Crombie REIT announces third quarter 2007 results



    STELLARTON, NS, Nov. 8 /CNW/ - Crombie Real Estate Investment Trust
("Crombie") (TSX: CRR.UN) is pleased to report its third quarter results for
the quarter ending September 30, 2007.
    Funds from Operations (FFO) for the quarter increased by 7.3% to
$12.1 million ($0.29 per unit) from $11.3 million ($0.27 per unit) during the
third quarter of 2006. Year-to-date FFO is not comparable to the prior year
FFO results due to the abbreviated reporting period in 2006 as Crombie began
operations on March 23, 2006.
    Adjusted Funds from Operations (AFFO) for the quarter decreased by 5.8%
to $6.276 million ($0.15 per unit) from $6.662 million ($0.16 per unit) during
the third quarter of 2006 due primarily to higher maintenance capital
expenditures during 2007. As these expenditures are not incurred evenly
throughout the fiscal year, there can be volatility in AFFO on a quarterly
basis.
    Property net operating income (NOI) for the quarter increased by 12.8% to
$20.463 million from $18.148 million during the third quarter of 2006.
Property NOI for the year-to-date period ended September 30, 2007 was
$62.045 million, representing an 11.7% increase over the estimated
year-to-date property NOI figure of $55.570 million for 2006.
    Net income for the quarter was $2.0 million ($0.10 per unit) compared to
$2.7 million ($0.13 per unit) for the quarter ended September 30, 2006. Net
income for the year-to-date period ended September 30, 2007 was $6.6 million
($0.31 per unit) compared to $8.8 million ($0.41 per unit) for the estimated
year-to-date period of 2006.
    As previously announced, on October 15, 2007, Crombie completed the
acquisition of a property in LaSalle, Ontario. The LaSalle site is a grocery
anchored neighbourhood retail centre of approximately 87,700 square feet and
was purchased for $12.7 million.
    Commenting on the third quarter and year-to-date results, J. Stuart
Blair, President and Chief Executive Officer stated: "While the anticipated
seasonal nature of our repair and maintenance expenditures, as well as capital
expenditures, reduced our distributable income and AFFO from the prior
quarter, I am pleased by our same-asset growth and the contribution of our
seven acquisitions completed to September 30, 2007. Crombie anticipates that
by the end of 2007, the full year payout ratio will approximate the
anticipated annual payout ratios."

    
    2007 Third Quarter Highlights

    - Same-asset net operating income (NOI) of $18.639 million increased by
      $0.491 million, or 2.7%, compared to $18.148 million for the same
      quarter in the prior year due to increased average rent per square foot
      ($11.70 in 2007 versus $11.33 in 2006).

    - Overall occupancy at September 30, 2007 decreased slightly to 93.5%
      when compared to 93.8% at June 30, 2007.

    - Property revenue for the quarter ended September 30, 2007 increased by
      $4.418 million, or 14.2%, to $35.619 million compared to
      $31.201 million for the third quarter in the prior year. The
      improvement was due primarily to increased same-asset property results
      and property acquisitions.

    - Net income decreased by $0.690 million or 25.2%, to $2.046 million for
      the third quarter of 2007, compared to $2.736 million for the third
      quarter in the previous year primarily due to increases in general and
      administration expenses of $0.231 million, interest expense of
      $1.338 million, depreciation and amortization expense of $1.819 million
      and future income tax expense of $0.268 million, which was partially
      offset by increased property NOI of $2.315 million. The increases in
      interest and depreciation expenses are related to the property
      acquisitions completed since September 30, 2006.

    - The distributable income payout ratio was 83.9%, 3.9% above the
      anticipated annual payout ratio of 80% due the seasonal nature of
      repair and maintenance expenditures.

    - The AFFO payout ratio was 141.3% which was above the anticipated annual
      AFFO payout ratio of 100%. This quarterly fluctuation was anticipated
      due to the seasonal nature of the capital expenditures.

    - Debt to gross book value increased to 48.1% at September 30, 2007 from
      47.2% at June 30, 2007. This is still well below management's intended
      leverage ratio of 50% to 55% and provides acquisition capacity of
      approximately $140 million.

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

    -------------------------------------------------------------------------
                                   Three       Three        Nine        Nine
                                  months      months      months      months
    (In millions of dollars,       ended       ended       ended       ended
    except where otherwise      Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30,
    noted)                          2007        2006        2007        2006
    -------------------------------------------------------------------------
    Property revenue          $   35.619  $   31.201  $  106.547  $   95.689
    Property expenses             15.156      13.053      44.502      40.119
    -------------------------------------------------------------------------
    Property NOI                  20.463      18.148      62.045      55.570
    -------------------------------------------------------------------------
    NOI margin percentage           57.4%       58.2%       58.2%       58.1%
    -------------------------------------------------------------------------
    Expenses:
      General and administrative   1.843       1.612       5.685       4.759
      Interest                     6.503       5.165      18.608      15.739
      Depreciation and
       amortization                7.454       5.635      21.002      16.666
    -------------------------------------------------------------------------
                                  15.800      12.412      45.295      37.164
    -------------------------------------------------------------------------
    Income before income taxes
     and non-controlling
     interest                      4.663       5.736      16.750      18.406
    -------------------------------------------------------------------------
    Income taxes
      Current                          -           -           -       0.081
      Future                       0.718       0.450       4.024       1.260
    -------------------------------------------------------------------------
                                   0.718       0.450       4.024       1.341
    -------------------------------------------------------------------------
    Income before non-
     controlling interest          3.945       5.286      12.726      17.065
    Non-controlling interest       1.899       2.550       6.125       8.312
    -------------------------------------------------------------------------
    Net income                $    2.046  $    2.736  $    6.601  $    8.753
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic & diluted net
     income per unit          $     0.10  $     0.13  $     0.31  $     0.41
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Property NOI

    Third quarter and year-to-date property NOI for 2007 increased to
$20.463 million (12.8%) and $62.045 million (11.7%) respectively from the same
periods in 2006 due to improved same property results and the seven property
acquisitions since September 30, 2006.

    Same-Asset Property Net Operating Income

    -------------------------------------------------------------------------
                                   Three       Three        Nine        Nine
                                  Months      Months      Months      Months
                                   ended       ended       ended       ended
                                Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30,
    (In millions of dollars)        2007        2006        2007        2006
    -------------------------------------------------------------------------
    Same-asset property
     revenue                  $   33.023  $   31.201  $  100.114  $   95.689
    Same-asset property
     expenses                     14.384      13.053      42.547      40.119
    -------------------------------------------------------------------------
    Same-asset property NOI   $   18.639  $   18.148  $   57.567  $   55.570
    -------------------------------------------------------------------------

    Same-asset property revenue of $33.023 million for the quarter ended
September 30, 2007 and year-to-date 2007 of $100.114 million was 5.8% higher
than the same quarter in the previous year and 4.6% higher than the estimated
year-to-date period in 2006 due primarily to the increased average rent per
square foot ($11.70 in 2007 and $11.33 in 2006).
    Same-asset property expenses of $14.384 million in the third quarter of
2007 and $42.547 million for year-to-date 2007 were 10.2% higher than the
$13.053 million for the third quarter of 2006 and 6.1% higher than the
$40.119 million for the estimated year-to-date period in 2006 due to increased
recoverable common area expenses primarily from increased property tax
expenses and the seasonal nature of non-recoverable landlord repairs and
maintenance expenditures.
    Same-asset NOI for the third quarter of 2007 grew by 2.7% over the same
period in 2006 while 2007 year-to-date same-asset NOI grew by 3.6% over the
estimated year-to-date period in 2006.

    Acquisition Property Net Operating Income

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

                                   Three       Three        Nine        Nine
                                  Months      Months      Months      Months
                                   ended       ended       ended       ended
                                Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30,
     (In millions of dollars)       2007        2006        2007        2006
    -------------------------------------------------------------------------
    Acquisition property
     revenue                  $    2.596  $        -  $    6.433  $        -
    Acquisition property
     expense                       0.772           -       1.955           -
    -------------------------------------------------------------------------
    Acquisition property NOI  $    1.824  $        -  $    4.478  $        -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    General and Administrative Expenses

    General and administrative expenses increased by 14.3% during the third
quarter of 2007 to $1.843 million and 19.4% year-to-date to $5.685 million
from the same periods in the prior year due to professional fees and other
public entity compliance costs.

    Interest

    -------------------------------------------------------------------------
                                   Three       Three        Nine        Nine
                                  Months      Months      Months      Months
                                   ended       ended       ended       ended
                                Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30,
    (In millions of dollars)        2007        2006        2007        2006
    -------------------------------------------------------------------------
    Same-asset interest
     expense                  $    5.158  $    5.165  $   15.532  $   15.739
    Acquisition interest
     expense                       1.345           -       3.076           -
    -------------------------------------------------------------------------
    Interest expense          $    6.503  $    5.165  $   18.608  $   15.739
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other Performance Measures

                                                                      Period
                                   Three       Three        Nine        from
                                  months      months      months    March 23,
    (In millions of dollars,       ended       ended       ended     2006 to
    except where otherwise      Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30,
    noted)                          2007        2006        2007        2006
    -------------------------------------------------------------------------
    Distributable income      $   10.567  $   10.880  $   33.825  $   23.474
    FFO                       $   12.117  $   11.293  $   37.752  $   24.539
    AFFO                      $    6.276  $    6.662  $   27.281  $   17.650
    Distributions             $    8.867  $    8.338  $   26.116  $   17.463
    DI Payout Ratio                 83.9%       76.6%       77.2%       74.4%
    AFFO Payout Ratio              141.3%      125.2%       95.7%       98.9%
    -------------------------------------------------------------------------
                                Sept. 30,    Jun. 30,    Mar. 31,    Dec. 31,
                                    2007        2007        2007        2006
                               ----------------------------------------------
    Debt to Gross Book Value        48.1%       47.2%       47.0%       44.8%
    -------------------------------------------------------------------------

    The distributable income payout ratio of 83.9% (year-to-date 77.2%) is
slightly above the anticipated annual payout ratio of 80% while the AFFO
payout ratio of 141.3% (year-to-date 95.7%) is above the anticipated annual
payout ratio of 100%. This quarterly fluctuation was anticipated due to the
seasonal nature of repair and maintenance as well as capital expenditures.
Crombie anticipates that by the end of 2007 the full year payout ratios will
approximate the anticipated annual payout ratios.

    Definition of Non-GAAP Measures

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

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

    About Crombie

    Crombie is an open-ended real estate investment trust established under,
and governed by, the laws of the Province of Ontario. The trust invests in
income-producing retail, office and mixed-use properties in Canada, with a
future growth strategy focused primarily on the acquisition of retail
properties. Crombie currently owns a portfolio of 52 commercial properties in
six provinces, comprising approximately 7.9 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 annual Management
Discussion and Analysis under "Risk Management" on pages 34 to 38 of the
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) anticipated distributions and payout ratios, which could be impacted
by seasonality of capital expenditures, results of operations and capital
resource allocation decisions.

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

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

    Conference Call Invitation

    Crombie will provide additional details concerning its third quarter
results on a conference call to be held Friday, November 9, 2007, at 2:00 p.m.
ADT. To join this conference call you may dial (416) 644-3421 or (800)
732-1073. 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 November 16, 2007, by dialling (416) 640-1917 or
(877) 289-8525 and entering pass code 21250358#, or on the Crombie website for
90 days after the meeting.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
                  Interim Consolidated Financial Statements
                                 (Unaudited)
                             September 30, 2007

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

                                                   September 30, December 31,
                                                           2007         2006
                                                  ---------------------------
                                                     (unaudited)    (audited)
    Assets
      Commercial properties (Note 5)               $    896,275  $   836,913
      Intangible assets (Note 6)                         60,978       63,021
      Notes receivable (Note 7)                          25,109       41,459
      Other assets (Note 8)                              24,975       21,362
      Cash and cash equivalents                               -        1,180
                                                  ---------------------------
                                                   $  1,007,337  $   963,935
                                                  ---------------------------
                                                  ---------------------------

    Liabilities and Unitholders' Equity
      Commercial property debt (Note 9)            $    493,232  $   432,963
      Payables and accruals (Note 10)                    32,616       37,432
      Intangible liabilities (Note 11)                   17,694       17,681
      Employee future benefits obligation                 4,410        4,064
      Distributions payable                               2,956        2,781
      Future income tax liability (Note 15)              84,495       80,471
                                                  ---------------------------
                                                        635,403      575,392

    Non-controlling interest (Note 12)                  179,457      187,649

    Unitholders' equity                                 192,477      200,894
                                                  ---------------------------
                                                   $  1,007,337   $  963,935
                                                  ---------------------------
                                                  ---------------------------
    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)
    -------------------------------------------------------------------------
                                                                      Period
                                   Three       Three        Nine        from
                                  Months      Months      Months    March 23,
                                   Ended       Ended       Ended     2006 to
                               September   September   September   September
                                30, 2007    30, 2006    30, 2007    30, 2006
                              -----------------------------------------------
    Revenues

    Property revenue
     (Note 14)                $   35,619  $   31,201  $  106,547  $   66,232
                              -----------------------------------------------
    Expenses
      Property expenses           15,156      13,053      44,502      27,123
      General and
       administrative
       expenses                    1,843       1,612       5,685       3,445
      Interest expense             6,503       5,165      18,608      10,969
      Depreciation of
       commercial properties       3,115       2,772       9,153       5,811
      Amortization of tenant
       improvements/
       lease costs                   822           -       1,843           -
      Amortization of deferred
       financing costs                 -          78           -         156
      Amortization of
       intangible assets           3,517       2,785      10,006       5,839
                              -----------------------------------------------
                                  30,956      25,465      89,797      53,343
                              -----------------------------------------------
                              -----------------------------------------------
    Income before income taxes
     and non-controlling
     interest                      4,663       5,736      16,750      12,889
    Income tax expense
      Future (Note 15)               718         450       4,024         900
                              -----------------------------------------------
    Income before
     non-controlling interest      3,945       5,286      12,726      11,989
    Non-controlling interest       1,899       2,550       6,125       5,801
                              -----------------------------------------------
    Net income                $    2,046  $    2,736  $    6,601  $    6,188
                              -----------------------------------------------
                              -----------------------------------------------
    Basic and diluted net
     income per unit          $     0.10  $     0.13  $     0.31  $     0.29
                              -----------------------------------------------
                              -----------------------------------------------
    Weighted average number
     of units outstanding
      Basic                   21,543,940  21,509,485  21,532,299  21,413,461
                              -----------------------------------------------
                              -----------------------------------------------
      Diluted                 21,648,985  21,552,525  21,645,175  21,434,084
                              -----------------------------------------------
                              -----------------------------------------------


               Consolidated Statements of Comprehensive Income
                          (In thousands of dollars)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                                      Period
                                   Three       Three        Nine        from
                                  Months      Months      Months    March 23,
                                   Ended       Ended       Ended     2006 to
                               September   September   September   September
                                30, 2007    30, 2006    30, 2007    30, 2006
                              -----------------------------------------------

    Net income                $    2,046  $    2,736  $    6,601  $    6,188
    Net change in
     derivatives designated
     as cash flow hedges          (1,321)          -      (1,722)          -
                              -----------------------------------------------

    Other comprehensive income    (1,321)          -      (1,722)          -
                              -----------------------------------------------
    Comprehensive income      $      725  $    2,736  $    4,879  $    6,188
                              -----------------------------------------------
                              -----------------------------------------------

