Crombie REIT announces second quarter 2007 results



    STELLARTON, NS, Aug. 9 /CNW/ - Crombie Real Estate Investment Trust
("Crombie") (TSX: CRR.UN) is pleased to report its second quarter results for
the quarter ending June 30, 2007.
    Funds from Operations (FFO) for the quarter increased by 3.7% to
$12.6 million ($0.30 per unit) from $12.1 million ($0.29 per unit) during the
second 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.
    Net income for the quarter was $1.3 million ($0.06 per unit) compared to
$3.2 million ($0.15 per unit) for the quarter ended June 30, 2006. Net income
for the year-to-date period ended June 30, 2007 was $4.6 million ($0.21 per
unit) compared to $6.0 million ($0.28 per unit) for the estimated year-to-date
period of 2006.
    As previously announced, on July 25, 2007, Crombie completed the
acquisition of a property in Fort Erie, Ontario. The Fort Erie site is a
grocery anchored neighbourhood retail centre of approximately 93,000 square
feet and was purchased for $19.2 million.
    Crombie is beginning to explore 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.
    Commenting on the second quarter and year-to-date results, J. Stuart
Blair, President and Chief Executive Officer stated: "While the improved FFO
results for the quarter were encouraging, there was a rise in general and
administrative expense during the quarter due to a number of specific costs
incurred during the second quarter of 2007."
    

    2007 Second Quarter Highlights

    - Same-asset net operating income (NOI) of $19.476 million increased by
      $0.344 million, or 1.8%, compared to $19.132 million for the same
      quarter in the prior year due to increased average rent per square foot
      ($9.81 in 2007 versus $9.53 in 2006) and improved occupancy (93.8% in
      2007 versus 93.4% in 2006).

    - Overall occupancy at June 30, 2007 decreased slightly to 93.8% when
      compared to 94.1% at March 31, 2007.

    - Property revenue for the quarter ended June 30, 2007 increased by
      $3.490 million, or 11.0%, to $35.248 million compared to
      $31.758 million for the second quarter in the prior year. The
      improvement was due primarily to increased same-asset property results
      as previously discussed and property acquisitions.

    - Net income decreased by $1.912 million or 60.4%, to $1.255 million for
      the second quarter of 2007, compared to $3.167 million for the second
      quarter in the previous year primarily due to the impact of the future
      tax expense recorded of $2.978 million, which includes a $1.5 million
      charge related to recent tax legislation impacting income trust
      structures. Crombie also realized increased property NOI of
      $1.816 million which was offset by increases in general and
      administration expenses of $0.537 million, interest expense of
      $0.897 million and depreciation and amortization expenses of
      $1.525 million. The increase in interest and depreciation expenses are
      related to the property acquisitions completed since June 30, 2006.

    - The distributable income payout ratio was 79.0%, 1.0% below the
      anticipated annual payout ratio of 80%.

    - The AFFO payout ratio was 85.2% which was also below the anticipated
      AFFO payout ratio of 100%. Management anticipates that the distribution
      increases of 6.25% during 2007, combined with the seasonal nature of
      the capital expenditures, will result in the annual payout ratio
      approximating the anticipated payout ratio.

    - Debt to gross book value increased to 47.2% at June 30, 2007 from 47.0%
      at March 31, 2007. This is still well below management's intended
      leverage ratio of 50% to 55% and provides acquisition capacity of
      approximately $150 million.

    The table below presents a summary of the financial performance for the
quarter and year-to-date. Year-to-date June 30, 2006 results have been
estimated by using actual results for the quarter ended 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         Six         Six
                                  months      months      months      months
    (In millions of dollars,       ended       ended       ended       ended
     except where otherwise      June 30,    June 30,    June 30,    June 30,
     noted)                         2007        2006        2007        2006
    -------------------------------------------------------------------------
    Property revenue          $   35.248  $   31.758  $   70.928  $   64.488
    Property expenses             14.300      12.626      29.346      27.066
    -------------------------------------------------------------------------
    Property NOI                  20.948      19.132      41.582      37.422
    -------------------------------------------------------------------------
    NOI margin percentage           59.4%       60.2%       58.6%       58.0%
    -------------------------------------------------------------------------
    Expenses:
      General and administrative   2.224       1.687       3.842       3.147
      Interest                     6.171       5.274      12.105      10.574
      Depreciation and
       amortization                7.156       5.631      13.548      11.031
    -------------------------------------------------------------------------
                                  15.551      12.592      29.495      24.752
    -------------------------------------------------------------------------
    Income before income taxes
     and non-controlling
     interest                      5.397       6.540      12.087      12.670
    -------------------------------------------------------------------------
    Income taxes
      Current                         --      (0.009)         --       0.081
      Future                       2.978       0.410       3.306       0.810
    -------------------------------------------------------------------------
                                   2.978       0.401       3.306       0.891
    -------------------------------------------------------------------------
    Income before non-
     controlling interest          2.419       6.139       8.781      11.779
    Non-controlling interest       1.164       2.972       4.226       5.762
    -------------------------------------------------------------------------
    Net income                $    1.255  $    3.167  $    4.555  $    6.017
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic & diluted net
     income per unit          $     0.06  $     0.15  $     0.21  $     0.28
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Property NOI

    Second quarter and year-to-date property NOI for 2007 increased to $20.948
million (9.5%) and $41.582 million (11.1%) respectively from the same periods
in 2006 ($19.132 million and $37.422 million respectively) due to increased
net rent per square foot and occupancy increases in same-asset properties
along with five property acquisitions since June 30, 2006.


    Same-Asset Property Net Operating Income

    -------------------------------------------------------------------------
                                                             Six         Six
                                 Quarter     Quarter      months      months
                                   ended       ended       ended       ended
                                 June 30,    June 30,    June 30,    June 30,
    (In millions of dollars)        2007        2006        2007        2006
    -------------------------------------------------------------------------
    Same-asset property
     revenue                  $   33.124  $   31.758  $   67.091  $   64.488
    Same-asset property
     expenses                     13.648      12.626      28.163      27.066
    -------------------------------------------------------------------------
    Same-asset property NOI   $   19.476  $   19.132  $   38.928  $   37.422
    -------------------------------------------------------------------------

    Same-asset property revenue of $33.124 million for the quarter ended
June 30, 2007 and year-to-date of $67.091 million was 4.3% higher than the
same quarter in the previous year and 4.0% year-to-date due primarily to the
increased average rent per square foot ($9.81 in 2007 and $9.53 in 2006) and
the improvement in the occupancy from 93.4% in 2006 to 93.8% in 2007.
    Same-asset property expenses of $13.648 million in the second quarter of
2007 and $28.163 million for year-to-date 2007 were 8.1% higher than the
$12.626 million for the second quarter of 2006 and 4.1% higher than the
$27.066 for the estimated year-to-date period in 2006 due to increased
recoverable common area expenses primarily from increased property tax
expenses.
    Same-asset NOI for the second quarter of 2007 grew by 1.8% over the same
period in 2006 while 2007 year-to-date same-asset NOI grew by 4.0% over the
estimated year-to-date period in 2006.

    General and Administrative Expenses

    General and administrative expenses increased by 31.8% during the second
quarter of 2007 to $2.224 million and 22.1% year-to-date to $3.842 million
from the same periods in the prior year due to professional fees and other
public entity compliance costs along with costs associated with executive
recruiting and other items.

    Income Before Income Taxes and Non-Controlling Interest

    Income before income taxes and non-controlling interest of $5.397 million
for the second quarter was 17.5% lower than the same period of 2006 of 
$6.540 million due to higher interest and depreciation expenses related to the
five property acquisitions made since June 30, 2006 along with higher general
and administrative expenses.

    Other Performance Measures

    Distributable income: Distributable income is calculated as follows:
    --------------------
                                                                      Period
                                   Three       Three         Six        from
                                  months      months      months    March 23,
                                   ended       ended       ended     2006 to
                                 June 30,    June 30,    June 30,    June 30,
    (In millions of dollars)        2007        2006        2007        2006
    -------------------------------------------------------------------------
    Net income                $    1.255  $    3.167  $    4.555  $    3.452

    Add back:
    Non-controlling interest       1.164       2.972       4.226       3.251
    Depreciation &
     amortization(1)               6.500       5.557      12.527       6.093
    Future income taxes            2.978       0.410       3.306       0.450
    Above market lease
     amortization                  0.752       0.665       1.449       0.729

    Deduct:
    Below market lease
     amortization                 (1.111)     (0.923)     (2.098)     (1.012)

    Straight line rent
     adjustment                   (0.399)     (0.339)     (0.706)     (0.369)
    -------------------------------------------------------------------------
    Distributable income      $   11.139  $   11.509  $   23.259  $   12.594
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes amortization of deferred financing charges, tenant
        improvements and leasing commission costs.

    The decline in distributable income for the second quarter of 2007 was due
to higher net operating income (NOI) as outlined above which was more than
offset by higher interest expenses related to those acquisitions, higher
general and administrative expenses and the depreciation expense for tenant
improvements and leasing costs incurred since June 30, 2006.

    FFO: FFO has been calculated in accordance with the recommendations of the
RealPAC as follows:

                                                                      Period
                                   Three       Three         Six        from
                                  months      months      Months    March 23,
                                   ended       ended       ended     2006 to
                                 June 30,    June 30,    June 30,    June 30,
    (In millions of dollars)        2007        2006        2007        2006
    -------------------------------------------------------------------------
    Net income                $    1.255  $    3.167  $    4.555  $    3.452

    Add back:
    Non-controlling interest       1.164       2.972       4.226       3.251
    Depreciation &
     amortization(1)               7.156       5.557      13.548       6.093
    Future income taxes            2.978       0.410       3.306       0.450
    -------------------------------------------------------------------------
    Funds from operations     $   12.553   $  12.106  $   25.635  $   13.246
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes amortization of deferred financing charges.

