Crombie Cover:Layout 1it operates. Crombie unitholders, as well as all other Crombie stakeholders,...

PEI

NOVA SCOTIA

ONTARIO

QUEBEC

NEWFOUNDLANDAND LABRADOR


NEW BRUNSWICK

QUEENSLAND PLAZA, STRATFORD

TOWN CENTRE PLAZA, LASALLEPORT COLBORNE MALL, PORT COLBORNE

INTERNATIONAL GATEWAY CENTRE, FORT ERIE

CHARLOTTE MALL, ST. STEPHEN

CARLETON MALL, WOODSTOCK EVANGELINE MALL, DIGBY

FORT EDWARD MALL, WINDSOR

AMHERST CENTRE, AMHERST

RIVERVIEW MALL (MIXED USE), RIVERVIEW

COUNTY FAIR MALL, SUMMERSIDE

VALLEY MALL, CORNER BROOK

RANDOM SQUARE, CLARENVILLE

UPPER JAMES SQUARE, HAMILTONRYMAL ROAD PLAZA, HAMILTON

ROSE CITY PLAZA, WELLANDSOUTH PELHAM MARKET PLAZA, WELLAND

VILLAGE SQUARE MALL, NEPEANTHE MEWS OF CARLETON PLACE, CARLETON PLACE

PERTH MEWS SHOPPING MALL, PERTH

PROSPECT ST. PLAZA, FREDERICTONUPTOWN CENTRE , FREDERICTON

NEW MINAS PLAZA, NEW MINASCOUNTY FAIR MALL, NEW MINAS

RETAIL

OFFICE

MIXED USE

DOWNSVIEW MALL, LOWER SACKVILLEDOWNSVIEW PLAZA, LOWER SACKVILLE

HALIFAX:BARRINGTON PLACE (MIXED USE)BARRINGTON TOWER (OFFICE)CIBC BUILDING (OFFICE)COGSWELL TOWER (OFFICE)DUKE TOWER (OFFICE)PARK LANE (MIXED USE)SCOTIA SQUARE MALL (MIXED USE)SCOTIA SQUARE PARKADE (PARKADE)BRUNSWICK PLACE (MIXED USE)WEST END MALL (MIXED USE)

HIGHLAND SQUARE MALL, NEW GLASGOWABERDEEN SHOPPING CENTRE (MIXED USE), NEW GLASGOW

PRINCE STREET PLAZA, SYDNEYSYDNEY SHOPPING CENTRE, SYDNEY

ELMWOOD PLAZA, MONCTONTERMINAL CENTRE (OFFICE), MONCTON

AVALON MALL, ST. JOHN’SHAMLYN ROAD PLAZA, ST. JOHN’S

GREENFIELD PARK CENTRE,LONGUEUIL

LOCH LOMOND PLACE(MIXED USE), SAINT JOHN

TAUNTON & WILSON PLAZA, OSHAWABRAMPTON PLAZA, BRAMPTONBURLINGTON PLAZA, BURLINGTON318 ONTARIO STREET, ST. CATHARINESNIAGARA PLAZA, NIAGARA FALLS

BROSSARD, QUEBEC

Fifty-two properties comprising 8.0 million

square feet of GLA, located in all four provinces of

Atlantic Canada as well as Ontario and Quebec

www.crombiereit.com 2 0 0 7 A N N U A L R E P O R T

R E I T

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P R O F I L E

Crombie REIT is the largest commercial landlord in

Atlantic Canada. Crombie owns, manages and maintains

income-producing enclosed and strip shopping centres,

as well as freestanding food stores, office buildings and

mixed-use properties, with a growth strategy focused

primarily on the acquisition of retail properties.

At the 2007 calendar year end, Crombie owned a portfolio of 52 commercial properties in

six provinces, comprising approximately 8.0 million square feet of gross leasable area (GLA),

with an overall occupancy rate of 93.6 percent. Retail properties represent 38 of the Trust’s

52 properties, accounting for approximately 63 percent of its total GLA and approximately

66 percent of its rental revenues. Crombie is an unincorporated, open-ended real estate

investment trust established under, and governed by, the laws of the Province of Ontario.

B OA R D O F T R U S T E E S

J. Stuart BlairTrustee, President and Chief Executive Officer

Frank C. SobeyTrustee and Chairman

Paul D. SobeyTrustee

David G. GrahamIndependent Trustee

David J. HennigarIndependent Trustee

John E. LatimerIndependent Trustee

Kenneth C. RoweIndependent and Lead Trustee

Elisabeth StrobackIndependent Trustee

David LeslieIndependent Trustee

O F F I C E R S

J. Stuart BlairPresident and Chief Executive Officer

Scott M. BallVice President, Chief Financial Officerand Secretary

Scott R. MacLeanVice President Operations

Patrick G. MartinVice President Leasing

C R O M B I E R E I T

Head Office:115 King St. Stellarton, Nova Scotia, B0K 1S0Telephone: (902) 755-8100Fax: (902) 755-6477Internet: www. crombiereit.com

I N V E S TO R R E L AT I O N S A N D I N Q U I R I E S

Unitholders, analysts, and investorsshould direct their financial inquiries or requests to: Scott M. Ball, CAVice President, Chief Financial Officer and SecretaryEmail: [email protected]

Communication regarding investorrecords, including changes of address orownership, lost certificates or tax forms,should be directed to the Company’stransfer agent and registrar, CIBC MellonTrust Company.

S TO C K E XC H A N G E L I S T I N G

Toronto Stock Exchange

U N I T S Y M B O L

REIT Trust Units – CRR.UN

D I S T R I B U T I O N R E CO R D A N D PAY M E N T D AT E S F O RF I S C A L 2 0 0 7

Record Date Payment Date

January 31, 2007 February 15, 2007

February 28, 2007 March 15, 2007

March 31, 2007 April 13, 2007

April 30, 2007 May 15, 2007

May 31, 2007 June 15, 2007

June 30, 2007 July 16, 2007

July 31, 2007 August 15, 2007

August 31, 2007 September 17, 2007

September 30, 2007 October 15, 2007

October 31, 2007 November 15, 2007

November 30, 2007 December 17, 2007

December 31, 2007 January 15, 2008

T R A N S F E R AG E N T

CIBC Mellon Trust CompanyInvestor CorrespondenceP.O. Box 7010Adelaide Street Postal StationToronto, Ontario, M5C 2W9Telephone: (800) 387-0825Email: [email protected]

CO U N S E L

Stewart McKelvey Halifax, Nova Scotia

AU D I TO R S

Grant Thornton LLPNew Glasgow, Nova Scotia

M U LT I P L E M A I L I N G S

If you have more than one account, youmay receive a separate mailing for each. If this occurs, please contact CIBC MellonTrust Company at (800) 387-0825 toeliminate the multiple mailings.

A N N UA L A N D S P E C I A LM E E T I N G

April 14, 200810:00 a.m. (Atlantic Standard Time)Empire Studio 7610 East River RoadNew Glasgow, Nova Scotia

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C O R P O R A T E A N D U N I T H O L D E R I N F O R M A T I O N

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1C R O M B I E R E I T 2 0 0 7 A N N U A L R E P O R T

C R E A T I N G V A L U E F O R U N I T H O L D E R Sunitholder d ist r ibut ions +6.25%acquis i t ion growth +8.0%

O P E R A T I N G A N D F I N A N C I A L H I G H L I G H T S

In 2007 we continued to build on our proven platform. We…

• Increased unitholder distributions twice, most recently to $0.85 per unit annualized, representing a 6.25%

increase since Crombie completed its initial public offering (IPO) on March 23, 2006;

• Completed the acquisition of five retail properties in 2007, adding approximately 403,000 square feet of GLA

to the portfolio;

• Entered into new leases or renewals representing 99% of 2007 scheduled lease expiries at an average of

$11.57 per square foot, compared with expiries at an average $9.97 per square foot;

• Improved same-asset property net operating income (NOI) by 4.8% compared with 2006 results, due primarily

to increased average rent;

• Achieved unitholder distributions at a payout ratio of 100.4% of AFFO, in line with the targeted payout ratio of 100%;

• Maintained a conservative leverage ratio of 48.1%, compared with the targeted leverage of 50% to 55%, well

within the 60% maximum permitted by Crombie’s Declaration of Trust;

• Maintained financial strength:

• minimal exposure (4.2%) to floating rate debt

• minimal exposure to debt maturity risk (3% in 2008; $Nil in 2009)

• 7.4 years weighted average maturity of debt

• 3.00 times interest service coverage ratio

• 1.86 times debt service coverage ratio

• During the fourth quarter of 2007, Crombie management and advisors undertook an extensive review of our

organizational structure and operations to support our assertion that it meets the REIT criteria at January 1, 2008.

ANNUALIZEDPAYOUT

SQUARE FEET(MILLIONS)

$.80 Annualized MARCH 23 ‘06

$.85 Annualized MAY 31 ‘07

7.1

7.2

7.3

7.4

7.5

7.6

7.7

7.8

7.9

8.0

IPO MARCH 23 ‘06

BRAMPTON PLAZA(BRAMPTON, ON)

TAUNTON & WILSON PLAZA

(OSHAWA, ON)OCTOBER 2 ‘06

BURLINGTON PLAZA(BURLINGTON, ON)

DECEMBER 20 ‘06

THE MEWS OFCARLETON PLACE

(CARLETON PLACE, ON)JANUARY 17 ‘07

PERTH MEWSSHOPPING MALL

(PERTH, ON)MARCH 7 ‘07

INTERNATIONALGATEWAY CENTRE

(FORT ERIE, ON)JULY 26 ‘07

IGA FOOD STORE(BROSSARD, QC)

AUGUST 24 ‘07

TOWN CENTRE PLAZA(LASALLE, ON)

OCTOBER 15 ‘07

$0.79

$0.80

$0.81

$0.82

$0.83

$0.84

$0.85

$0.86

$0.87

$0.88

$.83 Annualized MARCH 31 ‘07

FEBRUARY 28 ’08

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2 C R O M B I E R E I T 2 0 0 7 A N N U A L R E P O R T

C H A I R M A N ’ S M E S S A G E

In leading off this year’s annual report to unitholders, it’s

my pleasure, as chairman of Crombie REIT, to point to the

solid gains in the business that the management team

delivered in 2007. Crombie’s mandate, since the

foundation of the original business more than four

decades ago, has been to grow its asset base and increase

its long-term value through active management.

This year’s results – and the underlying financial strength of the organization – are extremely

gratifying and reflect considerable success in meeting the objectives of our business mandate.

As important, the strong performance of Crombie since its March 2006 initial public offering has

enabled the trustees to authorize two increases in monthly cash distributions to unitholders. In

all, Crombie paid unitholder distributions of $35 million relating to its 2007 activities.


As a public REIT, Crombie carries the additional requirements of making steady and reliable cash distributions to

unitholders and ensuring that acquisitions are accretive to cash available for distribution. To enhance Crombie’s

portfolio growth opportunities, while limiting exposure to the inherent risks of development, Crombie partners with

Empire Company Limited (“Empire”) through a development agreement.

In this regard, Crombie is materially assisted in the implementation of its growth strategies by its continuing

relationship with Empire, which provides Crombie with a preferred right to acquire any retail properties to be

divested by ECL Developments Limited (ECL), the real estate development subsidiary of Empire, as well as familiarity

with the Sobeys food stores business and its real estate operations.

The additional properties acquired during the year have helped to extend the coverage of Crombie in Ontario and

Quebec and have further solidified Crombie’s position as a leading Canadian retail landlord – a position we fully

intend to exploit and advance in the months and years to come.

We firmly believe that Crombie has much more profitable growth ahead, and that unitholders can and should

expect Crombie to leverage the successes of its early days as a publicly held REIT to become an even larger and

more successful commercial landlord.

As it has in the past, Crombie’s future success will be based on its commitment to excellence in all its dealings,

whether with employees, tenants, suppliers, lenders, unitholders or neighbours in the communities in which

it operates. Crombie unitholders, as well as all other Crombie stakeholders, can look forward to continued

long-term success.

Frank C. Sobey

Chairman

C R O M B I E R E I T 2 0 0 7 A N N U A L R E P O R T 3



M E S S A G E T O U N I T H O L D E R S

In 2007 Crombie REIT completed its first full year of

operations under public ownership, during which we

continued to build the portfolio through further property

acquisitions and to deliver investor value with two

increases in cash distributions to unitholders.

Our portfolio now encompasses approximately 8.0 million square feet of GLA in 52 commercial

properties in six provinces. These properties are well located in their markets and, as a result,

they attract and retain the most desirable tenants.

Our tenant base is widely diversified, with more than 1,100 individual tenancies. Among our

tenants, Sobeys operates food stores at 28 locations, representing 15.9 percent of rental revenue;

however, no other tenant represents more than 3.2 percent of rental revenue.

M A I N TA I N I N G A LO N G - T E R M P E R S P E C T I V E

As we have stressed, our approach to managing the portfolio is to maintain a long-term

perspective. We regularly re-invest approximately 3 to 5 percent of property revenue in our

properties to ensure a high standard of productive capacity, so they continue to appeal to

current and prospective tenants, as well as to their customers. This strategy helps ensure a high

degree of leased occupancy and, thereby, stability of rental revenues.

We also re-invest to expand or enhance our properties to generate increased rental revenues.

In 2007, we expanded a site at Rose City Plaza in Welland, ON; we created a new pad site at

Brampton Plaza, Brampton, ON; and we improved a satellite building at Avalon Mall in St. John’s,

NL. All of these projects are expected to enhance the portfolio’s long-term value.

Scott MacLeanVice President

Operations

Scott BallVice President, Chief Financial

Officer and Secretary

Jeff DownsDirector of Finance

F. Michael McGrathHuman Resource Manager

Patrick MartinVice President

Leasing


F I V E ACC R E T I V E ACQ U I S I T I O N S I N 2 0 0 7

Crombie also seeks to grow its business through accretive acquisitions. In 2007 we completed five such transactions,

further strengthening the retail sector of our business. These were The Mews of Carleton Place (Carleton Place, ON),

Perth Mews Shopping Mall (Perth, ON), International Gateway Centre (Fort Erie, ON), Brossard-Longueuil (Brossard, QC)

and Town Centre Plaza (LaSalle, ON).

These acquisitions, together with the three completed in 2006, increased the portfolio’s GLA by more than

600,000 square feet, representing an increase of more than 8 percent since our March 2006 IPO. These acquisitions

will add approximately four to six cents per unit in cash available for distribution over their first full year of operation

in the portfolio.

An important facet of our growth strategy is a 10-year development agreement with ECL, through which Crombie

enjoys a preferential right to acquire retail properties developed by ECL, subject to approval of our independent

trustees. Of the eight acquisitions completed between the IPO and December 31, 2007, two were from ECL and

six were through non-related third parties. Crombie’s long-term stability and ability to complete acquisitions

advantageously are enhanced by the continuing investment of Empire, which holds a 48.1 percent indirect interest

in Crombie.

S O L I D G R O W T H I N P O R T F O L I O O P E R AT I O N S

The following briefly summarizes our performance for the year:

New leases and renewals amounted to approximately 681,000 square feet, at an average net rental rate of $11.57

per square foot, compared with scheduled expiries of approximately 691,000 square feet, at an average of $9.97. As

a result, overall portfolio occupancy was maintained at 93.6 percent, consistent with a year earlier and 93.0 percent

at the IPO.

Property revenue increased to $143.6 million, from $129.4 million for the estimated year ended December 31, 2006,

due primarily to property acquisitions completed and rental rate increases.

Same-asset net operating income (NOI) for the year grew by 4.8 percent over the estimated year ended 2006 due to

higher average net rent per square foot results.

In 2007 Crombie paid distributions to unitholders totalling $35 million.

At the year end, Crombie’s ratio of debt to gross book value was 48.1, up slightly

from December 31, 2006. This increase was attributable to the financing for the five

acquisitions completed during the year. This ratio, however, remains well below

management’s targeted leverage ratio of 50 to 55 percent, and the maximum

60 percent as defined in the Declaration of Trust.

On your behalf, I extend thanks to all Crombie employees for their commitment and

hard work through the year, and to the members of the Board of Trustees for their

encouragement and wise counsel.

In looking ahead to the balance of 2008 and beyond, I would like to

thank our unitholders for their continuing interest and support,

and to express the continuing dedication of everyone at

Crombie to delivering increased value for unitholders.

J. Stuart Blair

President and Chief Executive Officer




G R O W I N G I N O U R M A R K E T S

Crombie was established with the belief that a focus on

retail properties offers significant advantages over other

types of real estate ownership – advantages that are

important to investors seeking a generally conservative

approach to management and reliable cash distributions.

Thus, from the outset, Crombie has focused on anchored strip plazas and freestanding food

stores, which now account for approximately 66 percent of rental revenue. This will continue to

be our primary focus going forward.

Date Acquired: October 2, 2006Brampton Plaza (Brampton, ON)GLA (sq. ft.): 66,000Acquisition Cost ($000): $13,160Capitalization Rate: 8.3%

>

Date Acquired: December 20, 2006Burlington Plaza (Burlington, ON)

GLA (sq. ft.): 56,000Acquisition Cost ($000): $14,200

Capitalization Rate: 7.4%

>

>

Date Acquired: October 2, 2006Taunton & Wilson Plaza (Oshawa, ON)GLA (sq. ft.): 83,000Acquisition Cost ($000): $18,725Capitalization Rate: 7.4%



And, as discussed in this annual report’s Message to Unitholders, we take a long-term perspective in managing our

properties to ensure their continuing productive capacity and ability to attract and retain the best tenants.

Retail-anchored strip plazas are typically less affected by swings in consumer spending than other types of real

estate. Consumers often visit such properties – particularly when they are anchored by food stores – several times a

week to shop for groceries and to take care of other day-to-day requirements, such as banking, drugstore needs and

other services. These consumer goods and services may be considered less discretionary than other purchases and,

therefore, less sensitive to large-scale economic trends. As a result, the retail properties in Crombie’s portfolio

provide a stable business platform that reliably generates rental revenues on which to base unitholder distributions,

while we gain exposure to other property segments and balance the portfolio through our other holdings.

Notwithstanding a degree of turbulence in capital markets towards the end of 2007, retail market trends remained

steady throughout of the year, supported by low unemployment and higher wage growth. Atlantic Canada, where

Crombie has its strongest retail presence, continued to attract retailers seeking to serve a large, regional market that

is characterized by less variability in business conditions than other regions of Canada.

Date Acquired: March 7, 2007Perth Mews Shopping Mall (Perth, ON)GLA (sq. ft.): 103,000Acquisition Cost ($000): $17,900Capitalization Rate: 7.3%

Date Acquired: January 17, 2007The Mews of Carleton Place (Carleton Place, ON)GLA (sq. ft.): 80,000Acquisition Cost ($000): $11,800Capitalization Rate: 7.9%

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G R O W I N G I N O U R M A R K E T S

To drive both portfolio growth and increases in distributable cash for unitholders, Crombie has acquired eight

additional retail properties in Ontario and Quebec since the completion of its IPO in March 2006 – three in 2006

and five in 2007 – totalling more than 600,000 square feet of GLA. These acquisitions have increased the size of

the portfolio by 8 percent since the IPO and will provide incremental cash available for distribution as they

complete their first 12 months of operations in the Crombie portfolio. As a matter of policy, we look to all

acquisitions to be accretive to cash available for distribution, virtually from the outset. Going forward, we are

looking for opportunities to enhance their revenue-generating abilities through lease-up of vacant space, rental

rate increases or property enhancements.

Further opportunities to increase distributable cash from the acquired properties arise from site expansion

potential. For example, in Brossard, QC, additional site density allows for future development of a 10,000-square-foot

expansion to the IGA store and additional tenants; at Fort Erie, ON, additional site density will permit development

of an additional 10,000-square-foot freestanding building, 25,000 square feet of multi-tenant retail strip

development and a 10,000-square-foot expansion to the Sobeys food store on the property. These opportunities,

none of which was factored into the original purchase calculations, constitute further low-cost portfolio expansion

potential available to benefit Crombie and its unitholders.

