluted weighted average Units 45,841,408 41,722,814 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions per unit $0.43 $0.41 FFO payout ratio (target ratio =70%) 61.6% 66.6% AFFO payout ratio (target ratio =95%) 101.4% 80.5% ------------------------------------------------------------------------- The FFO payout ratio of 61.6% 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 101.4% exceeded the target ratio as a result of the 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. Crombie anticipates that the annual AFFO payout ratio will approximate the target payout ratio by the end of fiscal 2008. SECOND QUARTER RESULTS Comparison to Previous Year ------------------------------------------------------------------------- Quarter Ended (In thousands of ---------------------- dollars, except June 30, June 30, where otherwise noted) 2008 2007 Variance ------------------------------------------------------------------------- Property revenue $47,315 $34,636 $12,679 Property expenses 17,009 13,958 (3,051) ------------------------------------------------------------------------- Property NOI 30,306 20,678 9,628 ------------------------------------------------------------------------- NOI margin percentage 64.1% 59.7% 4.4% ------------------------------------------------------------------------- Expenses: General and administrative 1,979 2,224 245 Interest 9,965 6,080 (3,885) Depreciation and amortization 10,524 7,085 (3,439) ------------------------------------------------------------------------- 22,468 15,389 (7,079) ------------------------------------------------------------------------- Income from continuing operations before other items, income taxes and non-controlling interest 7,838 5,289 2,549 Other items 97 - 97 ------------------------------------------------------------------------- Income from continuing operations before income taxes and non-controlling interest 7,935 5,289 2,646 Income taxes expense - Future 701 2,978 2,277 ------------------------------------------------------------------------- Income from continuing operations before non-controlling interest 7,234 2,311 4,923 Income from discontinued operations 136 108 28 ------------------------------------------------------------------------- Income before non-controlling interest 7,370 2,419 4,951 Non-controlling interest 3,531 1,164 (2,367) ------------------------------------------------------------------------- Net income $3,839 $1,255 $2,584 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted net income per Unit $0.15 $0.06 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic weighted average Units outstanding (in 000's) 25,910 21,538 ------------------------------------------------------------- ------------------------------------------------------------- Diluted weighted average Units outstanding (in 000's) 26,029 21,649 ------------------------------------------------------------- ------------------------------------------------------------- Net income for the quarter ended June 30, 2008 of $3,839 increased by $2,584 from $1,255 for the quarter ended June 30, 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 June 30, 2007 and the portfolio Acquisition; offset in part by - higher interest and depreciation charges, due primarily to the individual property acquisitions since June 30, 2007 and the portfolio Acquisition. Property Revenue and Property Expenses ------------------------------------------------------------------------- Quarter Ended ---------------------- June 30, June 30, (In thousands of dollars) 2008 2007 Variance ------------------------------------------------------------------------- Same-asset property revenue $36,151 $34,636 $1,515 Acquisition property revenue 11,164 - 11,164 ------------------------------------------------------------------------- Property revenue $47,315 $34,636 $12,679 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Same-asset property revenue of $36,151 for the quarter ended June 30, 2008 was 4.4% higher than the quarter ended June 30, 2007 due primarily to the increased average rent per square foot ($12.39 in 2008 and $12.02 in 2007) and increased revenue from higher recoverable common area expenses. ------------------------------------------------------------------------- Quarter Ended ---------------------- June 30, June 30, (In thousands of dollars) 2008 2007 Variance ------------------------------------------------------------------------- Same-asset property expenses $14,528 $13,958 $570 Acquisition property expenses 2,481 - 2,481 ------------------------------------------------------------------------- Property expenses $17,009 $13,958 $3,051 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Same-asset property expenses of $14,528 for the quarter ended June 30, 2008 were 4.1% higher than quarter ended June 30, 2007 due to increased recoverable common area expenses primarily from increased utility and snow removal costs. ------------------------------------------------------------------------- Quarter Ended ---------------------- June 30, June 30, (In thousands of dollars) 2008 2007 Variance ------------------------------------------------------------------------- Same-asset property NOI $21,623 $20,678 $945 Acquisition property NOI 8,683 - 8,683 ------------------------------------------------------------------------- Property NOI $30,306 $20,678 $9,628 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Same-asset NOI for the quarter ended June 30, 2008 grew by 4.6% over the quarter ended June 30, 2007. Property NOI for the quarter ended June 30, 2008 by region was as follows: ------------------------------------------------------------------------- 2008 2007 --------------------------------------- (In thou- sands of Property Property Property NOI % of NOI % of dollars) Revenue Expenses NOI revenue revenue Variance ------------------------------------------------------------------------- Nova Scotia $22,271 $8,686 $13,585 61.0% 55.5% 5.5% New- foundland and Labrador 6,923 2,008 4,915 71.0% 66.5% 4.5% New Brunswick 6,120 2,706 3,414 55.8% 50.1% 5.7% Ontario 7,565 2,633 4,932 65.2% 68.8% (3.6)% Prince Edward Island 1,353 306 1,047 77.4% 74.5% 2.9% Quebec 2,926 643 2,283 78.0% 73.7% 4.3% Saskatche- wan 157 27 130 82.8% -% -% ------------------------------------------------------------------------- Total $47,315 $17,009 $30,306 64.1% 59.7% 4.4% ------------------------------------------------------------------------- ------------------------------------------------------------------------- The overall increase in NOI % of revenue, as well as the specific provincial increases, is due to the portfolio Acquisition as well as the growth in the same-asset NOI. The decrease in Ontario is primarily a result of the increased utility and snow removal costs in 2008 as compared to 2007. General and Administrative Expenses The following table outlines the major categories of expenses. ------------------------------------------------------------------------- Quarter Ended ---------------------- June 30, June 30, 2008 2007 Variance ------------------------------------------------------------------------- Salaries and benefits $961 $991 $(30) Professional fees 454 459 (5) Public company costs 268 297 (29) Rent and occupancy 166 268 (102) Other 130 209 (79) ------------------------------------------------------------------------- General and administrative costs $1,979 $2,224 $(245) ------------------------------------------------------------------------- ------------------------------------------------------------------------- As a percentage of revenue 4.2% 6.4% (2.2)% ------------------------------------------------------------------------- General and administrative expenses decreased by 11% for the quarter ended June 30, 2008 to $1,979 compared to $2,224 for the quarter ended June 30, 2007. 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 ---------------------- June 30, June 30, (In thousands of dollars) 2008 2007 Variance ------------------------------------------------------------------------- Same-asset interest expense $5,760 $6,080 $(320) Acquisition interest expense 4,205 - 4,205 ------------------------------------------------------------------------- Interest expense $9,965 $6,080 $3,885 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Same-asset interest expense of $5,760 for the quarter ended June 30, 2008 decreased by 5.3% when compared to the quarter ended June 30, 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 June 30, 2007 and a decrease in the effective interest rate on the revolving credit facility. 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 June 30, 2008 was $852 (quarter ended June 30, 2007 - $898). Depreciation and Amortization ------------------------------------------------------------------------- Quarter Ended ---------------------- June 30, June 30, (In thousands of dollars) 2008 2007 Variance ------------------------------------------------------------------------- Same-asset depreciation and amortization $7,233 $7,085 $148 Acquisition depreciation and amortization 3,291 - 3,291 ------------------------------------------------------------------------- Depreciation and amortization $10,524 $7,085 $3,439 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Same-asset depreciation and amortization of $7,233 for the quarter ended June 30, 2008 was 2.1% higher than the quarter ended June 30, 2007 due primarily to depreciation on fixed asset additions incurred since June 30, 2007. Depreciation and amortization consists of: ------------------------------------------------------------------------- Quarter Ended ---------------------- June 30, June 30, (In thousands of dollars) 2008 2007 Variance ------------------------------------------------------------------------- Depreciation of commercial properties $4,185 $3,030 $1,155 Amortization of tenant improvements/lease costs 700 647 53 Amortization of intangible assets 5,639 3,408 2,231 ------------------------------------------------------------------------- Depreciation and amortization $10,524 $7,085 $3,439 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Future Income Taxes During the second quarter of 2007, Crombie recorded a future income tax expense of $1,500 as a result of proposed tax legislation. As a result of the review of Crombie's operations, this expense was reversed at year end and is the primary cause for the favourable difference in the second quarter of 2008 of $2,277. Sector Information Retail Freestanding Properties ------------------------------------------------------------------------- (In thousands of dollars, except as otherwise noted) ------------------------------------------------------------------------- Quarter