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

    Adjusted Funds from Operations (AFFO): Crombie considers AFFO to be a
measure of its cash generating activities. 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         Six        from
                                  months      months      months    March 23,
                                   ended       ended       ended     2006 to
                                 June 30,    June 30,    June 30,    June 30,
    (In millions of dollars)        2007        2006        2007        2006
    -------------------------------------------------------------------------
    Distributable income      $   11.139  $   11.509  $   23.259  $   12.594

    Less:
    Maintenance capital
     expenditures
     (net of amounts
     recoverable from ECL)        (0.311)     (0.200)     (1.059)     (0.200)
    Unamortized additions to
     tenant improvements and
     lease costs (net of
     amounts recoverable
     from ECL)                    (0.498)     (1.406)     (0.999)     (1.406)
    -------------------------------------------------------------------------
    AFFO                      $   10.330  $    9.903  $   21.201  $   10.988
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributions and Distribution Payout Ratios

    Details of distributions to unitholders are as follows:

                                                                      Period
                                   Three       Three         Six        from
                                  months      months      months    March 23,
    (In millions of dollars,       ended       ended       ended     2006 to
     except per unit amounts     June 30,    June 30,    June 30,    June 30,
     and as otherwise noted)        2007        2006        2007        2006
    -------------------------------------------------------------------------
    Distributions to
     Unitholders              $    4.563  $    4.302  $    8.947  $    4.720
    Distributions to
     Special Voting
     Unitholders              $    4.235       4.020       8.302       4.405
    -------------------------------------------------------------------------
    Total Distributions       $    8.798  $    8.322  $   17.249  $    9.125
    -------------------------------------------------------------------------
    Number of diluted Units   21,648,985  21,408,184  21,643,238  21,325,118
    Number of diluted
     Special Voting Units     20,079,576  20,079,576  20,079,576  20,079,576
    -------------------------------------------------------------------------
    Total weighted average
     number of Units          41,728,561  41,487,760  41,722,814  41,404,694
    -------------------------------------------------------------------------
    Distributions per unit    $     0.21  $     0.20  $     0.41  $     0.22
    Distributable income
     payout ratio                   79.0%       72.3%       74.2%       72.4%
    AFFO payout ratio               85.2%       84.0%       81.4%       83.0%
    -------------------------------------------------------------------------

    The distributable income payout ratio of 79.0% for the second quarter and
74.2% year-to-date is slightly below the anticipated annual payout ratio of
80% while the AFFO payout ratio of 85.2% for the second quarter and 81.4%
year-to-date is below the anticipated annual payout ratio of 100%. The
distributable income result reflects both the improved operating results, due
to the acquisitions completed in 2006 and 2007 combined with the improved
same-asset property results, while the AFFO results reflect the seasonal
cyclicality of the expenditures for maintenance and capital improvements that
can occur quarter to quarter. Crombie increased its distributions in 2007 by
6.25% and anticipates that over the remainder of 2007 the full year payout
ratios will more closely approximate the anticipated payout ratios.

    Debt to Gross Book Value

    The debt to gross book value ratio increased to 47.2% at June 30, 2007
from 47.0% at March 31, 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 millions of dollars,   As at     As at     As at     As at     As at
     except as otherwise     Jun. 30,  Mar. 31,  Dec. 31,  Sep. 30,  Jun. 30,
     noted)                     2007      2007      2006      2006      2006
    -------------------------------------------------------------------------
    Mortgages payable       $366.731  $346.437  $350.063  $326.806  $330.234
    Revolving credit
     facility payable        100.900   114.818    82.900    73.238    74.389
    -------------------------------------------------------------------------
    Total debt outstanding   467.631   461.255   432.963   400.044   404.623
    Less: Marked-to-market
     adjustment due to
     interest rate subsidy   (15.913)  (16.811)  (17.717)  (18.630)  (19.549)
    -------------------------------------------------------------------------
    Debt                    $451.718  $444.444  $415.246  $381.414  $385.074
    -------------------------------------------------------------------------

    Total assets            $976.699  $972.737  $963.935  $936.768  $948.508
    Add:
    Deferred financing
     charges reclassified
     to commercial property
     debt beginning
     January 1, 2007           1.763     1.551         -         -         -
    Accumulated
     depreciation of
     commercial properties    16.120    12.401     9.061     5.810     3.039
    Accumulated amortization
     of intangible assets     18.775    14.586    10.837     7.231     3.783
    Less:
    Note receivable for
     interest rate subsidy   (15.913)  (16.811)  (17.717)  (18.630)  (19.549)
    Fair value adjustment
     to future taxes         (39.519)  (39.519)  (39.519)  (47.941)  (47.941)
    -------------------------------------------------------------------------
    Gross book value        $957.925  $944.945  $926.597  $883.238  $887.840
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Debt-to-gross book
     value                      47.2%     47.0%     44.8%     43.2%     43.4%
    Maximum borrowing
     capacity(1)                  60%       60%       60%       60%       60%
    -------------------------------------------------------------------------
    (1) Maximum permitted by the Declaration of Trust

    Taxation

    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 has recorded a non-cash charge in the amount of $1.5 million to
earnings in the second quarter 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.

    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 50 commercial properties in
six provinces, comprising approximately 7.8 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) overall indebtedness levels, which could be impacted by the level of
acquisition activity Crombie is able to achieve and future financing
opportunities;
    (ii) anticipated distributions and payout ratios, which could be impacted
by the seasonality of capital expenditures, results of operations and capital
resource allocation decisions; and
    (iii) tax exempt status, which can be impacted by regulatory changes
enacted by governmental authorities.

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

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

    Conference Call Invitation

    Crombie will provide additional details concerning its second quarter
results on a conference call to be held Friday, August 10, 2007, at 2:00 p.m.
ADT. To join this conference call you may dial (416) 644-3434 or
(800) 588-4942. You may also listen to a live audio web cast of the conference
call by visiting Crombie's website located at www.crombiereit.com. Replay will
be available until midnight August 17, 2007, by dialling (416) 640-1917 or
(877) 289-8525 and entering pass code 21242020#, or on the Crombie website for
90 days after the meeting.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
                  Interim Consolidated Financial Statements
                                  Unaudited
                                June 30, 2007


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

                                                        June 30, December 31,
                                                           2007         2006
                                                    -------------------------
                                                     (unaudited)    (audited)
    Assets
      Commercial properties (Note 5)                $   863,775  $   836,913
      Intangible assets (Note 6)                         61,349       63,021
      Notes receivable (Note 7)                          28,453       41,459
      Other assets (Note 8)                              22,481       21,362
      Cash and cash equivalents                             641        1,180
                                                    -------------------------
                                                    $   976,699  $   963,935
                                                    -------------------------
                                                    -------------------------

    Liabilities and Unitholders' Equity
      Commercial property debt (Note 9)             $   465,868  $   432,963
      Payables and accruals (Note 10)                    23,277       37,432
      Intangible liabilities (Note 11)                   17,143       17,681
      Employee future benefits obligation                 4,295        4,064
      Distributions payable                               2,956        2,781
      Future income tax liability (Note 15)              83,777       80,471
                                                    -------------------------
                                                        597,316      575,392

    Non-controlling interest (Note 12)                  183,051      187,649

    Unitholders' equity                                 196,332      200,894
                                                    -------------------------
                                                    $   976,699  $   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         Six        from
                                  Months      Months      Months    March 23,
                                   Ended       Ended       Ended     2006 to
                                 June 30,    June 30,    June 30,    June 30,
                                    2007        2006        2007        2006
                              -----------------------------------------------
    Revenues

      Property revenue
       (Note 14)              $   35,248  $   31,758  $   70,928  $   35,031
                              -----------------------------------------------
    Expenses
      Property expenses           14,300      12,626      29,346      14,070
      General and
       administrative
       expenses                    2,224       1,687       3,842       1,833
      Interest expense             6,171       5,274      12,105       5,804
      Depreciation of
       commercial properties       3,063       2,771       6,038       3,039
      Amortization of tenant
       improvements/
       lease costs                   656           -       1,021           -
      Amortization of deferred
       financing costs                 -          74           -          78
      Amortization of
       intangible assets           3,437       2,786       6,489       3,054
                              -----------------------------------------------
                                  29,851      25,218      58,841      27,878
                              -----------------------------------------------
                              -----------------------------------------------
    Income before income taxes
     and non-controlling
     interest                      5,397       6,540      12,087       7,153
                              -----------------------------------------------
    Income tax expense
      Current                          -          (9)          -           -
      Future (Note 15)             2,978         410       3,306         450
                              -----------------------------------------------
                                   2,978         401       3,306         450
                              -----------------------------------------------
    Income before
     non-controlling interest      2,419       6,139       8,781       6,703
    Non-controlling interest       1,164       2,972       4,226       3,251
                              -----------------------------------------------
    Net income                $    1,255  $    3,167  $    4,555  $    3,452
                              -----------------------------------------------
                              -----------------------------------------------
    Basic and diluted net
     income per unit          $     0.06  $     0.15  $     0.21  $     0.16
                              -----------------------------------------------
                              -----------------------------------------------
    Weighted average number
     of units outstanding
      Basic                   21,538,422  21,408,184  21,526,382  21,325,118
                              -----------------------------------------------
                              -----------------------------------------------
      Diluted                 21,648,985  21,408,184  21,643,238  21,325,118
                              -----------------------------------------------
                              -----------------------------------------------


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

    Net income                $    1,255  $    3,167  $    4,555  $    3,452
      Net change in
       derivatives designated
       as cash flow hedges          (460)          -        (401)          -
                              -----------------------------------------------
    Other comprehensive income      (460)          -        (401)          -
                              -----------------------------------------------
    Comprehensive income      $      795  $    3,167  $    4,154  $    3,452
                              -----------------------------------------------
                              -----------------------------------------------

    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    -         -          18         -           -        18
    Repayment
     of EUPP
     loans
     receivable    375         -           -         -           -       375
    Net income       -     4,555           -         -           -     4,555
    Distributions    -         -           -         -      (8,947)   (8,947)
    Other
     comprehensive
     income          -         -           -      (401)          -      (401)
              ---------------------------------------------------------------
    Unitholders'
     equity,
     June
     30,
     2007     $205,258  $ 13,960  $       (7) $   (563) $  (22,316) $196,332
              ---------------------------------------------------------------
              ---------------------------------------------------------------

    Unitholders'
     equity,
     March
     23,
     2006     $    Nil  $    Nil  $      Nil  $    Nil  $      Nil  $    Nil
    Unit
     issue
     proceeds,
     net of
     costs of
     $10,224   204,871         -           -         -           -   204,871
    Net
     income          -     3,452           -         -           -     3,452
    Distributions    -         -           -         -      (4,720)   (4,720)
              ---------------------------------------------------------------
    Unitholders'
     equity,
     June
     30,
     2006     $204,871  $  3,452  $      Nil  $    Nil  $   (4,720) $203,603
              ---------------------------------------------------------------
              ---------------------------------------------------------------

    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         Six        from
                                  Months      Months      Months    March 23,
                                   Ended       Ended       Ended     2006 to
                                 June 30,    June 30,    June 30,    June 30,
                                    2007        2006        2007        2006
                              -----------------------------------------------
    Cash flows provided by
    (used in)

    Operating Activities

    Net income                $    1,255  $    3,167  $    4,555  $    3,452
    Items not affecting cash
      Non-controlling interest     1,164       2,972       4,226       3,251
      Depreciation of
       commercial properties       3,063       2,771       6,038       3,039
      Amortization of tenant
       improvements/
       lease costs                   656           -       1,021           -
      Amortization of deferred
       financing costs               108          74         200          78
      Amortization of
       intangible assets           3,437       2,786       6,489       3,054
      Amortization of above
       market leases                 752         665       1,449         729
      Amortization of below
       market leases              (1,111)       (923)     (2,098)     (1,012)
      Accrued rental revenue        (399)       (339)       (706)       (369)
      Unit based compensation          9           -          18           -
      Future income taxes          2,978         410       3,306         450
                              -----------------------------------------------
                                  11,912      11,583      24,498      12,672
    Additions to tenant
     improvements and lease
     costs                        (1,828)     (1,404)     (2,909)     (1,404)
    Change in other non-cash
     operating items (Note 16)    (7,777)      3,936     (17,000)      9,561
                              -----------------------------------------------
    Cash provided by operating
     activities                    2,307      14,115       4,589      20,829
                              -----------------------------------------------
    Financing Activities