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

    Unitholders'
     equity,
     December
     31,
     2006     $204,831  $  9,405  $       27  $    Nil  $  (13,369) $200,894
    Transition
     adjustment
     as of
     January 1,
     2007
     (Note 3)        -         -           -      (162)          -      (162)
    Units
     released
     under
     EUPP           52         -         (52)        -           -         -
    Units
     issued
     under
     EUPP          215         -           -         -           -       215
    Loans
     receivable
     under
     EUPP         (215)        -           -         -           -      (215)
    EUPP
     compensation    -         -          28         -           -        28
    Repayment
     of EUPP
     loans
     receivable    384         -           -         -           -       384
    Net income       -     6,601           -         -           -     6,601
    Distributions    -         -           -         -     (13,546)  (13,546)
    Other
     comprehensive
     income          -         -           -    (1,722)          -    (1,722)
              ---------------------------------------------------------------
    Unitholders'
     equity,
     September
     30,
     2007     $205,267  $ 16,006  $        3  $ (1,884) $  (26,915) $192,477
              ---------------------------------------------------------------
              ---------------------------------------------------------------

    Unitholders'
     equity,
     March
     23,
     2006         $Nil  $    Nil  $      Nil  $    Nil  $      Nil  $    Nil
    Unit
     issue
     proceeds,
     net of
     costs of
     $10,224   204,871         -           -         -           -   204,871
    Units
     issued
     under
     EUPP        1,261         -           -         -           -     1,261
    Loans
     receivable
     under
     EUPP       (1,261)        -           -         -           -    (1,261)
    Net
     income          -     6,188           -         -           -     6,188
    Distributions    -         -           -         -      (9,040)   (9,040)
              ---------------------------------------------------------------
    Unitholders'
     equity,
     September
     30,
     2006     $204,871  $  6,188  $      Nil  $    Nil  $   (9,040) $202,019
              ---------------------------------------------------------------
              ---------------------------------------------------------------

    See accompanying notes to the interim consolidated financial statements.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
                    Consolidated Statements of Cash Flows
                          (In thousands of dollars)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                                      Period
                                   Three       Three        Nine        from
                                  Months      Months      Months    March 23,
                                   Ended       Ended       Ended     2006 to
                               September   September   September   September
                                30, 2007    30, 2006    30, 2007    30, 2006
                              -----------------------------------------------
    Cash flows provided by
    (used in)

    Operating Activities

    Net income                $    2,046  $    2,736  $    6,601  $    6,188
    Items not affecting cash
      Non-controlling interest     1,899       2,550       6,125       5,801
      Depreciation of
       commercial properties       3,115       2,772       9,153       5,811
      Amortization of tenant
       improvements/
       lease costs                   822           -       1,843           -
      Amortization of deferred
       financing costs               105          78         305         156
      Amortization of
       intangible assets           3,517       2,785      10,006       5,839
      Amortization of above
       market leases                 751         664       2,200       1,393
      Amortization of below
       market leases              (1,134)       (922)     (3,233)     (1,934)
      Accrued rental revenue        (345)       (155)     (1,051)       (524)
      Unit based compensation         10           -          28           -
      Future income taxes            718         450       4,024         900
                              -----------------------------------------------
                                  11,504      10,958      36,001      23,630

    Additions to tenant
     improvements and lease
     costs                        (6,104)     (4,385)     (9,013)     (5,789)
    Change in other non-cash
     operating items (Note 16)     4,758      (4,122)    (12,242)      5,439
                              -----------------------------------------------
    Cash provided by operating
     activities                   10,158       2,451      14,746      23,280
                              -----------------------------------------------
    Financing Activities
    Issue of commercial
     property debt                21,704           -      77,645      82,900
    Issue costs of commercial
     property debt                   (34)          -        (419)          -
    Repayment of commercial
     property debt                (9,252)     (4,579)    (30,525)    (16,500)
    Collection of notes
     receivable                    3,344      15,019      16,350      16,034
    Units issued on initial
     public offering                   -           -           -     215,095
    Unit issue costs                   -           -           -     (19,668)
    Repayment of EUPP loan
     receivable                        8           -         384           -
    Payment of distributions      (8,867)     (8,338)    (25,941)    (17,463)
                              -----------------------------------------------
    Cash provided (used) by
     financing activities          6,903       2,102      37,494     260,398
                              -----------------------------------------------
    Investing Activities
    Business acquisition
     (Note 4)                          -           -           -    (263,542)
    Additions to commercial
     properties                   (5,764)    (12,467)    (11,265)    (20,136)
    Acquisition of commercial
     properties (Note 5)         (11,938)          -     (42,155)          -
                              -----------------------------------------------
    Cash used in investing
     activities                  (17,702)    (12,467)    (53,420)   (283,678)
                              -----------------------------------------------

    Decrease in cash and cash
     equivalents during the
     period                         (641)     (7,914)     (1,180)        Nil

    Cash and cash equivalents,
     beginning of period             641       7,914       1,180         Nil
                              -----------------------------------------------

    Cash and cash equivalents,
     end of period            $      Nil  $      Nil  $      Nil  $      Nil
                              -----------------------------------------------
                              -----------------------------------------------

    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)
                             September 30, 2007
    -------------------------------------------------------------------------

    1) CROMBIE REAL ESTATE INVESTMENT TRUST

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

    2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    (a) Basis of presentation

    These 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
included 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 period ended December 31,
2006, as set out in the 2006 Annual Report.
    The accounting policies used in preparation of these interim consolidated
financial statements conform with those used in the 2006 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.

    (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 will be 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 and for those
differences in unincorporated entities which will reverse after December 31,
2010. 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. Initial adoption of
new legislation relating to differences in unincorporated entities has been
recorded as a charge to future income tax expense in the second quarter of
fiscal 2007.

    (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 third quarter and year to date fiscal 2007, the net defined
benefit pension plans and other benefit plans expense was $115 and $346
respectively (2006 $141 and $212).

    (f) Use of estimates

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

    3) CHANGES IN ACCOUNTING POLICIES

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

    The new standards and accounting policy changes are as follows:

    Financial Instruments - Recognition and Measurement (Section 3855)

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

    Comprehensive Income (Section 1530)

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

    Hedges (Section 3865)

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

    In accordance with the provisions of these new standards, on January 1,
2007 Crombie recorded:

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

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

    Transaction costs

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

    Cash Flow Statements (Section 1540)

    Amendments to CICA Section 1540, Cash Flow Statements, require entities to
disclose total cash distributions on financial instruments classified as
equity in accordance with a contractual agreement and the extent to which
total cash distributions are non-discretionary. This disclosure requirement is
effective for interim and annual financial statements for fiscal periods
ending on or after March 31, 2007. The determination to declare and make
payable distributions from Crombie are at the discretion of the Board of
Trustees of Crombie and, until declared payable by the Board of Trustees of
Crombie, Crombie has no contractual requirement to pay cash distributions to
Unitholders' of Crombie. During the nine month period ended September 30,
2007, $25,941 (period March 23, 2006 to September 30, 2006 - $17,463) in cash
distributions were declared payable by the Board of Trustees to Crombie
Unitholders and Crombie Limited Partnership Unitholders (the "Class B LP
Units").

    4)  BUSINESS ACQUISITION

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


    Commercial property acquired, net:
    -------------------------------------------------------------------------
    Tangible assets                                              $   772,040
    Net intangible assets                                             46,577
    Other assets, net of liabilities                                   1,181
    Notes receivable                                                  62,682
    Future income tax liability                                      (81,234)
    -------------------------------------------------------------------------
    Net purchase price                                               801,246
    Assumed mortgages (marked to market)                            (333,644)
    -------------------------------------------------------------------------
                                                                    $467,602
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Consideration paid, funded by:
    -------------------------------------------------------------------------
    Class B LP Units (non-controlling interest)                     $200,795
    Cash                                                             263,542
    Land transfer costs and additional financing costs                 3,265
    -------------------------------------------------------------------------
                                                                 $   467,602
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    5) COMMERCIAL PROPERTIES

                                                 September 30, 2007
                                       --------------------------------------
                                                    Accumulated
                                                          Depre-         Net
                                              Cost      ciation   Book Value
                                       --------------------------------------
    Land                               $   179,290  $       Nil  $   179,290
    Buildings                              720,728       17,773      702,955
    Tenant improvements and
     leasing costs                          16,314        2,284       14,030
                                       --------------------------------------
                                       $   916,332  $    20,057  $   896,275
                                       --------------------------------------
                                       --------------------------------------

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

    Property Acquisitions

    On January 17, 2007, Crombie acquired a property in Carleton Place,
Ontario, representing a 79,700 square foot increase to the portfolio, for
$11,800 plus additional closing costs, from an unrelated third party. The
acquisition was initially financed through Crombie's floating rate revolving
credit facility. On April 27, 2007, a mortgage of $7,850 at a fixed rate of
5.18% and a term of twelve years was established for the property.
    On March 7, 2007, Crombie acquired a property in Perth, Ontario
representing a 102,500 square foot increase to the portfolio, for $17,900 plus
additional closing costs, from an unrelated third party. The acquisition was
initially financed through Crombie's floating rate revolving credit facility.
On April 20, 2007, a mortgage of $12,600 at a fixed rate of 5.43% and a term
of fifteen years was established for the property.
    On July 26, 2007, Crombie acquired a property in Fort Erie, Ontario
representing a 92,500 square foot increase to the portfolio, for $19,200 plus
additional closing costs, from an unrelated third party. The acquisition was
financed through an assumption of an existing mortgage of $11,400 at a fixed
rate of 5.36% and a term of eight years with the balance of the purchase price
paid in cash using funds from the revolving credit facility.
    On August 24, 2007, Crombie acquired a property in Brossard, Quebec
representing a 38,800 square foot increase to the portfolio, for $7,300 plus
additional closing costs, from an unrelated third party. The acquisition was
financed through an assumption of an existing mortgage of $3,400 at a fixed
rate of 6.44% and a term of 17 years with the balance of the purchase price
paid in cash using funds from the revolving credit facility.

    The preliminary allocation of the total cost of the acquisitions is as
follows. The final allocation will be determined in the fourth quarter.

                                                          Three         Nine
                                                         Months       Months
                                                          Ended        Ended
                                                       Sept. 30,    Sept. 30,
    Commercial property acquired, net:                     2007         2007
    -------------------------------------------------------------------------
    Land                                           $      5,994  $    11,175
    Buildings                                            18,575       38,905
    Intangible assets:
      Lease origination costs                             1,133        2,118
      Tenant relationships                                1,174        3,418
      Above market leases                                     -          855
      In-place leases                                     1,589        3,771
    Intangible liabilities
      Below market leases                                (1,686)      (3,246)
    -------------------------------------------------------------------------
    Net purchase price                                   26,779       56,996
    Assumed mortgages                                   (14,841)     (14,841)
    -------------------------------------------------------------------------
                                                   $     11,938  $    42,155
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration paid, funded by:
    -------------------------------------------------------------------------
    Floating rate revolving credit facility        $      8,938  $    17,955
    Mortgage financing                                        -       20,450
    Application of deposit                                3,000        3,750
    -------------------------------------------------------------------------
                                                   $     11,938  $    42,155
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    6) INTANGIBLE ASSETS

                                                 September 30, 2007
                                       --------------------------------------
                                                    Accumulated
                                                         Amorti-         Net
                                              Cost       zation   Book Value
                                       --------------------------------------
    Origination costs for
     existing leases                   $    13,000  $     4,593  $     8,407
    In-place leases                         20,704        7,983       12,721
    Tenant relationships                    34,557        6,176       28,381
    Above market existing leases            15,760        4,291       11,469
                                       --------------------------------------
                                       $    84,021  $    23,043  $    60,978
                                       --------------------------------------
                                       --------------------------------------

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


    7) NOTES RECEIVABLE

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

    The balance of each note is as follows:

                                                      September     December
                                                       30, 2007     31, 2006
                                                    -------------------------

    Capital expenditure program                     $     7,566  $    21,224
    Tax on property transfer                              2,518        2,518
    Interest rate subsidy                                15,025       17,717
                                                    -------------------------
                                                    $    25,109  $    41,459
                                                    -------------------------
                                                    -------------------------

    8)  OTHER ASSETS

                                                      September     December
                                                       30, 2007     31, 2006
                                                    -------------------------
    Accounts receivable                             $     7,025  $     7,438
    Deposit on property                                     400          750
    Accrued straight-line rent receivable                 5,700        4,649
    Prepaid expenses                                     11,252        6,270
    Deferred financing charges                                -        1,578
    Restricted cash                                         598          677
                                                    -------------------------
                                                    $    24,975  $    21,362
                                                    -------------------------
                                                    -------------------------

    9) COMMERCIAL PROPERTY DEBT

                                            Weighted    Weighted    Carrying
                                             average     average      Amount
                                            interest     term to   September
                                   Range        rate    maturity    30, 2007
                              -----------------------------------------------
    Fixed rate mortgages       5.15-6.44%       5.48%  7.7 years  $  380,420
    Deferred financing charges                                        (1,692)
    Floating rate revolving
     credit facility                5.79%       5.79%  2.8 years     114,504
                                                                   ----------
                                                                  $  493,232
                                                                   ----------
                                                                   ----------

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

    As of September 30, 2007, debt retirements for the next 5 years are:

                                            Floating   Financing
                              Fixed Rate        Rate       Costs       Total
                              -----------------------------------------------
    2008                      $   27,162  $      Nil  $      Nil  $   27,162
    2009                          12,666           -           -      12,666
    2010                          68,283     114,504           -     182,787
    2011                          18,605           -           -      18,605
    2012                          10,974           -           -      10,974
    Thereafter                   227,705           -           -     227,705
                              -----------------------------------------------
                                 365,395     114,504           -     479,899
    Deferred financing charges         -           -      (1,692)     (1,692)
    Fair value debt adjustment    15,025           -           -      15,025
                              -----------------------------------------------
                              $  380,420  $  114,504  $   (1,692) $  493,232
                              -----------------------------------------------
                              -----------------------------------------------

    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 September 30,
2007, based on the security granted by Crombie, approximately $138,148 is
available for draw down, of which $114,504 is drawn down on the facility.
    During the second quarter of 2007, the maturity date of the floating rate
revolving credit facility was extended to June 30, 2010.
    Crombie has entered into a fixed interest rate swap agreement which
expires on July 2, 2010 for a portion of the revolving credit facility.
Interest on $50,000 is paid at a fixed rate of 5.54% and is received at a
floating rate based on the 90-day bankers' acceptance rate, resulting in an
overall 5.62% current interest rate.
    On April 23, 2007, Crombie completed the refinancing of an existing
mortgage on the Burlington, Ontario property. The new fixed rate mortgage of
$9,925 provided funds of $3,573 (net of fees and the payment of the existing
mortgage). The interest rate was reduced from 6.39% to 5.32% and the term was
extended to twelve years.
    On September 7, 2007, Crombie completed the refinancing of an existing
mortgage on the Niagara Plaza, Ontario property. The new fixed rate mortgage
of $8,100 provided funds of $2,886 (net of fees and the payment of the
existing mortgage). The interest rate on the new mortgage is 5.65% and has a
twenty year term.