ended June 30, 2008 Quarter ended June 30, 2007 ---------------------------------------------------------------- Same- Acqui- Same- Acqui- Asset sitions Total Asset sitions Total ------------------------------------------------------------------------- Property revenue $166 $5,229 $5,395 $172 $- $172 Property expenses 10 1,121 1,131 13 - 13 ------------------------------------------------------------------------- Property NOI $156 4,108 $4,264 $159 $- $159 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NOI Margin % 94.0% 78.6% 79.0% 92.4% -% 92.4% ------------------------------------------------------------------------- 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. Retail Plaza Properties ------------------------------------------------------------------------- (In thousands of dollars, except as otherwise noted) ------------------------------------------------------------------------- Quarter ended June 30, 2008 Quarter ended June 30, 2007 ---------------------------------------------------------------- Same- Acqui- Same- Acqui- Asset sitions Total Asset sitions Total ------------------------------------------------------------------------- Property revenue $10,139 $5,631 $15,770 $8,426 $- $8,426 Property expenses 3,200 1,303 4,503 2,627 - 2,627 ------------------------------------------------------------------------- Property NOI $6,939 $4,328 $11,267 $5,799 $- $5,799 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NOI Margin % 68.4% 76.9% 71.4% 68.8% -% 68.8% ------------------------------------------------------------------------- Occupancy % 95.3% 97.4% 96.4% 95.1% -% 95.1% ------------------------------------------------------------------------- The improvement in the retail plaza property NOI was caused primarily by the portfolio Acquisition, as well as by the higher NOI in the same-asset properties due to the improved average net rent per square foot figures achieved in the prior year renewal and new leasing. Retail Enclosed Properties ------------------------------------------------------------------------- (In thousands of dollars, except as otherwise noted) ------------------------------------------------------------------------- Quarter ended June 30, 2008 Quarter ended June 30, 2007 ---------------------------------------------------------------- Same- Acqui- Same- Acqui- Asset sitions Total Asset sitions Total ------------------------------------------------------------------------- Property revenue $11,158 $304 $11,462 $12,390 $- $12,390 Property expenses 4,226 57 4,283 4,662 - 4,662 ------------------------------------------------------------------------- Property NOI $6,932 $247 $7,179 $7,728 $- $7,728 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NOI Margin % 62.1% 81.3% 62.7% 62.4% -% 62.4% ------------------------------------------------------------------------- Occupancy % 91.3% 92.6% 91.4% 92.2% -% 92.2% ------------------------------------------------------------------------- ------------------------------------------------------------------------- The NOI has declined for retail enclosed properties due primarily to the redevelopment of Uptown Centre in Fredericton, New Brunswick, which has been reclassified to a retail plaza in 2008. Office Properties ------------------------------------------------------------------------- (In thousands of dollars, except as otherwise noted) ------------------------------------------------------------------------- Quarter ended June 30, 2008 Quarter ended June 30, 2007 ---------------------------------------------------------------- Same- Acqui- Same- Acqui- Asset sitions Total Asset sitions Total ------------------------------------------------------------------------- Property revenue $5,849 $- $5,849 $5,355 $- $5,355 Property expenses 2,953 - 2,953 2,832 - 2,832 ------------------------------------------------------------------------- Property NOI $2,896 $- $2,896 $2,523 $- $2,523 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NOI Margin % 49.5% -% 49.5% 47.1% -% 47.1% ------------------------------------------------------------------------- Occupancy % 90.9% -% 90.9% 93.1% -% 93.1% ------------------------------------------------------------------------- The improved occupancy levels and net rent per square foot at the Halifax Developments properties in Halifax exceeded the decreased occupancy in Terminal Centres in Moncton, New Brunswick. These factors resulted in the higher property NOI and NOI margin percent for the office properties in the second quarter 2008 compared to the second quarter of 2007. Mixed-Use Properties ------------------------------------------------------------------------- (In thousands of dollars, except as otherwise noted) ------------------------------------------------------------------------- Quarter ended June 30, 2008 Quarter ended June 30, 2007 ---------------------------------------------------------------- Same- Acqui- Same- Acqui- Asset sitions Total Asset sitions Total ------------------------------------------------------------------------- Property revenue $8,839 $- $8,839 $8,293 $- $8,293 Property expenses 4,139 - 4,139 3,824 - 3,824 ------------------------------------------------------------------------- Property NOI $4,700 $- $4,700 $4,469 $- $4,469 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NOI Margin % 53.2% -% 53.2% 53.9% -% 