    Issue of commercial
     property debt                24,023           -      55,941      82,900
    Issue costs of commercial
     property debt                  (320)          -        (385)          -
    Repayment of commercial
     property debt               (17,647)    (11,763)    (21,273)    (11,921)
    Collection of notes
     receivable                    4,651       1,015      13,006       1,015
    Units issued on initial
     public offering                   -      10,243           -     215,095
    Unit issue costs                   -        (589)          -     (19,668)
    Repayment of EUPP loan
     receivable                      188           -         375           -
    Payment of distributions      (8,727)     (9,125)    (17,074)     (9,125)
                              -----------------------------------------------
    Cash provided (used) by
     financing activities          2,168     (10,219)     30,590     258,296
                              -----------------------------------------------
    Investing Activities

    Business acquisition
     (Note 4)                          -           -           -    (263,542)
    Additions to commercial
     properties                   (3,834)     (7,669)     (5,501)     (7,669)
    Acquisition of commercial
     properties (Note 5)               -           -     (30,217)          -
                              -----------------------------------------------
    Cash used in investing
     activities                   (3,834)     (7,669)    (35,718)   (271,211)
                              -----------------------------------------------
    Increase (decrease) in
     cash and cash
     equivalents during the
     period                          641      (3,773)       (539)      7,914

    Cash and cash equivalents,
     beginning of period               -      11,687       1,180           -
                              -----------------------------------------------

    Cash and cash equivalents,
     end of period            $      641  $     7,914 $      641  $    7,914
                              -----------------------------------------------
                              -----------------------------------------------

    See accompanying notes to the interim consolidated financial statements.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
                 Notes to Consolidated Financial Statements
             (In thousands of dollars, except per unit amounts)
                                 (Unaudited)
                                June 30, 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 second quarter and year to date fiscal 2007, the net defined
benefit pension plans and other benefit plans expense was $116 and $231
respectively (2006 $71 and $71)

    (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 costs 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 six month period ended June 30, 2007,
$17,249 (period March 23, 2006 to June 30, 2006 - $9,125) 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

                                                     June 30, 2007
                                       --------------------------------------
                                                    Accumulated
                                                          Depre-         Net
                                              Cost      ciation   Book Value
                                       --------------------------------------
    Land                               $   173,268  $         -  $   173,268
    Buildings                              696,416       14,658      681,758
    Tenant improvements and
     leasing costs                          10,211        1,462        8,749
                                       --------------------------------------
                                       $   879,895  $    16,120  $   863,775
                                       --------------------------------------
                                       --------------------------------------

                                                   December 31, 2006
                                       --------------------------------------
                                                    Accumulated
                                                          Depre-         Net
                                              Cost      ciation   Book Value
                                       --------------------------------------
    Land                               $   168,087  $         -  $   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.

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

    Commercial property acquired, net:
    -------------------------------------------------------------------------
    Land                                                         $     5,181
    Buildings                                                         20,330
    Intangible assets:
      Lease origination costs                                            985
      Tenant relationships                                             2,244
      Above market leases                                                855
      In-place leases                                                  2,182
    Intangible liabilities
      Below market leases                                             (1,560)
    -------------------------------------------------------------------------
                                                                 $    30,217
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Consideration paid, funded by:
    -------------------------------------------------------------------------
    Floating rate revolving credit facility                      $     9,017
    Mortgage financing                                                20,450
    Application of deposit                                               750
    -------------------------------------------------------------------------
                                                                 $    30,217
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    6) INTANGIBLE ASSETS

                                                  June 30, 2007
                                       --------------------------------------
                                                    Accumulated
                                                         Amorti-         Net
                                              Cost       zation   Book Value
                                       --------------------------------------
    Origination costs for
     existing leases                   $    11,866  $     3,739  $     8,127
    In-place leases                         19,115        6,493       12,622
    Tenant relationships                    33,383        5,004       28,379
    Above market existing leases            15,760        3,539       12,221
                                       --------------------------------------
                                       $    80,124  $    18,775  $    61,349
                                       --------------------------------------
                                       --------------------------------------

                                                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
5.0 years.

    The balance of each note is as follows:
                                                        June 30, December 31,
                                                           2007         2006
                                                    -------------------------
    Capital expenditure program                     $    10,022  $    21,224
    Tax on property transfer                              2,518        2,518
    Interest rate subsidy                                15,913       17,717
                                                    -------------------------
                                                    $    28,453  $    41,459
                                                    -------------------------
                                                    -------------------------


    8) OTHER ASSETS
                                                        June 30, December 31,
                                                           2007         2006
                                                    -------------------------
    Accounts receivable                             $     5,344  $     7,438
    Deposit on property                                   2,000          750
    Accrued straight-line rent receivable                 5,355        4,649
    Prepaid expenses                                      9,041        6,270
    Deferred financing charges                                -        1,578
    Restricted cash                                         741          677
                                                    -------------------------
                                                    $    22,481  $    21,362
                                                    -------------------------
                                                    -------------------------


    9) COMMERCIAL PROPERTY DEBT

                                            Weighted    Weighted    Carrying
                                             average     average      Amount
                                            interest     term to     June 30,
                                   Range        rate    maturity        2007
                              -----------------------------------------------
    Fixed rate mortgages       5.15-5.55%       5.49%  7.9 years  $  366,731
    Financing costs                                                   (1,763)
    Floating rate revolving
     credit facility                5.62%       5.62%  3.0 years     100,900
                                                                  -----------
                                                                  $  465,868
                                                                  -----------
                                                                  -----------

                                            Weighted    Weighted    Carrying
                                             average     average      Amount
                                            interest     term to    December
                                   Range        rate    maturity    31, 2007
                              -----------------------------------------------
    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 June 30, 2007, debt retirements for the next 5 years are:

                                            Floating   Financing
                              Fixed Rate        Rate       Costs       Total
                              -----------------------------------------------
    2008                      $   24,365  $        -  $        -  $   24,365
    2009                          19,438           -           -      19,438
    2010                          68,352     100,900           -     169,252
    2011                          17,794           -           -      17,794
    2012                           9,968           -           -       9,968
    Thereafter                   210,901           -           -     210,901
                              -----------------------------------------------
                                 350,818     100,900           -     451,718
    Financing costs                    -           -      (1,763)     (1,763)
    Fair value debt
     adjustment                   15,913           -           -      15,913
                              -----------------------------------------------
                              $  366,731  $  100,900  $   (1,763) $  465,868
                              -----------------------------------------------
                              -----------------------------------------------

    The floating rate revolving credit facility has a maximum principal amount
of $150,000 and is used by Crombie for working capital purposes and to provide
financing for future acquisitions. It is secured by a pool of first and second
mortgages and negative pledges on certain properties. As at June 30, 2007,
based on the security granted by Crombie, approximately $136,810 is available
for draw down, of which $100,900 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.
    Crombie has entered into a term sheet to refinance the existing mortgage
for Niagara Plaza in Ontario, which matures on September 1, 2007, with a fixed
rate mortgage of $8,100 carrying an interest rate of 5.65% with a twenty year
term.


    10) PAYABLES AND ACCRUALS
                                                        June 30, December 31,
                                                           2007         2006
                                                    -------------------------
    Tenant improvements and capital expenditures    $     1,236  $     7,134
    Property operating costs                             19,308       28,845
    Interest on commercial property debt                  1,648        1,453
    Interest rate swap agreements                         1,085            -
                                                    -------------------------
                                                    $    23,277  $    37,432
                                                    -------------------------
                                                    -------------------------


    11) INTANGIBLE LIABILITIES
                                                   June 30, 2007
                                       --------------------------------------
                                                    Accumulated
                                                         Amorti-         Net
                                              Cost       zation   Book Value
                                       --------------------------------------
    Below market existing leases       $    22,137  $     4,994  $    17,143
                                       --------------------------------------
                                       --------------------------------------

                                                 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           -     4,226         -         -               4,226
    Distributions        -         -         -         -    (8,302)   (8,302)
    Other
     comprehensive
     income              -         -         -      (374)        -      (374)
                  -----------------------------------------------------------
                  -----------------------------------------------------------
    Non-controlling
     interest,
     June 30,
     2007         $191,302  $ 13,013  $    Nil  $   (522) $(20,742) $183,051
                  -----------------------------------------------------------
                  -----------------------------------------------------------

                                                  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           -     3,251         -         -         -     3,251
    Distributions        -         -         -         -    (4,405)   (4,405)
                  -----------------------------------------------------------
                  -----------------------------------------------------------
    Non-controlling
     interest,
     June 30,
     2006         $191,351    $3,251  $    Nil  $    Nil  $ (4,405) $190,197
                  -----------------------------------------------------------
                  -----------------------------------------------------------


    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      -       160           -         -           -       160
            -----------------------------------------------------------------
    Balance,
     June
     30,
     2007   21,648,985  $205,258  20,079,576  $191,302  41,728,561  $396,560
            -----------------------------------------------------------------
            -----------------------------------------------------------------

                                      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            -  $      -           -  $      -           -  $      -

    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)
            -----------------------------------------------------------------
    Balance,
     June
     30,
     2006   21,509,485  $204,871  20,079,576  $191,351  41,589,061  $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 June 30, 2007, there are loans receivable from executives of
$1,101 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 June 29,
2007 was $1,381.
    The compensation expense related to the EUPP during the three months ended
and six months ended June 30, 2007 was $9 and $18 respectively (three months
ended June 30, 2006 - $Nil and the period from March 23, 2006 to June 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 June 30, 2007, there are
no other dilutive items.


    14) PROPERTY REVENUE
                                                                      Period
                                   Three       Three              from March
                                  Months      Months  Six Months    23, 2006
                              Ended June  Ended June  Ended June     to June
                                30, 2007    30, 2006    30, 2007    30, 2006
                              -----------------------------------------------
    Rental revenue
     contractually due
     from tenants             $   34,490  $   31,161  $   69,573  $   34,379

    Accrued rent
     recognized on a
     straight-line
     basis                           399         339         706         369

    Amortization of
     values ascribed
     to below market
     existing leases               1,111         923       2,098       1,012

    Amortization of
     values ascribed
     to above market
     existing leases                (752)       (665)     (1,449)       (729)
                              -----------------------------------------------
                              $   35,248  $   31,758  $   70,928  $   35,031
                              -----------------------------------------------
                              -----------------------------------------------


    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 $1,500 as a result of new income
tax legislation during the second quarter of fiscal 2007. The charge will have
no impact on cash flow or distributions.