Date Acquired: July 26, 2007International Gateway Centre (Fort Erie, ON)GLA (sq. ft.): 93,000Acquisition Cost ($000): $19,200Capitalization Rate: 6.9%

<

Date Acquired: August 24, 2007IGA Food Store (Brossard, QC)GLA (sq. ft.): 39,000Acquisition Cost ($000): $7,300Capitalization Rate: 6.7%

>

Date Acquired: October 15, 2007Town Centre Plaza (LaSalle, ON)

GLA (sq. ft.): 88,000Acquisition Cost ($000): $12,700

Capitalization Rate: 8.0%

>




Crombie Property Portfolio December 31, 2007

Property Description GLA (sq. ft.) Number of Leases Occupancy

Nova ScotiaAberdeen Shopping Centre Mixed-use 394,000 34 97.1%Amherst Centre Retail – Enclosed 228,000 30 92.1%County Fair Mall Retail – Enclosed 269,000 50 97.1%Downsview Mall Retail – Strip 142,000 15 98.6%Downsview Plaza Retail – Strip 256,000 25 99.1%Evangeline Mall Retail – Enclosed 61,000 6 78.1%Fort Edward Mall Retail – Enclosed 141,000 15 91.0%Highland Square Mall Retail – Enclosed 246,000 50 93.3%New Minas Plaza Retail – Strip 52,000 9 77.0%Park Lane Mixed-use 267,000 67 88.4%Prince Street Plaza Retail – Strip 71,000 12 98.1%Sydney Shopping Centre Retail – Enclosed 250,000 33 95.1%West End Mall Mixed-use 201,000 45 86.1%

Halifax Developments propertiesBarrington Place Mixed-use 186,000 31 97.4%Barrington Tower Office 185,000 1 100.0%Brunswick Place Mixed-use 253,000 10 94.3%CIBC Building Office 207,000 30 95.5%Cogswell Tower Office 203,000 36 97.4%Duke Tower Office 232,000 31 96.4%Scotia Square Mall Mixed-use 286,000 55 99.7%Scotia Square Parkade Other – Parkade N/A N/A N/A

Total Nova Scotia 4,130,000 585 94.9%

Ontario318 Ontario Street Freestanding Store 47,000 1 100.0%Brampton Plaza Retail – Strip 70,000 3 100.0%Burlington Plaza Retail – Strip 56,000 9 93.2%Carleton Place Mews Retail – Strip 80,000 14 94.2%International Gateway Centre Retail – Strip 93,000 16 97.9%Niagara Plaza Retail – Strip 61,000 14 98.0%Perth Mews Retail – Strip 103,000 16 96.6%Port Colborne Mall Retail – Enclosed 136,000 8 91.4%Queensland Plaza Retail – Strip 48,000 8 96.0%Rose City Plaza Retail – Strip 126,000 14 77.2%Rymal Road Plaza Retail – Strip 65,000 10 97.3%South Pelham Market Plaza Retail – Strip 63,000 10 94.3%Taunton & Wilson Plaza Retail – Strip 87,000 11 93.4%Town Centre Plaza Retail – Strip 88,000 16 91.8%Upper James Square Retail – Strip 114,000 23 98.4%Village Square Mall Retail – Strip 69,000 16 100.0%

Total Ontario 1,306,000 189 94.1%

New BrunswickCarleton Mall Retail – Enclosed 113,000 13 95.3%Charlotte Mall Retail – Enclosed 113,000 9 93.2%Elmwood Plaza Retail – Strip 31,000 9 80.9%Loch Lomond Place Mixed-use 191,000 17 95.6%Prospect Street Plaza Retail – Strip 21,000 2 100.0%Riverview Mall Mixed-use 151,000 23 94.0%Terminal Centres Office 200,000 16 65.9%Uptown Centre Retail – Enclosed 320,000 14 98.6%

Total New Brunswick 1,140,000 103 90.4%

Newfoundland and LabradorAvalon Mall Retail – Enclosed 565,000 138 94.1%Hamlyn Road Plaza Retail – Strip 43,000 13 82.3%Random Square Retail – Enclosed 113,000 20 98.8%Valley Mall Retail – Enclosed 164,000 21 75.1%

Total Newfoundland and Labrador 885,000 192 90.6%

Prince Edward IslandCounty Fair Mall Retail – Enclosed 301,000 32 92.7%

QuebecBrossard-Longueuil Freestanding Store 39,000 1 100.0%Greenfield Park Centre Retail – Power Centre 153,000 8 95.2%

Total Quebec 192,000 9 96.4%

Total 7,954,000 1,110 93.6%

Stellarton, Nova Scotia, Canada


The Board of Trustees represents the interests of all

unitholders in setting the strategic direction of the

organization, hiring management, and supervising and

evaluating management in the performance of its duties.

Good governance – provided by an engaged and effective board – relies on more than

structures and processes. Good governance relies on board members with the experience, skill

in management and finance, time and independence necessary to fulfill their obligations fully.

Crombie unitholders can be assured that the members of the Board of Trustees represent the

highest standards of probity and that they represent unitholder interests with integrity. To

assure alignment with unitholder interests, Crombie’s trustees are required to hold significant

investments in Crombie units.

Crombie’s Board exercises its responsibilities primarily through the operation of four

committees: Audit, Governance and Nominating, Investment, and Human Resources.

As mandated, the Board has both a chairman and a lead trustee, and all

members of the Audit Committee are financially literate. The Human

Resources Committee includes a related trustee, proportionately

reflecting Empire’s retained interest in Crombie. The one related

member of the Investment Committee is a non-voting member.

Accordingly, we are pleased to endorse both the annual

financial and operating results of Crombie as reported in this

document and the conduct of the business.

In closing we gratefully acknowledge the many contributions of

independent trustees William T. Brock and John B. Roy, who

retired from the Board of Crombie during the year, having

served since its foundation in 2006.

G O V E R N A N C E

Frank C. Sobey

Chairman

Kenneth C. Rowe

Lead Trustee10 C R O M B I E R E I T 2 0 0 7 A N N U A L R E P O R T



M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S

12 FORWARD-LOOKING INFORMATION

13 NON-GAAP FINANCIAL MEASURES

13 INTRODUCTION

16 2007 HIGHLIGHTS

17 OVERVIEW OF THE PROPERTY PORTFOLIO

20 2007 RESULTS OF OPERATIONS

24 OTHER 2007 PERFORMANCE MEASURES

26 LIQUIDITY AND CAPITAL RESOURCES

31 FOURTH QUARTER RESULTS

35 OTHER FOURTH QUARTER PERFORMANCE MEASURES

36 CHANGES IN ACCOUNTING POLICIES

37 RELATED PARTY TRANSACTIONS

38 CRITICAL ACCOUNTING ESTIMATES

39 FUTURE CHANGES IN SIGNIFICANT ACCOUNTING POLICIES

39 CONTINGENCIES

40 RISK MANAGEMENT

44 SUBSEQUENT EVENTS

44 INTERNAL CONTROL OVER FINANCIAL REPORTING

45 QUARTERLY INFORMATION


C R O M B I E R E I T 2 0 0 7 A N N U A L R E P O R T12

The following is Management’s Discussion and Analysis (“MD&A”) of the consolidated financial condition and results of operations of

Crombie Real Estate Investment Trust (“Crombie”) for the year and quarter ended December 31, 2007, with a comparison to the

financial condition and results of operations for the comparable period in 2006. The 2006 annual results were estimated by using

actual results for the quarters ended June 30, 2006, September 30, 2006 and December 31, 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 audited consolidated financial statements and

accompanying notes for the year ended December 31, 2007, and the audited consolidated financial statements and accompanying

notes for the period March 23, 2006 to December 31, 2006. Information about Crombie can be found on SEDAR at www.sedar.com.

FOR WARD-LOOKING INFORMATIONThis MD&A contains forward-looking statements that reflect the current expectations of management of Crombie about Crombie‘s

future results, performance, achievements, prospects and opportunities. Wherever possible, words such as “may,” “will,” “estimate,”

“anticipate,” “believe,” “expect,” “intend” and similar expressions have been used to identify these forward-looking statements. These

statements reflect current beliefs and are based on information currently available to management of Crombie. Forward-looking

statements necessarily involve known and unknown risks and uncertainties. A number of factors, including those discussed under

“Risk Management,” could cause actual results, performance, achievements, prospects or opportunities to differ materially from the

results discussed or implied in the forward-looking statements. These factors should be considered carefully and a reader should not

place undue reliance on the forward-looking statements. There can be no assurance that the expectations of management of

Crombie will prove to be correct.

In particular, certain statements in this document discuss Crombie’s anticipated outlook of future events. These statements include,

but are not limited to:

i) the development of new properties under a development agreement, which development activities are undertaken by a related

party and thus are not under the direct control of Crombie and whose activities could be impacted by real estate market cycles,

the availability of labour and general economic conditions;

ii) the acquisition of accretive properties and the anticipated extent of the accretion of any acquisitions, which could be impacted

by demand for properties and the effect that demand has on acquisition capitalization rates and changes in interest rates;

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

decisions;

iv) generating improved rental income and occupancy levels, which could be impacted by changes in demand for Crombie’s

properties, tenant bankruptcies, the effects of general economic conditions and competitive supply of retail or office locations in

proximity to Crombie locations;

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

financing opportunities;

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

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

viii) anticipated distributions and payout ratios, which could be impacted by seasonality of capital expenditures, results of operations

and capital resource allocation decisions; and

ix) anticipated accretion levels and debt to gross book value ratios relating to a portfolio acquisition, which are dependent on

financing risks.

Readers are cautioned that such forward-looking statements are subject to certain risks and uncertainties that could cause actual

results to differ materially from these statements. Crombie can give no assurance that actual results will be consistent with these

forward-looking statements.


(In thousands of dollars, except per unit amounts)

Crombie Final Backend:Layout 1 4/14/08 4:18 PM Page 12

NON-GAAP FINANCIAL MEASURESThere 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 20), distributable income (page 24), adjusted funds from operations (“AFFO”) (page 25), debt to gross

book value (page 30), funds from operations (“FFO”) (page 25) and earnings before interest, taxes, depreciation and amortization

(“EBITDA”)(page 30). Management includes these measures because it believes certain investors use these measures as a means of

assessing relative financial performance.

INTRODUCTION

Period fromYear Ended Mar. 23, 2006 to Quarter Ended Quarter Ended

(in thousands of dollars, except per unit amounts and as otherwise noted) Dec. 31, 2007 Dec. 31, 2006 Dec. 31, 2007 Dec. 31, 2006

Property revenue $ 143,606 $ 99,949 $ 37,059 $ 33,717Net income $ 10,659 $ 9,405 $ 4,058 $ 3,217Basic and diluted net income per unit $ 0.49 $ 0.44 $ 0.19 $ 0.15

Distributable income $ 45,340 $ 33,288 $ 11,515 $ 9,815Distributable income per unit(1) $ 1.09 $ 0.80 $ 0.28 $ 0.24Distributable income payout ratio (%) 77.2% 77.5% 77.0% 85.0%FFO $ 50,809 $ 35,237 $ 13,057 $ 10,699FFO per unit(1) $ 1.22 $ 0.85 $ 0.31 $ 0.26AFFO $ 34,842 $ 25,912 $ 7,561 $ 8,263AFFO per unit(1) $ 0.84 $ 0.62 $ 0.18 $ 0.20AFFO payout ratio (%) 100.4% 99.6% 117.3% 101.0%

Dec. 31, 2007 Dec. 31, 2006

Debt to gross book value(2) 48.1% 44.8%Total assets $ 1,013,982 $ 963,935Total commercial property debt $ 500,578 $ 432,963

(1) Distributable income, FFO and AFFO per unit are calculated by distributable income, FFO or AFFO, as the case may be, divided by the diluted weighted average

of the total Units and Special Voting Units outstanding of 41,728,561 for the quarter ended December 31, 2007, 41,712,801 for the quarter ended December 31,

2006, 41,725,711 for the year ended December 31, 2007 or 41,578,171 for the period from March 23, 2006 to December 31, 2006.

(2) See page 30 for detailed calculation.

Overview of the Business

Crombie is an unincorporated, open-ended real estate investment trust established pursuant to a Declaration of Trust dated January 1,

2006, as amended and restated (the “Declaration of Trust”) under, and governed by, the laws of the Province of Ontario. The units of

Crombie trade on the Toronto Stock Exchange under the symbol CRR.UN.

Crombie completed its initial public offering (“IPO”) of 20,485,224 units (“Units”) on March 23, 2006 for gross proceeds of $204,852.

Concurrent with the 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 December 31, 2007, Crombie owned a portfolio of 52 commercial properties in

six provinces, comprising approximately 8.0 million square feet of gross leaseable area (“GLA”).

Business Strategy and Outlook

The objectives of Crombie are threefold:

1. Generate reliable and growing cash distributions;

2. Enhance the value of Crombie’s assets and maximize long-term unit value through active management; and

3. Expand the asset base of Crombie and increase its cash available for distribution through accretive acquisitions.




Generate reliable and growing cash distributions: Management focuses on improving both the same-asset results while expanding

the asset base with accretive acquisitions to grow the cash distributions to unitholders. As at December 31, 2007, after just over

21 months of operations, Crombie has been able to increase its distributions twice for a total increase of 6.25%. Crombie has

achieved these distribution increases while maintaining the 100% AFFO payout ratio target for both 2006 and 2007.

Enhance value of Crombie’s assets: In addition to the four commercial properties either redeveloped or in the process of

redevelopment, for which the costs will be covered by the non-interest-bearing demand notes from ECL, Crombie anticipates

reinvesting approximately 3% to 5% of its property revenue each year into its properties to maintain their productive capacity and

thus overall value.

Crombie’s internal growth strategy focuses on generating greater rental income from its existing properties. Crombie plans to

achieve this by strengthening its asset base through judicious expansion and improvement of existing properties, leasing vacant

space at competitive market rates with the lowest possible transaction costs, and maintaining good relations with tenants.

Management will continue to conduct regular reviews of properties and, based on its experience and market knowledge, will assess

ongoing opportunities within the portfolio.

Expand asset base with accretive acquisitions: The three property acquisitions completed in 2006, combined with the five

additional acquisitions during 2007, are anticipated to add approximately four to six cents per unit in cash available for distribution

over their first full years of operation. While the investment market continues to remain competitive, Crombie intends to continue to

pursue acquisitions which can be made at values which are accretive to Crombie.

Crombie’s external growth strategy focuses primarily on accretive acquisitions of income-producing retail properties. Crombie

pursues two sources of accretive acquisitions which include third party acquisitions and our relationship with ECL. Each of these

two sources of acquisitions has provided four acquisitions to date. The relationship with ECL includes currently owned and future

development properties, as well as opportunities through the rights of first refusal that one of Empire Company Limited’s (“Empire”)

subsidiaries has negotiated in many of their leases. Crombie will seek to identify future property acquisitions using investment

criteria that focus on the strength of anchor tenancies, market demographics, terms of tenancies, proportion of revenue from

national tenants, opportunities for expansion, security of cash flow, potential for capital appreciation and potential for increasing

value through more efficient management of the assets being acquired, including expansion and repositioning. In addition,

Crombie will seek to leverage its close relationship with the Empire Subsidiaries to access acquisition opportunities that satisfy the

foregoing criteria.

Crombie plans to work closely with the Empire Subsidiaries to identify development opportunities that further Crombie’s external

growth strategy. The relationship is governed by a development agreement described in the Material Contracts section of Crombie’s

Annual Information Form for the year ended December 31, 2007. Through this relationship, Crombie expects to have the benefits

associated with development while limiting its exposure to the inherent risks, such as real estate market cycles, cost overruns, labour

disputes, construction delays and unpredictable general economic conditions. The development agreement will also enable Crombie

to avoid the uncertainties associated with property development, including paying the carrying costs of land, securing construction

financing, obtaining development approvals, managing construction projects, marketing in advance of and during construction and

earning no return during the construction period.

The development agreement provides Crombie with a preferential right to acquire retail properties developed by ECL, subject to

approval by the independent trustees. The history of the relationship between Crombie and Empire Subsidiaries continues to provide

promising opportunities for growth through future development opportunities on both new and existing sites in Crombie’s portfolio.

This relationship has allowed for both 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 eight acquisitions in Brampton and Oshawa, Ontario.

ECL currently owns 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.

On February 25, 2008, Crombie announced that it has entered into agreements with Empire Company Limited (and certain of its

wholly-owned subsidiaries) to acquire a portfolio of 61 retail properties representing approximately 3.3 million square feet of GLA.

The cost of the acquisition to Crombie is expected to be approximately $441,500, including approximately $13,000 in closing and

transaction costs. The portfolio consists of 40 single-use freestanding Sobeys grocery stores of various Sobeys banners and 21 Sobeys

anchored retail strip centres. The GLA of the portfolio is as follows: Atlantic Canada – 78%; Quebec – 7%; and Ontario – 15%.




In order to partially finance the acquisition, Crombie has agreed to sell, on a bought-deal basis, $60,005 of subscription receipts at

a price of $11.00 per subscription receipt and $30,000 of convertible extendible unsecured subordinated debentures (the

“Debentures”) to a syndicate of underwriters led by CIBC World Markets Inc. and TD Securities Inc. Crombie has also granted the

underwriters an over-allotment option to purchase up to an additional 5% of subscription receipts at the same offering price,

exercisable up to 30 days after the closing of the offering. Crombie will be filing a preliminary prospectus on or before

February 29, 2008 in relation to this financing.

On closing of the acquisition, each subscription receipt will convert into one unit of Crombie. The Debentures have an initial maturity

date of May 16, 2008, which will be extended to March 20, 2013 upon closing of the acquisition. The Debentures have a coupon of

7.0% per annum and will pay interest semi-annually in arrears on June 30 and December 31 in each year commencing on June 30,

2008. Each $1,000 principal amount of Debenture is convertible into approximately 76.9 units of Crombie, at any time, at the option

of the holder, representing a conversion price of $13.00 per unit.

Empire Company Limited has agreed to take $55,000 of the purchase price in Class B LP Units of Crombie Limited Partnership at the

$11.00 offering price. Following the closing of the acquisition, Empire will continue to hold an approximate 48% economic and

voting interest in Crombie.

The remainder of the purchase price will be satisfied with a $278,500, 18-month bridge financing from the Bank of Nova Scotia and a

draw of approximately $18,000 on Crombie’s revolving credit facility. It is Crombie’s intention to replace the bridge financing by

suitable long-term debt financing following the closing of the acquisition.

Crombie expects that the transaction will have a positive impact to AFFO per unit and FFO per unit will remain at a consistent level as

for the year ended December 31, 2007. Debt to gross book value will increase from 48.1% as at December 31, 2007 to 54.7%,

excluding Debentures, which is within Crombie’s target ratio of 50–55%, and 56.8% including Debentures. Both ratios remain under

the maximum allowable ratio as per Crombie’s Declaration of Trust of 65%.

Because the transaction is with a related party to Crombie, Crombie will require approval by a majority of its unitholders (excluding

Empire and certain of its affiliates and insiders) at a meeting to be held April 14, 2008.

The following table summarizes the key performance measures and balance sheet changes as a result of the acquisition:

Pro Forma Crombie Crombie as at Effects of Annualized forDec. 31, 2007 Portfolio SLP Portfolio

Commercial properties $ 909,095 $ 411,262 $ 1,320,357Commercial property debt $ 500,578 $ 294,775 $ 795,353

Property revenue $ 143,606 $ 51,274 $ 194,880Property NOI $ 84,261 $ 34,848 $ 119,109

Units outstanding 21,648,985 5,455,000 27,103,985Class B LP units outstanding 20,079,576 5,000,000 25,079,576

FFO $ 50,809 $ 13,072 $ 63,881FFO/unit $ 1.22 $ 1.25 $ 1.22AFFO $ 34,842 $ 12,170 $ 47,012AFFO/unit $ 0.84 $ 1.16 $ 0.90

Debt to gross book value 48.1% — 54.7%




Business Environment

During the latter half of 2007, reducing credit availability continued to be a major risk to the interest-rate sensitive real estate

investment trust (“REIT”) business environment. Widening credit spreads due to higher risk premiums resulting from lenders’

apprehension of their exposure to real estate, largely resulting from the issues faced in the residential sub-prime mortgage market

in the United States, have more than offset the decline in Canadian bond yields. This risk aversion has resulted in reduced credit

availability as some avenues of debt financing, such as CMBS financing, are difficult to access while other lenders have become more

restrictive with capital, applying more stringent due diligence and loan covenant requirements. This trend has negatively impacted

the unit prices of most REITs and has begun to reduce the acquisition prices the real estate market is willing to pay for assets due to

the higher cost of capital.