53.9% ------------------------------------------------------------------------- Occupancy % 94.7% -% 94.7% 95.7% -% 95.7% ------------------------------------------------------------------------- The slight decline in mixed-use occupancy levels from 95.7% in 2007 to 94.7% in 2008 was offset by improved average net rent per square foot from leasing activity, resulting in the improved NOI results for the second quarter of 2008 when compared to the second quarter of 2007 results. OTHER SECOND QUARTER PERFORMANCE MEASURES Funds from Operations A calculation of FFO for the quarters ended June 30, 2008 and 2007 is as follows: ------------------------------------------------------------------------- Quarter Quarter Ended Ended June 30, June 30, (In thousands of dollars) 2008 2007 Variance ------------------------------------------------------------------------- Net income $3,839 $1,255 $2,584 Add back: Non-controlling interest 3,531 1,164 2,367 Depreciation and amortization 10,524 7,085 3,439 Depreciation and amortization on discontinued operations 61 71 (10) Future income taxes 701 2,978 (2,277) Less: Gain on disposition of land (77) - (77) ------------------------------------------------------------------------- FFO $18,579 $12,553 $6,026 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The improvement in FFO for the second quarter of 2008 was primarily due to higher property NOI as a result of the individual acquisitions, the portfolio Acquisition and the improvement in same-asset results, offset in part by the increased interest expense related to the acquisitions. Adjusted Funds from Operations The calculation of AFFO for the quarters ended June 30, 2008 and 2007 is as follows: ------------------------------------------------------------------------- Quarter Quarter Ended Ended June 30, June 30, (In thousands of dollars) 2008 2007 Variance ------------------------------------------------------------------------- FFO $18,579 $12,553 $6,026 Add back: Above market lease amortization 762 735 27 Non-cash revenue impacts on discontinued operations 10 9 1 Less: Below market lease amortization (1,814) (1,106) (708) Straight-line rent adjustment (701) (396) (305) Maintenance capital expenditures (net of amounts recoverable from ECL) (2,481) (311) (2,170) Additions to TI and lease costs (net of amounts recoverable from ECL) (2,672) (1,154) (1,518) ------------------------------------------------------------------------- AFFO $11,683 $10,330 $1,353 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The improved AFFO result for the second quarter of 2008 when compared to the same period in 2007 was due to the improved FFO, partially offset by the increased maintenance capital expenditures and TI costs. 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 June 30, June 30, (In thousands of dollars) 2008 2007 Variance ------------------------------------------------------------------------- Cash provided by operating activities $16,407 $2,307 $14,100 Add back (deduct): Recoverable/productive capacity enhancing TIs 1,099 674 425 Change in non-cash operating items (3,008) 7,777 (10,785) Unit-based compensation expense (11) (9) (2) Amortization of deferred financing charges (323) (108) (215) Maintenance capital expenditures (net of amounts recoverable from ECL) (2,481) (311) (2,170) ------------------------------------------------------------------------- AFFO $11,683 $10,330 $1,353 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash Flow ------------------------------------------------------------------------- Quarter Quarter Ended Ended June 30, June 30, (In thousands of dollars) 2008 2007 Variance ------------------------------------------------------------------------- Cash provided by (used in): Operating activities $16,407 $2,307 $14,100 Financing activities $378,614 $2,168 $376,446 Investing activities $(395,021) $(3,834) $(391,187) ------------------------------------------------------------------------- Operating Activities -------------------- Cash provided by operating activities during the quarter of $16,407 was generated by the income before non-controlling interest of $7,370, the adding back of non-cash expenses, primarily depreciation and amortization of $10,524 and the effect of non-cash operating items of $3,008. These items were partially offset by additions made to tenant improvements and leasing costs of $3,771. During the second quarter of 2007, $2,307 was generated by the income before the non-controlling interest, the adding back of non-cash expenses, primarily depreciation and amortization of $7,085 and the effect of non-cash working capital items of $(7,777). These items were partially offset by additions made to tenant improvements and leasing costs of $1,828. Financing Activities -------------------- Cash provided by financing activities during the quarter of $378,614 was primarily due to the issue of the Term Facility and the public issue of Units related to the portfolio Acquisition partially offset by payments on commercial property debt and distributions. In 2007, $2,168 of cash was provided from financing activities, primarily as a result of proceeds from commercial property debt issued, offset in part by payments on commercial property debt and distributions. Investing Activities -------------------- Cash used in investing activities of $395,021 during the quarter