    The future income tax liability consists of the following:

    Tax effected temporary differences between          June 30, December 31,
     accounting and tax basis relating to:                 2007         2006
                                                    -------------------------
      Assets and liabilities of incorporated
       subsidiaries                                 $    82,277  $    80,471
      Assets and liabilities of unincorporated
       entities                                           1,500            -
                                                    -------------------------
                                                    $    83,777  $    80,471
                                                    -------------------------
                                                    -------------------------

    The future income tax expense consists of the following:

                                                                      Period
                                   Three       Three              from March
                                  Months      Months  Six Months    23, 2006
                              Ended June  Ended June  Ended June     to June
                                30, 2007    30, 2006    30, 2007    30, 2006
                              -----------------------------------------------
    Provision for income
     taxes at the expected
     rate                     $    1,478  $      410  $    1,806  $      450
    Tax effect from change
     in tax exempt status
     beginning in 2011             1,500           -       1,500           -
                              -----------------------------------------------
                              $    2,978  $      410  $    3,306  $      450
                              -----------------------------------------------
                              -----------------------------------------------


    16) SUPPLEMENTAL CASH FLOW INFORMATION

    (a)  Change in other non-cash operating items

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

      Receivables             $   (2,353) $   (5,709) $    2,094  $   (9,129)

      Prepaid expenses
       and other assets           (7,463)     (3,149)     (4,082)     (2,624)

      Payables and
       other liabilities           2,039      12,794     (15,012)     21,314
                              -----------------------------------------------
                              $   (7,777) $    3,936  $  (17,000) $    9,561
                              -----------------------------------------------
                              -----------------------------------------------

    (b)  Interest
                                                                      Period
                                   Three       Three              from March
                                  Months      Months  Six Months    23, 2006
                              Ended June  Ended June  Ended June     to June
                                30, 2007    30, 2006    30, 2007    30, 2006
                              -----------------------------------------------
    Interest paid             $    6,864  $    5,752  $   13,511  $    6,134
                              -----------------------------------------------
                              -----------------------------------------------


    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 June 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 six months ended June 30, 2007 were $412 and $714 respectively (three
months ended June 30, 2006 - $150 and the period from March 23, 2006 to June
30, 2006 - $165) 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 six months ended June 30, 2007 were $504 and
$1,198 respectively (three months ended June 30, 2006 - $605 and the period
from March 23, 2006 to June 30, 2006 - $671) and were netted against property
expenses. The rental income subsidy during the three months ended and six
months ended June 30, 2007 was $8 and $16 respectively (three months ended
June 30, 2006 - $235 and the period from March 23, 2006 to June 30, 2006 -
$244) and the head lease subsidy during the three months ended and six months
ended June 30, 2007 was $260 and $515 respectively (three months ended June
30, 2006 - $297 and period from March 23, 2006 to June 30, 2006 $347).
    Crombie also earned property revenue of $6,275 for the three months ended
June 30, 2007 and $12,046 for six months ended June 30, 2007 (three months
ended June 30, 2006 - $5,389 and period from March 23, 2006 to June 30, 2006 -
$5,831) 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 June 30, 2007, had a favourable difference of $691 (December 31,
2006 - unfavourable $310) compared to its face value. The change in this
amount has been recognized in other comprehensive income at June 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 $1,776 compared to the face value on June 30, 2007. The change
in these amounts has been recognized in other comprehensive income at June 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
$449,946.


    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 July 20, 2007, Crombie declared distributions of 7.083 cents per
       unit for the period from July 1, 2007 to, and including, July 31,
       2007. The distribution will be payable on August 15, 2007 to
       Unitholders of record as at July 31, 2007.

    b) On July 25, 2007, Crombie completed the acquisition of the
       International Gateway Centre in Fort Erie, Ontario from an unrelated
       third party. The purchase price of the acquisition was $19,200, which
       was satisfied by the assumption of a fixed rate mortgage of $11,600
       with the balance of the purchase price paid using funds from the
       revolving credit facility.


    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
June 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 quarter ended June 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
June 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 11),
distributable income (page 16), adjusted funds from operations ("AFFO") (page
17), debt to gross book value (page 22) and funds from operations ("FFO")
(page 17). Management includes these measures because it believes certain
investors use these measures as a means of assessing relative financial
performance.

    INTRODUCTION

    Financial and Operational Summary
    (in thousands of dollars, except per unit
     amounts and as otherwise noted)

    -------------------------------------------------------------------------
                                   Three       Three         Six         Six
                                  Months      Months      Months      Months
                                   Ended       Ended       Ended       Ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2007        2006        2007      2006(1)
    -------------------------------------------------------------------------
    Property revenue          $   35,248  $   31,758  $   70,928  $   64,488
    Net income                $    1,255  $    3,167  $    4,555  $    6,017
    Basic and diluted net
     income per Unit          $     0.06  $     0.15  $     0.21  $     0.28
    -------------------------------------------------------------------------
                                                                      Period
                                                                        from
                                   Three       Three         Six    March 23
                                  Months      Months      Months        2006
                                   Ended       Ended       Ended          to
                                 June 30,    June 30,    June 30,    June 30,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Distributable
     income                   $   11,139  $   11,509  $   23,259  $   12,594
    Distributable
     income per
     Unit(2)                  $     0.27  $     0.28  $     0.56  $     0.30
    Distributable income
     payout ratio (%)               79.0%       72.3%       74.2%       72.4%
    FFO                       $   12,553  $   12,106  $   25,635  $   13,246
    FFO per unit(2)           $     0.30  $     0.29  $     0.61  $     0.32
    AFFO                      $   10,330  $    9,903  $   21,201  $   10,988
    AFFO per unit(2)          $     0.25  $     0.24  $     0.51  $     0.26
    AFFO payout ratio (%)           85.2%       84.0%       81.4%       83.0%
    -------------------------------------------------------------------------
                                 June 30,    June 30,
                                    2007        2006
    Debt to gross
     book value                     47.2%       43.4%
    Total assets              $  976,699  $  948,508
    Total commercial
     property debt            $  465,868  $  404,623
    -------------------------------------------------------------------------
    (1) The results for the six months ended June 30, 2006 were estimated by
        adding the second quarter 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 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 June 30, 2007,
        41,487,760 for the quarter ended June 30, 2006, 41,722,814 for the
        six months ended June 30, 2007 or 41,404,694 for the period from
        March 23, 2006 to June 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 June 30, 2007, Crombie owned a portfolio
of 49 commercial properties in six provinces, comprising approximately 7.7
million square feet of gross leaseable area.

    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 15 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 eight commercial
properties 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 two additional acquisitions
as at June 30, 2007, are anticipated to add approximately three to five 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 five 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 beginning to explore 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 quarter of 2007, the following two factors have become a
major risk to the interest-rate sensitive REIT business environment: (1)
rising interest rates, due to concern over 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 rising interest rates,
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 experiencing 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 does appear to
be a slowing of the steady decline in yields that has been occurring for some
time in light of the rising interest rate and 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 SECOND QUARTER HIGHLIGHTS

    - Same-asset NOI of $19,476 increased by $344, or 1.8%, compared to
      $19,132 for the same quarter in the prior year due to an increased
      average rent per square foot ($9.81 in 2007 versus $9.53 in 2006) and
      improved occupancy (93.7% in 2007 versus 93.4% in 2006).

    - Overall occupancy at June 30, 2007 decreased slightly to 93.8% when
      compared to 94.1% at March 31, 2007.

    - Property revenue for the quarter ended June 30, 2007 increased by
      $3,490, or 11.0%, to $35,248 compared to $31,758 for the second quarter
      in the prior year. The improvement was due primarily to increased
      average same-asset property results as previously discussed and
      property acquisitions.

    - Net income decreased by $1,912 or 60.4%, to $1,255 for the second
      quarter of 2007, compared to $3,167 for the second quarter in the
      previous year primarily due to the impact of the future tax expenses
      recorded of $2,978, which includes a $1,500 charge related to the
      recent tax legislation impacting income trust structures described in
      "Risk Management". Crombie also realized increased property NOI of
      $1,816 which was offset by increases in general and administration
      expenses of $537, interest expense of $897 and depreciation and
      amortization expenses of $1,525. The increases in interest and
      depreciation expenses are related to the property acquisitions
      completed since June 30, 2006.

    - The distributable income payout ratio was 79.0%, 1.0% below the
      anticipated annual payout ratio of 80%.

    - The AFFO payout ratio was 85.2% which was also below the anticipated
      AFFO payout ratio of 100%. Management anticipates that the
      distribution increases of 6.25% during 2007, combined with the seasonal
      nature of the capital expenditures, will result in the annual payout
      ratio approximating the anticipated payout ratio.

    - Debt to gross book value increased to 47.2% at June 30, 2007 from 47.0%
      at March 31, 2007. This is still well below management's intended
      leverage ratio of 50% to 55% and provides acquisition capacity of
      approximately $150,000.

    OVERVIEW OF THE PROPERTY PORTFOLIO

    Property Profile

    The net book value of the property portfolio represents 88.4% of the total
assets as at June 30, 2007. At June 30, 2007 the property portfolio consisted
of 49 commercial properties that contain approximately 7.7 million square feet
of gross leaseable area ("GLA"). The properties are located in six provinces:
Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island,
Ontario and Quebec.

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

    -------------------------------------------------------------------------
                                                           % of
                                                         Annual
                   Number of         GLA        % of    Minimum
    Province      Properties    (sq. ft.)        GLA       Rent  Occupancy(1)
    -------------------------------------------------------------------------
    Nova Scotia           21   4,128,000        53.7%      47.6%        95.3%
    Ontario               14   1,102,000        14.4%      17.0%        94.3%
    New Brunswick          8   1,133,000        14.8%      11.9%        93.2%
    Newfoundland
     and Labrador          4     886,000        11.5%      17.4%        87.1%
    Prince Edward
     Island                1     293,000         3.8%       3.5%        92.7%
    Quebec                 1     142,000         1.8%       2.6%        95.2%
    -------------------------------------------------------------------------
    Total                 49   7,684,000       100.0%     100.0%        93.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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 five acquisitions in Ontario as at June 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 June 30, 2007.

    -------------------------------------------------------------------------
                                       % of Annual
                                           Minimum       Leased    Number of
    Tenant                                    Rent     (sq. ft.) Locations(1)
    -------------------------------------------------------------------------
    Sobeys food stores(2)                     15.0%   1,114,000           25
    Zellers                                    3.1%     569,000            6
    Empire Theatres                            3.1%     240,000            8
    Nova Scotia Power/Emera                    2.9%     188,000            2
    Shoppers Drug Mart                         2.9%     141,000           12
    CIBC                                       2.3%     163,000           13
    Bell (Alliant)                             2.2%     152,000           13
    Province of Nova Scotia                    2.1%     132,000            9
    Wal-Mart                                   2.1%     243,000            3
    Public Works Canada                        1.9%      72,000            6
    -------------------------------------------------------------------------
    Total                                     37.6%   3,014,000           97
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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 15.0% of the annual minimum rent, no
other tenant accounts for more than 3.1% of Crombie's minimum rent. This
tenant mix ensures that Crombie is not dependent on any single tenant or class
of tenant.