While it is impossible to predict when the current risk aversion concerns may pass, Crombie believes that it is in a strong position

to withstand the current conditions:

• Crombie has minimal exposure to floating rate debt at December 31, 2007 (4.2% of total commercial property debt);

• Crombie has only 3.0% ($14,539) of its debt maturing in 2008 with four mortgages requiring refinancing. Crombie currently has

no debt maturing in 2009;

• AFFO payout ratio continues to meet our intended target of 100% and is thus considered sustainable;

• Crombie’s debt service coverage ratio (“DSCR”) and interest service coverage ratio (“ISCR”) are strong at 1.86 times EBITDA and

3.00 times EBITDA, respectively;

• Weighted average debt maturity term of 7.4 years provides long-term stability; and

• Crombie has undertaken a number of steps to hedge its exposure to interest rate risk, which are outlined in the “Risk

Management” section of the MD&A.

The real estate investment market continues to remain competitive. However, as previously discussed, there now appear to be signs

that yields have begun to modestly increase in light of the widening credit spread environment. In addition, investor interest in real

estate has moderated from early 2007, which has resulted in an expansion in cap rates. Crombie intends to continue to pursue

acquisitions that can be made at values which are accretive and provide an acceptable return. It is anticipated that a number of these

acquisitions may result from the relationship between Crombie and the Empire Subsidiaries.

In terms of occupancy rates, 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 continues to attract retailers, which has allowed the occupancy levels to

remain relatively stable. The office sector, especially in the Halifax region, continues to experience single-digit vacancy rates. However,

there remain concerns regarding the impact that a slowing U.S. economy may have for Canada’s economic growth prospects. 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.

Finally, the federal government’s issuance of proposed technical amendments on December 20, 2007 provided further clarity to the

tax rules and criteria that were part of Bill C-52 and applicable to Crombie. These technical amendments provided more certainty that

Crombie qualifies as a REIT.

2007 HIGHLIGHTS• Crombie acquired five properties in 2007, increasing GLA by 403,000 square feet for a combined purchase price of $68,900.

• Crombie completed leasing activity on 99% of its 2007 expiring leases, increasing average net rent per square foot to $11.57 from

the expiring rent per square foot of $9.97.

• Overall occupancy at December 31, 2007 remained consistent with December 31, 2006 at 93.6%.

• Property revenue for the year ended December 31, 2007 increased by $14,200, or 11.0%, to $143,606 compared to $129,406 for

the estimated year ended December 31, 2006. The improvement was due to increased same-asset property results and the

eight property acquisitions completed to date.

• Same-asset NOI of $77,130 increased by $3,552, or 4.8%, compared to $73,578 for the estimated prior year due primarily to an

increased average rent per square foot ($11.79 in 2007 versus $11.37 in 2006).

• The AFFO payout ratio was 100.4% which was consistent with the anticipated annual AFFO payout ratio of 100% and the payout

ratio for 2006 of 99.6%.




• Debt to gross book value remained unchanged at 48.1% at December 31, 2007 compared to 48.1% at September 30, 2007.

• Crombie’s debt service coverage ratio in 2007 was 1.86 times EBITDA and interest service coverage ratio was 3.00 times EBITDA,

compared to 1.91 times EBITDA and 3.10 times EBITDA, respectively, for 2006.

• During the fourth quarter of 2007, Crombie’s management and their advisors underwent an extensive review of Crombie’s

organizational structure and operations to support Crombie’s assertion that it meets the REIT criteria at January 1, 2008.

OVER VIE W OF THE PROPERT Y PORTFOLIO

Property Profile

The net book value of the property portfolio represents 90% of the total assets as at December 31, 2007. At December 31, 2007 the

property portfolio consisted of 52 commercial properties that contain approximately 8.0 million square feet of GLA. The properties

are located in six provinces: Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island, Ontario and Quebec.

As at December 31, 2007, the portfolio distribution of the GLA by province was as follows:

Number of GLA % of % of AnnualProvince Properties (sq. ft.) GLA Minimum Rent Occupancy(1)

Nova Scotia 21 4,130,000 51.9% 46.2% 94.9%Ontario 16 1,306,000 16.4% 18.3% 94.1%New Brunswick 8 1,140,000 14.3% 11.4% 90.4%Newfoundland and Labrador 4 885,000 11.2% 17.4% 90.6%Prince Edward Island 1 301,000 3.8% 3.5% 92.7%Quebec 2 192,000 2.4% 3.2% 96.4%

Total 52 7,954,000 100.0% 100.0% 93.6%

(1) For purposes of calculating occupancy percentage, Crombie considers GLA covered by the head lease agreement in favour of ECL as occupied as there is head

lease revenue being earned on the GLA.

Crombie continues to diversify its geographic composition through growth opportunities, as indicated by the seven acquisitions in

Ontario and one acquisition in Quebec. As well, the properties are located in rural and urban locations, which Crombie believes adds

stability and future growth potential, while reducing vulnerability to economic fluctuations that may affect any particular region.

Largest Tenants

The following table illustrates the 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 December 31, 2007.

% of Annual Total Area Number ofTenant Minimum Rent Leased (sq. ft.) Locations(1)

Sobeys(2) 15.9% 1,225,000 28Shoppers Drug Mart 3.2% 160,000 13Empire Theatres 3.0% 242,000 8Zellers 3.0% 569,000 6Nova Scotia Power/Emera 2.8% 188,000 2CIBC 2.2% 162,000 13Province of Nova Scotia 2.2% 141,000 11Bell (Aliant) 2.1% 153,000 14Public Works Canada 1.8% 72,000 6Best Buy Canada Ltd. 1.6% 89,000 3

Total 37.8% 3,001,000 104

(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, which accounts for 15.9% of the annual minimum rent,

no other tenant accounts for more than 3.2% of Crombie’s minimum rent.

On January 15, 2008, SAAN Stores Ltd. obtained protection under the Companies’ Creditors Arrangement Act (“CCAA”) to implement

a restructuring plan. As at that date, Crombie had four locations leased to SAAN totalling 116,156 square feet of GLA, representing

1.5% of Crombie’s total GLA as at December 31, 2007. Total annual rental revenue from the locations is approximately $185,

representing 0.1% of Crombie’s total property revenue ($1.59 net rent per square foot). Should SAAN not emerge as a viable entity

from CCAA, Crombie will seek to lease the GLA at more favourable per square foot rents.

Lease Maturities

The following table sets out as of December 31, 2007 the number of leases relating to the properties subject to lease maturities during

the periods indicated (assuming tenants do not holdover on a month-to-month basis or exercise renewal options or termination

rights), the renewal area, the percentage of the total GLA of the properties represented by such maturities and the estimated average

net rent per square foot at the time of expiry. The weighted average remaining term of all leases is approximately 7.7 years.

Average NetNumber of Renewal Area % of Total Rent per Sq. Ft.

Year Leases (sq. ft.) GLA at Expiry ($)

2008 210 771,000 9.7% $ 11.062009 185 817,000 10.3% $ 13.582010 173 737,000 9.3% $ 12.192011 181 993,000 12.5% $ 13.532012 131 767,000 9.6% $ 11.45Thereafter 230 3,358,000 42.2% $ 12.53

Total 1,110 7,443,000 93.6% $ 12.48

2007 Portfolio Lease Expiries and Leasing Activity

As at December 31, 2007, portfolio lease expiries and leasing activity were as follows:

Quarter Quarter Quarter Quarter YearEnded Ended Ended Ended Ended As a %

Mar. 31, 2007 Jun. 30, 2007 Sep. 30, 2007 Dec. 31, 2007 Dec. 31, 2007 of GLA

Expiries (sq. ft.) 272,000 170,000 116,000 133,000 691,000 8.7%Average net rent per sq. ft. $ 9.90 $ 7.55 $ 11.81 $ 11.61 $ 9.97

Committed renewals (sq. ft.) 168,000 122,000 80,000 53,000 423,000 5.3%Average net rent per sq. ft. $ 9.83 $ 6.42 $ 12.81 $ 12.71 $ 9.77New leasing (sq. ft.) 30,000 78,000 74,000 76,000 258,000 3.2%Average net rent per sq. ft. $ 13.84 $ 14.62 $ 12.79 $ 16.44 $ 14.54

Total renewals and new leasing (sq. ft.) 198,000 200,000 154,000 129,000 681,000 8.6%Total average net rent per sq. ft. $ 10.44 $ 9.60 $ 12.80 $ 14.91 $ 11.57

During the year ended December 31, 2007, Crombie had renewals or entered into new leases in respect of approximately

681,000 square feet at an average net rent of $11.57 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 fourth quarter of 81,000 square feet. Of the

691,000 square feet of expiries, approximately 139,000 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 fourth quarter, the leasing activity

resulted in the mix of new leasing versus renewal leasing contracted as follows:

Quarter Ended Quarter Ended Quarter Ended Quarter EndedMar. 31, 2007 Jun. 30, 2007 Sep. 30, 2007 Dec. 31, 2007

New leasing 15% 39% 48% 59%Renewal leasing 85% 61% 52% 41%

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. The leasing activity in the last two quarters of 2007 showed

increased net rent as a result of the new leasing activity which increased the average net rent per square foot on an annual basis to

$11.57, or a 16.0% increase over the expiring average net rent.

Sector Information

As at December 31, 2007, the portfolio distribution of the GLA by asset type was as follows:

Number of % of AnnualAsset Type Properties GLA (sq. ft.) % of GLA Minimum Rent Occupancy(1)

Retail 38 4,998,000 62.8% 66.1% 93.8%Office 5 1,027,000 12.9% 12.6% 91.1%Mixed-Use 9 1,929,000 24.3% 21.3% 94.4%

Total 52 7,954,000 100.0% 100.0% 93.6%

(1) For purposes of calculating occupancy percentage, Crombie considers GLA covered by the head lease agreement in favour of ECL as occupied.

The following table sets out, as of December 31, 2007, the square feet under lease subject to lease maturities during the periods indicated.

Retail Office Mixed-Use Total

Year (sq. ft.) (%) (sq. ft.) (%) (sq. ft.) (%) (sq. ft.) (%)

2008 351,000 7.0% 136,000 13.3% 284,000 14.8% 771,000 9.7%2009 353,000 7.1% 125,000 12.1% 339,000 17.6% 817,000 10.3%2010 279,000 5.6% 74,000 7.2% 384,000 19.9% 737,000 9.3%2011 324,000 6.5% 360,000 35.1% 309,000 16.0% 993,000 12.5%2012 374,000 7.5% 110,000 10.7% 283,000 14.7% 767,000 9.6%Thereafter 3,006,000 60.1% 131,000 12.7% 221,000 11.4% 3,358,000 42.2%

Total 4,687,000 93.8% 936,000 91.1% 1,820,000 94.4% 7,443,000 93.6%

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

Year Retail Office Mixed-Use

2008 $ 12.53 $ 10.92 $ 9.31 2009 $ 15.52 $ 11.37 $ 12.362010 $ 16.04 $ 11.65 $ 9.502011 $ 17.40 $ 13.79 $ 9.19 2012 $ 13.77 $ 9.43 $ 9.16Thereafter $ 12.50 $ 11.16 $ 13.67

Total $ 13.42 $ 12.00 $ 10.40




2007 RESULTS OF OPERATIONS

Acquisitions

The following table outlines the acquisitions made which affected the results of operations when compared to the previous year’s results.

Acquisition Ownership Property Property Type Date Acquired GLA (sq. ft.) Cost(1) Interest

Brampton Plaza, Brampton, Ontario Retail – Strip Oct. 2, 2006 66,000 $ 13,160 100%

Taunton & Wilson Plaza,Oshawa, Ontario Retail – Strip Oct. 2, 2006 83,000 $ 18,725 100%

Burlington Plaza, Burlington, Ontario Retail – Strip Dec. 20, 2006 56,000 $ 14,200 100%

The Mews of Carleton Place, Carleton Place, Ontario Retail – Strip Jan. 17, 2007 80,000 $ 11,800 100%

Perth Mews Shopping Mall,Perth, Ontario Retail – Strip Mar. 7, 2007 103,000 $ 17,900 100%

International Gateway Centre,Fort Erie, Ontario Retail – Strip Jul. 26, 2007 93,000 $ 19,200 100%

Brossard-Longueuil, Brossard, Quebec Freestanding store Aug. 24, 2007 39,000 $ 7,300 100%

Town Centre,LaSalle, Ontario Retail – Strip Oct. 15, 2007 88,000 $ 12,700 100%

Total 608,000 $ 114,985

(1) Excluding additional closing costs.

Comparison to Previous Year

Results of operations for the year ended December 31, 2006 have been estimated by using actual results for the quarters ended June 30, 2006,

September 30, 2006 and December 31, 2006 and pro-rating the results for the nine days of operations from March 23, 2006 to

March 31, 2006. It is believed that this method of estimation of the results would be reflective of the actual results of Crombie in all

material respects had Crombie been in operation for the entire period.

Year Ended

(In thousands of dollars, except where otherwise noted) Dec. 31, 2007 Dec. 31, 2006 Variance

Property revenue $ 143,606 $ 129,406 $ 14,200 Property expenses 59,345 55,210 (4,135)

Property NOI 84,261 74,196 10,065

NOI margin percentage 58.7% 57.3% 1.4%

Expenses:General and administrative 8,177 7,052 (1,125)Interest 25,275 21,262 (4,013)Depreciation and amortization 29,229 22,936 (6,293)

62,681 51,250 (11,431)

Income before income taxes and non-controlling interest 21,580 22,946 (1,366)Income taxes expense (recovery) – Future 1,030 (763) (1,793)

Income before non-controlling interest 20,550 23,709 (3,159)Non-controlling interest 9,891 11,512 1,621

Net income $ 10,659 $ 12,197 $ (1,538)

Basic and diluted net income per Unit $ 0.49 $ 0.57 $ (0.08)

Basic weighted average Units outstanding (in 000s) 21,535 21,445

Diluted weighted average Units outstanding (in 000s) 21,646 21,499




Net income for the year ended December 31, 2007 of $10,659 decreased by $1,538 from $12,197 for the estimated year ending

December 31, 2006. The decrease was due to:

• higher interest and depreciation charges, due primarily to the eight property acquisitions to date, along with higher general and

administrative costs incurred for ongoing compliance and professional fees; offset in part by

• higher property NOI from the increased average rent per square foot of the same-asset properties, as well as the impact from the

eight property acquisitions to date.

Property Revenue and Property Expenses

Year Ended

(In thousands of dollars) Dec. 31, 2007 Dec. 31, 2006 Variance

Same-asset property revenue $ 133,570 $ 128,641 $ 4,929Acquisition property revenue 10,036 765 9,271

Property revenue $ 143,606 $ 129,406 $ 14,200

Same-asset property revenue of $133,570 for the year ended December 31, 2007 was 3.8% higher than the estimated year ended

December 31, 2006 due primarily to the increased average rent per square foot ($11.79 in 2007 and $11.37 in 2006) and increased

revenue from higher recoverable common area expenses.

Year Ended


Same-asset property expenses $ 56,440 $ 55,063 $ 1, 377Acquisition property expenses 2,905 147 2,758

Property expenses $ 59,345 $ 55,210 $ 4,135

Same-asset property expenses of $56,440 for the year ended December 31, 2007 were 2.5% higher than the estimated year ended

December 31, 2006 due to increased recoverable common area expenses primarily from increased property taxes.

Year Ended


Same-asset property NOI $ 77,130 $ 73,578 $ 3,552Acquisition property NOI 7,131 618 6,513

Property NOI $ 84,261 $ 74,196 $ 10,065

Same-asset NOI for the year ended December 31, 2007 grew by 4.8% over the estimated year ended December 31, 2006.

Property NOI for the year ended December 31, 2007 and the estimated year ended December 31, 2006 by region was as follows:

2007 2006

Property Property Property NOI % of NOI % of (In thousands of dollars) Revenue Expenses NOI Revenue Revenue Variance

Nova Scotia $ 72,454 $ 33,009 $ 39,445 54.4% 53.9% 0.5%Newfoundland and Labrador 23,177 8,142 15,035 64.9% 65.1% (0.2)%New Brunswick 17,516 8,718 8,798 50.2% 51.2% (1.0)%Ontario 22,802 7,479 15,323 67.2% 64.0% 3.2%Prince Edward Island 4,225 1,157 3,068 72.6% 77.3% (4.7)%Quebec 3,432 840 2,592 75.5% 78.9% (3.4)%

Total $ 143,606 $ 59,345 $ 84,261 58.7% 57.3% 1.4%

Ontario’s growth in NOI percentage of revenue is attributable to the acquisition activity in that province in 2006 and 2007. Prince Edward

Island has only one commercial property, and Quebec operated with one property in 2007 until the addition of Brossard in the third

quarter. Because of the fluctuations due to maintenance costs in any given year, higher variances are not unusual on any single property.




General and Administrative Expenses

General and administrative expenses increased by 16% for the year ended December 31, 2007 to $8,177 from the estimated prior

year due to higher professional fees and other public entity compliance costs. During the fourth quarter of 2007, there were

additional professional fees incurred of approximately $265 to ensure Crombie could comply with the REIT taxation requirements

(see “Future Income Taxes”).

Interest Expense

Year Ended


Same-asset interest expense $ 20,643 $ 20,800 $ (157)Acquisition interest expense 4,632 462 4,170

Interest expense $ 25,275 $ 21,262 $ 4,013

Same-asset interest expense of $20,643 for the year ended December 31, 2007 decreased by 0.8% when compared to the estimated year

ended December 31, 2006 due to the declining interest portion of debt repayments for the same-assets, offset in part 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 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 year ended December 31, 2007 was $3,566 (period ending December 31,

2006 – $2,847). The interest rate subsidy is received by Crombie through monthly repayments by ECL of amounts due under one of

the demand notes issued by ECL to Crombie Developments Limited (“CDL”) prior to the Business Acquisition.

Depreciation and Amortization

Year Ended


Same-asset depreciation and amortization $ 25,581 $ 22,742 $ 2,839Acquisition depreciation and amortization 3,648 194 3,454

Depreciation and amortization $ 29,229 $ 22,936 $ 6,293

Same-asset depreciation and amortization of $25,581 for the year ended December 31, 2007 was 12.5% higher than the estimated

year ended December 31, 2006 due primarily to amortization of tenant improvements and lease costs incurred since June 30, 2006.

Depreciation and amortization consists of:

Year Ended


Depreciation of commercial properties $ 12,499 $ 10,989 $ 1,510Amortization of tenant improvements/lease costs 2,747 441 2,306Amortization of intangible assets 13,983 11,202 2,781Amortization of deferred financing charges — 304 (304)


As previously discussed, changes in accounting policies adopted by Crombie have resulted in the reclassification of the amortization

of the deferred financing charges to interest expense during the first quarter of 2007.

Future Income Taxes

Crombie believes it has organized its assets and operations to permit Crombie to satisfy the criteria contained in the Income Tax Act

(Canada) in regard to the definition of a REIT. The relevant tests apply throughout the taxation year of Crombie and, as such, the

actual status of Crombie for any particular taxation year can only be ascertained at the end of the year.




During the fourth quarter of 2007, Crombie’s management and their advisors underwent an extensive review of Crombie’s

organizational structure and operations to support Crombie’s assertion that it meets the REIT criteria at January 1, 2008.

In addition, the issuance of proposed technical amendments on December 20, 2007 provided further clarity to the tax rules and

criteria that were part of Bill C-52 and applicable to Crombie. These technical amendments provided more certainty that Crombie

qualifies as a REIT.

A trust that satisfies the criteria of a REIT throughout its taxation year will not be subject to income tax in respect of distributions to

its unitholders or be subject to the restrictions on its growth that would apply to trusts classified as specified investment flow-

through entities (“SIFTs”).

As a result of the above, Crombie has reversed the impact of $1,850 to future income taxes that were booked during the second and

third quarters of 2007. Income tax expense is higher in 2007 compared to 2006 due to increases in timing differences between

accounting value and tax value of assets during the year.

Sector Information

Retail Properties

Year Ended December 31, 2007 Year Ended December 31, 2006

(In thousands of dollars, except as otherwise noted) Same-Asset Acquisitions Total Same-Asset Acquisitions Total

Property revenue $ 75,476 $ 10,036 $ 85,512 $ 73,286 $ 765 $ 74,051Property expenses 26,777 2,905 29,682 26,644 147 26,791

Property NOI $ 48,699 $ 7,131 $ 55,830 $ 46,642 $ 618 $ 47,260

NOI margin % 64.5% 71.1% 65.3% 63.6% 80.8% 63.8%

Occupancy % 93.6% 95.4% 93.8% 92.7% 97.0% 92.9%

The improvement in the annual property NOI was caused by the slight increase in retail occupancy levels in the same-asset retail

properties from 92.7% in 2006 to 93.6% 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.