    10) PAYABLES AND ACCRUALS

                                                      September     December
                                                       30, 2007     31, 2006
                                                   --------------------------
    Tenant improvements and capital expenditures   $      7,189  $     7,134
    Property operating costs                             20,087       28,845
    Interest on commercial property debt                  1,711        1,453
    Interest rate swap agreements                         3,629            -
                                                   --------------------------
                                                   $     32,616  $    37,432
                                                   --------------------------
                                                   --------------------------

    11)  INTANGIBLE LIABILITIES

                                                 September 30, 2007
                                       --------------------------------------
                                                    Accumulated
                                                         Amorti-         Net
                                              Cost       zation   Book Value
                                       --------------------------------------
    Below market existing leases       $    23,823  $     6,129  $    17,694
                                       --------------------------------------
                                       --------------------------------------

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


    12) NON-CONTROLLING INTEREST

                                                Accumu-
                                                 lated
                                                 Other
                                      Contri-   Compre-
               Class B       Net       buted   hensive      Distri-
              LP Units    Income     Surplus    Income     butions     Total
              ---------------------------------------------------------------
    Non-
     controlling
     interest,
     December
     31,
     2006     $191,302  $  8,787  $      Nil  $    Nil  $  (12,440) $187,649
    Transition
     adjustment
     as of
     January 1,
     2007
     (Note 3)        -         -           -      (148)          -      (148)
    Net income       -     6,125           -         -                 6,125
    Distributions    -         -           -         -     (12,570)  (12,570)
    Other
     comprehensive
     income          -         -           -    (1,599)          -    (1,599)
              ---------------------------------------------------------------
              ---------------------------------------------------------------
    Non-
     controlling
     interest,
     September
     30,
     2007     $191,302  $ 14,912  $      Nil  $ (1,747) $  (25,010) $179,457
              ---------------------------------------------------------------
              ---------------------------------------------------------------


                                                Accumu-
                                                 lated
                                                 Other
                                      Contri-   Compre
               Class B       Net       buted   hensive      Distri-
              LP Units    Income     Surplus    Income     butions     Total
              ---------------------------------------------------------------
    Non-
     controlling
     interest,
     March 23,
     2006     $    Nil  $    Nil  $      Nil  $    Nil  $      Nil  $    Nil
    Unit issue
     proceeds,
     net of
     costs of
     $9,444    191,351         -           -         -           -   191,351
    Net income       -     5,801           -         -           -     5,801
    Distributions    -         -           -         -      (8,423)   (8,423)
              ---------------------------------------------------------------
              ---------------------------------------------------------------
    Non-
     controlling
     interest,
     September
     30,
     2006     $191,351  $  5,801  $      Nil  $    Nil  $   (8,423) $188,729
              ---------------------------------------------------------------
              ---------------------------------------------------------------


    13) UNITS OUTSTANDING

                                      Crombie REIT
                                   Special Voting Units
               Crombie REIT Units  and Class B LP Units          Total
               ------------------  --------------------    ------------------
                Number                Number                Number
              of Units    Amount    of Units    Amount    of Units    Amount
            -----------------------------------------------------------------
    Balance,
     December
     31,
     2006   21,633,225  $204,831  20,079,576  $191,302  41,712,801  $396,133
    Units
     issued
     under
     EUPP       15,760       215           -         -      15,760       215
    Units
     released
     under
     EUPP            -        52           -         -           -        52
    Net
     change
     in EUPP
     loans
     receivable      -       169           -         -           -       169
            -----------------------------------------------------------------
    Balance,
     September
     30,
     2007   21,648,985  $205,267  20,079,576  $191,302  41,728,561  $396,569
            -----------------------------------------------------------------
            -----------------------------------------------------------------

                                       Crombie REIT
                                   Special Voting Units
               Crombie REIT Units  and Class B LP Units          Total
               ------------------  --------------------    ------------------
                Number                Number                Number
              of Units    Amount    of Units    Amount    of Units    Amount
            -----------------------------------------------------------------
    Balance,
     March 23,
     2006            -  $    Nil           -  $    Nil           -  $    Nil
    Capital
     contri-
     bution 21,509,485   215,095  20,079,576   200,795  41,589,061   415,890
    Costs of
     issuance        -   (10,224)          -    (9,444)          -   (19,668)
            -----------------------------------------------------------------
    Net Unit
     issue
     proceeds        -   204,871           -   191,351           -   396,222
    Units
     issued
     under
     EUPP      123,740     1,261           -         -     123,740     1,261
    Loans
     receivable
     EUPP            -    (1,261)          -         -           -    (1,261)
            -----------------------------------------------------------------
    Balance,
     September
     30,
     2006   21,633,225  $204,871  20,079,576  $191,351  41,712,801  $396,222
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    Crombie REIT Units

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

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

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

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

    Crombie REIT Special Voting Units and Class B LP Units

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

    Employee Unit Purchase Plan ("EUPP")

    Crombie provides for unit purchase entitlements under the EUPP for certain
senior executives. Awards made under the EUPP will allow executives to
purchase units from treasury at the average daily high and low board lot
trading prices per unit on the Toronto Stock Exchange for the five trading
days preceding the issuance. Executives are provided non-recourse loans at 3%
annual interest by Crombie for the purpose of acquiring Units from treasury
and the Units purchased are held as collateral for the loan. The loan is
repaid through the application of the after-tax amounts of all distributions
received on the Units, as well as the after-tax portion of any Long-Term
Incentive Plan ("LTIP") cash awards received, as payments on interest and
principal. As at September 30, 2007, there are loans receivable from
executives of $1,093 under Crombie's EUPP, representing 105,045 Units, which
are classified as a reduction of Unitholders' Equity. Loan repayments will
result in a corresponding increase in Unit Capital. Market value of the Units
at September 28, 2007 was $1,324
    The compensation expense related to the EUPP during the three months ended
and nine months ended September 30, 2007 was $10 and $28 respectively (three
months ended September 30, 2006 - $Nil and the period from March 23, 2006 to
September 30, 2006 - $Nil).

    Earnings per Unit Computations

    Basic net earnings per Unit is computed by dividing net earnings by the
weighted average number of Units outstanding during the period. Diluted
earnings per Unit is calculated on the assumption that all EUPP loans were
repaid at the beginning of the period. For all periods, the assumed exchange
of all Class B LP Units would not be dilutive. As at September 30, 2007, there
are no other dilutive items.

    14) PROPERTY REVENUE
                                                                      Period
                                   Three       Three        Nine        from
                                  Months      Months      Months       March
                                   Ended       Ended       Ended    23, 2006
                                    Sept.       Sept.       Sept.    to Sept.
                                30, 2007    30, 2006    30, 2007    30, 2006
                              -----------------------------------------------
    Rental revenue
     contractually due
     from tenants             $   34,891  $   30,788  $  104,463   $  65,167
    Straight-line rent
     recognition                     345         155       1,051         524
    Below market lease
     amortization                  1,134         922       3,233       1,934
    Above market lease
     amortization                   (751)       (664)     (2,200)     (1,393)
                              -----------------------------------------------
                              $   35,619  $   31,201  $  106,547   $  66,232
                              -----------------------------------------------
                              -----------------------------------------------


    15) FUTURE INCOME TAXES

    On June 22, 2007, Bill C-52, the Budget Implementation Act ("Bill C-52")
received Royal Assent. Bill C-52 now imposes guidelines relating to the
federal income taxation of publicly-traded income trusts, or flow-through
entities ("FTE"), whose distributions will be subject to corporate tax rates
beginning in 2011. In addition, Bill C-52 outlines the technical tests that
determine which FTE's can qualify as a real estate investment trust ("REIT")
and thus be exempt from taxation on the income portion of their distributions.
    Bill C-52 is not expected to apply to Crombie until 2011 as it provides
for a transition period for publicly traded entities that existed prior to
November 1, 2006. While Crombie intends to qualify for the REIT exemption
prior to 2011, management has determined that Crombie's current multi-tier
corporate structure would prohibit it from currently qualifying for the REIT
exemption. Crombie has reviewed the structural changes that would need to be
made in order to ensure it complies with the REIT technical tests, and
management believes it will be able to deal with this issue in a manner which
would not cause any material adverse consequence to Crombie or its
Unitholders.
    GAAP however does not permit Crombie to consider future changes to its
corporate structure that it may make to qualify for the REIT exemption. Thus
GAAP requires Crombie to recognize future income tax assets and liabilities
based on estimated temporary differences expected at January 1, 2011. The
reversal of all or part of Crombie's future income tax balance related to Bill
C-52 will only be recognized in the financial statements at such time that
Crombie qualifies for the REIT exemption.
    Crombie has recorded a non-cash charge of $350 as a result of new income
tax legislation during the third quarter of fiscal 2007 (year to date $1,850).
The charge will have no impact on cash flow or distributions.

    Tax effected temporary differences between accounting and tax basis
relating to:

                                                      September     December
                                                       30, 2007     31, 2006
                                                   --------------------------
    Assets and liabilities of incorporated
     subsidiaries                                  $     82,645  $    80,471
    Assets and liabilities of unincorporated
     entities                                             1,850            -
                                                   --------------------------
                                                   $     84,495  $    80,471
                                                   --------------------------
                                                   --------------------------

    The future income tax expense consists of the following:

                                                                      Period
                                   Three       Three        Nine        from
                                  Months      Months      Months       March
                                   Ended       Ended       Ended    23, 2006
                                    Sept.       Sept.       Sept.    to Sept.
                                30, 2007    30, 2006    30, 2007    30, 2006
                              -----------------------------------------------
    Provision for income
     taxes at the expected
     rate                     $      368  $      450  $    2,174   $     900
    Tax effect from change
     in tax exempt status
     beginning in 2011               350           -       1,850           -
                              -----------------------------------------------
                              $      718  $      450  $    4,024   $     900
                              -----------------------------------------------
                              -----------------------------------------------


    16) SUPPLEMENTAL CASH FLOW INFORMATION

    (a) Change in other non-cash operating items

                                                                      Period
                                   Three       Three        Nine        from
                                  Months      Months      Months       March
                                   Ended       Ended       Ended    23, 2006
                                    Sept.       Sept.       Sept.    to Sept.
                                30, 2007    30, 2006    30, 2007    30, 2006
                              -----------------------------------------------
    Cash provided by (used in):

      Receivables             $   (1,681) $    2,874  $      413   $  (6,255)

      Prepaid expenses and
       other assets                 (468)     (3,289)     (4,553)     (5,913)

      Payables and other
       liabilities                 6,907      (3,707)     (8,102)     17,607
                              -----------------------------------------------
                              $    4,758  $   (4,122) $  (12,242)  $   5,439
                              -----------------------------------------------
                              -----------------------------------------------

    (b) Interest

                                                                      Period
                                   Three       Three        Nine        from
                                  Months      Months      Months       March
                                   Ended       Ended       Ended    23, 2006
                                    Sept.       Sept.       Sept.    to Sept.
                                30, 2007    30, 2006    30, 2007    30, 2006
                              -----------------------------------------------
    Interest paid             $    7,231  $    6,096  $   20,742   $  12,230
                              -----------------------------------------------
                              -----------------------------------------------


    17) COMMITMENTS AND CONTINGENCIES

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

    18) RELATED PARTY TRANSACTIONS

    As at September 30, 2007, Empire Company Limited, through its wholly-owned
subsidiary ECL, holds a 48.1% indirect interest in Crombie.
    For a period of five years commencing March 23, 2006, certain executive
management individuals and other employees of Crombie will provide general
management, financial, leasing, administrative, and other administration
support services to certain real estate subsidiaries of Empire Company Limited
on a cost recovery basis. The expense recoveries during the three months ended
and nine months ended September 30, 2007 were $464 and $1,178 respectively
(three months ended September 30, 2006 - $609 and the period from March 23,
2006 to September 30, 2006 - $774) and were netted against general and
administrative expenses.
    For a period of five years, certain on-site maintenance and management
employees of Crombie will provide property management services to certain real
estate subsidiaries of Empire Company Limited on a cost recovery basis. In
addition, for various periods, ECL has an obligation to provide rental income,
large federal corporation tax and interest rate subsidies. The cost recoveries
during the three months ended and nine months ended September 30, 2007 were
$576 and $1,774 respectively (three months ended September 30, 2006 - $544 and
the period from March 23, 2006 to September 30, 2006 - $1,215) and were netted
against property expenses. The rental income subsidy during the three months
ended and nine months ended September 30, 2007 was $9 and $25 respectively
(three months ended September 30, 2006 - $189 and the period from March 23,
2006 to September 30, 2006 - $433) and the head lease subsidy during the three
months ended and nine months ended September 30, 2007 was $295 and $810
respectively (three months ended September 30, 2006 - $347 and period from
March 23, 2006 to September 30, 2006 $694).
    Crombie also earned property revenue of $5,664 for the three months ended
September 30, 2007 and $17,710 for nine months ended September 30, 2007 (three
months ended September 30, 2006 - $4,783 and period from March 23, 2006 to
September 30, 2006 - $10,614) from Sobeys Inc., Empire Theatres Limited and
ASC Commercial Leasing Limited. These companies are all subsidiaries of Empire
Company Limited.

    19) FINANCIAL INSTRUMENTS

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

    Credit risk

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

    Interest rate risk

    From time to time, Crombie may enter into interest rate swap transactions
to modify the interest rate profile of its current or future debts without an
exchange of the underlying principal amount.
    As part of this interest rate management program, Crombie has entered into
a fixed interest rate swap to fix the amount of interest to be paid on $50,000
of the revolving credit facility. The remainder of the revolving credit
facility is at variable interest rates. The fair value of the fixed interest
rate swap at September 30, 2007, had a favourable difference of $236 (December
31, 2006 - unfavourable $310) compared to its face value. The change in this
amount has been recognized in other comprehensive income at September 30,
2007.
    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 June 1, 2008 and June 1, 2011,
maturing between June 1, 2018 and July 2, 2021 to mitigate the exposure to
interest rate increases for mortgages maturing between 2008 and 2011. The fair
value of Crombie's delayed interest rate swap agreements had an unfavourable
difference of $3,865 compared to the face value on September 30, 2007. The
change in these amounts has been recognized in other comprehensive income at
September 30, 2007.

    Fair value of financial instruments

    The book value of cash and cash equivalents, restricted cash, receivables,
payables and accruals approximate fair values due to their short term
maturity. The total fair value of commercial property debt is estimated to be
$481,897.

    20) EFFECT OF NEW ACCOUNTING STANDARDS NOT YET IMPLEMENTED

    Financial instruments - Disclosures

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

    Financial instruments - Presentation

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

    Capital disclosures

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

    21) SUBSEQUENT EVENTS

    a) On October 15, 2007, Crombie completed the acquisition of Town Centre
       Plaza in LaSalle, Ontario from an unrelated third party. The purchase
       price of the acquisition was $12,700, which was satisfied by the
       assumption of a fixed rate mortgage of $4,000 carrying an interest
       rate of 6% with an approximate four year term with the balance of the
       purchase price paid using funds from the revolving credit facility.

    b) On October 22, 2007, Crombie declared distributions of 7.083 cents per
       unit for the period from October 1, 2007 to, and including, October
       31, 2007. The distribution will be payable on November 15, 2007 to
       Unitholders of record as at October 31, 2007.

    c) On October 24, 2007, Crombie entered into a term sheet to provide an
       additional $51,000 of financing on the portfolio of office and mixed-
       use properties known as Halifax Developments Properties. The financing
       will have a fixed interest rate of 150 basis points above the Bank of
       Canada bond yield and a maturity date of February 1, 2010.