    Lease Maturities

    The following table sets out as of June 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.

    -------------------------------------------------------------------------
                                                                 Average Net
                                             Renewal                Rent per
                               Number of        Area  % of Total  Sq. Ft. at
    Year                          Leases    (sq. ft.)        GLA   Expiry ($)
    -------------------------------------------------------------------------
    2007 (remaining 6 months)         94     292,000         3.8%     $11.51
    2008                             179     687,000         8.9%     $11.08
    2009                             172     814,000        10.6%     $13.32
    2010                             161     671,000         8.7%     $12.33
    2011                             174     985,000        12.8%     $13.64
    Thereafter                       291   3,760,000        49.0%     $11.48
    -------------------------------------------------------------------------
    Total                          1,071   7,209,000        93.8%     $12.03
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    2007 Portfolio Lease Expiries and Leasing Activity

    As at June 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       9.0%
    Average net
     rent per
     sq. ft.      $   9.90  $   7.55  $  11.81  $  11.61  $   9.97
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Committed
     renewals
     (sq. ft.)     141,000   121,000    63,000     6,000   331,000       4.3%
    Average net
     rent per
     sq. ft.      $   9.34  $   6.23  $  11.03  $  18.18  $   8.69
    New leasing
     (sq. ft.)      30,000    93,000    30,000    30,000   183,000       2.4%
    Average net
     rent per
     sq. ft.      $  13.84  $  13.04  $  17.68  $  18.49  $  14.85
    -------------------------------------------------------------------------
    Total renewals
     and new
     leasing
     (sq. ft.)     171,000   214,000    93,000    36,000   514,000       6.7%
    Total average
     net rent
     per
     sq. ft.      $  10.13  $   9.19 $   13.20  $  18.44  $  10.88
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During the six months ended June 30, 2007, Crombie had renewals or entered
into new leases in respect of approximately 514,000 square feet at an average
net rent of $10.88 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 second quarter of 115,000 square feet. Of
the 691,000 square feet of expiries, approximately 117,000 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 first 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                       18%         44%         32%         83%
    Renewal leasing                   82%         56%         68%         17%
    -------------------------------------------------------------------------
    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 June 30, 2007, the portfolio distribution of the GLA by asset type
was as follows:

    -------------------------------------------------------------------------
                                                            % of
                                                          Annual
                   Number of         GLA        % of     Minimum
    Asset Type    Properties    (sq. ft.)        GLA        Rent Occupancy(1)
    -------------------------------------------------------------------------
    Retail                35   4,726,000        61.5%       65.3%       93.3%
    Office                 5   1,029,000        13.4%       13.0%       93.1%
    Mixed-Use              9   1,929,000        25.1%       21.7%       95.4%
    -------------------------------------------------------------------------
    Total                 49   7,684,000       100.0%      100.0%       93.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For purposes of calculating occupancy percentage, Crombie considers
        GLA covered by the head lease agreement in favour of ECL as occupied

    The following table sets out as of June 30, 2007, the square feet under
lease subject to lease maturities during the periods indicated.

    -------------------------------------------------------------------------
    Year                                Retail                  Office
                                (sq. ft.)         (%)   (sq. ft.)         (%)
    -------------------------------------------------------------------------
    2007(1)                      127,000         2.7%     40,000         3.9%
    2008                         373,000         7.9%    132,000        12.8%
    2009                         341,000         7.2%    139,000        13.5%
    2010                         232,000         4.9%     69,000         6.7%
    2011                         318,000         6.7%    351,000        34.1%
    Thereafter                 3,019,000        63.9%    227,000        22.1%
    -------------------------------------------------------------------------
    Total                      4,410,000        93.3%    958,000        93.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Year                                Mixed-Use               Total
                                (sq. ft.)         (%)   (sq. ft.)         (%)
    -------------------------------------------------------------------------
    2007(1)                      125,000         6.5%    292,000         3.8%
    2008                         182,000         9.4%    687,000         8.9%
    2009                         334,000        17.3%    814,000        10.6%
    2010                         370,000        19.2%    671,000         8.7%
    2011                         316,000        16.4%    985,000        12.8%
    Thereafter                   514,000        26.6%  3,760,000        49.0%
    -------------------------------------------------------------------------
    Total                      1,841,000        95.4%  7,209,000        93.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Remaining six 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 6 months)          $     14.28  $      8.94  $      9.48
    2008                               $     11.42  $     10.84  $     10.54
    2009                               $     15.30  $     11.08  $     12.22
    2010                               $     17.70  $     11.09  $      9.21
    2011                               $     17.83  $     13.86  $      9.18
    Thereafter                         $     11.95  $     10.34  $     10.34
    -------------------------------------------------------------------------
    Total                              $     12.98  $     11.80  $     10.22
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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.

    -------------------------------------------------------------------------
                                                             Acqui-    Owner-
                        Property            Date            sition      ship
    Property              Type          Acquired      GLA     Cost  Interest
    -------------------------------------------------------------------------
    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,
    Perth,                               March 7,
    Ontario          Retail - Strip         2007  103,000  $17,900       100%
    -------------------------------------------------------------------------
    Total                                         388,000  $76,462
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Comparison to Previous Year

    Results of operations for the six months ended June 30, 2006 have been
estimated by using actual results for the quarter ended 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        Six Months Ended
                                ---------------------------------------------
    (In thousands
    of dollars,
    except where                 June 30,    June 30,    June 30,    June 30,
    otherwise noted)                2007        2006        2007        2006
    -------------------------------------------------------------------------
    Property revenue          $   35,248  $   31,758  $   70,928  $   64,488
    Property expenses             14,300      12,626      29,346      27,066
    -------------------------------------------------------------------------
    Property net operating
     income ("NOI")               20,948      19,132      41,582      37,422
    -------------------------------------------------------------------------
    NOI margin percentage           59.4%       60.2%       58.6%       58.0%
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative              2,224       1,687       3,842       3,147
      Interest                     6,171       5,274      12,105      10,574
      Depreciation
       and amortization            7,156       5,631      13,548      11,031
    -------------------------------------------------------------------------
                                  15,551      12,592      29,495      24,752
    -------------------------------------------------------------------------
    Income before income
     taxes and non-
     controlling interest          5,397       6,540      12,087      12,670
    -------------------------------------------------------------------------
    Income taxes:
      Current                          -          (9)          -          81
      Future                       2,978         410       3,306         810
    -------------------------------------------------------------------------
                                   2,978         401       3,306         891
    -------------------------------------------------------------------------
    Income before non-
     controlling interest          2,419       6,139       8,781      11,779
    Non-controlling interest       1,164       2,972       4,226       5,762
    -------------------------------------------------------------------------
    Net income                $    1,255  $    3,167  $    4,555  $    6,017
    -------------------------------------------------------------------------

    Basic and diluted net
     income per Unit          $     0.06  $     0.15  $     0.21  $     0.28
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic weighted average
    Units outstanding
     (in 000's)                   21,538      21,408      21,526      21,325
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted weighted average
     Units outstanding
     (in 000's)                   21,649      21,408      21,643      21,325
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income for the second quarter of 2007 of $1,255 decreased by $1,912
from $3,167 for the second quarter of 2006 while year-to-date net income
decreased by $1,462 to $4,555 from the estimated six months of 2006 of $6,017.
The decrease was due to:

    - the $1,500 of future tax expense recorded as a result of the tax
      legislation impacting income trust structures as described in "Risk
      Management";
    - higher interest and depreciation charges due primarily to the five
      property acquisitions to date along with higher general and
      administrative costs incurred for ongoing compliance and executive
      recruiting and other costs; offset in part by
    - higher property NOI from the increased average rent per square foot and
      improved occupancy of the same-asset properties, as well as the impact
      from the five property acquisitions to date.


    Property Revenue and Property Expenses

    -------------------------------------------------------------------------
                                  Three Months Ended        Six Months Ended
    -------------------------------------------------------------------------
                                 June 30,    June 30,    June 30,    June 30,
    (In thousands of dollars)       2007        2006        2007        2006
    -------------------------------------------------------------------------
    Same-asset property
     revenue                  $   33,124 $   31,758   $  67,091   $   64,488
    Acquisition property
     revenue                       2,124           -       3,837           -
    -------------------------------------------------------------------------
    Property revenue          $   35,248 $    31,758   $  70,928  $   64,488
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset property revenue of $33,124 for the quarter ended June 30, 2007
and year-to-date of $67,091 was 4.3% higher than the same quarter in the
previous year and 4.0% higher than the estimated year-to-date period in 2006
due primarily to the increased average rent per square foot ($9.81 in 2007 and
$9.53 in 2006) and the improvement in the occupancy from 93.4% in 2006 to
93.8% in 2007

    -------------------------------------------------------------------------
                                 Three Months Ended        Six Months Ended
    -------------------------------------------------------------------------
                                 June 30,    June 30,    June 30,    June 30,
    (In thousands of dollars)       2007        2006        2007        2006
    -------------------------------------------------------------------------
    Same-asset property
     expenses                 $   13,648  $   12,626  $   28,163  $   27,066
    Acquisition property
     expenses                        652           -       1,183           -
    -------------------------------------------------------------------------
    Property expenses         $   14,300  $   12,626  $   29,346  $   27,066
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset property expenses of $13,648 in the second quarter of 2007 and
$28,163 for year-to-date 2007 were 8.1% higher than the $12,626 for the second
quarter of 2006 and 4.1% higher than the $27,066 for the estimated year-to-
date period in 2006 due to increased recoverable common area expenses
primarily from increased property tax expenses.

    -------------------------------------------------------------------------
                                  Three Months Ended        Six Months Ended
    -------------------------------------------------------------------------
                                 June 30,    June 30,    June 30,    June 30,
    (In thousands of dollars)       2007        2006        2007        2006
    -------------------------------------------------------------------------
    Same-asset property NOI   $   19,476  $   19,132  $   38,928  $   37,422
    Acquisition property NOI       1,472           -       2,654           -
    -------------------------------------------------------------------------
    Property NOI              $   20,948  $   19,132  $   41,582  $   37,422
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset NOI for the second quarter of 2007 grew by 1.8% over the same
period in 2006 while 2007 year-to-date same-asset NOI grew by 4.0% over the
estimated year-to-date period in 2006.
    Property NOI for the quarter ended June 30, 2007 by region was as follows:

    -------------------------------------------------------------------------
                                Property    Property    Property    NOI % of
    (In thousands of dollars)    Revenue    Expenses         NOI     revenue
    -------------------------------------------------------------------------
    Nova Scotia               $   17,976  $    8,071  $    9,905        55.1%
    Newfoundland and Labrador      5,653       1,895       3,758        66.5%
    New Brunswick                  4,365       2,179       2,186        50.1%
    Ontario                        5,261       1,640       3,621        68.8%
    Prince Edward Island           1,168         298         870        74.5%
    Quebec                           825         217         608        73.7%
    -------------------------------------------------------------------------
    Total                     $   35,248  $   14,300  $   20,948        59.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    General and Administrative Expenses

    General and administrative expenses increased by 31.8% during the second
quarter of 2007 to $2,224 and 22.1% year-to-date to $3,842 from the same
periods in the prior year due to professional fees and other public entity
compliance costs along with costs associated with executive recruiting and
other items.