Office Properties



Property revenue $ 21,409 $ — $ 21,409 $ 21,216 $ — $ 21,216Property expenses 12,462 — 12,462 11,922 — 11,922

Property NOI $ 8,947 $ — $ 8,947 $ 9,294 $ — $ 9,294

NOI margin % 41.8% —% 41.8% 43.8% —% 43.8%

Occupancy % 91.1% —% 91.1% 92.7% —% 92.7%

The improved occupancy levels and net rent per square foot at the Halifax Developments properties in Halifax were more than offset

by decreased occupancy in Terminal Centres in Moncton, New Brunswick. These factors resulted in the lower property NOI and NOI

margin percent for the properties in 2007 compared to the estimated year ended December 31, 2006.

Mixed-Use Properties




Property NOI $ 19,484 $ — $ 19,484 $ 17,642 $ — $ 17,642

NOI margin % 53.1% —% 53.1% 51.7% —% 51.7%

Occupancy % 94.4% —% 94.4% 95.8% —% 95.8%




The slight decline in mixed-use occupancy levels from 95.8% in 2006 to 94.4% in 2007 was offset by improved average net rent per

square foot from leasing activity resulting in the improved year ended mixed-use property NOI result when compared to the

estimated prior year ended results.

OTHER 2007 PERFORMANCE MEASURESDistributable 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 REITs 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 to the ability of Crombie to earn and distribute 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 REITs and, accordingly, may not be comparable to other such issuers.

While distributable income is a measure currently outlined in Crombie’s Declaration of Trust, the Board of Trustees of Crombie has

proposed to eliminate the term distributable income from the Declaration of Trust at the upcoming Annual and Special Meeting of

Unitholders to be held on April 14, 2008. Although distributable income has been a term generally reported by Canadian REITs, there

can be important differences in the definition from entity to entity, and the Board of Trustees of Crombie is of the view that the

continuation of the use of a term lacking a common calculation is not helpful to the investing public.

As previously noted, the prior period comparative figures for distributable income, FFO and AFFO reflect only the 284 days of

operations Crombie had in 2006. As a number of the components of the calculations cannot reasonably be annualized, such as

maintenance capital expenditures, cash provided by operating activities, change in non-cash operating items and additions to tenant

improvements, no discussion of the variances between 2007 and 2006 for these performance measures has been included.

Distributable Income

Distributable income is defined in Crombie’s Declaration of Trust as net income of Crombie, on a consolidated basis, as determined in

accordance with GAAP, adjusted by (i) adding back the following items: non-controlling interest, depreciation of buildings and

improvements (excluding amortization of tenant inducements, leasing commissions and deferred financing costs) and amortization

of related intangibles (including amortization of value of tenant rents for in-place lease agreements, amortization of differential

between original rent and above-market rents and 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.

Period fromYear Ended Mar. 23, 2006 to


Net income $ 10,659 $ 9,405 $ 1,254Add back:Non-controlling interest 9,891 8,787 1,104Depreciation and amortization(1) 26,482 17,367 9,115Future income taxes 1,030 (763) 1,793Above-market lease amortization 2,982 2,090 892Deduct:Below-market lease amortization (4,489) (2,896) (1,593)Accrued rental revenue (1,195) (702) (493)Amortization of fair value debt premium (20) — (20)

Distributable income $ 45,340 $ 33,288 $ 12,052

(1) Excludes amortization of deferred financing charges, tenant improvements and leasing commission costs.




Pursuant to CSA Staff Notice 52-306,“(Revised) Non-GAAP Financial Measures,” non-GAAP measures such as distributable income

should be reconciled to the most directly comparable GAAP measure, which is interpreted to be the cash flow from operating

activities rather than net income. The reconciliation is as follows:



Cash provided by operating activities $ 33,936 $ 47,997 $ (14,061)Add back (deduct):Additions to tenant improvements and lease costs 11,223 7,302 3,921Change in non-cash operating items 3,400 (21,275) 24,675Unit-based compensation expense (37) (27) (10)Amortization of deferred financing charges (415) (268) (147)Amortization of tenant improvements and lease costs (2,747) (441) (2,306)Amortization of fair value debt premium (20) — (20)


Adjusted Funds from Operations

Crombie considers AFFO to be a measure of its distribution-generating ability. AFFO reflects distributable income after the provision

for maintenance capital expenditures and unamortized additions to tenant improvements and lease costs.



Distributable income $ 45,340 $ 33,288 $ 12,052Less capital adjustments:Maintenance capital expenditures (net of amounts recoverable from ECL) (5,395) (2,223) (3,172)Unamortized additions to tenant improvements and lease costs (net of amounts recoverable from ECL) (5,103) (5,153) 50

AFFO $ 34,842 $ 25,912 $ 8,930

Funds from Operations

FFO represents a supplemental non-GAAP industry-wide financial measure of a real estate organization’s operating performance.

Crombie has calculated FFO in accordance with the recommendations of the Real Property Association of Canada (“RealPAC”) which

defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable real estate and

extraordinary items, plus depreciation and amortization expense, plus future income taxes, and after adjustments, for equity-

accounted entities and non-controlling interests. Crombie’s method of calculating FFO may differ from other issuers’ methods and

accordingly may not be directly comparable to FFO reported by other issuers.

A reconciliation of GAAP net income to FFO is as follows:



Net income $ 10,659 $ 9,405 $ 1,254Add back:Non-controlling interest 9,891 8,787 1,104Depreciation and amortization(1) 29,229 17,808 11,421Future income taxes 1,030 (763) 1,793

Funds from operations $ 50,809 $ 35,237 $ 15,572

(1) Excludes amortization of deferred financing charges.




LIQUIDIT Y AND CAPITAL RESOURCES

Sources and Uses of Funds

Cash flow generated from operating the property portfolio represents the primary source of liquidity used to service the interest

on debt, fund general and administrative expenses, reinvest into the portfolio through capital expenditures, as well as fund tenant

improvements and distributions. In addition, Crombie has the following sources of financing available to finance future growth:

secured short-term financing through an authorized $150,000 revolving credit facility, of which $70,900 was drawn at December 31, 2007,

and the issue of new equity and mortgage debt, pursuant to the Declaration of Trust.



Cash provided by (used in):Operating activities $ 33,936 $ 47,997 $ (14,061)Financing activities $ 35,463 $ 283,638 $ (248,175)Investing activities $ (67,871) $ (330,455) $ 262,584

Operating Activities



Cash provided by (used in):Net income and non-cash items $ 48,559 $ 34,024 $ 14,535Tenant improvements and leasing costs (11,223) (7,302) (3,921)Non-cash working capital (3,400) 21,275 (24,675)

Increase in cash provided by operating activities $ 33,936 $ 47,997 $ (14,061)

Fluctuations in cash provided by operating activities is largely influenced by the quarterly change in non-cash working capital, which

can be affected by the timing of receipts and payments. Comparison to the previous year end results is not possible due to the fact

that there were only 284 days of operations during the 2006 year and the annualized effect of items such as additions to tenant

improvements, as well as changes in non-cash working capital items,cannot be reasonably estimated. Of the tenant improvements

and leasing costs in 2007, $3,373 was covered by the non-interest-bearing demand notes from ECL ($1,708 in 2006).

Financing Activities



Cash provided by (used in):Issue of commercial property debt $ 89,475 $ 113,200 $ (23,725)Repayment of commercial property debt (39,021) (20,304) (18,717)Collection of ECL notes receivable 20,491 21,223 (732)Units issued on initial public offering (net of costs) — 215,095 (215,095)Payment of distributions (34,808) (25,809) (8,999)Other items (net) (674) (19,767) 19,093

Increase in cash provided by (used in) financing activities $ 35,463 $ 283,638 $ (248,175)

Cash provided by financing activities for the year ended December 31, 2007 was $248,175 lower than the period ended December 31,

2006 primarily due to proceeds from the initial public offering completed in 2006.




Investing ActivitiesCash used in investing activities of $67,871 for the year ended December 31, 2007 included $51,049 which was used for the

acquisition of five properties, net of assumed mortgages, and $16,822 used for additions to commercial properties. Of the cash used

for additions to commercial properties, $7,669 was for the eight commercial properties covered by non-interest-bearing demand

notes from ECL. The cash used in investing activities for the year ended December 31, 2006 included $26,574 for additions made to

commercial properties in addition to $263,542 for the original business acquisition as a result of the Crombie initial public offering in

2006 and $40,339 for the acquisition of the three properties in 2006. Of the additions made to commercial properties in 2006,

$24,351 was covered by the non-interest-bearing demand notes from ECL.

Tenant Improvement and Capital ExpendituresThere 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.

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.

Tenant improvement (“TI”) expenditures can occur when renewing existing tenant leases or for new tenants occupying a new space.

Typically, leasing costs for existing tenants are lower on a per square foot basis than for new tenants. However, new tenants may

provide more overall cash flow to Crombie through higher rents or improved traffic to a property. The timing of such expenditures

fluctuates depending on the satisfaction of contractual terms contained in the leases.

In 2007, of the additions to commercial properties and TI costs, $11,042 is recoverable from ECL as part of its obligation at the time

of the IPO. During the year ended December 31, 2007, Crombie incurred a total of $3,758 on productive capacity enhancements as

follows: expanded site for a Shoppers Drug Mart at Rose City Plaza in Welland, Ontario; new pad site for a TD Bank at Brampton Plaza

in Brampton, Ontario; and renovations to a satellite building at Avalon Mall in St. John’s, Newfoundland and Labrador that allow for

substantially higher net rents per square foot.


(In thousands of dollars) Dec. 31, 2007 Dec. 31, 2006

Total additions to commercial properties $ 16,822 $ 26,574Less: Amounts recoverable from ECL (7,669) (24,351)

Net additions to commercial properties 9,153 2,223Less: Productive capacity enhancements (3,758) —

Maintenance capital expenditures $ 5,395 $ 2,223


(In thousands of dollars) Dec. 31, 2007 Dec. 31, 2006

Total additions to tenant improvements and leasing costs $ 11,223 $ 7,302Less: Amounts recoverable from ECL (3,373) (1,708)

Net additions to tenant improvements and leasing costs 7,850 5,594Less: Productive capacity enhancements — —

Maintenance tenant improvements and leasing costs 7,850 5,594Less: Tenant improvement and leasing costs amortization (2,747) (441)

Unamortized additions to tenant improvements and leasing costs $ 5,103 $ 5,153




Capital Structure

(In thousands of dollars) Dec. 31, 2007 Sep. 30, 2007 Jun. 30, 2007 Mar. 31, 2007 Dec. 31, 2006

Commercial property debt $ 500,578 $ 493,232 $ 465,868 $ 459,704 $ 432,963Non-controlling interest $ 177,919 $ 179,457 $ 183,051 $ 186,550 $ 187,649Unitholders’ equity $ 190,834 $ 192,477 $ 196,332 $ 199,903 $ 200,894

Commercial Property DebtAs of December 31, 2007, Crombie had fixed rate mortgages outstanding of $417,450 ($431,906 after including the marked to market

adjustment of $14,456), carrying a weighted average interest rate of 5.46% (after giving effect to a monthly interest rate subsidy from

ECL under an omnibus subsidy agreement) and a weighted average term to maturity of 7.4 years.

Crombie has in place an authorized floating rate revolving credit facility of $150,000, $70,900 of which was drawn upon as at December 31,

2007. The revolving credit facility is secured by a pool of first and second mortgages and negative pledges on certain assets.

During 2007, Crombie finalized or assumed five new fixed rate mortgage agreements as a result of the acquisitions made during the

year, refinanced two existing fixed rate mortgage agreements and finalized a second mortgage, which provided $96,972 of new

funds. These funds were used to reduce the floating rate credit facility.

New Net Mortgage

Property Proceeds Interest Rate Term

Perth Mews, Perth, Ontario $ 12,600 5.43% 15 yearsCarleton Place Mews, Carleton Place, Ontario 7,850 5.18% 12 yearsBurlington Place, Burlington, Ontario 3,573 5.32% 12 yearsInternational Gateway Centre, Fort Erie, Ontario 11,418 5.36% 8 yearsBrossard, Quebec 3,425 6.44% 17 yearsTown Centre, LaSalle, Ontario 4,220 6.00% 4 yearsNiagara Plaza, Ontario 2,886 5.65% 20 yearsHalifax Developments properties, Nova Scotia 51,000 5.29% 2 years

Total $ 96,972

Crombie has entered into a fixed interest rate swap agreement which expires on July 2, 2010. Interest on $50,000 is paid at a fixed

rate of 5.54%, after including the applicable stamping fee of 1.125%, and is received at a floating rate based on the 90-day bankers’

acceptance rate. For the year ended December 31, 2007 the effect of the marked to market adjustment for the swap resulted in a loss

of $173 which was recognized in other comprehensive income in Crombie’s financial statements. The effect of the fixed interest rate

swap agreement is to limit Crombie’s exposure to floating interest rates on the $50,000 revolving credit facility. Therefore, as at

December 31, 2007, only $20,900, or 4.2%, of Crombie’s total commercial property debt was exposed to floating interest rate risk

($32,900, or 7.6%, at December 31, 2006). Principal repayments of the debt are scheduled as follows:

Payments of Debt Maturing Revolving TotalYear Principal During Year Credit Facility Maturity % of Total

2008 $ 13,728 $ 14,539 $ — $ 28,267 5.8%2009 14,201 — — 14,201 2.9%2010 10,714 106,079 70,900 187,693 38.4%2011 10,641 11,502 — 22,143 4.5%2012 11,084 — — 11,084 2.3%Thereafter 63,501 161,461 — 224,962 46.1%

Total(1) $ 123,869 $ 293,581 $ 70,900 $ 488,350 100.0%

(1) Excludes marked to market adjustment due to interest rate subsidy and fair value debt adjustment of $14,456 and the deferred financing costs of $2,228.




Unitholders’ Equity In March 2007 there were 15,760 Units awarded as part of the Employee Unit Purchase Plan. Total Units outstanding at February 28,

2008 were as follows:

Units 21,648,985Special Voting Units(1) 20,079,576

(1) Crombie Limited Partnership, a subsidiary of Crombie, has also issued 20,079,576 Class B Limited Partnership (“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:

• Annualized NOI for the prescribed properties must be a minimum of 1.6 times the coverage of the related annualized debt service

requirements; and

• Annualized NOI on all properties must be a minimum of 1.5 times the coverage of all annualized debt service requirements.

The revolving credit facility also contains a covenant of Crombie that ECL must maintain a minimum 40% voting interest in Crombie.

If ECL reduces its voting interest below this level, Crombie will be required to renegotiate the revolving credit facility or obtain

alternative financing. Pursuant to an exchange agreement and while such covenant remains in place, ECL will be required to give

Crombie at least six months’ prior written notice of its intention to reduce its voting interest below 40%. Crombie remains in

compliance with all debt covenant measures.

The following is the remaining availability of the revolving credit facility:

(In thousands of dollars) Dec. 31, 2007 Sep. 30, 2007 Jun. 30, 2007 Mar. 31, 2007 Dec. 31, 2006

Available for drawdown $ 118,923 $ 138,148 $ 136,810 $ 137,337 $ 136,141Amount utilized 70,900 114,504 100,900 114,818 82,900

Remaining availability $ 48,023 $ 23,644 $ 35,910 $ 22,519 $ 53,241

The reduction in drawdown availability and amount utilized at December 31, 2007 from September 30, 2007 is due primarily to the

financing received on the Halifax Developments properties in the amount of $51,000.

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 remained at 48.1% at December 31, 2007 compared to 48.1% at September 30, 2007. This leverage ratio

is still substantially below the maximum 60%, or 65% including convertible debentures, as outlined by Crombie’s Declaration of Trust. On a

long-term basis, Crombie intends to maintain overall indebtedness in the range of 50% to 55% of gross book value, depending upon

Crombie’s future acquisitions and financing opportunities.




As at As at As at As at As at(In thousands of dollars, except as otherwise noted) Dec. 31, 2007 Sep. 30, 2007 Jun. 30, 2007 Mar. 31, 2007 Dec. 31, 2006

Mortgages payable $ 431,906 $ 380,420 $ 366,731 $ 346,437 $ 350,063Revolving credit facility payable 70,900 114,504 100,900 114,818 82,900

Total debt outstanding 502,806 494,924 467,631 461,255 432,963Less: Marked to market adjustment due to interest rate

subsidy and fair value debt (14,456) (15,025) (15,913) (16,811) (17,717)

Debt $ 488,350 $ 479,899 $ 451,718 $ 444,444 $ 415,246

Total assets $ 1,013,982 $ 1,007,337 $ 976,699 $ 972,737 $ 963,935Add:Deferred financing charges 2,228 1,692 1,763 1,551 —Accumulated depreciation of commercial properties 24,307 20,057 16,120 12,401 9,061Accumulated amortization of intangible assets 27,802 23,043 18,775 14,586 10,837Less:Fair value debt adjustments (14,456) (15,025) (15,913) (16,811) (17,717)Fair value adjustment to future taxes (39,519) (39,519) (39,519) (39,519) (39,519)

Gross book value $ 1,014,344 $ 997,585 $ 957,925 $ 944,945 $ 926,597

Debt to gross book value 48.1% 48.1% 47.2% 47.0% 44.8%Maximum borrowing capacity(1) 60% 60% 60% 60% 60%

(1) Maximum permitted by the Declaration of Trust.

Interest and Debt Service Coverage Ratios

Crombie’s interest and debt service coverage ratios for the year ended December 31, 2007 were 3.00 times EBITDA and 1.86 times

EBITDA, respectively.This compares to 3.10 times EBITDA and 1.91 times EBITDA, respectively, for the period ended December 31,

2006. EBITDA should not be considered an alternative to net income, cash flow from operations or any other measure of operations

or liquidity as prescribed by Canadian GAAP. EBITDA is not a GAAP financial measure; however, Crombie believes it is an indicative

measure of its ability to service debt requirements, fund capital projects and acquire properties. EBITDA may not be calculated in a

comparable measure reported by other entities.


Dec. 31, 2007 Dec. 31, 2006

Property revenue $ 143,606 $ 99,949Amortization of above-market leases 2,982 2,090Amortization of below-market leases (4,489) (2,896)

Adjusted property revenue 142,099 99,143

Property expenses 59,345 42,214General and administrative expenses 8,177 5,738

EBITDA (1) $ 74,577 $ 51,191

Interest expense $ 25,275 $ 16,492Amortization of deferred financing charges (415) —

Adjusted interest expense (2) $ 24,860 $ 16,492

Debt repayments $ 39,021 $ 20,304Amortization of fair value debt premium (20) —Payments on revolving credit facility (12,000) (10,000)Balloon payments on refinanced mortgages (11,672) —

Adjusted debt repayments (3) $ 15,329 $ 10,304

Interest service coverage ratio {(1)/(2)} 3.00 3.10

Debt service coverage ratio {(1)/((2)+(3))} 1.86 1.91




Distributions and Distribution Payout Ratios

Distribution PolicyPursuant to Crombie’s Declaration of Trust, Crombie 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 and no more than 100% of its AFFO on an annual basis.

Details of distributions to Unitholders are as follows:


(In thousands of dollars, except per unit amounts and as otherwise noted) Dec. 31, 2007 Dec. 31, 2006

Distributions to Unitholders $ 18,146 $ 13,369Distributions to Special Voting Unitholders 16,837 12,440

Total distributions $ 34,983 $ 25,809

Number of diluted Units 21,646,135 21,498,595Number of diluted Special Voting Units 20,079,576 20,079,576

Total diluted weighted average Units 41,725,711 41,578,171

Distributions per unit $ 0.84 $ 0.62Distributable income payout ratio (target ratio = 80%) 77.2% 77.5%AFFO payout ratio (target ratio = 100%) 100.4% 99.6%

FOURTH QUARTER RESULTS

Comparison to Previous Year

Quarter Ended

(In thousands of dollars, except where otherwise noted) Dec. 31, 2007 Dec. 31, 2006 Variance

Property revenue $ 37,059 $ 33,717 $ 3,342 Property expenses 14,843 15,091 248

Property NOI 22,216 18,626 3,590

NOI margin percentage 59.9% 55.2% 4.7%

Expenses:General and administrative 2,492 2,293 (199)Interest 6,667 5,523 (1,144)Depreciation and amortization 8,227 6,270 (1,957)

17,386 14,086 (3,300)

Income before income taxes and non-controlling interest 4,830 4,540 290Income taxes recovery – future (2,994) (1,663) 1,331

Income before non-controlling interest 7,824 6,203 1,621Non-controlling interest 3,766 2,986 780

Net income $ 4,058 $ 3,217 $ 841

Basic and diluted net income per Unit $ 0.19 $ 0.15

Basic weighted average Units outstanding (in 000s) 21,544 21,509

Diluted weighted average Units outstanding (in 000s) 21,649 21,633

Net income for the fourth quarter of 2007 of $4,058 increased by $841 from $3,217 for the fourth quarter of 2006. The increase was due to:

• higher property NOI from the increased average rent per square foot of the same-asset properties, as well as the impact from the

five property acquisitions since December 31, 2006; and

• higher future income tax recovery due to the reversal of expenses recorded in the second and third quarters as a result of

increased clarity surrounding REIT taxation rules (see “Future Income Taxes”); offset in part by

• higher interest and depreciation charges, due primarily to the five property acquisitions since December 31, 2006, along with

higher general and administrative costs incurred for ongoing compliance and professional fees.