    22) 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
September 30, 2007, with a comparison to the financial condition and results
of operations for the comparable period in 2006 which was estimated by using
actual results for the quarters ended June 30, 2006 and September 30, 2006 and
pro-rating the nine-day operating period of March 23, 2006 to March 31, 2006.
    This discussion and analysis should be read in conjunction with Crombie's
consolidated financial statements and accompanying notes for the period ended
September 30, 2007, the audited consolidated financial statements and
accompanying notes for the period March 23, 2006 to December 31, 2006 and the
related MD&A as contained on pages 11 to 40 of Crombie's 2006 Annual Report.
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 in the annual
MD&A under "Risk Management" on pages 34 to 38 of the 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 those 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, construction costs and future tax
costs; and

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

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

    NON-GAAP FINANCIAL MEASURES

    There are financial measures included in this MD&A that do not have a
standardized meaning under Canadian generally accepted accounting principles
("GAAP") as prescribed by the Canadian Institute of Chartered Accountants.
These measures are property net operating income ("NOI") (page 10),
distributable income (page 13), adjusted funds from operations ("AFFO") (page
14), debt to gross book value (page 19) and funds from operations ("FFO")
(page 14). 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

    -------------------------------------------------------------------------
                                   Three       Three        Nine        Nine
                                  Months      Months      Months      Months
    (in thousands of dollars,      Ended       Ended       Ended       Ended
     except per unit amounts   September   September   September   September
     and as otherwise noted)    30, 2007    30, 2006    30, 2007  30, 2006(1)
    -------------------------------------------------------------------------
    Property revenue          $   35,619  $   31,201  $  106,547  $   95,689
    Net income                $    2,046  $    2,736  $    6,601  $    8,753
    Basic and diluted net
     income per Unit          $     0.10  $     0.13  $     0.31  $     0.41
    -------------------------------------------------------------------------
                                                                      Period
                                   Three       Three        Nine        from
                                  Months      Months      Months    March 23,
                                   Ended       Ended       Ended     2006 to
                               September   September   September   September
                                30, 2007    30, 2006    30, 2007    30, 2006
    -------------------------------------------------------------------------
    Distributable income      $   10,567  $   10,880  $   33,825  $   23,474
    Distributable income
     per Unit(2)              $     0.25  $     0.26  $     0.81  $     0.57
    Distributable income
     payout ratio (%)               83.9%       76.6%       77.2%       74.4%
    FFO                       $   12,117  $   11,293  $   37,752  $   24,539
    FFO per unit(2)           $     0.29  $     0.27  $     0.91  $     0.59
    AFFO                      $    6,276  $    6,662  $   27,281  $   17,650
    AFFO per unit(2)          $     0.15  $     0.16  $     0.65  $     0.43
    AFFO payout ratio (%)          141.3%      125.2%       95.7%       98.9%
    -------------------------------------------------------------------------
                               September   September
                                30, 2007    30, 2006
    -------------------------------------------------------------------------
    Debt to gross book value        48.1%       43.2%
    Total assets              $1,007,337  $  936,768
    Total commercial
     property debt            $  493,232  $  400,044
    -------------------------------------------------------------------------
    (1) The results for the nine months ended September 30, 2006 were
        estimated by adding the second and third quarters of 2006 with the
        pro-rated results for the nine-day period from March 23, 2006 to
        March 31, 2006 as Crombie began operations on March 23, 2006.

    (2) Distributable income, FFO and AFFO per unit are calculated by
        distributable income, FFO or AFFO, as the case may be, divided by the
        diluted weighted average of the total Units and Special Voting Units
        outstanding of 41,728,561 for the quarter ended September 30, 2007,
        41,632,101 for the quarter ended September 30, 2006, 41,724,751 for
        the nine months ended September 30, 2007 or 41,513,660 for the period
        from March 23, 2006 to September 30, 2006.

    Overview of the Business

    Crombie is an unincorporated, open-ended real estate investment trust
established pursuant to a Declaration of Trust dated January 1, 2006, as
amended and restated (the "Declaration of Trust") under, and governed by, the
laws of the Province of Ontario. The units of Crombie trade on the Toronto
Stock Exchange under the symbol CRR.UN.
    Crombie completed its IPO of 20,485,224 units ("Units") on March 23, 2006
for gross proceeds of $204,852. Concurrent with the initial public offering
("IPO"), Crombie acquired 44 commercial properties in six provinces, totalling
approximately 7,161,000 square feet (the "Business Acquisition") from certain
affiliates of Empire Company Limited ("Empire Subsidiaries").
    Crombie invests in income-producing retail, office and mixed-use
properties in Canada, with a future growth strategy focused primarily on the
acquisition of retail properties. At September 30, 2007, Crombie owned a
portfolio of 51 commercial properties in six provinces, comprising
approximately 7.8 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 distributable income
       through accretive acquisitions.

    Generate reliable and growing cash distributions: The approach that
Crombie has taken in defining distributable income, which management believes
to be conservative, along with Crombie's intention to distribute 80% of its
annual distributable income, helps to ensure that the cash distributions made
are sustainable. Management focuses on improving both the same-asset results
while expanding the asset base with accretive acquisitions to grow the cash
distributions to Unitholders. In just over 18 months of operations, Crombie
has been able to increase its distributions twice for a total increase of
6.25%.

    Enhance value of Crombie's assets: In addition to the four commercial
properties still being redeveloped, for the which the costs will be covered by
the non-interest-bearing demand notes from ECL, Crombie anticipates
reinvesting approximately 20% of its distributable income each year into its
properties to maintain their productive capacity and thus overall value.
    Crombie's internal growth strategy focuses on generating greater rental
income from its existing properties. Crombie plans to achieve this by
strengthening its asset base through judicious expansion and improvement of
existing properties, leasing vacant space at competitive market rates with the
lowest possible transaction costs, and maintaining good relations with
tenants. Management will continue to conduct regular reviews of properties
and, based on its experience and market knowledge, will assess ongoing
opportunities within the portfolio.

    Expand asset base with accretive acquisitions: The three property
acquisitions completed in 2006, combined with the four additional acquisitions
as at September 30, 2007, are anticipated to add approximately four to six
cents per unit in accretive distributable income over their first full years
of operation. While the investment market continues to remain very
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 will seek to
identify potential 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 period ended
December 31, 2006. Through this relationship, Crombie expects to have the
benefits associated with development while limiting its exposure to some
inherent risks, such as real estate market cycles, cost overruns, labour
disputes, construction delays and unpredictable general economic conditions.
The development agreement will also enable Crombie to avoid the uncertainties
associated with property development, including paying the carrying costs of
land, securing construction financing, obtaining development approvals,
managing construction projects, marketing in advance of and during
construction and earning no return during the construction period.
    The development agreement provides Crombie with a preferential right to
acquire retail properties developed by ECL, subject to approval by the
independent trustees. The history of the relationship between Crombie and
Empire Subsidiaries continues to provide promising opportunities for growth
through future development opportunities on both new and existing sites in
Crombie's portfolio.
    This relationship has allowed for the completed and ongoing development of
County Fair Mall in Summerside, Prince Edward Island, Fredericton Mall and
Prospect Street Plaza in Fredericton, New Brunswick, Greenfield Park Centre in
Longueuil, Quebec and Highland Square Mall in New Glasgow, Nova Scotia, along
with providing two of the first seven acquisitions in Brampton and Oshawa,
Ontario.
    ECL currently own approximately one million square feet of development
property that can be offered to Crombie on a preferential right through the
development agreement when the properties are sufficiently developed to meet
Crombie's acquisition criteria. These properties are anticipated to be made
available to Crombie over the next one to three years.
    Crombie is exploring the potential acquisition of some or all of the
commercial real estate portfolio owned by Sobey Leased Properties ("SLP")
which is a wholly-owned subsidiary of Empire Company Limited ("Empire").
Pursuant to a non-competition agreement between Empire and Crombie, any
property sold from SLP must first be offered to Crombie. Any potential
transaction, if deemed appropriate, would be subject to approval by the
independent trustees.

    Business Environment

    During the second and third quarters of 2007, the following two factors
have become a major risk to the interest-rate sensitive REIT business
environment: (1) uncertainty regarding interest rates due to rising inflation
rates, and (2) widening credit spreads, due to higher risk premiums resulting
from investor apprehension of the issues faced in the residential sub-prime
mortgage market in the United States. These trends have impacted both the unit
prices of most REIT's as well as begun to reduce the acquisition prices the
real estate market is willing to pay due to the higher cost of capital.
Crombie has undertaken a number of steps to hedge its exposure to interest
rate risk, which are outlined in the Risk Management section of the MD&A.
    In terms of occupancy rates, in both the retail and office markets where
Crombie has a prominent presence, the business environment continues to be
stable. Retail markets have continued to be steady, supported by low
unemployment and higher wage growth. In Atlantic Canada, sustained consumer
spending rates are attracting a steady stream of retailers which has allowed
the occupancy levels to remain relatively stable. The office sector,
especially in the Halifax region, continues to experience single-digit vacancy
rates. However, there remain concerns regarding the impact that a slowing U.S.
economy may have for consumers in Central and Eastern Canada. One offsetting
factor to these potential concerns is that many of Crombie's retail locations
are anchored by food stores, which typically are less affected by swings in
consumer spending.
    The real estate investment market continues to remain very competitive,
with acquisition prices at high levels due to strong investor demand,
resulting in low yields. However as previously discussed, there now appears to
be signs that yields will begin to modestly increase in light of the widening
credit spread environment. 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 will result from
the relationship between Crombie and the Empire Subsidiaries.

    2007 THIRD QUARTER HIGHLIGHTS

    - Same-asset NOI of $18,639 increased by $491, or 2.7%, compared to
      $18,148 for the same quarter in the prior year due to an increased
      average rent per square foot ($11.70 in 2007 versus $11.33 in 2006) and
      occupancy has remained steady (93.4% in 2007 versus 93.4% in 2006).

    - Overall occupancy at September 30, 2007 decreased slightly to 93.5%
      when compared to 93.8% at June 30, 2007.

    - Property revenue for the quarter ended September 30, 2007 increased by
      $4,418, or 14.2%, to $35,619 compared to $31,201 for the third quarter
      in the prior year. The improvement was due primarily to increased
      same-asset property results and property acquisitions.

    - Net income decreased by $690 or 25.2%, to $2,046 for the third quarter
      of 2007, compared to $2,736 for the third quarter in the previous year
      primarily due to increases in general and administration expenses of
      $231, interest expense of $1,338, depreciation and amortization expense
      of $1,819 and future income tax expense of $268, which was partially
      offset by increased property NOI of $2,315. The increases in interest
      and depreciation expenses are related to the property acquisitions
      completed since September 30, 2006.

    - The distributable income payout ratio was 83.9%, 3.9% above the
      anticipated annual payout ratio of 80% due the seasonal nature of
      repair and maintenance expenditures.

    - The AFFO payout ratio was 141.3% which was above the anticipated annual
      AFFO payout ratio of 100%. This quarterly fluctuation was anticipated
      due to the seasonal nature of maintenance capital expenditures. It is
      anticipated that the payout ratio for the full year of 2007 will
      approximate the anticipated annual payout ratio.

    - Debt to gross book value increased to 48.1% at September 30, 2007 from
      47.2% at June 30, 2007. This is still well below management's intended
      leverage ratio of 50% to 55% and provides acquisition capacity of
      approximately $140,000.

    OVERVIEW OF THE PROPERTY PORTFOLIO

    Property Profile

    The net book value of the property portfolio represents 89% of the total
assets as at September 30, 2007. At September 30, 2007 the property portfolio
consisted of 51 commercial properties that contain approximately 7.8 million
square feet of GLA. The properties are located in six provinces: Nova Scotia,
New Brunswick, Newfoundland and Labrador, Prince Edward Island, Ontario and
Quebec.

    As at September 30, 2007, the portfolio distribution of the GLA by
province was as follows:

    -------------------------------------------------------------------------
                                                            % of
                                                          Annual
                   Number of         GLA        % of     Minimum   Occupancy
    Province      Properties    (sq. ft.)        GLA        Rent          (1)
    -------------------------------------------------------------------------
    Nova Scotia           21   4,128,000        52.7%       46.2%       94.8%
    Ontario               15   1,197,000        15.3%       18.3%       94.7%
    New Brunswick          8   1,143,000        14.6%       11.4%       90.1%
    Newfoundland and
     Labrador              4     885,000        11.3%       17.4%       90.5%
    Prince Edward
     Island                1     301,000         3.8%        3.5%       92.1%
    Quebec                 2     181,000         2.3%        3.2%       96.2%
    -------------------------------------------------------------------------
    Total                 51   7,835,000       100.0%      100.0%       93.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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 six acquisitions in Ontario and one
acquisition in Quebec as at September 30, 2007. As well, the properties are
located in rural and urban locations, which Crombie believes to add stability
and future growth potential, while reducing vulnerability to economic
fluctuations that may affect any particular region.

    Largest Tenants

    The following table illustrates the 10 largest tenants in Crombie's
portfolio of income-producing properties as measured by their percentage
contribution to total annual minimum base rent as at September 30, 2007.

    -------------------------------------------------------------------------
                                       % of Annual   Total Area
                                           Minimum       Leased    Number of
    Tenant                                    Rent     (sq. ft.) Locations(1)
    -------------------------------------------------------------------------
    Sobeys food stores(2)                     15.9%   1,188,000           27
    Shoppers Drug Mart                         3.1%     153,000           13
    Zellers                                    3.1%     569,000            6
    Empire Theatres                            3.0%     240,000            8
    Nova Scotia Power/Emera                    2.9%     188,000            2
    CIBC                                       2.3%     163,000           13
    Bell (Alliant)                             2.2%     152,000           13
    Province of Nova Scotia                    2.1%     138,000           10
    Public Works Canada                        1.9%      72,000            6
    Best Buy Canada Ltd                        1.6%      89,000            3
    -------------------------------------------------------------------------
    Total                                     38.1%   2,952,000          101
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Each location is represented by a separate lease.
    (2) Excludes Lawtons.

    Crombie's portfolio is leased to a wide variety of tenants. Other than
Sobeys food stores, which account for 15.9% of the annual minimum rent, no
other tenant accounts for more than 3.1% of Crombie's minimum rent.

    Lease Maturities

    The following table sets out as of September 30, 2007 the number of leases
relating to the properties subject to lease maturities during the periods
indicated (assuming tenants do not holdover on a month-to-month basis or
exercise renewal options or termination rights), the renewal area, the
percentage of the total GLA of the properties represented by such maturities
and the estimated average net rent per square foot at the time of expiry. The
weighted average remaining term of all leases is approximately 7.4 years.