    Interest Expense

    -------------------------------------------------------------------------
                                   Three Months Ended       Six Months Ended
    -------------------------------------------------------------------------
                                  June 30,    June 30,   June 30,    June 30,
    (In thousands of dollars)        2007        2006        2007       2006
    -------------------------------------------------------------------------
    Same-asset interest
     expense                  $     5,169 $     5,274 $    10,374 $   10,574
    Acquisition interest
     expense                        1,002           -       1,731          -
    -------------------------------------------------------------------------
    Interest expense          $     6,171 $     5,274 $    12,105 $   10,574
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset interest expense of $5,169 for period ending June 30, 2007 and
year-to-date $10,374 decreased by 2.0% compared to the second quarter of 2006
and 1.9% when compared to the estimated year-to-date period in 2006 due to the
declining interest portion of debt repayments for the same-assets, partially
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 second quarter of 2007 was $898 (year-to-date - $1,804). The interest rate
subsidy is received by Crombie through monthly repayments by ECL of amounts
due under one of the demand notes issued by ECL to Crombie Developments
Limited ("CDL") prior to the Business Acquisition.


    Depreciation and Amortization

    -------------------------------------------------------------------------
                                  Three Months Ended        Six Months Ended
    -------------------------------------------------------------------------
                                 June 30,    June 30,    June 30,    June 30,
    (In thousands of dollars)       2007        2006        2007        2006
    -------------------------------------------------------------------------
    Same-asset depreciation
     and amortization         $    6,314  $    5,631  $   12,203  $   11,031
    Acquisition depreciation
     and amortization                842           -       1,345           -
    -------------------------------------------------------------------------
    Depreciation and
     amortization             $    7,156  $    5,631  $   13,548  $   11,031
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset depreciation and amortization of $6,314 for the second quarter
of 2007 and year-to-date of $12,203 was 12.1% higher than the second quarter
of 2006 and 10.6% 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        Six Months Ended
    -------------------------------------------------------------------------
                                 June 30,    June 30,    June 30,    June 30,
    (In thousands of dollars)       2007        2006        2007        2006
    -------------------------------------------------------------------------
    Depreciation of commercial
     properties               $    3,063  $    2,771  $    6,038  $    5,441
    Amortization of tenant
     improvements/lease costs        656           -       1,021           -
    Amortization of intangible
     assets                        3,437       2,786       6,489       5,476
    Amortization of deferred
     financing charges                 -          74           -         114
    -------------------------------------------------------------------------
                              $    7,156  $    5,631  $   13,548  $   11,031
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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 second quarter of 2007.


    Future Income Tax

    Crombie has recorded a non-cash charge of $1,500 as a result of new income
tax legislation during the second quarter 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       Three         Six         Six
                                  Months      Months      Months      Months
                                   Ended       Ended       Ended       Ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2007        2006        2007        2006
                              -----------------------------------------------
    Provision for income
     taxes at the expected
     rate                     $    1,478  $      410  $    1,806  $      810
    Tax effect from change
     in tax exempt status
     beginning in 2011             1,500           -       1,500          -
                              -----------------------------------------------
                              $    2,978  $      410  $    3,306  $      810
                              -----------------------------------------------
                              -----------------------------------------------

    Sector Information

    Retail Properties
    -------------------------------------------------------------------------
    (In thousands
     of dollars,
     except as     Quarter ended June 30, 2007   Quarter ended June 30, 2006
     otherwise        Same-    Acqui-               Same-    Acqui-
     noted)          Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $ 18,864  $  2,124  $ 20,988  $ 18,017  $      -  $ 18,017
    Property
     expenses        6,651       652     7,303     6,113         -     6,113
    -------------------------------------------------------------------------
    Property NOI  $ 12,213  $  1,472  $ 13,685  $ 11,904  $      -  $ 11,904
    -------------------------------------------------------------------------
    NOI Margin %      64.7%     69.3%     65.2%     66.1%        -%     66.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (In thousands
     of dollars,           Six months ended             Six months ended
     except as              June 30, 2007                 June 30, 2006
     otherwise        Same-    Acqui-               Same-    Acqui-
     noted)          Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $ 38,509  $  3,832  $ 42,341  $ 37,547  $      -  $ 37,547
    Property
     expenses       14,031     1,183    15,214    13,627         -    13,627
    -------------------------------------------------------------------------
    Property NOI  $ 24,478  $  2,649  $ 27,127  $ 23,920  $      -  $ 23,920
    -------------------------------------------------------------------------
    NOI Margin %      63.6%     69.1%     64.1%     63.7%        -%     63.7%
    -------------------------------------------------------------------------

    The improvement in NOI for the year-to-date was caused by the slight
increase in retail occupancy levels in the same-asset retail properties from
92.5% in 2006 to 93.1% 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 in 2006, 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 second quarter versus 2006.


    Office Properties
    -------------------------------------------------------------------------
    (In thousands
    of dollars,
    except as      Quarter ended June 30, 2007   Quarter ended June 30, 2006
    otherwise         Same-    Acqui-               Same-    Acqui-
    noted)           Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue     $   5,355  $      -  $  5,355  $  5,040  $      -  $  5,040
    Property
     expenses        2,832         -     2,832     2,661         -     2,661
    -------------------------------------------------------------------------
    Property NOI $   2,523  $      -  $  2,523  $  2,379  $      -  $  2,379
    -------------------------------------------------------------------------
    NOI Margin %      47.1%        -%     47.1%     47.2%        -%     47.2%
    -------------------------------------------------------------------------
    (In thousands
    of dollars,           Six months ended              Six months ended
    except as               June 30, 2007                 June 30, 2006
    otherwise         Same-    Acqui-               Same-    Acqui-
    noted)           Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $ 10,773  $      -  $ 10,773  $ 10,092  $      -  $ 10,092
    Property
     expenses        5,740         -     5,740     5,635         -     5,635
    -------------------------------------------------------------------------
    Property NOI  $  5,033  $      -  $  5,033  $  4,457  $      -  $  4,457
    -------------------------------------------------------------------------
    NOI Margin %      46.7%        -%     46.7%     44.2%        -%     44.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The improved occupancy levels and net rent per square foot at the Halifax
Developments properties in Halifax resulted in the improved office NOI result
when compared to the estimated prior year results.

    Mixed-Use Properties
    -------------------------------------------------------------------------
    (In thousands
    of dollars,
    except as      Quarter ended June 30, 2007   Quarter ended June 30, 2006
    otherwise         Same-    Acqui-               Same-    Acqui-
    noted)           Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $  8,905  $      -  $  8,905  $  8,701  $      -  $  8,701
    Property
     expenses        4,165         -     4,165     3,852         -     3,852
    -------------------------------------------------------------------------
    Property NOI  $  4,740  $      -  $  4,740  $  4,849  $      -  $  4,849
    -------------------------------------------------------------------------
    NOI Margin %      53.2%        -%     53.2%     55.7%        -%     55.7%
    -------------------------------------------------------------------------
    (In thousands
    of dollars,           Six months ended              Six months ended
    except as                June 30, 2007                 June 30, 2006
    otherwise         Same-    Acqui-               Same-    Acqui-
    noted)           Asset   sitions     Total     Asset   sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue      $ 17,814  $      -  $ 17,814  $ 16,849  $      -  $ 16,849
    Property
     expenses        8,392         -     8,392     7,804         -     7,804
    -------------------------------------------------------------------------
    Property NOI  $  9,422  $      -  $  9,422  $  9,045  $      -  $  9,045
    -------------------------------------------------------------------------
    NOI Margin %      52.9%        -%     52.9%     53.7%        -%     53.7%
    -------------------------------------------------------------------------

    The slight decline in mixed-use occupancy levels from 96.3% in 2006 to
95.4% 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 NOI result when compared to the estimated prior year year-to-
date results. The decline in occupancy levels in the second quarter of 2007
caused the reduction in mixed-use property NOI and NOI margin percentage due
to the reduced recovery of common area expenses.

    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         Six        from
                                  Months      Months      Months    March 23
                                   Ended       Ended       Ended          to
                                 June 30,    June 30,    June 30,    June 30,
    (In thousands of dollars)       2007        2006        2007        2006
    -------------------------------------------------------------------------
    Net income                $    1,255  $    3,167  $    4,555  $    3,452
    Add back:
    Non-controlling interest       1,164       2,972       4,226       3,251
    Depreciation and
     amortization(1)               6,500       5,557      12,527       6,093
    Future income taxes            2,978         410       3,306         450
    Above-market lease
     amortization                    752         665       1,449         729
    Deduct:
    Below-market lease
     amortization                 (1,111)       (923)     (2,098)     (1,012)
    Straight-line rent
     adjustment                     (399)       (339)       (706)       (369)
    -------------------------------------------------------------------------
    Distributable income      $   11,139  $   11,509  $   23,259  $   12,594
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes amortization of deferred financing charges, tenant
        improvements and leasing commission costs.