Property Revenue and Property Expenses

Quarter Ended


Same-asset property revenue $ 34,628 $ 33,717 $ 911Acquisition property revenue 2,431 — 2,431

Property revenue $ 37,059 $ 33,717 $ 3,342

Same-asset property revenue of $34,628 for the fourth quarter of 2007 was 2.7% higher than the same quarter in the previous year

due primarily to the increased average rent per square foot ($11.88 in 2007 and $11.67 in 2006).

Quarter Ended


Same-asset property expenses $ 14,204 $ 15,091 $ (887)Acquisition property expenses 639 — 639

Property expenses $ 14,843 $ 15,091 $ (248)

Same-asset property expenses of $14,204 in the fourth quarter of 2007 were 5.9% lower than the fourth quarter of 2006 primarily

due to decreased non-recoverable repair and maintenance projects in 2007 versus 2006.

Quarter Ended


Same-asset property NOI $ 20,424 $ 18,626 $ 1,798Acquisition property NOI 1,792 — 1,792

Property NOI $ 22,216 $ 18,626 $ 3,590

Same-asset NOI for the fourth quarter of 2007 grew by 9.7% over the same period in 2006.

Property NOI by region was as follows:

Quarter EndedQuarter Ended December 31, 2007 Dec. 31, 2006

Property Property Property NOI % of NOI % of (In thousands of dollars, except where otherwise noted) Revenue Expenses NOI Revenue Revenue Variance

Nova Scotia $ 18,322 $ 8,106 $ 10,216 55.7% 50.8% 4.9%Newfoundland and Labrador 5,852 2,011 3,841 65.6% 63.8% 1.8%New Brunswick 4,360 2,250 2,110 48.4% 47.9% 0.5%Ontario 6,635 1,986 4,649 70.1% 64.0% 6.1%Prince Edward Island 1,121 330 791 70.6% 74.3% (3.7)%Quebec 769 160 609 79.2% 75.6% 3.6%

Total $ 37,059 $ 14,843 $ 22,216 59.9% 55.2% 4.7%

The increase in NOI percentage of revenue in Nova Scotia is due primarily to the timing of non-recoverable repair and maintenance

projects in 2007 versus 2006. The Ontario and Quebec growth in NOI percentage of revenue is attributable to the acquisition activity

in those provinces. Crombie has only one commercial property in Prince Edward Island, and because of the fluctuations due to

maintenance costs in any given year, higher variances are not unusual on any single property.




General and Administrative Expenses

General and administrative expenses increased by 8.7% during the fourth quarter of 2007 to $2,492 due to higher professional fees

and other public entity compliance costs. During the fourth quarter of 2007, there were additional professional fees incurred of

approximately $265 to ensure Crombie could comply with the REIT taxation requirements.

Interest Expense

Quarter Ended


Same-asset interest expense $ 5,533 $ 5,523 $ 10Acquisition interest expense 1,134 — 1,134

Interest expense $ 6,667 $ 5,523 $ 1,144

Same-asset interest expense of $5,533 for the fourth quarter of 2007 increased by 0.2% for same period in the prior year due to the

declining interest portion of debt repayments for the same-assets, offset by the reallocation of the amortization of deferred financing

charges as a result of changes in accounting policies adopted by Crombie effective January 1, 2007. The amount of the interest rate

subsidy recorded during the fourth quarter of 2007 was $874 ($913 for the fourth quarter of 2006).

Depreciation and Amortization

Quarter Ended


Same-asset depreciation and amortization $ 6,923 $ 6,270 $ 653Acquisition depreciation and amortization 1,304 — 1,304


Same-asset depreciation and amortization of $6,923 for the fourth quarter of 2007 was 10.4% higher than for the fourth quarter of

2006 due primarily to amortization of tenant improvements and lease costs incurred since June 30, 2006. Depreciation and

amortization consists of:

Quarter Ended


Depreciation of commercial properties $ 3,346 $ 2,776 $ 570Amortization of tenant improvements/lease costs 904 441 463Amortization of intangible assets 3,977 2,942 1,035Amortization of deferred financing charges — 111 (111)


Sector Information

Retail Properties

Quarter Ended December 31, 2007 Quarter Ended December 31, 2006


Property revenue $ 19,830 $ 2,431 $ 22,261 $ 18,394 $ — $ 18,394Property expenses 6,380 639 7,019 7,202 — 7,202

Property NOI $ 13,450 $ 1,792 $ 15,242 $ 11,192 $ — $ 11,192

NOI margin % 67.8% 73.7% 68.5% 60.8% —% 60.8%

Occupancy % 93.6% 95.4% 93.8% 92.9% —% 92.9%




The improvement in the fourth quarter of 2007 retail property NOI was caused by the slight increase in retail occupancy levels in the

same-asset retail properties from 92.9% in 2006 to 93.6% 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.

Office Properties




Property NOI $ 1,988 $ — $ 1,988 $ 2,661 $ — $ 2,661

NOI margin % 37.2% —% 37.2% 43.9% —% 43.9%

Occupancy % 91.1% —% 91.1% 92.7% —% 92.7%

The improved occupancy levels and net rent per square foot at the Halifax Developments properties in Halifax were more than offset

by decreased occupancy in Terminal Centres in Moncton, New Brunswick. These factors resulted in the lower property NOI and NOI

margin percent for the properties in the fourth quarter of 2007 compared to the fourth quarter of 2006.

Mixed-Use Properties




Property NOI $ 4,986 $ — $ 4,986 $ 4,773 $ — $ 4,773

NOI margin % 52.7% —% 52.7% 51.5% —% 51.5%

Occupancy % 94.4% —% 94.4% 95.8% —% 95.8%

The slight decline in mixed-use occupancy levels from 95.8% in 2006 to 94.4% in 2007 was offset by improved average net rent per

square foot from leasing activity.

Cash Flow

Quarter Ended Quarter Ended(In thousands of dollars) Dec. 31, 2007 Dec. 31, 2006 Variance

Cash provided by (used in):Operating activities $ 19,190 $ 24,717 $ (5,527)Financing activities $ (2,031) $ 23,240 $ (25,271)Investing activities $ (14,451) $ (46,777) $ 32,326

Operating ActivitiesCash provided by operating activities during the fourth quarter of 2007 of $19,190 was generated by the income before non-

controlling interest of $4,830, the adding back of non-cash expenses, primarily depreciation and amortization of $8,227, and the

effect of non-cash operating items of $8,842. These items were partially offset by additions made to tenant improvements and

leasing costs of $2,210.

During the fourth quarter of 2006 $24,717 was generated by the income before the non-controlling interest of $4,540, the adding

back of non-cash expenses, primarily depreciation and amortization of $6,270, and the effect of non-cash working capital items of

$15,836. The change in non-cash items in 2006 was primarily as a result of the finalization and collection of amounts due from ECL in

addition to a holdback related to the acquisition of the Oshawa property.




Financing ActivitiesCash used by financing activities during the fourth quarter of 2007 of $2,031 was primarily due to the payments made on mortgages

and distribution payments of $8,867 made during the quarter, offset in part by new mortgage proceeds (see “Commercial Property

Debt”). In 2006, $23,240 of cash was provided from financing activities, primarily as a result of proceeds received from three mortgages

related to the acquisitions made in the quarter and an increase in the revolving credit facility, also as a result of the three acquisitions.

Investing ActivitiesCash used in investing activities of $14,451 during the fourth quarter of 2007 was due primarily to the acquisition of Town Centre in

at LaSalle, Ontario. During the fourth quarter of 2006, cash of $46,777 was used primarily for the acquisition of the three properties in

the quarter for $40,339.

OTHER FOURTH QUARTER PERFORMANCE MEASURES

Distributable Income

Distributable income as defined in Crombie’s Declaration of Trust is calculated as follows:

Quarter Ended


Net income $ 4,058 $ 3,217 $ 841Add back:Non-controlling interest 3,766 2,986 780Depreciation and amortization(1) 7,323 5,718 1,605Future income taxes (2,994) (1,663) (1,331)Above-market lease amortization 782 697 85Deduct:Below-market lease amortization (1,256) (962) (294)Accrued rental revenue (144) (178) 34Amortization of fair value debt premium (20) — (20)


(1) Excludes amortization of deferred financing charges, tenant improvements and leasing commission costs.

The increase in distributable income for the fourth quarter of 2007 when compared to the fourth quarter of 2006 was due to increased

NOI of $3,590 in 2007 as previously discussed, partially offset by increases in general and administrative costs of $199 and interest

expense of $1,144. The interest rate increase is a result of the six additional properties acquired since the fourth quarter of 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:

Quarter Ended


Cash provided by operating activities $ 19,190 $ 24,717 $ (5,527)Add back (deduct):Additions to tenant improvements and lease costs 2,210 1,513 697Change in non-cash operating items (8,842) (15,836) 6,994Unit-based compensation expense (9) (27) 18Amortization of deferred financing charges (110) (111) 1Amortization of tenant improvements and lease costs (904) (441) (463)Amortization of fair value debt premium (20) — (20)





Adjusted Funds from Operations

As maintenance capital expenditures and tenant improvements are not incurred evenly throughout a fiscal year, there can be

volatility in AFFO on a quarterly basis. The calculation of AFFO for the quarter ended is as follows:

Quarter Ended


Distributable income $ 11,515 $ 9,815 $ 1,700Less capital adjustments:Maintenance capital expenditures (net of amount recoverable from ECL) (2,712) (933) (1,779)Unamortized additions to tenant improvements and lease costs (net of amount recoverable from ECL) (1,242) (619) (623)

AFFO $ 7,561 $ 8,263 $ (702)

Funds from Operations

The calculation of FFO for the quarter ended is as follows:

Quarter Ended


Net income $ 4,058 $ 3,217 $ 841Add back:Non-controlling interest 3,766 2,986 780Depreciation and amortization(1) 8,227 6,159 2,068Future income taxes (2,994) (1,663) (1,331)

Funds from operations $ 13,057 $ 10,699 $ 2,358

(1) Excludes amortization of deferred financing charges.

The improvement in FFO for the fourth quarter of 2007 over the fourth quarter of 2006 was due to the improved property NOI, partially

offset by higher interest expenses related to the acquisitions and higher general and administrative expenses as outlined previously.

CHANGES IN ACCOUNTING POLICIESEffective 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(loss) for the period. A new category, accumulated other

comprehensive income(loss), has been added to the consolidated statement of unitholders’ equity.




Hedges (Section 3865)

This new section establishes standards for when and how hedge accounting may be applied, as well as the disclosure requirements.

Hedge accounting enables the recording of gains, losses, revenues and expenses from the derivative financial instruments in the

same period as for those related to the hedged item.

The new standard outlines the criteria for applying hedge accounting to cash flow hedges and fair value hedges. Cash flow hedges

are recognized on the balance sheet at fair value with the effective portion of the hedging relationship recognized in other

comprehensive income. Any ineffective portion of the cash flow hedge is recognized in net income. Amounts recognized in

accumulated other comprehensive income are reclassified to net income in the same periods in which the hedged item is

recognized in net income. Fair value hedges and the related hedge items are recognized on the balance sheet at fair value with

any changes in fair value recognized in net income. To the extent the fair value hedge is effective, the changes in the fair value of

the hedge and the hedged item will offset each other.

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

i) an adjustment to reflect a reallocation on the consolidated balance sheet of $1,578 from deferred financing charges to

commercial property debt for unamortized transaction costs previously incurred and accounted for separately; and

ii) a transition adjustment to recognize the fair value of a derivative designated as a cash flow hedge. The fair value at

January 1, 2007 was $(310), of which $(162) has been allocated to unitholders’ equity and $(148) to non-controlling interest.

The adoption of these new standards has been reflected on Crombie’s 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 annual financial statements for fiscal periods ending on or after March 31,

2007. The determination to declare and make payable distributions from Crombie is at the discretion of the Board of Trustees of

Crombie and, until declared payable by the Board of Trustees of Crombie, Crombie has no contractual requirement to pay cash

distributions to Unitholders of Crombie. During the year ended December 31, 2007, $34,983 (period March 23, 2006 to

December 31, 2006 – $25,809) in cash distributions were declared payable by the Board of Trustees to Crombie Unitholders

and Crombie Limited Partnership Unitholders (the “Class B LP Unitholders”).

RELATED PART Y TRANSACTIONSAs at December 31, 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 year ended December 31, 2007

were $1,505 (period from March 23, 2006 to December 31, 2006 – $850) 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

year ended December 31, 2007 were $2,408 (the period from March 23, 2006 to December 31, 2006 – $1,764) and were netted

against property expenses. The rental income subsidy during the year ended December 31, 2007 was $37 (period from March 23,

2006 to December 31, 2006 – $461) and the head lease subsidy during the year ended December 31, 2007 was $2,124 (period from

March 23, 2006 to December 31, 2006 – $1,123).




Crombie also earned property revenue of $23,722 for the year ended December 31, 2007 (period from March 23, 2006 to December 31,

2006 – $16,427) from Sobeys Inc., Empire Theatres Limited and ASC Commercial Leasing Limited. These companies are all subsidiaries

of Empire Company Limited.

CRITICAL ACCOUNTING ESTIMATES

Property Acquisitions

Upon acquisition of commercial properties, Crombie performs an assessment of the fair value of the properties’ related tangible and

intangible assets and liabilities (including land, buildings, origination costs, in-place leases, above-and below-market leases, and any

other assumed assets and liabilities), and allocates the purchase price to the acquired assets and liabilities. Crombie assesses and

considers fair value based on cash flow projections that take into account relevant discount and capitalization rates and any other

relevant sources of market information available. Estimates of future cash flow are based on factors that include historical operating

results, if available, and anticipated trends, local markets and underlying economic conditions.

Crombie allocates the purchase price based on the following:

Land – The amount allocated to land is based on an appraisal estimate of its fair value.

Buildings – Buildings are recorded at the fair value of the building on an “as-if-vacant” basis, which is based on the present value of

the anticipated net cash flow of the building from vacant start-up to full occupancy.

Origination costs for existing leases – Origination costs are determined based on estimates of the costs that would be incurred to

put the existing leases in place under the same terms and conditions. These costs include leasing commissions as well as foregone

rent and operating cost recoveries during an assumed lease-up period.

In-place leases – In-place lease values are determined based on estimated costs required for each lease that represents the net

operating income lost during an estimated lease-up period that would be required to replace the existing leases at the time of purchase.

Tenant relationships – Tenant relationship values are determined based on costs avoided if the respective tenants were to renew

their leases at the end of the existing term, adjusted for the estimated probability that the tenants will renew.

Above- and below-market existing leases – Values ascribed to above- and below-market existing leases are determined based on the

present value of the difference between the rents payable under the terms of the respective leases and estimated future market rents.

Fair value of debt – Values ascribed to fair value of debt are determined based on the differential between contractual and market

interest rates on long term liabilities assumed at acquisition.

Commercial Properties

Commercial properties include land, buildings and tenant improvements. Commercial properties are carried at cost less accumulated

depreciation and are reviewed periodically for impairment.

Depreciation of buildings is calculated using the straight-line method with reference to each property’s cost, its estimated useful life

(not exceeding 40 years) and its residual value.

Amortization of tenant improvements is determined using the straight-line method over the terms of the tenant lease agreements

and renewal periods where applicable.

Repair and maintenance improvements that are not recoverable from tenants are either expensed as incurred or, in the case of a

major item, capitalized to commercial properties and amortized on a straight-line basis over the expected useful life of the

improvement.

Revenue Recognition

Property revenue includes rents earned from tenants under lease agreements, percentage rent, realty tax and operating cost

recoveries, and other incidental income. Certain leases have rental payments that change over their term due to changes in rates.

Crombie records the rental revenue from these leases on a straight-line basis over the term of the lease. Accordingly, an accrued rent

receivable/payable is recorded for the difference between the straight-line rent recorded as property revenue and the rent that is




contractually due from the tenants. Percentage rents are recognized when tenants are obligated to pay such rent under the terms of

the related lease agreements. The value of the differential between original and market rents for existing leases is amortized using

the straight-line method over the terms of the tenant lease agreements. Realty tax and other operating cost recoveries, and other

incidental income are recognized on an accrual basis.

Use of Estimates

The preparation of consolidated financial statements in conformity with 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. The significant areas of estimation and assumption include:

• Impairment of assets;

• Depreciation;

• Allocation of purchase price on property acquisitions;

• Fair value of mortgages.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying value

of an asset may not be recoverable.

If it is determined that the net recoverable value of a long-lived asset is less than its carrying value, the long-lived asset is written

down to its fair value. Net recoverable amount represents the undiscounted estimated future cash flow expected to be received from

the long-lived asset. Assets reviewed under this policy include commercial properties and intangible assets.

FUTURE CHANGES IN S IGNIFICANT ACCOUNTING POLICIES

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 an 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.

CONTINGENCIESThere 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 MANAGEMENTThere are certain risks inherent in the activities of Crombie, including the following:

Risk Factors Related to the Real Estate Industry

Real Property Ownership and Tenant RisksAll real property investments are subject to elements of risk. The value of real property and any improvements thereto depend on the

credit and financial stability of tenants and upon the vacancy rates of the properties. In addition, certain significant expenditures,

including property taxes, ground rent, mortgage payments, insurance costs and related charges must be made throughout the

period of ownership of real property regardless of whether a property is producing any income. Cash available for distribution will be

adversely affected if a significant number of tenants are unable to meet their obligations under their leases or if a significant amount

of available space in the properties becomes vacant and cannot be leased on economically favourable lease terms.

Upon the expiry of any lease, there can be no assurance that the lease will be renewed or the tenant replaced. The terms of any

subsequent lease may be less favourable to Crombie than those of an existing lease. The ability to rent unleased space in the

properties in which Crombie has an interest will be affected by many factors, including general economic conditions, local real estate

markets, changing demographics, supply and demand for leased premises, competition from other available premises and various

other factors. Management utilizes staggered lease maturities so that Crombie is not required to lease unusually large amounts of

space in any given year. In addition, the diversification of our property portfolio by geographic location, tenant mix and asset type

also help to mitigate this risk.

CompetitionThe real estate business is competitive. Numerous other developers, managers and owners of properties compete with Crombie in

seeking tenants. Some of the properties located in the same markets as Crombie’s properties are newer, better located, less levered

or have stronger anchor tenants than Crombie’s properties. Some property owners with properties located in the same markets as

Crombie’s properties may be better capitalized and may be stronger financially and hence better able to withstand an economic

downturn. Competitive pressures in such markets could have a negative effect on Crombie’s ability to lease space in its properties

and on the rents charged or concessions granted.

Risk Factors Related to the Business of Crombie

Reliance on Anchor TenantsCrombie’s anchor tenants are concentrated in a relatively small number of retail operators. Specifically, 15.9% of the annual minimum

rent generated from Crombie’s properties is derived from anchor tenants which are owned and/or operated by Sobeys. Therefore,

Crombie is dependent on the sustainable operation by Sobeys in these locations.

Retail and Geographic ConcentrationCrombie’s portfolio of properties is heavily weighted in retail properties. Consequently, changes in the retail environment and

general consumer spending could adversely impact Crombie’s financial condition. Crombie’s portfolio of properties is also heavily

concentrated in Atlantic Canada. An economic downturn concentrated in the Atlantic Canada region could also adversely impact

Crombie’s financial condition. The geographic breakdown of properties and percentage of annual minimum rent of Crombie’s

properties for 2007 are as follows: 21 properties in Nova Scotia comprising 46.2%; 16 properties in Ontario comprising 18.3%; eight

properties in New Brunswick comprising 11.4%; four properties in Newfoundland and Labrador comprising 17.4%; one property in

Prince Edward Island comprising 3.5%; and two properties in Quebec comprising 3.2%. Crombie’s growth strategy of expansion

outside of Atlantic Canada is predicated on reducing the geographic concentration risk.