    -------------------------------------------------------------------------
                                                                 Average Net
                                             Renewal                Rent per
                               Number of        Area        % of  Sq. Ft. at
    Year                          Leases    (sq. ft.)  Total GLA   Expiry ($)
    -------------------------------------------------------------------------
    2007 (remaining 3 months)         64     189,000         2.4%     $11.18
    2008                             176     628,000         8.0%     $11.46
    2009                             175     806,000        10.3%     $13.39
    2010                             164     680,000         8.7%     $12.37
    2011                             176     990,000        12.6%     $13.44
    Thereafter                       332   4,035,000        51.5%     $12.05
    -------------------------------------------------------------------------
    Total                          1,087   7,328,000        93.5%     $12.35
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    2007 Portfolio Lease Expiries and Leasing Activity

    As at September 30, 2007, portfolio lease expiries and leasing activity
were as follows:

    -------------------------------------------------------------------------
                   Quarter   Quarter   Quarter   Quarter      Year
                    ending    ending    ending    ending    ending
                   Mar. 31,  Jun. 30,  Sep. 30,  Dec. 31,  Dec. 31,   As a %
                      2007      2007      2007      2007      2007    of GLA
    -------------------------------------------------------------------------
    Expiries
     (sq. ft.)     272,000   170,000   116,000   133,000   691,000       8.8%
    Average net
     rent per
     sq. ft.      $   9.90  $   7.55  $  11.81  $  11.61  $   9.97
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Committed
     renewals
     (sq. ft.)     155,000   122,000    71,000    40,000   388,000       5.0%
    Average net
     rent per
     sq. ft.      $   9.98  $   6.42  $  10.96  $  14.52  $   9.51
    New leasing
     (sq. ft.)      30,000    83,000    65,000    34,000   212,000       2.7%
    Average net
     rent per
     sq. ft.      $  13.84  $  14.18  $  14.21  $  17.64  $  14.70
    -------------------------------------------------------------------------
    Total renewals
     and new
     leasing
     (sq. ft.)     185,000   205,000   136,000    74,000   600,000       7.7%
    Total average
     net rent per
     sq. ft.      $  10.60  $   9.56  $  12.51  $  15.96  $  11.35
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During the nine months ended September 30, 2007, Crombie had renewals or
entered into new leases in respect of approximately 600,000 square feet at an
average net rent of $11.35 per square foot, compared with expiries of
approximately 691,000 square feet at an average net rent of $9.97 per square
foot. Crombie completed leasing activity in the third quarter of 86,000 square
feet. Of the 691,000 square feet of expiries, approximately 107,000 square
feet involve tenants that are still paying property revenues on a holdover
basis.
    Fluctuations in the average net rent per square foot figures occur on a
quarterly basis due primarily to fluctuations in the mix between new and
renewal leasing. New leasing generally requires larger tenant inducement
spending when compared to renewals. As a result, new lease deals also
generally command a higher net rent per square foot. During the third quarter,
the leasing activity resulted in the mix of new leasing versus renewal leasing
contracted as follows:

    -------------------------------------------------------------------------
                                 Quarter     Quarter     Quarter     Quarter
                                  ending      ending      ending      ending
                                 Mar. 31,    Jun. 30,    Sep. 30,    Dec. 31,
                                    2007        2007        2007        2007
    -------------------------------------------------------------------------
    New leasing                       16%         40%         48%         46%
    Renewal leasing                   84%         60%         52%         54%
    -------------------------------------------------------------------------
    Total                            100%        100%        100%        100%
    -------------------------------------------------------------------------

    The high level of renewal deals during the first two quarters of 2007
resulted in the lower net rent per square foot figures. In particular, a
number of the renewals completed during the first two quarters of 2007 had
specific major tenants whose leases contained favourable renewal terms
negotiated in previous years.

    Sector Information

    As at September 30, 2007, the portfolio distribution of the GLA by asset
type was as follows:

    -------------------------------------------------------------------------
                                                            % of
                                                          Annual
                   Number of         GLA        % of     Minimum   Occupancy
    Asset Type    Properties    (sq. ft.)        GLA        Rent          (1)
    -------------------------------------------------------------------------
    Retail                37   4,878,000        62.3%       65.2%       93.7%
    Office                 5   1,028,000        13.1%       12.9%       91.0%
    Mixed-Use              9   1,929,000        24.6%       21.9%       94.5%
    -------------------------------------------------------------------------
    Total                 51   7,835,000       100.0%      100.0%       93.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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 September 30, 2007, the square feet
under lease subject to lease maturities during the periods indicated.

    -------------------------------------------------------------------------
    Year                                  Retail                  Office
                                (sq. ft.)         (%)   (sq. ft.)         (%)
    -------------------------------------------------------------------------
    2007(1)                       74,000         1.5%     18,000         1.8%
    2008                         305,000         6.2%    135,000        13.1%
    2009                         342,000         7.0%    124,000        12.1%
    2010                         229,000         4.7%     67,000         6.5%
    2011                         315,000         6.5%    359,000        34.9%
    Thereafter                 3,306,000        67.8%    232,000        22.6%
    -------------------------------------------------------------------------
    Total                      4,571,000        93.7%    935,000        91.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Year                                 Mixed-Use                Total
                                (sq. ft.)         (%)   (sq. ft.)         (%)
    -------------------------------------------------------------------------
    2007(1)                       97,000         5.0%    189,000         2.4%
    2008                         188,000         9.8%    628,000         8.0%
    2009                         340,000        17.6%    806,000        10.3%
    2010                         384,000        19.9%    680,000         8.7%
    2011                         316,000        16.4%    990,000        12.6%
    Thereafter                   497,000        25.8%  4,035,000        51.5%
    -------------------------------------------------------------------------
    Total                      1,822,000        94.5%  7,328,000        93.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Remaining three months of 2007

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

    -------------------------------------------------------------------------
    Year                                    Retail       Office    Mixed-Use
    -------------------------------------------------------------------------
    2007 (remaining 3 months)          $     14.83  $     10.63  $      8.51
    2008                               $     12.64  $     10.79  $     10.03
    2009                               $     15.25  $     11.31  $     12.27
    2010                               $     17.66  $     11.05  $      9.45
    2011                               $     17.44  $     13.68  $      9.18
    Thereafter                         $     12.32  $     10.42  $     11.10
    -------------------------------------------------------------------------
    Total                              $     13.26  $     11.89  $     10.39
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    2007 RESULTS OF OPERATIONS

    Acquisitions

    The following table outlines the acquisitions made which affected the
results of operations when compared to the prior year quarter and prior
year-to-date results.

    -------------------------------------------------------------------------
                                                                       Owner-
                                                                Acqui-  ship
                                            Date               sition    Int-
    Property          Property Type     Acquired      GLA        Cost  erest
    -------------------------------------------------------------------------
    Brampton Plaza,
    Brampton,                          October 2,
    Ontario          Retail - Strip         2006   66,000   $  13,406    100%
    -------------------------------------------------------------------------
    Taunton & Wilson
    Plaza, Oshawa,                     October 2,
    Ontario          Retail - Strip         2006   83,000   $  19,016    100%
    -------------------------------------------------------------------------
    Burlington Plaza,
    Burlington,                      December 20,
    Ontario          Retail - Strip         2006   56,000   $  14,340    100%
    -------------------------------------------------------------------------
    The Mews of
    Carleton Place,
    Carleton Place,                   January 17,
    Ontario          Retail - Strip         2007   80,000   $  11,800    100%
    -------------------------------------------------------------------------
    Perth Mews
    Shopping Mall,                       March 7,
    Perth, Ontario   Retail - Strip         2007  103,000   $  17,900    100%
    -------------------------------------------------------------------------
    International
    Gateway Centre,
    Fort Erie,                           July 26,
    Ontario          Retail - Strip         2007   93,000   $  19,200    100%
    -------------------------------------------------------------------------
    IGA Food Store,
    Brossard,                          August 24,
    Quebec           Retail - Strip         2007   39,000   $   7,300    100%
    -------------------------------------------------------------------------
    Total                                         520,000   $ 102,962
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Comparison to Previous Year

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

    -------------------------------------------------------------------------
                                  Three Months Ended       Nine Months Ended
    (In thousands of dollars,   ---------------------------------------------
     except where otherwise    September   September   September   September
     noted)                     30, 2007    30, 2006    30, 2007    30, 2006
    -------------------------------------------------------------------------
    Property revenue          $   35,619  $   31,201  $  106,547  $   95,689
    Property expenses             15,156      13,053      44,502      40,119
    -------------------------------------------------------------------------
    Property NOI                  20,463      18,148      62,045      55,570
    -------------------------------------------------------------------------
    NOI margin percentage           57.4%       58.2%       58.2%       58.1%
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative              1,843       1,612       5,685       4,759
      Interest                     6,503       5,165      18,608      15,739
      Depreciation and
       amortization                7,454       5,635      21,002      16,666
    -------------------------------------------------------------------------
                                  15,800      12,412      45,295      37,164
    -------------------------------------------------------------------------
    Income before income
     taxes and
     Non-controlling
     interest                      4,663       5,736      16,750      18,406
    -------------------------------------------------------------------------
    Income taxes:
      Current                          -           -           -          81
      Future                         718         450       4,024       1,260
    -------------------------------------------------------------------------
                                     718         450       4,024       1,341
    -------------------------------------------------------------------------
    Income before
     non-controlling
     interest                      3,945       5,286      12,726      17,065
    Non-controlling interest       1,899       2,550       6,125       8,312
    -------------------------------------------------------------------------
    Net income                $    2,046  $    2,736  $    6,601  $    8,753
    -------------------------------------------------------------------------

    Basic and diluted net
     income per Unit          $     0.10  $     0.13  $     0.31  $     0.41
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic weighted average
     Units outstanding
     (in 000's)                   21,544      21,509      21,532      21,413
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted weighted average
     Units outstanding
     (in 000's)                   21,649      21,553      21,645      21,434
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income for the third quarter of 2007 of $2,046 decreased by $690 from
$2,736 for the third quarter of 2006, while year-to-date net income decreased
by $2,152 to $6,601 from the estimated nine months of 2006 of $8,753. The
decrease was due to:

    - higher interest and depreciation charges due primarily to the seven
      property acquisitions to date along with higher general and
      administrative costs incurred for ongoing compliance and other costs;

    - higher future income tax as a result of the tax legislation impacting
      income trust structures as described in "Risk Management"; offset in
      part by

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

    Property Revenue and Property Expenses

    -------------------------------------------------------------------------
                                  Three Months Ended       Nine Months Ended
    -------------------------------------------------------------------------
                               September   September   September   September
    (In thousands of dollars)   30, 2007    30, 2006    30, 2007    30, 2006
    -------------------------------------------------------------------------
    Same-asset property
     revenue                  $   33,023  $   31,201   $ 100,114  $   95,689
    Acquisition property
     revenue                       2,596           -       6,433           -
    -------------------------------------------------------------------------
    Property revenue          $   35,619  $   31,201   $ 106,547  $   95,689
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset property revenue of $33,023 for the quarter ended September 30,
2007 and year-to-date of $100,114 was 5.8% higher than the same quarter in the
previous year and 4.6% higher than the estimated year-to-date period in 2006
due primarily to the increased average rent per square foot ($11.70 in 2007
and $11.33 in 2006) and increased revenue from increased recoverable common
area expenses.

    -------------------------------------------------------------------------
                                  Three Months Ended       Nine Months Ended
    -------------------------------------------------------------------------
                               September   September   September   September
    (In thousands of dollars)   30, 2007    30, 2006    30, 2007    30, 2006
    -------------------------------------------------------------------------
    Same-asset property
     expenses                 $   14,384  $   13,053   $  42,547  $   40,119
    Acquisition property
     expenses                        772          -        1,955           -
    -------------------------------------------------------------------------
    Property expenses         $   15,156  $   13,053   $  44,502  $   40,119
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset property expenses of $14,384 in the third quarter of 2007 and
$42,547 for year-to-date 2007 were 10.2% higher than the third quarter of 2006
and 6.1% higher than the estimated year-to-date period in 2006 due to
increased recoverable common area expenses primarily from increased property
tax expenses.

    -------------------------------------------------------------------------
                                  Three Months Ended       Nine Months Ended
    -------------------------------------------------------------------------
                               September   September   September   September
    (In thousands of dollars)   30, 2007    30, 2006    30, 2007    30, 2006
    -------------------------------------------------------------------------
    Same-asset property NOI   $   18,639  $   18,148   $  57,567  $   55,570
    Acquisition property NOI       1,824           -       4,478           -
    -------------------------------------------------------------------------
    Property NOI              $   20,463  $   18,148   $  62,045  $   55,570
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset NOI for the third quarter of 2007 grew by 2.7% over the same
period in 2006 while 2007 year-to-date same-asset NOI grew by 3.6% over the
estimated year-to-date period in 2006.

    Property NOI for the quarter ended September 30, 2007 by region was as
follows:

    -------------------------------------------------------------------------
                                Property    Property    Property    NOI % of
    (In thousands of dollars)    Revenue    Expenses         NOI     revenue
    -------------------------------------------------------------------------
    Nova Scotia               $   18,258  $    8,945   $   9,313        51.0%
    Newfoundland and Labrador      5,535       1,941       3,594        64.9%
    New Brunswick                  4,203       2,032       2,171        51.7%
    Ontario                        5,719       1,775       3,944        69.0%
    Prince Edward Island           1,050         251         799        76.1%
    Quebec                           854         212         642        75.2%
    -------------------------------------------------------------------------
    Total                     $   35,619  $   15,156   $  20,463        57.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The decline in NOI % of revenue in Nova Scotia during the third quarter of
2007 when compared to 55.1% NOI % during the second quarter of 2007 is due
primarily to increased common area expenses in the office properties,
partially offset by the recoverable portion of the expenses from tenants.

    General and Administrative Expenses

    General and administrative expenses increased by 14.3% during the third
quarter of 2007 to $1,843 and 19.4% year-to-date to $5,685 from the same
periods in the prior year due to professional fees and other public entity
compliance costs.

    Interest Expense

    -------------------------------------------------------------------------
                                  Three Months Ended       Nine Months Ended
    -------------------------------------------------------------------------
                               September   September   September   September
    (In thousands of dollars)   30, 2007    30, 2006    30, 2007    30, 2006
    -------------------------------------------------------------------------
    Same-asset interest
     expense                  $    5,158  $    5,165   $  15,532  $   15,739
    Acquisition interest
     expense                       1,345           -       3,076           -
    -------------------------------------------------------------------------
    Interest expense          $    6,503  $    5,165   $  18,608  $   15,739
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset interest expense of $5,158 for the third quarter of 2007 was
virtually unchanged for the same period in the prior year while year-to-date
interest expense of $15,532 for 2007 decreased by 1.3% when compared to the
estimated year-to-date period in 2006 due to the declining interest portion of
debt repayments for the same-assets, offset by the reallocation of the
amortization of deferred financing charges as a result of changes in
accounting policies adopted by Crombie effective January 1, 2007. The
accounting policy change was adopted on a prospective basis with no
restatement of prior period financial statements.
    There is an agreement between Empire's subsidiary 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 third quarter of 2007 was $888 (year-to-date - $2,692). 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

    -------------------------------------------------------------------------
                                  Three Months Ended       Nine Months Ended
    -------------------------------------------------------------------------
                               September   September   September   September
    (In thousands of dollars)   30, 2007    30, 2006    30, 2007    30, 2006
    -------------------------------------------------------------------------
    Same-asset depreciation
     and amortization         $    6,651  $    5,635   $  18,854  $   16,666
    Acquisition depreciation
     and amortization                803           -       2,148           -
    -------------------------------------------------------------------------
    Depreciation and
     amortization             $    7,454  $    5,635   $  21,002  $   16,666
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset depreciation and amortization of $6,651 for the third quarter
of 2007 and year-to-date of $18,854 was 18.0% higher than the third quarter of
2006 and 13.1% higher than the estimated year-to-date in 2006 due primarily to
amortization of tenant improvements and lease costs incurred since June 30,
2006 associated with these assets. Depreciation and amortization consists of:

    -------------------------------------------------------------------------
                                  Three Months Ended       Nine Months Ended
    -------------------------------------------------------------------------
                               September   September   September   September
    (In thousands of dollars)   30, 2007    30, 2006    30, 2007    30, 2006
    -------------------------------------------------------------------------
    Depreciation of commercial
     properties               $    3,115  $    2,772   $   9,153  $    8,213
    Amortization of tenant
     improvements/lease costs        822           -       1,843           -
    Amortization of intangible
     assets                        3,517       2,785      10,006       8,260
    Amortization of deferred
     financing charges                 -          78           -         193
    -------------------------------------------------------------------------
                              $    7,454  $    5,635   $  21,002  $   16,666
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Future Income Tax

    Crombie has recorded a non-cash charge of $1,850 as a result of new income
tax legislation during the second and third quarters of fiscal 2007. The
charge will have no impact on cash flow or distributions. Crombie has reviewed
the structural changes that would have to be made in order to ensure it
complies with the REIT rules, and management has reason to believe it will be
able to deal with this issue in a manner that would not cause any material
adverse consequence to Crombie or its Unitholders. (see "Risk Management"
section of MD&A).