    The decline in distributable income for the second quarter of 2007 was due
to higher net operating income (NOI) as outlined previously which was more
than offset by higher interest expenses related to those acquisitions, higher
general and administrative expenses and the depreciation expense for tenant
improvements and leasing costs incurred since June 30, 2006.
    Pursuant to CSA Staff Notice 52-306 "(Revised) Non-GAAP Financial
Measures", non-GAAP measures such as distributable income should be reconciled
to the most directly comparable GAAP measure, which is interpreted to be the
cash flow from operating activities rather than net income. The reconciliation
is as follows:

    -------------------------------------------------------------------------
                                                                      Period
                                   Three       Three         Six        from
                                  Months      Months      Months    March 23
                                   Ended       Ended       Ended          to
                                 June 30,    June 30,    June 30,    June 30,
    (In thousands of dollars)       2007        2006        2007        2006
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                $   2,307  $   14,115  $    4,589  $   20,829
    Add back (deduct):
    Additions to tenant
     improvements and lease
     costs                         1,828       1,404       2,909       1,404
    Change in non-cash operating
     items                         7,777      (3,936)     17,000      (9,561)
    Unit-based compensation
     expense                          (9)          -         (18)          -
    Amortization of deferred
     financing charges              (108)        (74)       (200)        (78)
    Amortization of tenant
     improvements and lease
     costs                          (656)          -      (1,021)          -
    -------------------------------------------------------------------------
    Distributable income      $   11,139  $   11,509  $   23,259  $   12,594
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Adjusted Funds from Operations

    Crombie considers AFFO to be a measure of its cash-generating activities.
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         Six        from
                                  Months      Months      Months    March 23
                                   Ended       Ended       Ended          to
                                 June 30,    June 30,    June 30,    June 30,
    (In thousands of dollars)       2007        2006        2007        2006
    -------------------------------------------------------------------------
    Distributable income      $   11,139  $   11,509  $   23,259  $   12,594
    Less:
    Maintenance capital
     expenditures (net of
     amounts recoverable
     from ECL)                      (311)       (200)     (1,059)       (200)
    Unamortized additions to
     tenant improvements and
     lease costs (net of
     amounts recoverable
     from ECL)                      (498)     (1,406)       (999)     (1,406)
    -------------------------------------------------------------------------
    AFFO                      $   10,330  $    9,903  $   21,201  $   10,988
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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. A reconciliation of GAAP net income to FFO for the
quarter ended June 30, 2007 is as follows:

    -------------------------------------------------------------------------
                                                                      Period
                                   Three       Three         Six        from
                                  Months      Months      Months    March 23
                                   Ended       Ended       Ended          to
                                 June 30,    June 30,    June 30,    June 30,
    (In thousands of dollars)       2007        2006        2007        2006
    -------------------------------------------------------------------------
    Net income                $    1,255  $    3,167  $    4,555  $    3,452
    Add back:
    Non-controlling interest       1,164       2,972       4,226       3,251
    Depreciation and
     amortization(1)               7,156       5,557      13,548       6,093
    Future income taxes            2,978         410       3,306         450
    -------------------------------------------------------------------------
    Funds from operations     $   12,553  $   12,106  $   25,635  $   13,246
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes amortization of deferred financing charges.