Financing RisksCrombie has outstanding fixed rate mortgages of approximately $431,906 with an average term to maturity of 7.4 years and a

weighted average interest rate of 5.46%. In addition, Crombie had a floating rate, revolving credit facility of $70,900 at December 31,

2007 with a 2.6-year term to maturity. Crombie has entered into a $50,000 fixed interest rate swap agreement at 5.50% to reduce the

exposure to floating interest rates.

The real estate industry is highly capital intensive. Crombie will require access to capital to fund its growth strategy and refinance

current obligations as they come due. As such, Crombie is subject to the risks associated with debt financing, including the risk that

the mortgages and banking facilities secured by Crombie’s properties will not be able to be refinanced or that the terms of such

refinancing will not be as favourable as the terms of existing indebtedness. In order to minimize this risk, Crombie attempts to




diversify the term structure of its debt so that in no one year does a disproportionate amount of its debt mature. In addition, Crombie

attempts to limit the use of floating rate debt. Accordingly, after affecting for the $50,000 fixed interest rate swap agreement,

approximately 4.2% of Crombie’s total indebtedness is variable rate debt.

Crombie’s credit facilities also contain covenants that require it to maintain certain financial ratios on a consolidated basis. If Crombie

does not maintain such ratios, its ability to make distributions will be limited. The revolving credit facility 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%.There can be no assurance that Crombie would be able to renegotiate the revolving credit

facility or obtain alternative financing.

As part of Crombie’s ongoing interest rate risk management strategy, during the second quarter of 2007, Crombie entered into

delayed interest rate swap agreements of a notional amount of $118,689 for all mortgages maturing between June 2008 and June 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 completion of the

refinancing of the Niagara Plaza mortgage discussed earlier, Crombie has finalized all debt maturities for 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.

In reference to the agreements with Empire to purchase the portfolio of 61 properties, Crombie believes that it will be able to obtain

permanent financing as contemplated in the table outlining accretion levels to FFO and AFFO.

Environmental MattersEnvironmental legislation and regulations have become increasingly important in recent years. As an owner of interests in real

property in Canada, Crombie is subject to various Canadian federal, provincial and municipal laws relating to environmental matters.

Such laws provide that Crombie could become liable for environmental harm, damage or costs, including with respect to the release

of hazardous, toxic or other regulated substances into the environment, and the removal or other remediation of hazardous, toxic or

other regulated substances that may be present at or under its properties. The failure to remove or otherwise address such

substances or properties, if any, may adversely affect Crombie’s ability to sell such property, realize the full value of such property or

borrow using such property as collateral security, and could potentially result in claims against Crombie by public or private parties

by way of civil action.

Crombie’s operating policy is to obtain a Phase I environmental site assessment, conducted by an independent and experienced

environmental consultant, prior to acquiring a property and to have Phase II environmental site assessment work completed where

recommended in a Phase I environmental site assessment.

Crombie is not aware of any material non-compliance with environmental laws at any of its properties and is not aware of any

pending or threatened investigations or actions by environmental regulatory authorities in connection with any of its properties.

Crombie will implement policies and procedures to assess, manage and monitor environmental conditions at its properties to

manage exposure to liability.

Potential Conflicts of InterestThe trustees will, from time to time, in their individual capacities, deal with parties with whom Crombie may be dealing, or may be

seeking investments similar to those desired by Crombie. The interests of these persons could conflict with those of Crombie. The

Declaration of Trust contains conflict of interest provisions requiring the trustees to disclose their interests in certain contracts and

transactions and to refrain from voting on those matters. In addition, certain decisions regarding matters that may give rise to a

conflict of interest must be made by a majority of independent trustees only.

Conflicts may exist due to the fact that certain trustees, senior officers and employees of Crombie are directors and/or senior officers

of ECL and/or its affiliates or will provide management or other services to ECL and its affiliates. ECL and its affiliates are engaged in a

wide variety of real estate and other business activities. Crombie may become involved in transactions that conflict with the interests

of the foregoing. The interests of these persons could conflict with those of Crombie. To mitigate these potential conflicts, Crombie

and ECL have entered into a number of agreements to outline how potential conflicts of interest will be dealt with including a

Non-Competition Agreement, Management Cost Sharing Agreement and Development Agreement. As well, the Declaration of Trust

contains a number of provisions to manage potential conflicts of interest including setting limits to the number of ECL appointees to

the Board, conflict of interest guidelines, as well as outlining which matters require the approval of a majority of the independent

trustees such as any property acquisitions or dispositions between Crombie and ECL or another related party.




Reliance on Key PersonnelThe management of Crombie depends on the services of certain key personnel. The loss of the services of any key personnel could

have an adverse effect on Crombie and adversely impact Crombie’s financial condition. Crombie does not have key-man insurance

on any of its key employees.

Reliance on ECL and Other Empire AffiliatesECL has agreed to support Crombie under an omnibus subsidy agreement and to pay ongoing rent pursuant to a head lease and a

ground lease. Crombie’s ability to acquire new development properties is dependent upon ECL and the successful operation of the

Development Agreement. In addition, a significant portion of Crombie’s rental income will be received from tenants that are affiliates

of Empire. There is no certainty that ECL will be able to perform its obligations to Crombie in connection with these agreements. ECL

has not provided any security to guarantee these obligations. If ECL, Empire or such affiliates are unable or otherwise fail to fulfill their

obligations to Crombie, such failure could adversely impact Crombie’s financial condition.

Prior Commercial OperationsCrombie Limited Partnership (“Crombie LP”) acquired from ECL all of the outstanding shares of Crombie Developments Limited (“CDL”).

CDL is the company resulting from the amalgamation of predecessor companies which began their operations in 1964 and have

since been involved in various commercial activities in the real estate sector. In addition, the share capital of CDL and its predecessors

has been subject to various transfers, redemptions and other modifications. Pursuant to the Business Acquisition, ECL made certain

representations and warranties to Crombie with respect to CDL, including with respect to the structure of its share capital and the

scope and amount of its existing and contingent liabilities. ECL also provided an indemnity to Crombie under the Business

Acquisition which provides, subject to certain conditions and thresholds, that ECL will indemnify Crombie for breaches of such

representations and warranties. There can be no assurance that Crombie will be fully protected in the event of a breach of such

representations and warranties or that ECL will be in a position to indemnify Crombie if any such breach occurs. ECL has not provided

any security for its obligations and is not required to maintain any cash within ECL for this purpose.

Risk Factors Related to the Units

Cash Distributions Are Not GuaranteedThere can be no assurance regarding the amount of income to be generated by Crombie’s properties. The ability of Crombie to

make cash distributions and the actual amount distributed are entirely dependent on the operations and assets of Crombie and

its subsidiaries and are subject to various factors including financial performance, obligations under applicable credit facilities, the

sustainability of income derived from anchor tenants and capital expenditure requirements. Cash available to Crombie to fund

distributions may be limited from time to time because of items such as principal repayments, tenant allowances, leasing

commissions, capital expenditures and redemptions of Units, if any. Crombie may be required to use part of its debt capacity or

to reduce distributions in order to accommodate such items. The market value of the Units will deteriorate if Crombie is unable to

maintain its distribution in the future, and that deterioration may be significant. In addition, the composition of cash distributions

for tax purposes may change over time and may affect the after-tax return for investors.

Restrictions on RedemptionsIt is anticipated that the redemption of Units will not be the primary mechanism for holders of Units to liquidate their investments.

The entitlement of Unitholders to receive cash upon the redemption of their Units is subject to the following limitations: (i) the total

amount payable by Crombie in respect of such Units and all other Units tendered for redemption in the same calendar month must

not exceed $50 (provided that such limitation may be waived at the discretion of the Trustees); (ii) at the time such Units are tendered

for redemption, the outstanding Units must be listed for trading on a stock exchange or traded or quoted on another market which

the Trustees consider, in their sole discretion, provides fair market value prices for the Units; and (iii) the trading of Units is not

suspended or halted on any stock exchange on which the Units are listed (or, if not listed on a stock exchange, on any market on

which the Units are quoted for trading) on the redemption date for more than five trading days during the 10-day trading period

commencing immediately after the redemption date.

Potential Volatility of Unit PricesOne of the factors that may influence the market price of the Units is the annual yield on the Units. An increase in market interest

rates may lead purchasers of Units to demand a higher annual yield, which accordingly could adversely affect the market price of the

Units. In addition, the market price of the Units may be affected by changes in general market conditions, fluctuations in the markets

for equity securities and numerous other factors beyond the control of Crombie.




Tax-Related Risk FactorsThe Declaration of Trust of Crombie provides that a sufficient amount of Crombie’s net income and net realized capital gains will be

distributed each year to Unitholders or otherwise in order to eliminate Crombie’s liability for tax under Part I of the Tax Act. Where the

amount of net income and net realized capital gains of Crombie in a taxation year exceeds the cash available for distribution in the

year, such excess net income and net realized capital gains will be distributed to Unitholders in the form of additional Units.

Unitholders will generally be required to include an amount equal to the fair market value of those Units in their taxable income,

notwithstanding that they do not directly receive a cash distribution.

Income fund or REIT structures in which there is a significant corporate subsidiary such as CDL generally involve a significant amount

of inter-company or similar debt, generating substantial interest expense, which reduces earnings and therefore income tax payable.

Management believes that the interest expense inherent in the structure of Crombie is supportable and reasonable in the

circumstances; however, there can be no assurance that taxation authorities will not seek to challenge the amount of interest

expense deducted on the debt owing by CDL to Crombie LP. If such a challenge were to succeed, it could adversely affect the amount

of cash available for distribution.

The cost amount for taxation purposes of various properties of CDL will be lower than their fair market value, generally resulting in

correspondingly lower deductions for taxation purposes and higher recapture of depreciation or capital gains on their disposition.

In addition, CDL (unlike Crombie) may not reduce its taxable income through cash distributions. If CDL should become subject to

corporate income tax, the cash available for distribution to Unitholders would likely be reduced.

On June 22, 2007, tax legislation Bill C-52, the Budget Implementation Act, 2007 (the “Act”) was passed into law. The Act related to the

federal income taxation of publicly traded income trusts and partnerships. The Act subjects all existing income trusts, or specified

investment flow-through entities (“SIFTs”), to corporate tax rates, beginning in 2011, subject to an exemption for real estate investment

trusts (“REITs”). The exemption for REITs was provided to “recognize the unique history and role of collective real estate investment

vehicles,” which are well-established structures throughout the world. A trust that satisfies the criteria of a REIT throughout its taxation

year will not be subject to income tax in respect of distributions to its unitholders or be subject to the restrictions on its growth that

would apply to SIFTs.

While REITs were exempted from the SIFT taxation, the Act proposed a number of technical tests to determine which entities would

qualify as a REIT. These technical tests did not fully accommodate the business structures used by many Canadian REITs.


organizational structure and operations to support Crombie’s assertion that, at January 1, 2008, it meets the REIT technical tests

contained in the Act. The relevant tests apply throughout the taxation year of Crombie and, as such, the actual status of Crombie for

any particular taxation year can be ascertained only at the end of the year.

On December 20, 2007, the Department of Finance (Canada) issued proposed amendments to provide further clarity to these technical

tests. While Crombie did not rely on these proposed amendments, they do provide further certainty that Crombie qualifies as a REIT.

Notwithstanding that Crombie may meet the criteria for a REIT under the Act and thus be exempt from the distribution tax, there can

be no assurance that the Department of Finance (Canada) or other governmental authority will not undertake initiatives which have

an adverse impact on Crombie or its unitholders.

Indirect Ownership of Units by EmpireECL holds a 48.1% economic interest in Crombie through the ownership of Class B LP Units. Pursuant to the Exchange Agreement,

each Class B LP Unit will be exchangeable at the option of the holder for one Unit of Crombie and will be attached to a Special Voting

Unit of Crombie, providing for voting rights in Crombie. Furthermore, pursuant to the Declaration of Trust, ECL is entitled to appoint a

certain number of trustees based on the percentage of Units held by it. Thus, Empire is in a position to exercise a certain influence

with respect to the affairs of Crombie. If Empire sells substantial amounts of its Class B LP Units or exchanges such units for Units and

sells these Units in the public market, the market price of the Units could fall. The perception among the public that these sales will

occur could also produce such effect.




SUBSEQUENT E VENTSOn January 22, 2008, Crombie declared distributions of 7.083 cents per unit for the period from January 1, 2008 to, and including,

January 31, 2008. The distribution will be payable on February 15, 2008 to Unitholders of record as at January 31, 2008.

On February 18, 2008, Crombie declared distributions of 7.083 cents per unit for the period from February 1, 2008 to, and including,

February 29, 2008. The distribution will be payable on March 17, 2008 to Unitholders of record as at February 29, 2008.

On February 25, 2008, Crombie announced that it has entered into agreements with subsidiaries of Empire Company Limited to

acquire a portfolio of 61 retail properties representing approximately 3.3 million square feet of gross leaseable area. The cost of the

acquisition to Crombie is approximately $441,500, including approximately $13,000 of closing and transaction costs. The closing of

the acquisition is expected on or about April 21, 2008.

Financing for the acquisition is expected to include approximately $18,000 from the revolving credit facility, an 18-month bridge

financing of $278,500, the issuance of $30,000 extendible convertible unsecured subordinated debentures, the issuance of $55,000

of Class B LP units of Crombie Limited Partnership to Empire Company Limited, and the issuance of $60,005 of subscription receipts

at a price of $11.00 per subscription receipt. On closing of the acquisition, each subscription receipt will convert into one REIT unit.

Crombie will be filing a preliminary prospectus in relation to the extendible convertible unsecured subordinated debentures and

the subscription receipts on February 29, 2008.

The acquisition must be approved by the affirmation vote of a majority of Unitholders (excluding Empire Company Limited and

certain of its affiliates and insiders) at a Unitholders meeting to be held on April 14, 2008.

INTERNAL CONTROL OVER FINANCIAL REPORTINGManagement is responsible for establishing and maintaining adequate internal control over financial reporting to provide

reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes

in accordance with GAAP. The Chief Executive Officer and the Chief Financial Officer have evaluated whether there were changes to

internal control over financial reporting for the year ended December 31, 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.

Based on an evaluation of Crombie’s disclosure controls and procedures, Crombie’s Chief Executive Officer and Chief Financial Officer

concluded as of December 31, 2007 that these controls and procedures were designed and operated effectively.

Crombie’s Chief Executive Officer and Chief Financial Officer also evaluated Crombie’s internal controls over financial reporting at

December 31, 2007 and concluded that these controls are appropriately designed.




QUARTERLY INFORMATIONThe following table shows information for revenues, net income, distributable income, AFFO, FFO, distributions and per unit amounts

for the seven most recently completed quarters.

Quarter Ended

(In thousands of dollars, except per unit amounts) Dec. 31, 2007 Sep. 30, 2007 Jun. 30, 2007 Mar. 31, 2007 Dec. 31, 2006 Sep. 30, 2006 Jun. 30, 2006

Property revenue $ 37,059 $ 35,619 $ 35,248 $ 35,680 $ 33,717 $ 31,201 $ 31,758Property expenses 14,843 15,156 14,300 15,046 15,091 13,053 12,626

Property net operating income 22,216 20,463 20,948 20,634 18,626 18,148 19,132

Expenses:General and administrative 2,492 1,843 2,224 1,618 2,293 1,612 1,687Interest 6,667 6,503 6,171 5,934 5,523 5,165 5,274Depreciation and amortization 8,227 7,454 7,156 6,392 6,270 5,635 5,631

17,386 15,800 15,551 13,944 14,086 12,412 12,592

Income before income taxes and non-controlling interest 4,830 4,663 5,397 6,690 4,540 5,736 6,540

Income taxes:Current — — — — — — (9)Future (2,994) 718 2,978 328 (1,663) 450 410

(2,994) 718 2,978 328 (1,663) 450 401

Income before non-controllinginterest 7,824 3,945 2,419 6,362 6,203 5,286 6,139

Non-controlling interest 3,766 1,899 1,164 3,062 2,986 2,550 2,972

Net income $ 4,058 $ 2,046 $ 1,255 $ 3,300 $ 3,217 $ 2,736 $ 3,167

Basic and diluted net income per unit $ 0.19 $ 0.10 $ 0.06 $ 0.15 $ 0.15 $ 0.13 $ 0.15

Quarter Ended

(In thousands of dollars, except per unit amounts) Dec. 31, 2007 Sep. 30, 2007 Jun. 30, 2007 Mar. 31, 2007 Dec. 31, 2006 Sep. 30, 2006 Jun. 30, 2006

Distributable income $ 11,515 $ 10,566 $ 11,139 $ 12,120 $ 9,815 $ 10,880 $ 11,509Less:Maintenance capital expenditures (2,712) (1,624) (311) (748) (933) (1,090) (200)Additions to tenant improvements

and lease costs (net of amounts recoverable from ECL) (1,242) (2,862) (498) (501) (619) (3,128) (1,406)

AFFO $ 7,561 $ 6,080 $ 10,330 $ 10,871 $ 8,263 $ 6,662 $ 9,903

FFO $ 13,057 $ 12,117 $ 12,553 $ 13,082 $ 10,699 $ 11,293 $ 12,106

Distributions $ 8,867 $ 8,867 $ 8,798 $ 8,451 $ 8,346 $ 8,338 $ 8,322

Distributable income per unit(2) $ 0.28 $ 0.25 $ 0.27 $ 0.29 $ 0.24 $ 0.26 $ 0.28

AFFO per unit(2) $ 0.18 $ 0.15 $ 0.25 $ 0.26 $ 0.20 $ 0.16 $ 0.24

FFO per unit(2) $ 0.31 $ 0.29 $ 0.30 $ 0.31 $ 0.26 $ 0.27 $ 0.29

Distributions per unit(2) $ 0.21 $ 0.21 $ 0.21 $ 0.20 $ 0.20 $ 0.20 $ 0.20

(1) The first quarter ended March 31, 2006 was for a nine-day period only due to Crombie beginning operations on March 23, 2006. As such, that period has not been

included in the above table due to a lack of comparability.

(2) Distributable income, FFO, AFFO and distributions per unit are calculated by distributable income, FFO, AFFO or distributions, as the case may be, divided by the

diluted weighted average of the total Units and Special Voting Units outstanding of 41,728,561 for the quarter ended December 31, 2007; 41,728,561 for the

quarter ended September 30, 2007; 41,728,561 for the quarter ended June 30, 2007; 41,712,801 for the quarter ended March 31, 2007; 41,589,061 for the quarter

ended December 31, 2006; 41,589,061 for the quarter ended September 30, 2006 and 41,487,760 for the quarter ended June 30, 2006.




Preparation of the consolidated financial statements accompanying this annual report and the presentation of all other information

in the report is the responsibility of management. The consolidated financial statements have been prepared in accordance with

Canadian generally accepted accounting principles and reflect management’s best estimates and judgments. All other financial

information in the report is consistent with that contained in the consolidated financial statements.

Management of the Trust has established and maintains a system of internal control that provides reasonable assurance as to the

integrity of the consolidated financial statements, the safeguarding of Trust assets, and the prevention and detection of fraudulent

financial reporting.

The Board of Trustees, through its Audit Committee, oversees management in carrying out its responsibilities for financial reporting

and systems of internal control. The Audit Committee, which is chaired by and composed solely of trustees who are unrelated to, and

independent of, the Trust, meets regularly with financial management and external auditors to satisfy itself as to the reliability and

integrity of financial information and the safeguarding of assets. The Audit Committee reports its findings to the Board of Trustees for

consideration in approving the annual consolidated financial statements to be issued to unitholders. The external auditors have full

and free access to the Audit Committee.

J. Stuart Blair Scott M. Ball

President and Vice President,

Chief Executive Officer Chief Financial Officer and Secretary

February 28, 2008 February 28, 2008

M A N A G E M E N T ’ S S T A T E M E N T O F R E S P O N S I B I L I T Y

F O R F I N A N C I A L R E P O R T I N G



We have audited the consolidated balance sheets of Crombie Real Estate Investment Trust (the “REIT”) as at December 31, 2007 and

2006 and the consolidated statements of income, comprehensive income, unitholders’ equity and cash flows for the year ended

December 31, 2007, and the consolidated statements of income, unitholders’ equity and cash flows for the period from March 23,

2006 to December 31, 2006. These consolidated financial statements are the responsibility of the REIT’s management. Our

responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan

and perform an audit to obtain reasonable assurance whether the consolidated financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated

financial statements. An audit also includes assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall consolidated financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the REIT as at

December 31, 2007 and 2006 and the results of its operations and its cash flows for the year ended December 31, 2007, and for the

period from March 23, 2006 to December 31, 2006, in accordance with Canadian generally accepted accounting principles.