    The future income tax expense consists of the following:

    -------------------------------------------------------------------------
                                  Three Months Ended       Nine Months Ended
    -------------------------------------------------------------------------
                               September   September   September   September
                                30, 2007    30, 2006    30, 2007    30, 2006
    -------------------------------------------------------------------------
    Provision for income taxes
     at the expected rate     $      368  $      450   $   2,174  $    1,260
    Tax effect from change in
     tax exempt status
     beginning in 2011               350           -       1,850           -
    -------------------------------------------------------------------------
                              $      718  $      450   $   4,024  $    1,260
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Sector Information

    Retail Properties

    -------------------------------------------------------------------------
    (In thousands
     of dollars,         Three Months ended           Three Months ended
     except as           September 30, 2007           September 30, 2006
     otherwise        Same-    Acqui-               Same-    Acqui-
     noted)          Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $ 18,355  $  2,596  $ 20,951  $ 17,761  $      -  $ 17,761
    Property
     expenses        6,662       772     7,434     6,154         -     6,154
    -------------------------------------------------------------------------
    Property NOI  $ 11,693  $  1,824  $ 13,517  $ 11,607  $      -  $ 11,607
    -------------------------------------------------------------------------
    NOI Margin %      63.7%     70.2%     64.5%     65.4%        -%     65.4%
    -------------------------------------------------------------------------
    (In thousands
     of dollars,         Nine Months ended            Nine Months ended
     except as           September 30, 2007           September 30, 2006
     otherwise        Same-    Acqui-               Same-    Acqui-
     noted)          Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $ 56,860  $  6,433  $ 63,293  $ 55,307  $      -  $ 55,307
    Property
     expenses       20,693     1,955    22,648    19,781         -    19,781
    -------------------------------------------------------------------------
    Property NOI  $ 36,167  $  4,478  $ 40,645  $ 35,526  $      -  $ 35,526
    -------------------------------------------------------------------------
    NOI Margin %      63.6%     69.6%     64.2%     64.2%        -%     64.2%
    -------------------------------------------------------------------------

    The improvement in the year-to-date property NOI was caused by the slight
increase in retail occupancy levels in the same-asset retail properties from
93.0% in 2006 to 93.5% in 2007 coupled with higher revenue due to the improved
average net rent per square foot figures achieved in the renewal and new
leasing activity, which were partially offset by increased recoverable common
area costs. The increase in property taxes caused the slight decline in NOI
margin percentage for the third quarter and year-to-date versus 2006.

    Office Properties

    -------------------------------------------------------------------------
    (In thousands
     of dollars,         Three Months ended           Three Months ended
     except as           September 30, 2007           September 30, 2006
     otherwise        Same-    Acqui-               Same-    Acqui-
     noted)          Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue     $   5,333  $      -  $  5,333  $  5,031  $      -  $  5,031
    Property
     expenses        3,380         -     3,380     2,702         -     2,702
    -------------------------------------------------------------------------
    Property
     NOI         $   1,953  $      -  $  1,953  $  2,329  $      -  $  2,329
    -------------------------------------------------------------------------
    NOI Margin %      36.6%        -%     36.6%     46.3%        -%     46.3%
    -------------------------------------------------------------------------
    (In thousands
     of dollars,         Nine Months ended            Nine Months ended
     except as           September 30, 2007           September 30, 2006
     otherwise        Same-    Acqui-               Same-    Acqui-
     noted)          Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue     $  16,106  $      -  $ 16,106  $ 15,123  $      -  $ 15,123
    Property
     expenses        9,120         -     9,120     8,337         -     8,337
    -------------------------------------------------------------------------
    Property
     NOI         $   6,986  $      -  $  6,986  $  6,786  $      -  $  6,786
    -------------------------------------------------------------------------
    NOI Margin %      43.4%        -%     43.4%     44.9%        -%     44.9%
    -------------------------------------------------------------------------

    The improved occupancy levels and net rent per square foot at the Halifax
Developments properties in Halifax were offset by increased recoverable
seasonal repairs and maintenance costs in the third quarter. These factors
resulted in the lower property NOI and NOI margin % for the properties in the
third quarter but improved property NOI when compared to the estimated prior
year results for the year to date.

    Mixed-Use Properties

    -------------------------------------------------------------------------
    (In thousands
     of dollars,         Three Months ended           Three Months ended
     except as           September 30, 2007           September 30, 2006
     otherwise        Same-    Acqui-               Same-    Acqui-
     noted)          Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue     $   9,335  $      -  $  9,335  $  8,409  $      -  $  8,409
    Property
     expenses        4,342         -     4,342     4,197         -     4,197
    -------------------------------------------------------------------------
    Property
     NOI         $   4,993  $      -  $  4,993  $  4,212  $      -  $  4,212
    -------------------------------------------------------------------------
    NOI Margin %      53.5%        -%     53.5%     50.1%        -%     50.1%
    -------------------------------------------------------------------------
    (In thousands
     of dollars,         Nine Months ended            Nine Months ended
     except as           September 30, 2007           September 30, 2006
     otherwise        Same-    Acqui-               Same-    Acqui-
     noted)          Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue     $  27,148  $      -  $ 27,148  $ 25,259  $      -  $ 25,259
    Property
     expenses       12,734         -    12,734    12,001         -    12,001
    -------------------------------------------------------------------------
    Property
     NOI         $  14,414  $      -  $ 14,414  $ 13,258  $      -  $ 13,258
    -------------------------------------------------------------------------
    NOI Margin %      53.1%        -%     53.1%     52.5%        -%     52.5%
    -------------------------------------------------------------------------

    The slight decline in mixed-use occupancy levels from 95.3% in 2006 to
94.5% in 2007 was offset by improved average net rent per square foot from
leasing activity. This overall improvement in revenue more than offsets
increased recoverable common area expenses resulting in the improved
year-to-date mixed-use property NOI result when compared to the estimated
prior year year-to-date results.

    OTHER PERFORMANCE MEASURES

    Distributable income, AFFO and FFO are not measures recognized under GAAP
and do not have standardized meanings prescribed by GAAP. As such, these
non-GAAP financial measures should not be considered as an alternative to net
income, cash flow from operations or any other measure prescribed under GAAP.
Distributable income has historically been used by REIT's as an indicator of
financial performance and is a metric outlined in Crombie's Declaration of
Trust. AFFO is presented in this MD&A because management of Crombie believes
this non-GAAP measure is relevant of the ability of Crombie to earn and
distribute cash returns to unitholders. FFO represents a supplemental non-GAAP
industry-wide financial measure of a real estate organization's operating
performance. Distributable income, FFO and AFFO as computed by Crombie may
differ from similar computations as reported by other real estate investment
trusts and, accordingly, may not be comparable to other such issuers.

    Distributable Income

    The calculation of distributable income is discussed in the "Distributable
Income, Adjusted Funds From Operations and Funds From Operations" section of
the MD&A in the 2006 Annual Report on page 24.

    -------------------------------------------------------------------------
                                                                      Period
                                   Three       Three        Nine        from
                                  Months      Months      Months    March 23,
                                   Ended       Ended       Ended     2006 to
                               September   September   September   September
    (In thousands of dollars)   30, 2007    30, 2006    30, 2007    30, 2006
    -------------------------------------------------------------------------
    Net income                $    2,046  $    2,736  $    6,601  $    6,188
    Add back:
    Non-controlling interest       1,899       2,550       6,125       5,801
    Depreciation and
     amortization(1)               6,632       5,557      19,159      11,650
    Future income taxes              718         450       4,024         900
    Above-market lease
     amortization                    751         664       2,200       1,393
    Deduct:
    Below-market lease
     amortization                 (1,134)       (922)     (3,233)     (1,934)
    Accrued rental revenue          (345)       (155)     (1,051)       (524)
    -------------------------------------------------------------------------
    Distributable income      $   10,567  $   10,880  $   33,825  $   23,474
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes amortization of deferred financing charges, tenant
        improvements and leasing commission costs.

    The decline in distributable income for the third quarter of 2007 when
compared to the third quarter of 2006 was due to increased amortization of
tenant improvement and leasing costs.
    Pursuant to CSA Staff Notice 52-306 "(Revised) Non-GAAP Financial
Measures", non-GAAP measures such as distributable income should be reconciled
to the most directly comparable GAAP measure, which is interpreted to be the
cash flow from operating activities rather than net income. The reconciliation
is as follows:

    -------------------------------------------------------------------------
                                                                      Period
                                   Three       Three        Nine        from
                                  Months      Months      Months    March 23,
                                   Ended       Ended       Ended     2006 to
                               September   September   September   September
    (In thousands of dollars)   30, 2007    30, 2006    30, 2007    30, 2006
    -------------------------------------------------------------------------
    Cash provided by
     operating activities     $   10,158  $    2,451  $   14,746  $   23,280
    Add back (deduct):
    Additions to tenant
     improvements and lease
     costs                         6,104       4,385       9,013       5,789
    Change in non-cash
     operating items              (4,758)      4,122      12,242      (5,439)
    Unit-based compensation
     expense                         (10)          -         (28)          -
    Amortization of deferred
     financing charges              (105)        (78)       (305)       (156)
    Amortization of tenant
     improvements and lease
     costs                          (822)          -      (1,843)          -
    -------------------------------------------------------------------------
    Distributable income      $   10,567  $   10,880  $   33,825  $   23,474
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Adjusted Funds from Operations

    Crombie considers AFFO to be a measure of its cash-generating ability.
AFFO reflects distributable income after the provision for maintenance capital
expenditures and unamortized additions to tenant improvements and lease costs.
As these expenditures are not incurred evenly throughout a fiscal year, there
can be volatility in AFFO on a quarterly basis.

    -------------------------------------------------------------------------
                                                                      Period
                                   Three       Three        Nine        from
                                  Months      Months      Months    March 23,
                                   Ended       Ended       Ended     2006 to
                               September   September   September   September
    (In thousands of dollars)   30, 2007    30, 2006    30, 2007    30, 2006
    -------------------------------------------------------------------------
    Distributable income      $   10,567  $   10,880  $   33,825  $   23,474
    Less capital adjustments:
    Maintenance capital
     expenditures (net of
     amounts recoverable
     from ECL)                    (1,453)     (1,090)     (2,683)     (1,290)
    Unamortized additions
     to tenant improvements
     and lease costs (net of
     amounts recoverable
     from ECL)                    (2,838)     (3,128)     (3,861)     (4,534)
    -------------------------------------------------------------------------
    AFFO                      $    6,276  $    6,662  $   27,281  $   17,650
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Funds from Operations

    Crombie has calculated FFO in accordance with the recommendations of the
Real Property Association of Canada ("RealPAC") as disclosed in the 2006
Annual Report on page 26.

    -------------------------------------------------------------------------
                                                                      Period
                                   Three       Three        Nine        from
                                  Months      Months      Months    March 23,
                                   Ended       Ended       Ended     2006 to
                               September   September   September   September
    (In thousands of dollars)   30, 2007    30, 2006    30, 2007    30, 2006
    -------------------------------------------------------------------------
    Net income                $    2,046  $    2,736  $    6,601  $    6,188
    Add back:
    Non-controlling interest       1,899       2,550       6,125       5,801
    Depreciation and
     amortization(1)               7,454       5,557      21,002      11,650
    Future income taxes              718         450       4,024         900
    -------------------------------------------------------------------------
    Funds from operations     $   12,117  $   11,293  $   37,752  $   24,539
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes amortization of deferred financing charges.

    The improvement in FFO for the third quarter of 2007 over the third
quarter of 2006 was due to the improved property NOI as outlined previously,
partially offset by higher interest expenses related to the acquisitions and
higher general and administrative expenses.