was due primarily to the portfolio Acquisition and the acquisition of River City Centre for $389,405. During the second quarter of 2007, cash of $3,834 was used for additions to commercial properties. Tenant Improvement and Capital Expenditures ------------------------------------------- ------------------------------------------------------------------------- Quarter Quarter Ended Ended June 30, June 30, (In thousands of dollars) 2008 2007 ------------------------------------------------------------------------- Total additions to commercial properties $5,803 $3,834 Less: amounts recoverable from ECL (2,084) (2,376) ------------------------------------------------------------------------- Net additions to commercial properties 3,719 1,458 Less: productive capacity enhancements (1,238) (1,147) ------------------------------------------------------------------------- Maintenance capital expenditures $2,481 $311 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Quarter Quarter Ended Ended June 30, June 30, (In thousands of dollars) 2008 2007 ------------------------------------------------------------------------- Total additions to TI and leasing costs $3,771 $1,828 Less: amounts recoverable from ECL (1,099) (674) ------------------------------------------------------------------------- Net additions to TI and leasing costs 2,672 1,154 Less: productive capacity enhancements - - ------------------------------------------------------------------------- Maintenance TI and leasing costs $2,672 $1,154 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CHANGES IN ACCOUNTING POLICIES Effective January 1, 2008 Crombie adopted two new accounting standards that were issued by the CICA in 2006. These accounting policy changes were adopted on a retroactive basis with no restatement of prior period financial statements. The new standards and accounting policy changes are as follows: 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. 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. 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". The new Section 3064 states that upon their initial identification, intangible assets are to be recognized as assets only if they meet the definition of an intangible asset and the recognition criteria. 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. Crombie is currently evaluating the effect of these new standards on its results and financial position. International Financial Reporting Standards ------------------------------------------- On February 13, 2008, the Accounting Standards Board confirmed the date of changeover from GAAP to International Financial Reporting Standards ("IFRS"). Canadian publicly accountable enterprises must adopt IFRS for their interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. Crombie is currently developing its IFRS conversion plan and evaluating the effect of the new standards on its consolidated financial statements. RELATED PARTY TRANSACTIONS As at June 30, 2008, Empire Company Limited, through its wholly-owned subsidiary ECL, holds a 47.9% indirect interest in Crombie. For a period of five years commencing March 23, 2006, certain executive management individuals and other employees of Crombie will provide general management, financial, leasing, administrative, and other administration support services to certain real estate subsidiaries of Empire Company Limited on a cost recovery basis. The expense recoveries during the three months ended and six months ended June 30, 2008 were $386 and $841 respectively (three months ended and six months ended June 30, 2007 - $412 and $714 respectively) and were netted against general and administrative expenses. 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 recovery basis. In addition, for various periods, ECL has an obligation to provide rental income and interest rate subsidies. The cost recoveries during the three months ended and six months ended June 30, 2008 were $484 and $1,173 respectively (three months ended and six months ended June 30, 2007 - $504 and $1,198 respectively) and was netted against property expenses. The rental income subsidy during the three months ended and six months ended June 30, 2008 were $Nil and $Nil respectively (three months ended and six months ended June 30, 2007 - $8 and $16 respectively) and the head lease subsidy during three months ended and six months ended June 30, 2008 were $231 and $629 respectively (three months ended and six months ended June 30, 2007 - $260 and $515 respectively). Crombie also earned property revenue of $13,135 for the three months ended June 30, 2008 and $19,497 for the six months ended June 30, 2008 (three months ended and six months ended June 30, 2007 - $6,275 and $12,046 respectively) from Sobeys Inc., Empire Theatres Limited and ASC Commercial Leasing Limited. These companies are all subsidiaries of Empire Company Limited. CRITICAL ACCOUNTING ESTIMATES Critical accounting estimates are discussed under the section "Critical Accounting Estimates" in the 2007 Annual Report. CONTINGENCIES There are various claims and litigation, involving Crombie, arising out of the ordinary course of business operations. In the opinion of management, any liability that would arise from such known claims and litigation would not have a significant adverse effect on the consolidated financial statements. Crombie