Grant Thornton LLP

Chartered Accountants

New Glasgow, Canada

February 11, 2008 (except for Note 22(b) which is as of February 18, 2008 and Note 22(c) which is as of February 25, 2008)

A U D I T O R S ’ R E P O R T



December 31, 2007 December 31, 2006

Assets

Commercial properties (Note 5) $ 909,095 $ 836,913

Intangible assets (Note 6) 60,480 63,021

Notes receivable (Note 7) 20,968 41,459

Other assets (Note 8) 20,731 21,362

Cash and cash equivalents 2,708 1,180

$ 1,013,982 $ 963,935

Liabil it ies and Unitholders’ Equit y

Commercial property debt (Note 9) $ 500,578 $ 432,963

Payables and accruals (Note 10) 39,174 37,432

Intangible liabilities (Note 11) 16,562 17,681

Employee future benefits obligation (Note 20) 4,458 4,064

Distributions payable 2,956 2,781

Future income tax liability (Note 15) 81,501 80,471

645,229 575,392

Non-controlling interest (Note 12) 177,919 187,649

Unitholders’ equity 190,834 200,894

$ 1,013,982 $ 963,935

Commitments and contingencies (Note 17)

On behalf of the B oard of Trustees

David Hennigar Frank Sobey

Trustee Trustee

See accompanying notes to the consolidated financial statements.

C O N S O L I D A T E D B A L A N C E S H E E T S

(In thousands of dollars)


Period from

Year Ended March 23, 2006 to


(Note 1)Revenues

Property revenue (Note 14) $ 143,606 $ 99,949

Expenses

Property expenses 59,345 42,214

General and administrative expenses 8,177 5,738

Interest expense 25,275 16,492

Depreciation of commercial properties 12,499 8,620

Amortization of tenant improvements/lease costs 2,747 441

Amortization of deferred financing costs — 268

Amortization of intangible assets 13,983 8,747

122,026 82,520

Income before income taxes and non-controlling interest 21,580 17,429

Income tax expense (recovery) – future (Note 15) 1,030 (763)

Income before non-controlling interest 20,550 18,192

Non-controlling interest 9,891 8,787

Net income $ 10,659 $ 9,405

Basic and diluted net income per unit $ 0.49 $ 0.44

Weighted average number of units outstanding

Basic 21,535,233 21,444,568

Diluted 21,646,135 21,498,595

C O N S O L I D A T E D S T A T E M E N T S O F C O M P R E H E N S I V E I N C O M E


Period from



(Note 1)

Net income $ 10,659 $ 9,405

Net change in derivatives designated as cash flow hedges (2,838) —

Other comprehensive loss (2,838) —

Comprehensive income $ 7,821 $ 9,405


C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E





Accumulated Other

Contributed ComprehensiveREIT Units Net Income Surplus Income (Loss) Distributions Total

(Note 13)

Unitholders’ equity, January 1, 2007 $ 204,831 $ 9,405 $ 27 $ Nil $ (13,369) $ 200,894

Transition adjustment (Note 3) — — — (162) — (162)

Units released under EUPP 52 — (52) — — —

Units issued under EUPP 215 — — — — 215

Loans receivable under EUPP (215) — — — — (215)

EUPP compensation — — 37 — — 37

Repayment of EUPP loans receivable 390 — — — — 390

Net income — 10,659 — — — 10,659

Distributions — — — — (18,146) (18,146)

Other comprehensive loss — — — (2,838) — (2,838)

Unitholders’ equity, December 31, 2007 $ 205,273 $ 20,064 $ 12 $ (3,000) $ (31,515) $ 190,834

Unitholders’ equity, March 23, 2006 (Note 1) $ Nil $ Nil $ Nil $ Nil $ Nil $ Nil

Unit issue proceeds, net of costs of $10,274 204,821 — — — — 204,821

Units issued under EUPP 1,261 — — — — 1,261

Loans receivable under EUPP (1,251) — — — — (1,251)

Net income — 9,405 — — — 9,405

Unit purchase plan compensation — — 27 — — 27

Distributions — — — — (13,369) (13,369)

Unitholders’ equity, December 31, 2006 $ 204,831 $ 9,405 $ 27 $ Nil $ (13,369) $ 200,894


C O N S O L I D A T E D S T A T E M E N T S O F U N I T H O L D E R S ’ E Q U I T Y



Period from



(Note 1)

Cash flows provided by (used in)

Operating Activities

Net income $ 10,659 $ 9,405

Items not affecting cash:

Non-controlling interest 9,891 8,787

Depreciation of commercial properties 12,499 8,620

Amortization of tenant improvements/lease costs 2,747 441

Amortization of deferred financing costs 415 268

Amortization of intangible assets 13,983 8,747

Amortization of above-market leases 2,982 2,090

Amortization of below-market leases (4,489) (2,896)

Accrued rental revenue (1,195) (702)

Unit-based compensation 37 27

Future income taxes 1,030 (763)

48,559 34,024

Additions to tenant improvements and lease costs (11,223) (7,302)

Change in other non-cash operating items (Note 16) (3,400) 21,275

Cash provided by operating activities 33,936 47,997

Financing Activities

Issue of commercial property debt 89,475 113,200

Issue costs of commercial property debt (1,064) —

Repayment of commercial property debt (39,021) (20,304)

Collection of notes receivable 20,491 21,223

Units issued on initial public offering — 215,095

Unit issue costs — (19,767)

Repayment of EUPP loan receivable 390 —

Payment of distributions (34,808) (25,809)

Cash provided by financing activities 35,463 283,638

Investing Activities

Business acquisition (Note 4) — (263,542)

Additions to commercial properties (16,822) (26,574)

Acquisition of commercial properties (Note 5) (51,049) (40,339)

Cash used in investing activities (67,871) (330,455)

Increase in cash and cash equivalents during the period 1,528 1,180

Cash and cash equivalents, beginning of period 1,180 Nil

Cash and cash equivalents, end of period $ 2,708 $ 1,180


C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S





N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

December 31, 2007 (In thousands of dollars, except per unit amounts)

1) CROMBIE REAL ESTATE INVESTMENT TRUSTCrombie 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 consolidated financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”) as

prescribed by the Canadian Institute of Chartered Accountants (“CICA”).

(b) Basis of Consolidation

The consolidated financial statements include the accounts of Crombie and its incorporated and unincorporated subsidiaries.

(c) Property Acquisitions

Upon acquisition of commercial properties, Crombie performs an assessment of the fair value of the properties’ related tangible and

intangible assets and liabilities (including land, buildings, origination costs, in-place leases, above- and below-market leases, and any

other assumed assets and liabilities), and allocates the purchase price to the acquired assets and liabilities. Crombie assesses and

considers fair value based on cash flow projections that take into account relevant discount and capitalization rates and any other

relevant sources of market information available. Estimates of future cash flow are based on factors that include historical operating

results, if available, and anticipated trends, local markets and underlying economic conditions.

Crombie allocates the purchase price based on the following:

Land – The amount allocated to land is based on an appraisal estimate of its fair value.

Buildings – Buildings are recorded at the fair value of the building on an “as-if-vacant” basis, which is based on the present value of

the anticipated net cash flow of the building from vacant start-up to full occupancy.

Origination costs for existing leases – Origination costs are determined based on estimates of the costs that would be incurred to

put the existing leases in place under the same terms and conditions. These costs include leasing commissions as well as foregone

rent and operating cost recoveries during an assumed lease-up period.

In-place leases – In-place lease values are determined based on estimated costs required for each lease that represents the net

operating income lost during an estimated lease-up period that would be required to replace the existing leases at the time of purchase.

Tenant relationships – Tenant relationship values are determined based on costs avoided if the respective tenants were to renew

their leases at the end of the existing term, adjusted for the estimated probability that the tenants will renew.

Above- and below-market existing leases – Values ascribed to above- and below-market existing leases are determined based on the

present value of the difference between the rents payable under the terms of the respective leases and estimated future market rents.

Fair value of debt – Values ascribed to fair value of debt are determined based on the differential between contractual and market

interest rates on long term liabilities assumed at acquisition.

(d) Commercial Properties

Commercial properties include land, buildings and tenant improvements. Commercial properties are carried at cost less accumulated

depreciation and are reviewed periodically for impairment as described in Note 2(m).

Depreciation of buildings is calculated using the straight-line method with reference to each property’s cost, its estimated useful life

(not exceeding 40 years) and its residual value.

Amortization of tenant improvements is determined using the straight-line method over the terms of the tenant lease agreements

and renewal periods where applicable.

Repair and maintenance improvements that are not recoverable from tenants are either expensed as incurred or, in the case of a

major item, capitalized to commercial properties and amortized on a straight-line basis over the expected useful life of the

improvement.


(e) Intangible Assets and Liabilities

Intangible assets include the value of origination costs for existing leases, the value of the differential between original and market

rents for above-market existing leases, the value of the immediate cash flow stream from in-place leases and the value of tenant

relationships.

Intangible liabilities are the value of the differential between original and market rents for below-market existing leases.

Amortization of the value of origination costs, in-place leases and tenant relationships is determined using the straight-line method

over the terms of the tenant lease agreements and renewal periods where applicable and is recorded as amortization. The value of

the differential between original and market rents for above- and below-market existing leases is recognized using the straight-line

method over the terms of the tenant lease agreements and recorded as property revenue.

Intangible assets are reviewed for impairment as described in Note 2(m).

(f) 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.

(g) Cash and Cash Equivalents

Cash and cash equivalents are defined as cash on hand, cash in bank, and short-term guaranteed investment certificates.

(h) Income Taxes

Crombie is taxed as a “mutual fund trust” for income tax purposes. Pursuant to the terms of the Declaration of Trust, Crombie must

make distributions not less than the amount necessary to ensure that Crombie will not be liable to pay income tax, except for the

amounts incurred in its incorporated subsidiaries.

Future income tax liabilities of Crombie relate to tax and accounting basis differences of all incorporated subsidiaries of Crombie.

Income taxes are accounted for using the liability method. Under this method, future income taxes are recognized for the expected

future tax consequences of differences between the carrying amount of balance sheet items and their corresponding tax values.

Future income taxes are computed using substantively enacted corporate income tax rates for the years in which tax and accounting

basis differences are expected to reverse.

(i) Financial Instruments

Crombie has a fixed interest rate swap agreement and a number of delayed interest rate swap agreements. Crombie has identified

these hedges against interest rate fluctuations and has formally documented all relationships between these derivative financial

instruments and hedged items, as well as the risk management strategy and objectives. Crombie assesses on an ongoing basis

whether the derivative financial instrument continues to be effective in offsetting changes in interest rates on the hedged items. The

effective portion of the change in the fair value of these hedging derivatives is recognized in other comprehensive income. Any

ineffective portion as defined by the standard is recognized in net income. Upon the termination of these swaps, the realized gain or

loss is deferred and amortized into interest expense using the effective interest rate method.

(j) Employee Future Benefits Obligation

The cost of pension benefits for defined contribution plans is 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.




(k) Employee Unit Purchase Plan

Crombie has a Unit purchase plan for certain employees which is described in Note 13. In accordance with the Emerging Issues

Committee Abstract 132, loans granted to employees to purchase units under the plan are accounted for as stock-based

compensation.

(l) Use of Estimates

The preparation of 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. The significant areas of estimation and assumption include:

• Impairment of assets;

• Depreciation;

• Allocation of purchase price on property acquisitions;

• Fair value of mortgages.

(m) Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying value

of an asset may not be recoverable.

If it is determined that the net recoverable value of a long-lived asset is less than its carrying value, the long-lived asset is written

down to its fair value. Net recoverable amount represents the undiscounted estimated future cash flow expected to be received from

the long-lived asset. Assets reviewed under this policy include commercial properties and intangible assets.

3 ) CHANGES IN ACCOUNTING POLICIESEffective 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(loss) for the period. A new category, accumulated other

comprehensive income(loss), has been added to the consolidated statements of unitholders’ equity.

Hedges (Section 3865)

This new section establishes standards for when and how hedge accounting may be applied, as well as the disclosure requirements.

Hedge accounting enables the recording of gains, losses, revenues and expenses from the derivative financial instruments in the

same period as for those related to the hedged item.

The new standard outlines the criteria for applying hedge accounting to cash flow hedges and fair value hedges. Cash flow hedges

are recognized on the balance sheet at fair value with the effective portion of the hedging relationship recognized in other

comprehensive income. Any ineffective portion of the cash flow hedge is recognized in net income. Amounts recognized in

accumulated other comprehensive income are reclassified to net income in the same periods in which the hedged item is

recognized in net income. Fair value hedges and the related hedge items are recognized on the balance sheet at fair value with any

changes in fair value recognized in net income. To the extent the fair value hedge is effective, the changes in the fair value of the

hedge and the hedged item will offset each other.




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

i) an adjustment to reflect a reallocation on the consolidated balance sheet of $1,578 from deferred financing charges to

commercial property debt for unamortized transaction costs previously incurred and accounted for separately; and

ii) a transition adjustment to recognize the fair value of a derivative designated as a cash flow hedge. The fair value at January 1,

2007 was $(310), of which $(162) has been allocated to unitholders’ equity and $(148) to non-controlling interest.

The adoption of these new standards has been reflected on Crombie’s 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 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 year ended December 31, 2007, $34,983 (period March 23, 2006 to December 31,

2006 – $25,809) in cash distributions were declared payable by the Board of Trustees to Crombie Unitholders and Crombie Limited

Partnership Unitholders (the “Class B LP Unitholders”).

4) BUSINESS ACQUISITIONOn 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 $ 772,040Net intangible assets 46,577Other assets, net of liabilities 1,181Notes receivable 62,682Future income tax liability (81,234)

Net purchase price 801,246Assumed mortgages (marked to market) (333,644)

$ 467,602

Consideration paid, funded by:

Class B LP Units (non-controlling interest) $ 200,795Cash 263,542Land transfer costs and additional financing costs 3,265

$ 467,602




5) COMMERCIAL PROPERTIES

December 31, 2007

Accumulated Cost Depreciation Net Book Value

Land $ 183,407 $ Nil $ 183,407Buildings 731,470 21,119 710,351Tenant improvements and leasing costs 18,525 3,188 15,337

$ 933,402 $ 24,307 $ 909,095

December 31, 2006

Accumulated Cost Depreciation Net Book Value

Land $ 168,087 $ Nil $ 168,087Buildings 670,585 8,620 661,965Tenant improvements and leasing costs 7,302 441 6,861

$ 845,974 $ 9,061 $ 836,913

Property Acquisitions

2007On 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 12 years

was established for the property.

On March 7, 2007, Crombie acquired a property in Perth, Ontario, representing a 102,500 square foot increase to the portfolio, for

$17,900 plus additional closing costs, from an unrelated third party. The acquisition was initially financed through Crombie’s 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 15 years was established

for the property.

On July 26, 2007, Crombie acquired a property in Fort Erie, Ontario, representing a 92,500 square foot increase to the portfolio, for

$19,200 plus additional closing costs, from an unrelated third party. The acquisition was financed through an assumption of an

existing mortgage of $11,418 at a fixed rate of 5.36% and a term of eight years with the balance of the purchase price paid in cash

using funds from the revolving credit facility.

On August 24, 2007, Crombie acquired a property in Brossard, Quebec, representing a 38,800 square foot increase to the portfolio, for

$7,300 plus additional closing costs, from an unrelated third party. The acquisition was financed through an assumption of an

existing mortgage of $3,425 at a fixed rate of 6.44% and a term of 17 years with the balance of the purchase price paid in cash using

funds from the revolving credit facility.

On October 15, 2007, Crombie acquired a property in LaSalle, Ontario, representing an 87,700 square foot increase to the portfolio,

for $12,700 plus additional closing costs, from an unrelated third party. The acquisition was financed through an assumption of an

existing mortgage of $4,220 at a fixed rate of 6.0% and an approximate term of four years with the balance of the purchase price paid

in cash using funds from the revolving credit facility.

2006On October 2, 2006, Crombie acquired properties in Oshawa and Brampton, Ontario, representing a 149,000 square foot increase to

the portfolio, for $31,885 plus additional closing costs, from subsidiaries of Empire Company Limited. The acquisitions were financed

through new mortgages totalling $20,300 at a fixed rate of 5.15% and a term of seven years with the balance of the purchase price

paid in cash using funds from the revolving credit facility.

On December 20, 2006, Crombie acquired a property in Burlington, Ontario, representing a 56,000 square foot increase to the

portfolio, for $14,200 plus additional closing costs, from an unrelated third party. The acquisition was financed through the

assumption of an existing mortgage of $6,423 at a fixed rate of 6.39% and a term of seven years with the balance of the purchase

price paid in cash using funds from the revolving credit facility.





Commercial property acquired, net: Dec. 31, 2007 Dec. 31, 2006

Land $ 15,102 $ 14,279Buildings 44,281 25,779Intangible assets:Lease origination costs 3,473 2,758Tenant relationships 4,806 1,822Above-market leases 1,086 1,618In-place leases 5,059 2,633Intangible liabilities:Below-market leases (3,370) (2,127)

70,437 46,762Assumed mortgages (19,063) (6,423)Fair value debt adjustment on assumed mortgages (325) —

Total $ 51,049 $ 40,339

Consideration paid, funded by:

Floating rate revolving credit facility $ 26,449 $ 20,039Mortgage financing 20,450 20,300Application of deposit 4,150 —

Total $ 51,049 $ 40,339

6) INTANGIBLE ASSETS

December 31, 2007

Accumulated Cost Amortization Net Book Value

Origination costs for existing leases $ 14,354 $ 5,567 $ 8,787In-place leases 21,992 9,628 12,364Tenant relationships 35,945 7,535 28,410Above-market existing leases 15,991 5,072 10,919

$ 88,282 $ 27,802 $ 60,480

December 31, 2006


Origination costs for existing leases $ 10,881 $ 2,149 $ 8,732In-place leases 16,933 3,734 13,199Tenant relationships 31,139 2,864 28,275Above-market existing leases 14,905 2,090 12,815

$ 73,858 $ 10,837 $ 63,021

7) NOTES RECEIVABLEOne 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. Payment on

the second note of $2,518 was received as funding was required to pay taxes on transfers of five commercial properties within

Crombie. Payments on the third note of $20,564 are being received on a monthly basis to reduce the effective interest rate to 5.54%

on certain assumed mortgages with an average term to maturity of approximately 4.5 years.




The balance of each note is as follows:

Dec. 31, 2007 Dec. 31, 2006

Capital expenditure program $ 6,817 $ 21,224Tax on property transfer — 2,518Interest rate subsidy 14,151 17,717

$ 20,968 $ 41,459

8) OTHER ASSETS

Dec. 31, 2007 Dec. 31, 2006

Accounts receivable $ 5,463 $ 7,438Deposit on property — 750Accrued straight-line rent receivable 5,844 4,649Prepaid expenses 8,634 6,270Deferred financing charges — 1,578Restricted cash 790 677

$ 20,731 $ 21,362

9) COMMERCIAL PROPERT Y DEBT

Weighted WeightedAverage Average Term

Range Interest Rate to Maturity Dec. 31, 2007

Fixed rate mortgages 5.15–6.44% 5.46% 7.4 years $ 431,906Deferred financing charges (2,228)Floating rate revolving credit facility 5.50% 5.50% 2.6 years 70,900

$ 500,578

Weighted WeightedAverage Average Term

Range Interest Rate to Maturity Dec. 31, 2006

Fixed rate mortgages 5.15–6.39% 5.50% 7.3 years $ 350,063Floating rate revolving credit facility 5.49% 5.49% 2.2 years 82,900

$ 432,963

As of December 31, 2007, debt retirements for the next five years are:

Financing Fixed Rate Floating Rate Costs Total

2008 $ 28,267 $ Nil $ Nil $ 28,2672009 14,201 — — 14,2012010 116,793 70,900 — 187,6932011 22,143 — — 22,1432012 11,084 — — 11,084Thereafter 224,962 — — 224,962

417,450 70,900 — 488,350Deferred financing charges — — (2,228) (2,228)Fair value debt adjustment 14,456 — — 14,456

$ 431,906 $ 70,900 $ (2,228) $ 500,578




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 December 31, 2007, based on the security granted by Crombie, approximately $118,923 is available for

drawdown, of which $70,900 is drawn down on the facility.