    LIQUIDITY AND CAPITAL RE

SOURCES Sources and Uses of Funds Cash flow generated from operating the property portfolio represents the primary source of liquidity used to service the interest on debt, fund general and administrative expenses, reinvest into the portfolio through capital expenditures, as well as fund tenant improvements and distributions. In addition, Crombie has the following sources of financing available to finance future growth: secured short-term financing through an authorized $150,000 revolving credit facility, of which $114,504 was drawn at September 30, 2007, and the issue of new equity and mortgage debt, pursuant to the Declaration of Trust. ------------------------------------------------------------------------- Period Three Three Nine from Months Months Months March 23, Ended Ended Ended 2006 to September September September September (In thousands of dollars) 30, 2007 30, 2006 30, 2007 30, 2006 ------------------------------------------------------------------------- Cash provided by (used in): - Operating activities $ 10,158 $ 2,451 $ 14,746 $ 23,280 - Financing activities 6,903 2,102 37,494 260,398 - Investing activities (17,702) (12,467) (53,420) (283,678) ------------------------------------------------------------------------- Operating Activities -------------------- ------------------------------------------------------------------------- Period Three Three Nine from Months Months Months March 23, Ended Ended Ended 2006 to September September September September (In thousands of dollars) 30, 2007 30, 2006 30, 2007 30, 2006 ------------------------------------------------------------------------- Cash provided by (used in): Net income and non-cash items $ 11,504 $ 10,958 $ 36,001 $ 23,630 Tenant improvements and leasing costs (6,104) (4,385) (9,013) (5,789) Non-cash working capital 4,758 (4,122) (12,242) 5,439 ------------------------------------------------------------------------- Increase in cash provided by operating activities $ 10,158 $ 2,451 $ 14,746 $ 23,280 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash provided by operating activities is largely influenced by the quarterly change in non-cash working capital which can be affected by the timing of receipts and payments. During the third quarter of 2007, non-cash working capital provided $4,758 of funds due to increased payables from the capital expenditure activity ongoing during the quarter. The third quarter of 2006 used funds of $4,122 primarily due to the reduction in activity related to the properties covered by the Development Agreement as work progressed and was completed. Comparison to the previous year-to-date results is not possible due to the fact that there were only 192 days of operations during the 2006 year-to-date period and the cash effect of items such as additions to tenant improvements as well as changes in non-cash working capital items cannot be reasonably estimated. Financing Activities -------------------- ------------------------------------------------------------------------- Period Three Three Nine from Months Months Months March 23, Ended Ended Ended 2006 to September September September September (In thousands of dollars) 30, 2007 30, 2006 30, 2007 30, 2006 ------------------------------------------------------------------------- Cash provided by (used in): Issue of commercial property debt $ 21,704 $ - $ 77,645 $ 82,900 Repayment of commercial property debt (9,252) (4,579) (30,525) (16,500) Collection of ECL notes receivable 3,344 15,019 16,350 16,034 Units issued on initial public offering (net of costs) - - - 195,427 Payment of distributions (8,867) (8,338) (25,941) (17,463) Other items (net) (26) - (35) - ------------------------------------------------------------------------- Increase in cash provided by (used in) financing activities $ 6,903 $ 2,102 $ 37,494 $ 260,398 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash provided by financing activities for the quarter increased by $4,801 from the third quarter of 2006 primarily due to the proceeds from the mortgage financings on the two properties acquired during the third quarter of 2007, partially offset by the reduction in the amount of notes collected from ECL in relation to the properties covered under the Development Agreement. Cash provided by financing activities for the year-to-date period in 2007 were $222,904 lower than the year-to-date period in 2006 primarily due to proceeds from the initial public offering and associated debt completed in 2006. Cash Used in Investing Activities --------------------------------- Cash used in investing activities for the third quarter of 2007 of $17,702 was used for acquisitions of two properties, net of assumed mortgages, and additions to commercial properties of which approximately $2,074 was for the eight commercial properties covered by non-interest bearing demand notes from ECL. Cash used during the third quarter of 2006 of $12,467 was used for additions made to commercial properties, of which approximately $11,377 was in relation to the eight commercial properties covered by non-interest bearing demand notes from ECL. Cash used in investing activities for the year-to-date period in 2007 of $53,420 was used for acquisition of four properties, net of assumed mortgages, and additions to commercial properties of which approximately $5,198 was for the eight commercial properties covered by non-interest bearing demand notes from ECL. The cash used in investing activities for the year-to-date period in 2006 included the additions made to commercial properties as described above in addition to the original business acquisition as a result of the Crombie initial public offering in 2006. Tenant Improvement and Capital Expenditures ------------------------------------------- There are two types of capital expenditures: - maintenance capital expenditures that maintain existing productive capacity and; - productive capacity enhancement expenditures. Maintenance capital expenditures are reinvestments into the portfolio to maintain the productive capacity of the existing assets and have a extended useful life. 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. In 2007, $2,074 of the third quarter and $5,197 of the year-to-date costs associated with increases to productive capacity are recoverable from ECL as part of its obligation at the time of the IPO. During the third quarter and nine months ended September 30, 2007, Crombie incurred a total of $2,237 and $3,384 respectively on productive capacity enhancements as follows: expanded site for a Shoppers Drug Mart at Rose City Plaza in Welland, Ontario; new pad site for a TD Bank at Brampton Plaza in Brampton, Ontario; and improved a satellite building at Avalon Mall in St. John's, Newfoundland and Labrador that allow for substantially higher net rents per square foot. All additions are expected to produce property NOI that will enhance the long term value of each property. Tenant improvement ("TI") expenditures can occur when renewing existing tenant leases or for new tenants occupying a new space. Typically, leasing costs for existing tenants are lower on a per square foot basis than for new tenants. However, new tenants may provide more overall cash flow to Crombie through higher rents or improved traffic to a property. The timing of such expenditures fluctuates depending on the satisfaction of contractual terms contained in the leases. ------------------------------------------------------------------------- Period Three Three Nine from Months Months Months March 23, Ended Ended Ended 2006 to September September September September (In thousands of dollars) 30, 2007 30, 2006 30, 2007 30, 2006 ------------------------------------------------------------------------- Total additions to commercial properties $ 5,764 $ 12,467 $ 11,265 $ 20,136 Less amounts recoverable from ECL (2,074) (11,377) (5,198) (18,846) ------------------------------------------------------------------------- Net additions to commercial properties $ 3,690 $ 1,090 $ 6,067 $ 1,290 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Productive capacity enhancements $ 2,237 $ Nil $ 3,384 $ Nil Maintenance capital expenditures 1,453 1,090 2,683 1,290 ------------------------------------------------------------------------- Net additions to commercial properties $ 3,690 $ 1,090 $ 6,067 $ 1,290 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Period Three Three Nine from Months Months Months March 23, Ended Ended Ended 2006 to September September September September (In thousands of dollars) 30, 2007 30, 2006 30, 2007 30, 2006 ------------------------------------------------------------------------- Total additions to TI's and leasing costs $ 6,104 $ 4,385 $ 9,013 $ 5,789 Less amounts recoverable from ECL (2,444) (1,257) (3,309) (1,255) ------------------------------------------------------------------------- Net additions to TI's and leasing costs $ 3,660 $ 3,128 $ 5,704 $ 4,534 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Productive capacity enhancements $ Nil $ Nil $ Nil $ Nil Recurring TI's and leasing costs 3,660 3,128 5,704 4,534 ------------------------------------------------------------------------- Net additions to TI's and leasing costs $ 3,660 $ 3,128 $ 5,704 $ 4,534 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Recurring TI's and leasing costs $ 3,660 $ 3,128 $ 5,704 $ 4,534 Less amortization (822) - (1,843) - ------------------------------------------------------------------------- Unamortized additions to TI's and leasing costs $ 2,838 $ 3,128 $ 3,861 $ 4,534 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Capital Structure September June March December (In thousands of dollars) 30, 2007 30, 2007 31, 2007 31, 2006 ------------------------------------------------------------------------- Commercial property debt $ 493,232 $ 465,868 $ 459,704 $ 432,963 Non-controlling interest $ 179,457 $ 183,051 $ 186,550 $ 187,649 Unitholders' equity $ 192,477 $ 196,332 $ 199,903 $ 200,894 ------------------------------------------------------------------------- Indebtedness ------------ As of September 30, 2007, Crombie had fixed rate mortgages outstanding of $365,395 ($380,420 after including the marked-to-market adjustment of $15,025), carrying a weighted average interest rate of 5.48% (after giving effect to a monthly interest rate subsidy from ECL under an omnibus subsidy agreement) and a weighted average term to maturity of 7.7 years. Crombie has in place an authorized floating rate revolving credit facility of $150,000, $114,504 of which was drawn upon as at September 30, 2007. The revolving credit facility is secured by a pool of first and second mortgages and negative pledges on certain assets. During the third quarter of 2007 Crombie finalized two new fixed-rate mortgage agreements which financed approximately $14,800 of the two property acquisitions made during the third quarter of 2007. New Mortgage Interest Property Proceeds Rate Term ------------------------------------------------------------------------- Fort Erie, Ontario $ 11,400 5.36% 8 years Brossard, Quebec 3,400 6.44% 17 years ------------------------------------------------------------------------- Total $ 14,800 ------------------------------------------------------------------------- Also during the third quarter of 2007, Crombie completed the refinancing of the existing mortgage for Niagara Plaza in Ontario, with a fixed rate mortgage of $8,100 carrying an interest rate of 5.65% with a 20 year term. Crombie has entered into a fixed interest rate swap agreement which expires on July 2, 2010. Interest on $50,000 is paid at a fixed rate of 5.54%, after including the applicable stamping fee of 1.125%, and is received at a floating rate based on the 90-day bankers' acceptance rate. For the quarter ended September 30, 2007 the effect of the mark to market adjustment for the swap resulted in a loss of $235 and year-to-date gain of $123 was recognized in the other comprehensive income of Crombie's financial statements. The effect of the mark to market adjustment for the delayed interest rate swaps during the third quarter of 2007, discussed under "Risk Management", resulted in a loss of $1,084 was also recognized in the other comprehensive income. Principal repayments of the debt are scheduled as follows: ------------------------------------------------------------------------- Debt Maturing Payments of During Total Year Principal Year Maturity % of Total ------------------------------------------------------------------------- 2008 $ 12,623 $ 14,539 $ 27,162 5.7% 2009 12,666 - 12,666 2.6% 2010 11,024 171,763 182,787 38.1% 2011 10,401 8,204 18,605 3.9% 2012 10,974 - 10,974 2.3% Thereafter 69,186 158,519 227,705 47.4% ------------------------------------------------------------------------- Total (1) $ 126,874 $ 353,025 $ 479,899 100.0% ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Excludes marked-to-market adjustment due to interest rate subsidy of $15,025 and the deferred financing costs of $1,692. Unitholders' Equity ------------------- In March 2007 there were 15,760 Units awarded as part of the Employee Unit Purchase Plan. Total Units outstanding at October 31, 2007 were as follows: ------------------------------------------------------------------------- Units 21,648,985 ------------------------------------------------------------------------- Special Voting Units(1) 20,079,576 ------------------------------------------------------------------------- (1) Crombie Limited Partnership, a subsidiary of Crombie, has also issued 20,079,576 Class B LP Units. These Class B LP units accompany the Special Voting Units, are the economic equivalent of a Unit, and are convertible into Units on a one-for-one basis. Borrowing Capacity and Debt Covenants Crombie has in place an authorized revolving credit facility of $150,000. The revolving credit facility is secured by a pool of first and second mortgages and negative pledges on certain assets. Under the terms governing the revolving credit facility, Crombie is entitled to borrow a maximum of 60% of the fair market value of assets subject to a first security position and 50% of the fair market value of assets subject to a second security position or a negative pledge, subject to the limitations on the ability of Crombie to incur indebtedness contained in the Declaration of Trust. The revolving credit facility provides Crombie with flexibility to add or remove properties from the security pool, subject to compliance with certain conditions. As part of the debt covenants attached to the revolving credit facility, in addition to the maximum borrowing above, Crombie must maintain certain debt ratios above prescribed levels: - NOI for the prescribed properties must be a minimum of 1.6 times the coverage of the related debt service requirements; and - NOI on all properties must be a minimum of 1.5 times the coverage of all 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. Based on the appraised value of the properties over which security has been granted by Crombie, approximately $138,148 is available for drawdown. At September 30, 2007, $114,504 was drawn down on the facility. When calculating debt to gross book value, debt is defined as bank loans plus commercial property debt. Gross book value means, at any time, the book value of the assets of Crombie and its consolidated subsidiaries plus accumulated depreciation and amortization in respect of Crombie's properties (and related intangible assets) less (i) the amount of any receivable reflecting interest rate subsidies on any debt assumed by Crombie and (ii) the amount of future income tax liability arising out of the fair value adjustment in respect of the indirect acquisitions of certain properties. If approved by a majority of the independent trustees, the appraised value of the assets of Crombie and its consolidated subsidiaries may be used instead of book value. On January 1, 2007, as a result of the adoption of new accounting standards issued by the Canadian Institute of Chartered Accountants ("CICA"), deferred financing charges were reclassified from an asset to a reduction in commercial property debt. As a result, to allow for consistent calculations of gross book value, the deferred financing charges are added back to the asset base when calculating the debt to gross book value ratio. The debt to gross book value ratio increased to 48.1% at September 30, 2007 from 47.2% at June 30, 2007 due to the net additional mortgage financings completed during the second quarter. However, this leverage ratio was still substantially below the maximum 60% as outlined by Crombie's Declaration of Trust. 