Crombie REIT announces significant portfolio acquisition and public offering of $60 million of subscription receipts and $30 million of convertible extendible unsecured subordinated debentures



    STELLARTON, NS, Feb. 25 /CNW/ - Crombie Real Estate Investment Trust
("Crombie") (TSX: CRR.UN) announced today that it has agreed to acquire a
portfolio of 61 retail properties (the "Acquisition") representing
approximately 3.3 million square feet of gross leaseable area ("GLA") from
subsidiaries of Empire Company Limited ("Empire"). The purchase price in
respect of the 61 properties is approximately $443 million, including
approximately $15 million of closing and transaction costs, and represents an
effective capitalization rate of 8.12% before transaction costs.
    The transaction will be immediately accretive to Crombie's adjusted funds
from operations ("AFFO") and, as a result, Crombie's Board of Trustees has
approved an increase in annual distributions from $0.85 per unit to
$0.89 per unit, conditional upon completion of the Acquisition.

    Financing of the Acquisition

    In order to partially finance the Acquisition, Crombie has agreed to
sell, on a bought-deal basis, $60 million of subscription receipts (the
"Subscription Receipts") at a price of $11.00 per Subscription Receipt and
$30 million of convertible extendible unsecured subordinated debentures (the
"Debentures") to a syndicate of underwriters led by CIBC World Markets Inc.
and TD Securities Inc. Crombie has also granted the underwriters an
over-allotment option to purchase up to an additional 272,750 Subscription
Receipts at the same offering price, exercisable up to 30 days after the
closing of the offering.
    On closing of the Acquisition, each Subscription Receipt will convert
into one unit of Crombie. The Debentures have an initial maturity date of
May 16, 2008, which will be extended to March 20, 2013 upon closing of the
Acquisition. The Debentures have a coupon of 7.0% per annum and will pay
interest semi-annually in arrears on June 30 and December 31 in each year
commencing on June 30, 2008. Each $1,000 principal amount of Debenture is
convertible into approximately 76.9231 units of Crombie, at any time, at the
option of the holder, representing a conversion price of $13.00 per unit.
    In addition to the issuance of the Subscription Receipts and Debentures,
Empire has agreed to take $55 million of Class B LP Units of Crombie Limited
Partnership at the $11.00 offering price. Immediately following the closing of
the Acquisition, Empire will continue to hold a 48.1% economic and voting
interest in Crombie.
    The remainder of the purchase price will be satisfied with a
$278.5 million 18 month bridge financing from the Bank of Nova Scotia and a
draw of approximately $20 million on Crombie's revolving credit facility. It
is Crombie's intention to replace the bridge financing by suitable long term
debt financing following the closing of the Acquisition.

    Recommendation of the Board of Trustees of Crombie

    As Empire currently owns a 48.1% economic and voting interest in Crombie,
Empire is considered a related party of Crombie under the securities laws of
certain provinces of Canada and therefore the Acquisition must be approved by
the affirmative vote of a majority of minority Unitholders at a Unitholders
Meeting scheduled for April 14, 2008.
    Due to the related party nature of the Acquisition, the board of trustees
of Crombie appointed a special committee of independent trustees consisting of
Kenneth Rowe (Chairman), David Hennigar, John Latimer, Elisabeth Stroback and
David Graham (the "Special Committee"), for the purpose of considering the
Acquisition. The Special Committee retained Cushman & Wakefield, LePage, Inc.
to prepare an independent valuation of the Acquisition in accordance with the
requirements of Multilateral Instrument 61-101 - Protection of Minority
Security Holders in Special Transactions and also retained Blackmont Capital
Inc., to act as the exclusive independent financial advisor to the Special
Committee in evaluating the Acquisition and to provide the Special Committee
with its opinion regarding the fairness of the Acquisition from a financial
point of view to the REIT's public unitholders (the "Fairness Opinion"). The
Special Committee has advised the board that based on, among other things, the
Independent Valuation and the Fairness Opinion, in its view the Acquisition is
fair to Crombie's public unitholders and in the best interests of Crombie, and
has unanimously recommended that the board of trustees enter into the
acquisition agreements and that the board of trustees recommend to Unitholders
that they vote in favour of the Acquisition.
    CIBC World Markets Inc. and TD Securities Inc. acted as financial
advisors to Crombie in connection with the Acquisition.