has agreed to indemnify, in certain circumstances, the Trustees and officers of Crombie. RISK MANAGEMENT Risks and uncertainties related to economic and industry factors and Crombie's management of this risk are discussed under "Risk Management" section of the MD&A for the year ended December 31, 2007. Crombie has entered into a fixed interest rate swap to fix the amount of interest to be paid on $50,000 of the revolving credit facility. The fair value of the fixed interest rate swap at June 30, 2008, had an unfavourable difference of $957 (June 30, 2007 - favourable $691) compared to its face value. The change in this amount has been recognized in other comprehensive income(loss). In addition to the fixed interest rate swap, Crombie has entered into a number of delayed interest rate swap agreements of a notional amount of $118,689 with an effective date between August 1, 2008 and June 1, 2011, maturing between August 1, 2018 and July 2, 2021 to mitigate the exposure to interest rate increases for mortgages maturing between 2008 and 2011. The fair value of these delayed interest rate swap agreements had an unfavourable difference of $8,468 compared to the face value on June 30, 2008 (June 30, 2007 - unfavourable $1,776). The change in these amounts has been recognized in other comprehensive income(loss). In relation to the portfolio Acquisition, Crombie has entered into a number of delayed interest rate swap agreements of a notional amount of $280,000 to mitigate the exposure to interest rate increases prior to replacing the Term Facility with long-term financing. 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 Term Facility. The fair value of these agreements had an unfavourable difference of $1,782 compared to their face value on June 30, 2008 (June 30, 2007 - $Nil). The change in these amounts has been recognized in other comprehensive income(loss). 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. In reference to the agreements relating to the portfolio Acquisition, Crombie believes that it will be able to obtain permanent financing as contemplated in the table outlining accretion levels to FFO and AFFO. SUBSEQUENT EVENTS On June 19, 2008, Crombie declared distributions of 7.417 cents per unit for the period from June 1, 2008 to, and including, June 30, 2008. The distribution was paid payable on July 15, 2008 to Unitholders of record as at June 30, 2008. On July 18, 2008, Crombie signed a commitment letter to refinance a prior mortgage on the South Pelham Market Plaza in Ontario. The commitment was for $5,610 with a five year term and an interest rate based on a 250 basis point spread over the Government of Canada five year bond rate. The closing of the financing is anticipated to occur by the end of August 2008. Proceeds from the financing will be used to reduce the revolving credit facility. On July 18, 2008, Crombie signed a commitment letter to refinance a prior mortgage on the freestanding store at 318 Ontario Street in Ontario. The commitment was for $4,600 with a five year term and an interest rate based on a 247 basis point spread over the Government of Canada five year bond rate. The closing of the financing is anticipated to occur by the end of August 2008. Proceeds from the financing will be used to reduce the revolving credit facility. On July 22, 2008, Crombie declared distributions of 7.417 cents per unit for the period from July 1, 2008 to, and including, July 31, 2008. The distribution will be payable on August 15, 2008 to Unitholders of record as at July 31, 2008. On August 1, 2008, Crombie signed commitment letters to refinance $100,000 of the Term facility used to partially finance the portfolio Acquisition with fixed rate mortgages. The commitments have a weighted average 7.7 year term and interest rates based on the prevailing amortizing swap rates for the loan terms plus a basis point spread which management anticipates will result in an overall weighted average interest rate which will approximate the 6.35% rate used to model the pro forma accretion of the portfolio Acquisition subject to final rate lock. The closing of the financing is anticipated to occur prior to the end of the third quarter of 2008. Proceeds from the financing will be used to reduce the Term Facility. INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Chief Executive Officer and the Chief Financial Officer have evaluated whether there were changes to internal control over financial reporting for the quarter ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting. No such changes were identified through their evaluation. 