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 Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, noted) 2007 2007 2007 2006 2006 ------------------------------------------------------------------------- Mortgages payable $ 380,420 $ 366,731 $ 346,437 $ 350,063 $ 326,806 Revolving credit facility payable 114,504 100,900 114,818 82,900 73,238 ------------------------------------------------------------------------- Total debt outstanding 494,924 467,631 461,255 432,963 400,044 Less: Marked- to-market adjustment due to interest rate subsidy (15,025) (15,913) (16,811) (17,717) (18,630) ------------------------------------------------------------------------- Debt $ 479,899 $ 451,718 $ 444,444 $ 415,246 $ 381,414 ------------------------------------------------------------------------- Total assets $1,007,337 $ 976,699 $ 972,737 $ 963,935 $ 936,768 Add: Deferred financing charges reclassified to commercial property debt beginning January 1, 2007 1,692 1,763 1,551 - - Accumulated depreciation of commercial properties 20,057 16,120 12,401 9,061 5,810 Accumulated amortization of intangible assets 23,043 18,775 14,586 10,837 7,231 Less: Note receivable for interest rate subsidy (15,025) (15,913) (16,811) (17,717) (18,630) Fair value adjustment to future taxes (39,519) (39,519) (39,519) (39,519) (47,941) ------------------------------------------------------------------------- Gross book value $ 997,585 $ 957,925 $ 944,945 $ 926,597 $ 883,238 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Debt-to-gross book value 48.1% 47.2% 47.0% 44.8% 43.2% Maximum borrowing capacity(1) 60% 60% 60% 60% 60% ------------------------------------------------------------------------- (1) Maximum permitted by the Declaration of Trust Distributions and Distribution Payout Ratios Distribution Policy ------------------- Pursuant to Crombie's Declaration of Trust, it is required, at a minimum, to make distributions to Unitholders equal to the amount of net income, net realizable capital gains and net recapture income of Crombie as is necessary to ensure that Crombie will not be liable for income taxes. Crombie intends to make monthly cash distributions to Unitholders equal to approximately 80% of its distributable income on an annual basis. Details of distributions to Unitholders are as follows: ------------------------------------------------------------------------- Period Three Three Nine from Months Months Months March 23, (In thousands of dollars, Ended Ended Ended 2006 to except per unit amounts September September September September and as otherwise noted) 30, 2007 30, 2006 30, 2007 30, 2006 ------------------------------------------------------------------------- Distributions to Unitholders $ 4,599 $ 4,321 $ 13,546 $ 9,041 Distributions to Special Voting Unitholders 4,268 4,017 12,570 8,422 ------------------------------------------------------------------------- Total distributions $ 8,867 $ 8,338 $ 26,116 $ 17,463 ------------------------------------------------------------------------- Number of diluted Units 21,648,985 21,552,525 21,645,175 21,434,084 Number of diluted Special Voting Units 20,079,576 20,079,576 20,079,576 20,079,576 ------------------------------------------------------------------------- Total diluted weighted average Units 41,728,561 41,632,101 41,724,751 41,513,660 ------------------------------------------------------------------------- Distributions per unit $ 0.21 $ 0.20 $ 0.62 $ 0.42 Distributable income payout ratio 83.9% 76.6% 77.2% 74.4% AFFO payout ratio 141.3% 125.2% 95.7% 98.9% ------------------------------------------------------------------------- The distributable income payout ratio of 83.9% (year-to-date 77.2%) is slightly above the anticipated annual payout ratio of 80% while the AFFO payout ratio of 141.3% (year-to-date 95.7%) is above the anticipated annual payout ratio of 100%. This quarterly fluctuation was anticipated due to the seasonal nature of repair and maintenance as well as capital expenditures. Crombie anticipates that by the end of 2007 the full year payout ratios will approximate the anticipated annual payout ratios. CHANGES IN ACCOUNTING POLICIES Effective January 1, 2007 Crombie adopted three new accounting standards that were issued by the CICA in 2005. These accounting policy changes were adopted on a retroactive basis with no restatement of prior period financial statements. The new standards and accounting policy changes are as follows: Financial Instruments - Recognition and Measurement (Section 3855) In accordance with this new standard, Crombie now classifies all financial instruments, including derivatives, as either held to maturity, available-for-sale, held for trading, loans and receivables or other financial liabilities. Financial assets held to maturity, loans and receivables, and financial liabilities other than those held for trading, are measured at amortized cost. Available-for-sale financial assets are measured at fair value with unrealized gains and losses recognized in other comprehensive income. Financial instruments classified as held for trading are measured at fair value with unrealized gains and losses recognized in the consolidated statement of income. Comprehensive Income (Section 1530) Comprehensive income is the change in unitholders' equity during a period from transactions and other events and circumstances from non-owner sources. In accordance with this new standard, Crombie now reports a consolidated statement of comprehensive income, comprising net income and other comprehensive income for the period. A new category, accumulated other comprehensive income, has been added to the consolidated statement of unitholders' equity section of the consolidated financial statements. Hedges (Section 3865) This new section establishes standards for when and how hedge accounting may be applied. Hedge accounting enables the recording of gains, losses, revenues and expenses from the derivative financial instruments in the same period as for those related to the hedged item. In accordance with the provisions of these new standards, on January 1, 2007 Crombie made an adjustment to reflect a reallocation on the consolidated balance sheet of $1,578 from deferred financing costs to commercial property debt for unamortized transaction costs previously incurred and accounted for separately, and a transition adjustment to recognize the fair value of a derivative designated as a cash flow hedge. The fair value at January 1, 2007 was $(310) of which $(162) has been allocated to unitholders' equity and $(148) has been allocated to non-controlling interest. The adoption of these new standards has been reflected on the Crombie's interim consolidated financial statements. The unrealized gains and losses included in ''accumulated other comprehensive income'' were recorded net of applicable taxes. Transaction costs Crombie adds transaction costs directly attributable to the acquisition or issue of a financial asset or financial liability, other than classified as held for trading, to the fair value of the financial asset or financial liability. Cash Flow Statements (Section 1540) Amendments to CICA Section 1540, Cash Flow Statements, require entities to disclose total cash distributions on financial instruments classified as equity in accordance with a contractual agreement and the extent to which total cash distributions are non-discretionary. This disclosure requirement is effective for interim and annual financial statements for fiscal periods ending on or after March 31, 2007. The determination to declare and make payable distributions from Crombie are at the discretion of the Board of Trustees of Crombie and, until declared payable by the Board of Trustees of Crombie, Crombie has no contractual requirement to pay cash distributions to Unitholders' of Crombie. During the three month period ended September 30, 2007, $8,867 (year-to-date 2007 - $26,116) (period ended September 30, 2006 - $8,338 and period from March 23, 2006 to September 30, 2006 - $17,463) in cash distributions were declared payable by the Board of Trustees to Crombie REIT and Class B LP Unitholders. RELATED PARTY TRANSACTIONS As at September 30, 2007, Empire Company Limited, through its wholly-owned subsidiary ECL, holds a 48.1% indirect interest in Crombie. For a period of five years commencing March 23, 2006, certain executive management individuals and other employees of Crombie will provide general management, financial, leasing, administrative, and other administration support services to certain real estate subsidiaries of Empire Company Limited on a cost recovery basis. The expense recoveries during the three months ended September 30, 2007 were $464 (year-to-date - $1,178 and three months ended September 30, 2006 - $609, and period from March 23, 2006 to September 30, 2006 - $774) and were netted against general and administrative expenses. For a period of five years, certain on-site maintenance and management employees of Crombie will provide property management services to certain real estate subsidiaries of Empire Company Limited on a cost recovery basis. In addition, for various periods, ECL has an obligation to provide rental income, large federal corporation tax and interest rate subsidies. The cost recoveries during the three months ended September 30, 2007 were $576 (year-to-date - $1,774 and three months ended September 30, 2006 - $544, and period from March 23, 2006 to September 30, 2006 - $1,215 ) and were netted against property expenses. The rental income subsidy during the three months ended September 30, 2007 was $9 (year-to-date - $25 and three months ended September 30, 2006 - $189, and period from March 23, 2006 to September 30, 2006 - $433) and the head lease subsidy during the three months ended September 30, 2007 was $295 (year-to-date - $810 and three months ended September 30, 2006 - $347, and period from March 23, 2006 to September 30, 2006 - $694). Crombie also earned property revenue of $5,664 for the three months ended September 30, 2007 (year-to-date - $17,710 and three months ended September 30, 2006 - $4,783, and period from March 23, 2006 to September 30, 2006 - $10,614) 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 MD&A of the 2006 Annual Report on pages 32 and 33. 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 in the 2006 Annual Report on pages 34 to 38. As part of Crombie's ongoing interest rate risk management strategy, during the second quarter of 2007, Crombie entered into delayed interest rate swap agreements of a notional amount of $118,689 for all mortgages maturing between June 2008 and July 2011. These delayed interest rate swap agreements have effectively established the interest rates that Crombie will pay in relation to the notional amount of the agreements once the mortgages come due for refinancing. In addition, as a result of on the completion of the refinancing of the Niagara Plaza mortgage discussed earlier, Crombie has finalized all debt maturities for the balance of fiscal 2007. Crombie also hedges a significant portion of the floating rates on the revolving credit facility through the use of the $50,000 fixed interest rate swap discussed in the "Indebtedness" section. As a result of recent tax legislation in Bill C-52, the Budget Implementation Act, 2007 (the "Act"), which was passed on June 22, 2007, Crombie recorded a non-cash charge in the amount of $1,850 to earnings in the second and third quarters of 2007. The charge relates to Crombie's future income tax liabilities arising from the temporary differences between accounting basis and tax basis of its assets and liabilities and will have no impact to cash flows or distributions. Due to a transition period under the Act for publicly traded entities in existence prior to November 1, 2006, the legislation is not expected to impact Crombie until 2011. Any entity that qualifies as a real estate investment trust ("REIT") would be exempt from the legislation. It is Crombie's intent to qualify for the REIT exemption prior to 2011, and, in doing so, may be required to restructure its current legal structure. From management's review of the Act, the legal structure would appear to be the only area in which further clarification is required in order for Crombie to ensure it satisfies all the technical tests established in the Act. Crombie has reviewed the structural changes that would have to be made in order to ensure it complies with the REIT rules, and management has reason to believe it will be able to deal with this issue in a manner that would not cause any material adverse consequence to Crombie or its Unitholders. SUBSEQUENT EVENTS On October 15, 2007, Crombie completed the acquisition of the Town Centre Plaza in LaSalle, Ontario from an unrelated third party. The purchase price of the acquisition was $12,700, which was satisfied by the assumption of a fixed rate mortgage of $4,000 carrying an interest rate of 6% with an approximate four year term with the balance of the purchase price paid using funds from the revolving credit facility. On October 22, 2007, Crombie declared distributions of 7.083 cents per unit for the period from October 1, 2007 to, and including, October 31, 2007. The distribution will be payable on November 15, 2007 to Unitholders of record as at October 31, 2007. On October 24, 2007 Crombie entered into a term sheet to provide an additional $51,000 of financing on the portfolio of office and mixed-use properties known as Halifax Developments properties. The financing will have a fixed interest rate set at 150 basis points above the Bank of Canada bond yield and a maturity date of February 1, 2010. 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 during the quarter ended September 30, 2007 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting. No such changes were identified through their evaluation. QUARTERLY INFORMATION The following table shows information for revenues, net income, distributable income, AFFO, distributions and per unit amounts for the six most recently completed quarters. ------------------------------------------------------------------------- Quarter ending ----------------------------------------------------------- (In thousands of dollars, except per Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, unit amounts) 2007 2007 2007 2006 2006 2006 ------------------------------------------------------------------------- Property revenue $ 35,619 $ 35,248 $ 35,680 $ 33,717 $ 31,201 $ 31,758 Property expenses 15,156 14,300 15,046 15,091 13,053 12,626 ------------------------------------------------------------------------- Property net operating income 20,463 20,948 20,634 18,626 18,148 19,132 ------------------------------------------------------------------------- Expenses: General and administra- tive 1,843 2,224 1,618 2,293 1,612 1,687 Interest 6,503 6,171 5,934 5,523 5,165 5,274 Depreciation and amortization 7,454 7,156 6,392 6,270 5,635 5,631 ------------------------------------------------------------------------- 15,800 15,551 13,944 14,086 12,412 12,592 ------------------------------------------------------------------------- Income before income taxes and non-controlling interest 4,663 5,397 6,690 4,540 5,736 6,540 ------------------------------------------------------------------------- Income taxes: Current - - - - - (9) Future 718 2,978 328 (1,663) 450 410 ------------------------------------------------------------------------- 718 2,978 328 (1,663) 450 401 ------------------------------------------------------------------------- Income before non-controlling interest 3,945 2,419 6,362 6,203 5,286 6,139 Non-controlling interest 1,899 1,164 3,062 2,986 2,550 2,972 ------------------------------------------------------------------------- Net income $ 2,046 $ 1,255 $ 3,300 $ 3,217 $ 2,736 $ 3,167 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted net income per unit $ 0.10 $ 0.06 $ 0.15 $ 0.15 $ 0.13 $ 0.15 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Quarter ending ----------------------------------------------------------- (In thousands of dollars, except per Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, unit amounts) 2007 2007 2007 2006 2006 2006 ------------------------------------------------------------------------- Cash provided by operating activities $ 10,158 $ 2,307 $ 2,282 $ 24,717 $ 2,451 $ 14,115 Add back (deduct): Additions to tenant improvements and lease costs 6,104 1,828 1,081 1,513 4,385 1,404 Change in non-cash operating items (4,758) 7,777 9,223 (15,836) 4,122 (3,936) Unit-based compensation expense (10) (9) (9) (27) - - Amortization of deferred financing charges (105) (108) (92) (111) (78) (74) Amortization of tenant improvements/ lease costs (822) (656) (365) (441) - - ------------------------------------------------------------------------- Distributable income $ 10,567 $ 11,139 $ 12,120 $ 9,815 $ 10,880 $ 11,509 Less: Maintenance capital expenditures (1,453) (311) (748) (933) (1,090) (200) Additions to tenant improvements and lease costs (net of amounts recoverable from ECL) (2,838) (498) (501) (619) (3,128) (1,406) ------------------------------------------------------------------------- AFFO $ 6,276 $ 10,330 $ 10,871 $ 8,263 $ 6,662 $ 9,903 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FFO $ 12,117 $ 12,553 $ 13,082 $ 10,699 $ 11,293 $ 12,106 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions $ 8,867 $ 8,798 $ 8,451 $ 8,346 $ 8,338 $ 8,322 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributable income per unit(2) $ 0.25 $ 0.27 $ 0.29 $ 0.24 $ 0.26 $ 0.28 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AFFO per unit(2) $ 0.15 $ 0.25 $ 0.26 $ 0.20 $ 0.16 $ 0.24 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FFO per unit(2) $ 0.29 $ 0.30 $ 0.31 $ 0.26 $ 0.27 $ 0.29 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions per unit(2) $ 0.21 $ 0.21 $ 0.20 $ 0.20 $ 0.20 $ 0.20 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) The first quarter ended March 31, 2006 was for a nine-day period only due to Crombie's beginning of operations on March 23, 2006. As such, that period has not been included in the above table due to a lack of comparability. (2) Distributable income, FFO, AFFO and distributions per unit are calculated by distributable income, FFO, AFFO or distributions, as the case may be, divided by the diluted weighted average of the total Units and Special Voting Units outstanding of 41,728,561 for the quarter ended September 30, 2007, 41,728,561 for the quarter ended June 30, 2007, 41,712,801 for the quarter ended March 31, 2007, 41,589,061 for the quarter ended December 31, 2006, 41,589,061 for the quarter ended September 30, 2006 and 41,487,760 for the quarter ended June 30, 2006. SCHEDULE OF THE PROPERTY PORTFOLIO AS AT SEPTEMBER 30, 2007 ------------------------------------------------------------------------- GLA Number of Property Description (sq. ft.) Leases Occupancy ------------------------------------------------------------------------- Nova Scotia Aberdeen Shopping Centre Mixed-use 394,000 34 96.7% Amherst Centre Retail - Enclosed 228,000 30 92.1% County Fair Mall Retail - Enclosed 269,000 50 97.1% Downsview Mall Retail - Strip 142,000 15 98.6% Downsview Plaza Retail - Strip 256,000 25 99.1% Evangeline Mall Retail - Enclosed 61,000 6 78.0% Fort Edward Mall Retail - Enclosed 141,000 15 91.0% Highland Square Mall Retail - Enclosed 246,000 51 93.8% New Minas Plaza Retail - Strip 48,000 9 82.8% Park Lane Mixed-use 267,000 66 86.8% Prince Street Plaza Retail - Strip 71,000 13 100.0% Sydney Shopping Centre Retail - Enclosed 250,000 33 95.1% West End Mall Mixed-use 201,000 44 85.2% Halifax Developments -------------------- properties ---------- Barrington Place Mixed-use 186,000 29 96.6% Barrington Tower Office 185,000 1 100.0% CIBC Building Office 208,000 29 92.9% Cogswell Tower Office 204,000 37 97.7% Duke Tower Office 232,000 32 97.7% Scotia Square Mall Mixed-use 286,000 56 99.9% Scotia Square Parkade Other - Parkade N/A N/A N/A Trade Mart Building Mixed-use 253,000 10 94.8% ------------------ ---------------------- Total Nova Scotia 4,128,000 585 ------------------ ---------------------- Ontario 318 Ontario Street Freestanding Store 47,000 1 100.0% Brampton Plaza Retail - Strip 66,000 2 100.0% Burlington Plaza Retail - Strip 56,000 10 95.4% Carleton Place Mews Retail - Strip 80,000 14 94.2% Fort Erie - International Gateway Centre Retail - Strip 93,000 15 92.7% Niagara Plaza Retail - Strip 61,000 14 98.0% Perth Mews Retail - Strip 103,000 16 96.6% Port Colborne Mall Retail - Enclosed 136,000 8 91.4% Queensland Plaza Retail - Strip 48,000 8 96.0% Rose City Plaza Retail - Strip 109,000 14 83.1% Rymal Road Plaza Retail - Strip 65,000 10 97.3% South Pelham Market Plaza Retail - Strip 63,000 10 94.3% Taunton & Wilson Plaza Retail - Strip 87,000 12 94.9% Upper James Square Retail - Strip 114,000 23 98.4% Village Square Mall Retail - Strip 69,000 15 97.8% ------------------ ---------------------- Total Ontario 1,197,000 172 ------------------ ---------------------- New Brunswick Carleton Mall Retail - Enclosed 113,000 12 95.3% Charlotte Mall Retail - Enclosed 113,000 9 93.2% Elmwood Plaza Retail - Strip 31,000 9 80.9% Fredericton Mall Retail - Enclosed 323,000 12 94.7% Loch Lomond Place Mixed-use 191,000 18 96.6% Prospect Street Plaza Retail - Strip 21,000 2 100.0% Riverview Mall Mixed-use 151,000 24 98.3% Terminal Centres Office 200,000 16 65.9% ------------------ ---------------------- Total New Brunswick 1,143,000 102 ------------------ ---------------------- Newfoundland and Labrador Avalon Mall Retail - Enclosed 565,000 139 94.3% Hamlyn Road Plaza Retail - Strip 43,000 13 82.3% Random Square Retail - Enclosed 113,000 20 98.8% Valley Mall Retail - Enclosed 164,000 20 74.0% ------------------ ---------------------- Total Newfoundland and Labrador 885,000 192 ------------------ ---------------------- Prince Edward Island County Fair Mall Retail - Enclosed 301,000 28 92.1% Quebec Brossard-Longueuil, Quebec Retail - Strip 39,000 1 100.0% Greenfield Park Centre Retail - Power Centre 142,000 7 95.2% ------------------ ---------------------- Total Quebec 181,000 8 ------------------ ---------------------- ------------------------------------------------------------------------- Total 7,835,000 1,087 93.5% ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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: November 8, 2007

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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