    Description of the Properties to be Acquired

    The properties to be acquired comprise 3.3 million square feet of GLA,
consisting of 40 freestanding grocery stores carrying various Sobeys banners,
which are 100% occupied, and 21 strip plazas, all of which are also anchored
by Sobeys bannered grocery stores, and are 96% occupied. In connection with
the Acquisition, Crombie will enter into new lease agreements with Sobeys for
each of the Sobeys stores located on the 61 properties. The majority of the
new fully-net lease agreements with Sobeys have terms of between 17 and
23 years. Crombie will experience positive asset and geographic
diversification from the acquisition portfolio as shown below:

    
    Asset Type                                 Current GLA %  Pro forma GLA %
    -------------------------------------------------------------------------
    Retail - Strip                                       62%              59%
    Retail - Freestanding                                 1%              15%
    Mixed-Use                                            24%              17%
    Office                                               13%               9%


    Province                                   Current GLA %  Pro forma GLA %
    -------------------------------------------------------------------------
    Nova Scotia                                          52%              47%
    Ontario                                              16%              15%
    New Brunswick                                        15%              15%
    Newfoundland and Labrador                            11%              13%
    Prince Edward Island                                  4%               3%
    Quebec                                                2%               7%
    


    "We are extremely pleased to announce this Acquisition and the increase
in annual distributions by $0.04 per unit following the closing of the
Acquisition. The Acquisition, together with our other acquisitions from ECL
Developments Limited, reflects Empire's desire to continue its active
relationship with Crombie for its current and future real estate portfolio.
The properties to be acquired will enhance our portfolio diversification and
the fully-net lease structure with Sobeys will be beneficial to Crombie's AFFO
as it reflects long-term market rents. The Acquisition will also increase our
penetration into Quebec to 7% from 2% of Crombie's total GLA. In addition, the
equity offering will substantially increase our public float and enhance
liquidity for our Unitholders. We are also delighted that Empire continues to
show its commitment to Crombie by participating in the offering and
maintaining their current minority interest share," said Crombie President and
Chief Executive Officer, J. Stuart Blair.
    On or before February 29, 2008, Crombie will file with the securities
commissions or other similar regulatory authorities in each of the provinces
of Canada, a preliminary short form prospectus relating to the issuance of the
Subscription Receipts and the Debentures. Closing of the offering is expected
to occur on March 20, 2008. The Subscription Receipts and Debentures will not
be registered under the United States Securities Act of 1933, as amended, and
may not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements.

    About Crombie

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

    This news release contains forward looking statements regarding the
Acquisition, the financing for the Acquisition and the impact of the
Acquisition on Crombie's property portfolio, accretion to AFFO and its
financial condition. Wherever possible, words such as "may", "will",
"estimate", "anticipate", "believe", "expect", "intention" and similar
expressions have been used to identify these forward looking statements. These
forward looking statements reflect the current expectations of management of
Crombie regarding the Acquisition and its impact on Crombie and are based on
information currently available to management of Crombie. These forward
looking statements involve significant risks and uncertainties. While
agreements of purchase and sale with respect to the Acquisition have been
entered into by Crombie and subsidiaries of Empire, the Acquisition remains
subject to significant conditions including the successful completion of the
bought deal offering and related debt financing, the approval of a majority of
minority Unitholders of Crombie and a number of regulatory and other consents
and approvals. There can be no assurance that Acquisition will be completed by
Crombie or that, if completed, the Acquisition will have the impact on Crombie
expected by management. In particular, the distribution increase approved by
the board of trustees of Crombie is conditional on the successful completion
of the Acquisition. The risks associated with these forward looking statements
should be considered carefully and readers 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. These
forward-looking statements are made as of the date of this news release and
Crombie assumes no obligation to update or revise them to reflect new events
or circumstances.
    AFFO does not have standardized meaning under Canadian generally accepted
accounting principles ("GAAP") and therefore may not be comparable to
similarly titled measures used by other publicly traded companies. Crombie has
referenced AFFO in this new release because it believes that it is a useful
measure for investors to evaluate the financial impact of the Acquisition on
Crombie. AFFO is calculated as net income (computed in accordance with GAAP),
excluding gains (or losses) from sales of depreciable real estate and
extraordinary items and the adjustments for any above-or below-market lease
amortization and straight-line rent, plus depreciation and amortization
(excluding amortization of deferred financing charges, tenant improvements and
leasing commission costs), future income taxes and after adjustments for
equity accounted entities and non-controlling interests, less maintenance
capital expenditures and unamortized additions to tenant improvements and
lease costs.

    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.




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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