During 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 5.50% 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% with a maturity date of May 2019.

On September 7, 2007, Crombie completed the refinancing of an existing mortgage on the Niagara Plaza, Ontario property. The new

fixed rate mortgage of $8,100 provided funds of $2,886 (net of fees and the payment of the existing mortgage). The interest rate on

the new mortgage is 5.65% with a maturity date of September 2027.

On December 7, 2007, Crombie entered into a second mortgage to provide an additional $51,000 of financing on the portfolio of

office and mixed-use properties known as Halifax Developments properties. The interest rate is 5.29% with a maturity date of

February 1, 2010.

10) PAYABLES AND ACCRUALS

Dec. 31, 2007 Dec. 31, 2006

Tenant improvements and capital expenditures $ 9,828 $ 7,134Property operating costs 21,801 28,845Interest on commercial property debt 1,761 1,453Interest rate swap agreements 5,784 —

$ 39,174 $ 37,432

11) INTANGIBLE L IABIL IT IES

December 31, 2007


Below-market existing leases $ 23,947 $ 7,385 $ 16,562

December 31, 2006


Below-market existing leases $ 20,577 $ 2,896 $ 17,681

12) NON-CONTROLLING INTEREST

Accumulated Other

Class B LP Contributed ComprehensiveUnits Net Income Surplus Income (Loss) Distributions Total

Balance, January 1, 2007 $ 191,302 $ 8,787 $ Nil $ Nil $ (12,440) $ 187,649Transition adjustment (Note 3) — — — (148) — (148)Net income — 9,891 — — — 9,891Distributions — — — — (16,837) (16,837)Other comprehensive loss — — — (2,636) — (2,636)

Balance, December 31, 2007 $ 191,302 $ 18,678 $ Nil $ (2,784) $ (29,277) $ 177,919




Accumulated Other

Class B LP Contributed ComprehensiveUnits Net Income Surplus Income (Loss) Distributions Total

Balance, March 23, 2006 $ Nil $ Nil $ Nil $ Nil $ Nil $ NilUnit issue proceeds, net of costs of $9,493 191,302 — — — — 191,302Net income — 8,787 — — — 8,787Distributions — — — — (12,440) (12,440)

Balance, December 31, 2006 $ 191,302 $ 8,787 $ Nil $ Nil $ (12,440) $ 187,649

13) UNITS OUTSTANDING

Crombie REIT Special VotingCrombie REIT Units Units and Class B LP Units Total

Number of Number of Number of Units Amount Units Amount Units Amount

Balance, January 1, 2007 21,633,225 $ 204,831 20,079,576 $ 191,302 41,712,801 $ 396,133Units issued under EUPP 15,760 215 — — 15,760 215Units released under EUPP — 52 — — — 52Net change in EUPP loans receivable — 175 — — — 175

Balance, December 31, 2007 21,648,985 $ 205,273 20,079,576 $ 191,302 41,728,561 $ 396,575

Crombie REIT Special VotingCrombie REIT Units Units and Class B LP Units Total

Number of Number of Number of Units Amount Units Amount Units Amount

Balance, March 23, 2006 — $ Nil — $ Nil — $ NilCapital contribution 21,509,485 215,095 20,079,576 200,795 41,589,061 415,890Costs of issuance — (10,274) — (9,493) — (19,767)

Net unit issue proceeds — 204,821 — 191,302 — 396,123Units issued under EUPP 123,740 1,261 — — 123,740 1,261Loans receivable EUPP — (1,251) — — — (1,251)

Balance, December 31, 2006 21,633,225 $ 204,831 20,079,576 $ 191,302 41,712,801 $ 396,133

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 days

during the 10-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 Units. 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 December 31, 2007, there are

loans receivable from executives of $1,087 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 December 31,

2007 was $1,169.

The compensation expense related to the EUPP during the year ended December 31, 2007 was $37 (period from March 23, 2006 to

December 31, 2006 – $27).

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 December 31, 2007, there are no other dilutive items.

14) PROPERT Y RE VENUE


Dec. 31, 2007 Dec. 31, 2006

(Note 1)

Rental revenue contractually due from tenants $ 140,904 $ 98,441Straight-line rent recognition 1,195 702Below-market lease amortization 4,489 2,896Above-market lease amortization (2,982) (2,090)

$ 143,606 $ 99,949

15) FUTURE INCOME TAXESOn June 22, 2007, tax legislation Bill C-52, the Budget Implementation Act, 2007 (the “Act”) was passed into law. The Act related to the

federal income taxation of publicly traded income trusts and partnerships. The Act subjects all existing income trusts, or specified

investment flow-through entities (“SIFTs”), to corporate tax rates beginning in 2011, subject to an exemption for real estate

investment trusts (“REITs”). A trust that satisfies the criteria of a REIT throughout its taxation year will not be subject to income tax in

respect of distributions to its unitholders or be subject to the restrictions on its growth that would apply to SIFTs.




organizational structure and operations to support Crombie’s assertion that, at January 1, 2008, it meets the REIT technical tests

contained in the Act. The relevant tests apply throughout the taxation year of Crombie and, as such, the actual status of Crombie for

any particular taxation year can only be ascertained at the end of the year.

On December 20, 2007, the Department of Finance (Canada) issued proposed amendments to provide further clarity to these technical

tests. While Crombie did not rely on these proposed amendments, they do provide further certainty that Crombie qualifies as a REIT.

As a result of the above, Crombie has reversed the impact of $1,850 to future income taxes that were booked during the second and

third quarters of 2007. The future income tax liability of the wholly-owned corporate subsidiary which is subject to income taxes

consists of the following:

Dec. 31, 2007 Dec. 31, 2006

Tax liabilities relating to difference in tax and book value $ 86,655 $ 81,521Tax asset relating to non-capital loss carry-forward (5,154) (1,050)

Future income tax liability $ 81,501 $ 80,471

The future income tax expense consists of the following:


Dec. 31, 2007 Dec. 31, 2006

(Note 1)

Provision for income taxes at the expected rate $ 7,553 $ 6,100Tax effect of income attribution to Crombie’s unitholders (4,986) (6,863)Decrease in income tax resulting from a change in expected rate (1,537) —

Income tax expense (recovery) $ 1,030 $ (763)

16) SUPPLEMENTAL CASH FLOW INFORMATION

(a) Change in other non-cash operating items


Dec. 31, 2007 Dec. 31, 2006

Cash provided by (used in): (Note 1)

Receivables $ 1,975 $ (3,067)Prepaid expenses and other assets (1,727) (1,239)Payables and other liabilities (3,648) 25,581

$ (3,400) $ 21,275

(b) Interest


Dec. 31, 2007 Dec. 31, 2006

(Note 1)

Interest paid $ 28,122 $ 18,669




17) COMMITMENTS AND CONTINGENCIESThere 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 PART Y TRANSACTIONSAs at December 31, 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 year ended December 31, 2007

were $1,505 (period from March 23, 2006 to December 31, 2006 – $850) 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

year ended December 31, 2007 were $2,408 (the period from March 23, 2006 to December 31, 2006 – $1,764) and were netted

against property expenses. The rental income subsidy during the year ended December 31, 2007 was $37 (period from

March 23, 2006 to December 31, 2006 – $461) and the head lease subsidy during the year ended December 31, 2007 was $2,124

(period from March 23, 2006 to December 31, 2006 – $1,123).

Crombie also earned property revenue of $23,722 for the year ended December 31, 2007 (period from March 23, 2006 to December 31,

2006 – $16,427) from Sobeys Inc., Empire Theatres Limited and ASC Commercial Leasing Limited. These companies are all subsidiaries

of Empire Company Limited.

19) F INANCIAL INSTRUMENTSIn the normal course of business, Crombie is exposed to a number of financial risks that can affect its operating performance. These

risks, and the actions 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 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 December 31, 2007, had an unfavourable difference of $173 (December 31, 2006 – unfavourable $310)

compared to its face value. The change in this amount has been recognized in other comprehensive income at December 31, 2007.

In addition to the fixed interest rate swap during 2007, Crombie 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 $5,611 compared to the face value on December 31,

2007. The change in these amounts has been recognized in other comprehensive income at December 31, 2007.




Fair value of financial instruments

The book value of cash and cash equivalents, restricted cash, receivables, payables and accruals approximates fair value due to their

short term maturity. The total fair value of commercial property debt is estimated to be $496,333.

20) EMPLOYEE FUTURE BENEFITSCrombie has a number of defined benefit and defined contribution plans providing pension and other retirement benefits to most

of its employees.

Defined contribution pension plans

The contributions required by the employee and the employer are specified. The employee’s pension depends on the level of

retirement income (for example, annuity purchase) that can be achieved with the combined total of employee and employer

contributions and investment income over the period of plan membership, and the annuity purchase rates at the time of the

employee’s retirement.

Defined benefit pension plans

The ultimate retirement benefit is defined by a formula that provides a unit of benefit for each year of service. Employee

contributions, if required, pay for part of the cost of the benefit, and the employer contributions fund the balance. The employer

contributions are not specified or defined within the plan text. They are based on the result of actuarial valuations which determine

the level of funding required to meet the total obligation as estimated at the time of the valuation.

Crombie uses December 31 as a measurement date for accounting purposes for its defined benefit pension plans.

Most Recent Next RequiredValuation Date Valuation Date

Retirement pension plan May 1, 2006 May 1, 2009Senior management pension plan May 1, 2007 May 1, 2010

Defined benefit plans

Information about Crombie’s defined benefit plans, in aggregate, is as follows:


Pension Other Pension OtherBenefit Plans Benefit Plans Benefit Plans Benefit Plans

Accrued benefit obligationBalance, January 1, 2007 $ 940 $ 3,356 $ 841 $ 2,904Impact of assumption changes 10 (523) — —Current service cost 50 148 35 130Interest cost 50 149 34 120Actuarial losses (gains) (99) (189) 30 202

Balance, December 31,2007 951 2,941 940 3,356

Funded statusUnamortized actuarial gains (losses) 59 507 (30) (202)

Accrued benefit obligation $ 1,010 $ 3,448 $ 910 $ 3,154

Net expenseCurrent service cost $ 50 $ 148 $ 35 $ 130Interest cost 50 149 34 120Actuarial losses (gains) (99) (189) 30 202

Expense before adjustments 1 108 99 452Recognized vs. actual actuarial losses (gains) 98 187 (30) (202)

Net expense $ 99 $ 295 $ 69 $ 250




The significant actuarial assumptions adopted in measuring the Company’s accrued benefit obligations are as follows (weighted

average assumptions as of May 1, 2007):

Pension Other Benefit Plans Benefit Plans

Discount rate 5.25% 5.25%Rate of compensation increase 4.00% N/A

For measurement purposes, a 10% fiscal 2007 annual rate of increase in the per capita cost of covered health care benefits was

assumed. The cumulative rate expectation to 2016 is 5%. The expected average remaining service period for the active employees

covered by the pension benefit plans is 3 years at year end. The expected average remaining service period of the active employees

covered by the other benefit plans is 10 years at year end.

The table below outlines the sensitivity of the fiscal 2007 key economic assumptions used in measuring the accrued benefit plan

obligations and related expenses of Crombie’s pension and other benefit plans. The sensitivity of each key assumption has been

calculated independently. Changes to more than one assumption simultaneously may amplify or reduce impact on the accrued

benefit obligation or benefit plan expenses.

Pension Benefit Plans Other Benefit Plans

Benefit Benefit Benefit BenefitObligations Cost(1) Obligations Cost(1)

Discount rate 5.25% 5.25% 5.25% 5.25%Impact of: 1% increase $ (114) $ (2) $ (650) $ (50)

1% decrease $ 130 $ 1 $ 834 $ 57Growth rate of health costs(2) 9.0% 9.0%Impact of: 1% increase $ 732 $ 86

1% decrease $ (556) $ (64)

(1) Reflects the impact on the current service costs, the interest cost and the expected return on assets.

(2) Gradually decreasing to 5.0% in 2016 and remaining at that level thereafter.

For fiscal 2007, the net defined contribution pension plans expense was $394 (2006 – $284).

21) EFFECT OF NE W 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


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 an 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





22) SUBSEQUENT E VENTSa) On January 22, 2008, Crombie declared distributions of 7.083 cents per unit for the period from January 1, 2008 to, and including,

January 31, 2008. The distribution will be payable on February 15, 2008 to Unitholders of record as at January 31, 2008.

b) On February 18, 2008, Crombie declared distributions of 7.083 cents per unit for the period from February 1, 2008 to, and including,

February 29, 2008. The distribution will be payable on March 17, 2008 to Unitholders of record as at February 29, 2008.

c) On February 25, 2008, Crombie announced that it has entered into agreements with subsidiaries of Empire Company Limited to

acquire a portfolio of 61 retail properties representing approximately 3.3 million square feet of gross leaseable area. The cost of

the acquisition to Crombie is approximately $441,500, including approximately $13,000 of closing and transaction costs. The

closing of the acquisition is expected on or about April 21, 2008.

Financing for the Acquisition is expected to include approximately $18,000 from the revolving credit facility, an 18-month bridge

financing of $278,500, the issuance of $30,000 convertible extendible unsecured subordinated debentures, the issuance of $55,000

of Class B LP units of Crombie Limited Partnership to Empire Company Limited, and the issuance of $60,005 of subscription

receipts at a price of $11.00 per subscription receipt. On closing of the acquisition, each subscription receipt will convert into one

REIT unit. Crombie will be filing a preliminary prospectus in relation to the extendible convertible unsecured subordinated

debentures and the subscription receipts on February 29, 2008.

The acquisition must be approved by the affirmation vote of a majority of Unitholders (excluding Empire Company Limited and

certain of its affiliates and insiders) at a Unitholders meeting to be held on April 14, 2008.

23) COMPARATIVE F IGURESComparative figures have been reclassified, where necessary, to reflect the current period’s presentation.




P R O F I L E

Crombie REIT is the largest commercial landlord in

Atlantic Canada. Crombie owns, manages and maintains

income-producing enclosed and strip shopping centres,

as well as freestanding food stores, office buildings and

mixed-use properties, with a growth strategy focused

primarily on the acquisition of retail properties.

At the 2007 calendar year end, Crombie owned a portfolio of 52 commercial properties in

six provinces, comprising approximately 8.0 million square feet of gross leasable area (GLA),

with an overall occupancy rate of 93.6 percent. Retail properties represent 38 of the Trust’s

52 properties, accounting for approximately 63 percent of its total GLA and approximately

66 percent of its rental revenues. Crombie is an unincorporated, open-ended real estate

investment trust established under, and governed by, the laws of the Province of Ontario.

B OA R D O F T R U S T E E S

J. Stuart BlairTrustee, President and Chief Executive Officer

Frank C. SobeyTrustee and Chairman

Paul D. SobeyTrustee

David G. GrahamIndependent Trustee

David J. HennigarIndependent Trustee

John E. LatimerIndependent Trustee

Kenneth C. RoweIndependent and Lead Trustee

Elisabeth StrobackIndependent Trustee

David LeslieIndependent Trustee

O F F I C E R S

J. Stuart BlairPresident and Chief Executive Officer

Scott M. BallVice President, Chief Financial Officerand Secretary

Scott R. MacLeanVice President Operations

Patrick G. MartinVice President Leasing

C R O M B I E R E I T

Head Office:115 King St. Stellarton, Nova Scotia, B0K 1S0Telephone: (902) 755-8100Fax: (902) 755-6477Internet: www. crombiereit.com

I N V E S TO R R E L AT I O N S A N D I N Q U I R I E S

Unitholders, analysts, and investorsshould direct their financial inquiries or requests to: Scott M. Ball, CAVice President, Chief Financial Officer and SecretaryEmail: [email protected]

Communication regarding investorrecords, including changes of address orownership, lost certificates or tax forms,should be directed to the Company’stransfer agent and registrar, CIBC MellonTrust Company.

S TO C K E XC H A N G E L I S T I N G

Toronto Stock Exchange

U N I T S Y M B O L

REIT Trust Units – CRR.UN

D I S T R I B U T I O N R E CO R D A N D PAY M E N T D AT E S F O RF I S C A L 2 0 0 7

Record Date Payment Date

January 31, 2007 February 15, 2007

February 28, 2007 March 15, 2007

March 31, 2007 April 13, 2007

April 30, 2007 May 15, 2007

May 31, 2007 June 15, 2007

June 30, 2007 July 16, 2007

July 31, 2007 August 15, 2007

August 31, 2007 September 17, 2007

September 30, 2007 October 15, 2007

October 31, 2007 November 15, 2007

November 30, 2007 December 17, 2007

December 31, 2007 January 15, 2008

T R A N S F E R AG E N T

CIBC Mellon Trust CompanyInvestor CorrespondenceP.O. Box 7010Adelaide Street Postal StationToronto, Ontario, M5C 2W9Telephone: (800) 387-0825Email: [email protected]

CO U N S E L

Stewart McKelvey Halifax, Nova Scotia

AU D I TO R S

Grant Thornton LLPNew Glasgow, Nova Scotia

M U LT I P L E M A I L I N G S

If you have more than one account, youmay receive a separate mailing for each. If this occurs, please contact CIBC MellonTrust Company at (800) 387-0825 toeliminate the multiple mailings.

A N N UA L A N D S P E C I A LM E E T I N G

April 14, 200810:00 a.m. (Atlantic Standard Time)Empire Studio 7610 East River RoadNew Glasgow, Nova Scotia

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PEI

NOVA SCOTIA

ONTARIO

QUEBEC



NEW BRUNSWICK

QUEENSLAND PLAZA, STRATFORD

TOWN CENTRE PLAZA, LASALLEPORT COLBORNE MALL, PORT COLBORNE

INTERNATIONAL GATEWAY CENTRE, FORT ERIE

CHARLOTTE MALL, ST. STEPHEN

CARLETON MALL, WOODSTOCK EVANGELINE MALL, DIGBY

FORT EDWARD MALL, WINDSOR

AMHERST CENTRE, AMHERST

RIVERVIEW MALL (MIXED USE), RIVERVIEW

COUNTY FAIR MALL, SUMMERSIDE

VALLEY MALL, CORNER BROOK

RANDOM SQUARE, CLARENVILLE

UPPER JAMES SQUARE, HAMILTONRYMAL ROAD PLAZA, HAMILTON

ROSE CITY PLAZA, WELLANDSOUTH PELHAM MARKET PLAZA, WELLAND

VILLAGE SQUARE MALL, NEPEANTHE MEWS OF CARLETON PLACE, CARLETON PLACE

PERTH MEWS SHOPPING MALL, PERTH

PROSPECT ST. PLAZA, FREDERICTONUPTOWN CENTRE , FREDERICTON

NEW MINAS PLAZA, NEW MINASCOUNTY FAIR MALL, NEW MINAS

RETAIL

OFFICE

MIXED USE

DOWNSVIEW MALL, LOWER SACKVILLEDOWNSVIEW PLAZA, LOWER SACKVILLE

HALIFAX:BARRINGTON PLACE (MIXED USE)BARRINGTON TOWER (OFFICE)CIBC BUILDING (OFFICE)COGSWELL TOWER (OFFICE)DUKE TOWER (OFFICE)PARK LANE (MIXED USE)SCOTIA SQUARE MALL (MIXED USE)SCOTIA SQUARE PARKADE (PARKADE)BRUNSWICK PLACE (MIXED USE)WEST END MALL (MIXED USE)

HIGHLAND SQUARE MALL, NEW GLASGOWABERDEEN SHOPPING CENTRE (MIXED USE), NEW GLASGOW

PRINCE STREET PLAZA, SYDNEYSYDNEY SHOPPING CENTRE, SYDNEY

ELMWOOD PLAZA, MONCTONTERMINAL CENTRE (OFFICE), MONCTON

AVALON MALL, ST. JOHN’SHAMLYN ROAD PLAZA, ST. JOHN’S

GREENFIELD PARK CENTRE,LONGUEUIL

LOCH LOMOND PLACE(MIXED USE), SAINT JOHN

TAUNTON & WILSON PLAZA, OSHAWABRAMPTON PLAZA, BRAMPTONBURLINGTON PLAZA, BURLINGTON318 ONTARIO STREET, ST. CATHARINESNIAGARA PLAZA, NIAGARA FALLS

BROSSARD, QUEBEC

Fifty-two properties comprising 8.0 million

square feet of GLA, located in all four provinces of

Atlantic Canada as well as Ontario and Quebec

www.crombiereit.com 2 0 0 7 A N N U A L R E P O R T

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