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, Jun. 30, Mar. 31, Dec. 31, Sep. 30, except per unit amounts) 2008 2008 2007 2007 ------------------------------------------------------------------------ Property revenue $47,315 $37,261 $36,492 $35,079 Property expenses 17,009 15,540 14,536 14,875 ------------------------------------------------------------------------ Property net operating income 30,306 21,721 21,956 20,204 ------------------------------------------------------------------------- Expenses: General and administrative 1,979 1,952 2,492 1,843 Interest 9,965 6,500 6,577 6,413 Depreciation and amortization 10,524 7,766 8,152 7,382 ------------------------------------------------------------------------- 22,468 16,218 17,221 15,638 ------------------------------------------------------------------------- Income from continuing operations before other items, income taxes and non-controlling interest 7,838 5,503 4,735 4,566 Other items 97 - - - ------------------------------------------------------------------------- Income from continuing operations before income taxes and non-controlling interest 7,935 5,503 4,735 4,566 Income taxes expense - Future 701 400 (2,994) 718 ------------------------------------------------------------------------- Income from continuing operations 7,234 5,103 7,729 3,848 Income from discontinued operations 136 263 95 97 ------------------------------------------------------------------------- Income before non-controlling interest 7,370 5,366 7,824 3,945 Non-controlling interest 3,531 2,583 3,766 1,899 ------------------------------------------------------------------------- Net income $3,839 $2,783 $4,058 $2,046 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted net income per unit $0.15 $0.13 $0.19 $0.10 ------------------------------------------------------------------------- ------------------------------------------------------------------------- --------------------------------------------------------- Quarter Ended ------------------------------------------------------------------------- (In thousands of dollars, Jun. 30, Mar. 31, Dec. 31, Sep. 30, except per unit amounts) 2007 2007 2006 2006 ------------------------------------------------------------------------- Property revenue $34,636 $35,076 $33,717 $31,201 Property expenses 13,958 14,647 15,091 13,053 ------------------------------------------------------------------------- Property net operating income 20,678 20,429 18,626 18,148 ------------------------------------------------------------------------- Expenses: General and administrative 2,224 1,618 2,293 1,612 Interest 6,080 5,841 5,523 5,165 Depreciation and amortization 7,085 6,322 6,270 5,635 ------------------------------------------------------------------------- 15,389 13,781 14,086 12,412 ------------------------------------------------------------------------- Income from continuing operations before other items, income taxes and non-controlling interest 5,289 6,648 4,540 5,736 Other items - - - - ------------------------------------------------------------------------- Income from continuing operations before income taxes and non-controlling interest 5,289 6,648 4,540 5,736 Income taxes expense - Future 2,978 328 (1,663) 450 ------------------------------------------------------------------------- Income from continuing operations 2,311 6,320 6,203 5,286 Income from discontinued operations 108 42 - - ------------------------------------------------------------------------- Income before non-controlling interest 2,419 6,362 6,203 5,286 Non-controlling interest 1,164 3,062 2,986 2,550 ------------------------------------------------------------------------- Net income $1,255 $3,300 $3,217 $2,736 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted net income per unit $0.06 $0.15 $0.15 $0.13 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Quarter Ended ------------------------------------------------------------------------- (In thousands of dollars, Jun. 30, Mar. 31, Dec. 31, Sep. 30, except per unit amounts) 2008 2008 2007 2007 ------------------------------------------------------------------------- AFFO $11,683 $7,867 $7,561 $6,080 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FFO $18,579 $13,610 $13,057 $12,117 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions $10,952 $8,867 $8,867 $8,867 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AFFO per unit(1) $0.23 $0.19 $0.18 $0.15 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FFO per unit(1) $0.37 $0.33 $0.31 $0.29 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions per unit(1) $0.22 $0.21 $0.21 $0.21 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Quarter Ended ------------------------------------------------------------------------- (In thousands of dollars, Jun. 30, Mar. 31, Dec. 31, Sep. 30, except per unit amounts) 2007 2007 2006 2006 ------------------------------------------------------------------------- AFFO $10,330 $10,871 $8,263 $6,662 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FFO $12,553 $13,082 $10,699 $11,293 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions $8,727 $8,347 $8,346 $8,338 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AFFO per unit(1) $0.25 $0.26 $0.20 $0.16 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FFO per unit(1) $0.30 $0.31 $0.26 $0.27 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions per unit(1) $0.21 $0.20 $0.20 $0.20 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1)Distributable income, FFO, AFFO and distributions per unit are calculated by FFO, AFFO or distributions, as the case may be, divided by the diluted weighted average of the total Units and Special Voting Units outstanding of 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, 41,589,061 for the quarter ended December 31, 2006, and 41,589,061 for the quarter ended September 30, 2006. 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: August 8, 2008 Stellarton, Nova Scotia, Canada

For further information:

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


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