    The improvement in FFO for the second quarter of 2007 was due to NOI as
outlined previously, partially offset by higher interest expenses related to
those 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 leasing costs and distributions. In addition, Crombie has the following sources of financing available to finance future growth: secured short-term financing through an authorized $150,000 revolving credit facility, of which $100,900 was drawn at June 30, 2007, and the issue of new equity and mortgage debt, pursuant to the Declaration of Trust. ------------------------------------------------------------------------- Period Three Three Six from Months Months Months March 23 Ended Ended Ended to June 30, June 30, June 30, June 30, (In thousands of dollars) 2007 2006 2007 2006 ------------------------------------------------------------------------- Cash provided by (used in): - Operating activities $ 2,307 $ 14,115 $ 4,589 $ 20,829 - Financing activities 2,168 (10,219) 30,590 258,296 - Investing activities (3,834) (7,669) (35,718) (271,211) ------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents during period 641 (3,773) (539) 7,914 Cash and cash equivalents, beginning of period - 11,687 1,180 - ------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 641 $ 7,914 $ 641 $ 7,914 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Operating Activities -------------------- ------------------------------------------------------------------------- Period Three Three Six from Months Months Months March 23 Ended Ended Ended to June 30, June 30, June 30, June 30, (In thousands of dollars) 2007 2006 2007 2006 ------------------------------------------------------------------------- Cash provided by (used in): Net income and non-cash items $ 11,912 $ 11,583 $ 24,498 $ 12,672 Tenant improvements and leasing costs (1,828) (1,404) (2,909) (1,404) Non-cash working capital (7,777) 3,936 (17,000) 9,561 ------------------------------------------------------------------------- Increase in cash provided by operating activities $ 2,307 $ 14,115 $ 4,589 $ 20,829 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash provided by operating activities has been affected primarily by the changes in non-cash working capital items. The largest change has occurred within payable and accruals which had a $10,755 negative variance from the second quarter of 2006 primarily due to the large number of construction projects that were being undertaken at June 30, 2006 in relation to the properties covered by the non-interest bearing demand notes from ECL. Much of this work is now completed and thus the level of the accruals required has been reduced at June 30, 2007. Comparison to the previous year-to-date results is not possible due to the fact that there were only 100 days of operations during the 2006 year-to-date period and the cash effect of items such as additions to tenants improvements as well as changes in non-cash working capital items cannot be reasonably estimated. Financing Activities -------------------- ------------------------------------------------------------------------- Period Three Three Six from Months Months Months March 23 Ended Ended Ended to June 30, June 30, June 30, June 30, (In thousands of dollars) 2007 2006 2007 2006 ------------------------------------------------------------------------- Cash provided by (used in): Issue of commercial property debt $ 24,023 $ - $ 55,941 $ 82,900 Repayment of commercial property debt (17,647) (11,763) (21,273) (11,921) Collection of ECL notes receivable 4,651 1,015 13,006 1,015 Units issued on initial public offering (net of costs) - 9,654 - 195,427 Payment of distributions (8,727) (9,125) (17,074) (9,125) Other items (net) (132) - (10) - ------------------------------------------------------------------------- Increase in cash provided by (used in) financing activities $ 2,168 $ (10,219) $ 30,590 $ 258,296 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash provided by financing activities for the quarter increased by $12,387 from the second quarter of 2006 primarily due to the proceeds from the mortgage financings on the two properties acquired during the first quarter of 2007, partially offset by the absence of proceeds from the units issued under the over-allotment option in connection with Crombie's initial public offering in 2006. Cash provided by financing activities for the year-to-date period in 2007 were $227,706 lower than the year-to-date period in 2006 primarily due to the absence of proceeds from the initial public offering and associated debt completed in 2006. Cash Used in Investing Activities --------------------------------- Cash used in investing activities for the second quarter of 2007 of $3,834 was used for additions to commercial properties, of which approximately $2,376 was for the eight commercial properties covered by non- interest bearing demand notes from ECL. Cash used during the second quarter of 2006 of $7,669 was used for additions made to commercial properties, of which approximately $7,469 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 $35,718 was used for additions to commercial properties, of which approximately $3,295 for the eight commercial properties covered by non- interest bearing demand notes from ECL. It also included the costs of acquiring the two properties during the first quarter of 2007. 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, $2,376 of the second quarter and $3,295 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 second quarter, Crombie incurred a total of $1,147 on productive capacity enhancements as follows: new pad site for a TD Bank in Brampton, Ontario; new pad site for a Shoppers Drug Mart at Rose City Plaza in Welland, 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 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 Six from Months Months Months March 23 Ended Ended Ended to June 30, June 30, June 30, June 30, (In thousands of dollars) 2007 2006 2007 2006 ------------------------------------------------------------------------- Expenditures: ------------------------------------------------------------------------- Maintenance capital expenditures (net of amounts recoverable from ECL) $ 311 $ 200 $ 1,059 $ 200 ------------------------------------------------------------------------- Productive capacity enhancements $ 3,523 $ 7,469 $ 4,442 $ 7,469 ------------------------------------------------------------------------- Tenant improvements and leasing costs $ 1,828 $ 1,404 $ 2,909 $ 1,404 ------------------------------------------------------------------------- Capital Structure June 30, March 31, December 31, (In thousands of dollars) 2007 2007 2006 ------------------------------------------------------------------------- Commercial property debt $ 465,868 $ 459,704 $ 432,963 Non-controlling interest $ 183,051 $ 186,550 $ 187,649 Unitholders' equity $ 196,332 $ 199,903 $ 200,894 ------------------------------------------------------------------------- Indebtedness ------------ As of June 30, 2007, Crombie had fixed rate mortgages outstanding of $350,818 ($366,731 after including the marked-to-market adjustment of $15,913), carrying a weighted average interest rate of 5.49% (after giving effect to a monthly interest rate subsidy from ECL under an omnibus subsidy agreement) and a weighted average term to maturity of 7.9 years. Crombie has in place an authorized floating rate revolving credit facility of $150,000, $100,900 of which was drawn upon as at June 30, 2007. The revolving credit facility is secured by a pool of first and second mortgages and negative pledges on certain assets. During the second quarter of 2007, the maturity date of the floating rate revolving credit facility was extended to June 30, 2010. During the second quarter of 2007 Crombie finalized two new fixed-rate mortgage agreements and the renegotiation of one existing fixed-rate mortgage agreement which provided $24,023 of net new funds. These funds were used to reduce the Floating Rate Credit Facility. New Mortgage Interest Property Proceeds Rate Term ------------------------------------------------------------------------- Perth Mews, Perth, Ontario $ 12,600 5.43% 15 years Carleton Place Mews, Carleton, Ontario 7,850 5.18% 12 years Burlington Plaza, Burlington, Ontario 3,573 5.32% 12 years ------------------------------------------------------------------------- Total $ 24,023 ------------------------------------------------------------------------- Also during the second quarter of 2007, Crombie entered into a term sheet to refinance the existing mortgage for Niagara Plaza in Ontario, which matures on September 1, 2007, 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, 2011. 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 June 30, 2007 the effect of the mark to market adjustment for the swap resulted in a gain of $460 and year-to-date of $359 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 second quarter of 2007, discussed under "Risk Management", resulted in a loss of $921 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 $ 12,064 $ 12,301 $ 24,365 5.4% 2009 11,863 7,575 19,438 4.3% 2010 11,093 158,159 169,252 37.5% 2011 9,590 8,204 17,794 3.9% 2012 9,968 - 9,968 2.2% Thereafter 61,300 149,601 210,901 46.7% ------------------------------------------------------------------------- Total(1) $ 115,878 $ 335,840 $ 451,718 100.0% ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Excludes marked-to-market adjustment due to interest rate subsidy of $15,913 and the deferred financing costs of $1,763. Unitholders' Equity ------------------- In March 2007 there were 15,760 Units awarded as part of the Employee Unit Purchase Plan. Total Units outstanding at July 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 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 $136,810 is available for drawdown. At June 30, 2007, $100,900 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 47.2% at June 30, 2007 from 47.0% at March 31, 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 at As at As at As at As at as otherwise Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, noted) 2007 2007 2006 2006 2006 ------------------------------------------------------------------------- Mortgages payable $ 366,731 $ 346,437 $ 350,063 $ 326,806 $ 330,234 Revolving credit facility payable 100,900 114,818 82,900 73,238 74,389 ------------------------------------------------------------------------- Total debt outstanding 467,631 461,255 432,963 400,044 404,623 Less: Marked- to-market adjustment due to interest rate subsidy (15,913) (16,811) (17,717) (18,630) (19,549) ------------------------------------------------------------------------- Debt $ 451,718 $ 444,444 $ 415,246 $ 381,414 $ 385,074 ------------------------------------------------------------------------- Total assets $ 976,699 $ 972,737 $ 963,935 $ 936,768 $ 948,508 Add: Deferred financing charges reclassified to commercial property debt beginning January 1, 2007 1,763 1,551 - - - Accumulated depreciation of commercial properties 16,120 12,401 9,061 5,810 3,039 Accumulated amortization of intangible assets 18,775 14,586 10,837 7,231 3,783 Less: Note receivable for interest rate subsidy (15,913) (16,811) (17,717) (18,630) (19,549) Fair value adjustment to future taxes (39,519) (39,519) (39,519) (47,941) (47,941) ------------------------------------------------------------------------- Gross book value $ 957,925 $ 944,945 $ 926,597 $ 883,238 $ 887,840 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Debt-to-gross book value 47.2% 47.0% 44.8% 43.2% 43.4% 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 (In thousands of Three Three Six from dollars, except Months Months Months March 23 per unit amounts Ended Ended Ended to and as otherwise June 30, June 30, June 30, June 30, noted) 2007 2006 2007 2006 ------------------------------------------------------------------------- Distributions to Unitholders $ 4,563 $ 4,302 $ 8,947 $ 4,720 Distributions to Special Voting Unitholders 4,235 4,020 8,302 4,405 ------------------------------------------------------------------------- Total distributions $ 8,798 $ 8,322 $ 17,249 $ 9,125 ------------------------------------------------------------------------- Number of diluted Units 21,648,985 21,408,184 21,643,238 21,325,118 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 41,487,760 41,722,814 41,404,694 ------------------------------------------------------------------------- Distributions per unit $ 0.21 $ 0.20 $ 0.41 $ 0.22 Distributable income payout ratio 79.0% 72.3% 74.2% 72.4% AFFO payout ratio 85.2% 84.0% 81.4% 83.0% ------------------------------------------------------------------------- Crombie had a total of $8,798 in distributions during the second quarter of 2007 ($17,249 year-to-date). The distributions for the year-to-date period ended June 30, 2006 included the distribution payable for the nine days of operations from March 23 to March 31, 2006. The distributable income payout ratio of 79.0% (year-to-date 74.2%) is below the anticipated annual payout ratio of 80% while the AFFO payout ratio of 85.2% (year-to-date 81.4%) is below the anticipated annual payout ratio of 100%. The distributable income result reflects both the improved operating results, due to the acquisitions completed in 2006 and 2007 combined with the improved same-asset property results, while the AFFO result reflects the seasonal cyclicality of the expenditures for maintenance and capital improvements that can occur quarter to quarter. Crombie anticipates that the distribution increases of 6.25% during 2007, combined with the seasonal nature of the capital expenditures, will result in the annual payout ratios approximating the anticipated payout ratios over the remainder of 2007. 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 June 30, 2007, $8,798 (year-to-date 2007 - $17,249) (period from March 23, 2006 to March 31, 2006 - $Nil and period from March 23, 2006 to June 30, 2006 - $9,125) in cash distributions were declared payable by the Board of Trustees to Crombie REIT and Class B LP Unitholders. RELATED PARTY TRANSACTIONS As at June 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 June 30, 2007 were $412 (year-to-date - $714 and three months ended June 30, 2006 - $150, and period from March 23, 2006 to June 30, 2006 - $165) 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 June 30, 2007 were $504 (year-to-date - $1,198 and three months ended June 30, 2006 - $605, and period from March 23, 2006 to June 30, 2006 - $671 ) and were netted against property expenses. The rental income subsidy during the three months ended June 30, 2007 was $8 (year-to-date - $16 and three months ended June 30, 2006 - $235, and period from March 23, 2006 to June 30, 2006 - $244) and the head lease subsidy during the three months ended June 30, 2007 was $260 (year-to-date - $515 and three months ended June 30, 2006 - $297, and period from March 23, 2006 to June 30, 2006 - $347). Crombie also earned property revenue of $6,275 for the three months ended June 30, 2007 (year-to-date - $12,046 and three months ended June 30, 2006 - $5,389, and period from March 23, 2006 to June 30, 2006 - $5,831) 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 quarter, 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 the term sheet entered into on Niagara Plaza 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 has recorded a non-cash charge in the amount of $1,500 to earnings in the second quarter 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 July 20, 2007, Crombie declared distributions of 7.083 cents per unit for the period from July 1, 2007 to, and including, July 31, 2007. The distribution will be payable on August 15, 2007 to Unitholders of record as at July 31, 2007. On July 25, 2007, Crombie completed the acquisition of the International Gateway Centre in Fort Erie, Ontario. The purchase price of the acquisition was $19,200, which was satisfied by the assumption of a fixed rate mortgage of $11,600 with the balance of the purchase price paid using funds from the revolving credit facility. INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Chief Executive Officer and the Chief Financial Officer have evaluated whether there were changes to internal control over financial reporting during the quarter ended June 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 five most recently completed quarters. ------------------------------------------------------------------------- Quarter ending --------------------------------------------------------- (In thousands of dollars, except per Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, unit amounts) 2007 2007 2006 2006 2006 ------------------------------------------------------------------------- Property revenue $ 35,248 $ 35,680 $ 33,717 $ 31,201 $ 31,758 Property expenses 14,300 15,046 15,091 13,053 12,626 ------------------------------------------------------------------------- Property net operating income 20,948 20,634 18,626 18,148 19,132 ------------------------------------------------------------------------- Expenses: General and administrative 2,224 1,618 2,293 1,612 1,687 Interest 6,171 5,934 5,523 5,165 5,274 Depreciation and amortization 7,156 6,392 6,270 5,635 5,631 ------------------------------------------------------------------------- 15,551 13,944 14,086 12,412 12,592 ------------------------------------------------------------------------- Income before income taxes and non-controlling interest 5,397 6,690 4,540 5,736 6,540 ------------------------------------------------------------------------- Income taxes: Current - - - - (9) Future 2,978 328 (1,663) 450 410 ------------------------------------------------------------------------- 2,978 328 (1,663) 450 401 ------------------------------------------------------------------------- Income before non-controlling interest 2,419 6,362 6,203 5,286 6,139 Non-controlling interest 1,164 3,062 2,986 2,550 2,972 ------------------------------------------------------------------------- Net income $ 1,255 $ 3,300 $ 3,217 $ 2,736 $ 3,167 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted net income per unit $ 0.06 $ 0.15 $ 0.15 $ 0.13 $ 0.15 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (In thousands Quarter ending of dollars, --------------------------------------------------------- except per Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, unit amounts) 2007 2007 2006 2006 2006 ------------------------------------------------------------------------- Cash provided by operating activities $ 2,307 $ 2,282 $ 24,717 $ 2,451 $ 14,115 Add back (deduct): Additions to tenant improvements and lease costs 1,828 1,081 1,513 4,385 1,404 Change in non-cash operating items 7,777 9,223 (15,836) 4,122 (3,936) Unit-based compensation expense (9) (9) (27) - - Amortization of deferred financing charges (108) (92) (111) (78) (74) Amortization of tenant improvements/ lease costs (656) (365) (441) - - ------------------------------------------------------------------------- Distributable income $ 11,139 $ 12,120 $ 9,815 $ 10,880 $ 11,509 Less: Maintenance capital expenditures (311) (748) (933) (1,090) (200) Additions to tenant improvements and lease costs (net of amounts recoverable from ECL) (498) (501) (619) (3,128) (1,406) ------------------------------------------------------------------------- AFFO $ 10,330 $ 10,871 $ 8,263 $ 6,662 $ 9,903 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FFO $ 12,553 $ 13,082 $ 10,699 $ 11,293 $ 12,106 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions $ 8,798 $ 8,451 $ 8,346 $ 8,338 $ 8,322 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributable income per unit(2) $ 0.27 $ 0.29 $ 0.24 $ 0.26 $ 0.28 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AFFO per unit(2) $ 0.25 $ 0.26 $ 0.20 $ 0.16 $ 0.24 ------------------------------------------------------------------------- ------------------------------------------------------------------------- FFO per unit(2) $ 0.30 $ 0.31 $ 0.26 $ 0.27 $ 0.29 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions per unit(2) $ 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 Mach 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 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 JUNE 30, 2007 ------------------------------------------------------------------------- GLA Number Property Description (sq. ft.) of Leases Occupancy ------------------------------------------------------------------------- Nova Scotia Aberdeen Shopping Centre Mixed-use 394,000 34 97.9% Amherst Centre Retail - Enclosed 228,000 29 90.5% County Fair Mall Retail - Enclosed 269,000 49 97.0% Downsview Mall Retail - Strip 142,000 15 98.6% Downsview Plaza Retail - Strip 256,000 25 99.4% Evangeline Mall Retail - Enclosed 61,000 7 98.8% Fort Edward Mall Retail - Enclosed 141,000 15 91.0% Highland Square Mall Retail - Enclosed 246,000 52 93.8% New Minas Plaza Retail - Strip 48,000 9 83.1% 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 43 92.8% Halifax Developments -------------------- properties ---------- Barrington Place Mixed-use 186,000 33 97.1% Barrington Tower Office 185,000 1 100.0% CIBC Building Office 208,000 28 91.8% Cogswell Tower Office 204,000 37 96.2% Duke Tower Office 232,000 32 97.2% Scotia Square Mall Mixed-use 286,000 54 99.3% Scotia Square Parkade Other - Parkade N/A N/A N/A Trade Mart Building Mixed-use 253,000 10 93.7% ------------------ ---------------------- 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 15 95.9% Niagara Plaza Retail - Strip 60,000 14 98.0% Perth Mews Retail - Strip 103,000 16 94.6% 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 16 86.9% 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 86,000 11 93.3% Upper James Square Retail - Strip 114,000 23 97.2% Village Square Mall Retail - Strip 69,000 14 89.0% ------------------ ---------------------- Total Ontario 1,102,000 158 ------------------ ---------------------- New Brunswick Carleton Mall Retail - Enclosed 112,000 11 94.8% Charlotte Mall Retail - Enclosed 114,000 9 93.2% Elmwood Plaza Retail - Strip 31,000 9 80.9% Fredericton Mall Retail - Enclosed 313,000 12 97.0% Loch Lomond Place Mixed-use 191,000 20 97.4% 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 80.2% ------------------ ---------------------- Total New Brunswick 1,133,000 103 ------------------ ---------------------- Newfoundland and Labrador Avalon Mall Retail - Enclosed 566,000 137 91.2% Hamlyn Road Plaza Retail - Strip 43,000 14 85.4% Random Square Retail - Enclosed 113,000 20 98.8% Valley Mall Retail - Enclosed 164,000 20 65.9% ------------------ ---------------------- Total Newfoundland and Labrador 886,000 191 ------------------ ---------------------- Prince Edward Island County Fair Mall Retail - Enclosed 293,000 27 92.7% Quebec Greenfield Park Centre Retail - Power Centre 142,000 7 95.2% ------------------------------------------------------------------------- Total 7,684,000 1,071 93.8% ------------------------------------------------------------------------- ------------------------------------------------------------------------- Additional information relating to Crombie, including its latest Annual Information Form, can be found on the SEDAR web site for Canadian regulatory filings at www.sedar.com. Dated: August 9, 2007 Stellarton, Nova Scotia, Canada

For further information:

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


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