News Releases

Crombie REIT announces second quarter 2010 results

2010 Highlights

Commenting on the quarterly results, Donald E. Clow, FCA, President and Chief Executive Officer stated: "We continue to see improvements in our quarterly occupancy results and solid growth in same-asset cash NOI, while maintaining a strong balance sheet and ample liquidity. The acquisitions completed in the first quarter are contributing positively to the growth in operating results and cash flows.

The recently announced $102.0 million acquisition of 11 additional properties anticipated to be completed in the third quarter reflects the sustainable competitive advantage of our relationship with Empire and Sobeys. The fact that seven of the 11 properties are located in primarily urban markets in Alberta and in Regina, Saskatchewan enhances the geographic diversification and urban/rural mix of our portfolio. The recently completed $50.0 million equity offering is a sign of the confidence investors have in our portfolio and our strategic direction.

We continue to seek out accretive acquisitions, both from our relationship with Empire and Sobeys, as well as from third parties and continue to assess our current portfolio for redevelopment opportunities to further improve our operating results."

The table below presents a summary of financial performance for the quarter and six months ended June 30, 2010 compared to the same periods in fiscal 2009.

Property acquisition

During the first quarter of 2010, Crombie completed the acquisition of eight retail properties from subsidiaries of Empire Company Limited. The cost of the portfolio was $59.2 million, excluding closing and transaction costs, and was partially financed by the assumption of $8.4 million of mortgages with a weighted average term of 8.6 years, 25 year amortization period and a weighted average interest rate of 6.26%. The balance was financed with Crombie's existing credit facility.

Property NOI - Cash Basis

Property NOI, on a cash basis, excludes straight-line rent recognition and amortization of below-market and above-market lease amounts. The 2.5% and 1.8% increases in same-asset cash NOI for the three months ended and six months ended June 30, 2010 respectively is primarily the result of increased occupancy rates combined with increased average net rent per square foot results from 2010 leasing activity.

Cash NOI is a better measure of the impact on AFFO sustainability and growth of the same-asset properties.

Same-Asset Property NOI

Same-asset property revenue for the second quarter ended June 30, 2010 of $48.3 million was 1.1% higher than the same period in 2009, due to increased base rent and recoveries as a result of higher overall occupancy; and higher recoverable costs; offset in part by decreased amortization on below-market leases. Same-asset property revenue of $97.8 million for the six months ended June 30, 2010 was 0.5% higher than the six months ended June 30, 2009 due to increased base rent and recoveries as a result of higher overall occupancy offset by a decrease in below-market lease amortization.

Same-asset property expenses of $16.9 million for the quarter ended June 30, 2010 were 5.5% higher than the quarter ended June 30, 2009 due primarily to increased recoverable property taxes and higher paving costs. Same-asset property expenses of $35.2 million for the six months ended June 30, 2010 increased by 2.5% from the six months ended June 30, 2009 due primarily to increased recoverable property taxes and non-shareable paving expenses offset in part by reduced snow clearing costs.

Acquisition and Redevelopment Property NOI

For the three months ended and six months ended June 30, 2010, the acquisition properties include the retail properties acquired in February and March 2010. In addition, Crombie has included the operating results of the six properties that were under redevelopment.

General and Administrative Expenses

General and administrative expenses for the quarter ended June 30, 2010 decreased by 17.6%, or 1.5% as a percentage of property revenue, when compared to the same period in 2009. The 2009 expenses include costs incurred for the retirement of Crombie's Chief Executive Officer, while Q2 2010 includes costs related to the departure of Crombie's Chief Financial Officer.

General and administrative expenses, as a percentage of property revenue, increased slightly to 5.2% of property revenue for the six months ended June 30, 2010 compared to 5.1% for the same period in 2009.

Interest

Same-asset interest expense for the quarter and six months ended June 30, 2010 reflects Crombie's replacement of short-term floating rate debt with long-term fixed rate mortgages and convertible debentures. The weighted average contractual interest rate on fixed rate mortgages increased to 5.87% at June 30, 2010 from 5.48% at June 30, 2009, primarily due to the refinancing on February 1, 2010 of the maturing Halifax Developments mortgages. Convertible debentures totalling $160.0 million have been issued since June 30, 2009, and combined with the mortgage refinancing, have resulted in a reduction in floating rate debt from $201.8 million at June 30, 2009 to $54.5 million at June 30, 2010.

The maturing $106.1 million Halifax Developments mortgages had a weighted average interest rate of 5.43%; while the new $141.0 million Halifax Developments mortgages have a weighted average interest rate of 6.48%. The convertible debentures have a weighted average interest rate of 6.25%.

FFO and AFFO

Crombie's Funds From Operations ("FFO") and Adjusted Funds From Operations ("AFFO") had the following results for the second quarter and six months:

The $2.1 million reduction in FFO for the quarter ended June 30, 2010 was primarily due to increased interest expense as a result of refinancing short-term floating rate debt with long-term fixed rate mortgages and convertible debentures, offset in part by lower general and administrative costs, and higher property NOI as previously discussed.

AFFO for the second quarter of 2010 was $13.1 million, a decrease of $1.4 million over the same period in 2009 due to the reduced FFO results as previously discussed and higher maintenance tenant improvements and leasing costs.

The $5.8 million reduction in FFO for the six months ended June 30, 2010 was primarily due to increased interest expense as a result of refinancing short-term floating rate debt with long-term fixed rate mortgages and convertible debentures as previously discussed; offset in part by slight improvement in property NOI.

AFFO for the first six months of 2010 was $25.9 million, a decrease of $0.4 million or 1.4% compared to the same period in 2009, due primarily to the reduced FFO results and higher maintenance capital expenditures and maintenance tenant improvements and leasing costs offset in part by the settlement costs on effective interest rate swap agreements incurred in 2009.

Liquidity and Financings

Crombie's objective when managing capital on a long-term basis is to utilize staggered debt maturities, minimize long-term exposure to floating rate debt and maintain sustainable payout ratios. Crombie has an authorized floating rate revolving credit facility of up to $150 million, of which $54.5 million was drawn as at June 30, 2010, resulting in significant available liquidity.

Debt to gross book value is 55.2% at June 30, 2010 compared to 54.8% at March 31, 2010, 52.4% at December 31, 2009, and 50.9% at June 30, 2009. This leverage ratio is below the maximum 60%, or 65% including convertible debentures, as outlined in Crombie's Declaration of Trust. On a long-term basis, Crombie intends to maintain overall indebtedness, including convertible debentures, in the range of 50% to 60% of gross book value, depending upon Crombie's future acquisitions and financing opportunities.

Crombie's interest and debt service coverage for the six months ended June 30, 2010 were 2.38 times EBITDA and 1.71 times EBITDA respectively. This compares to 2.88 times EBITDA and 2.01 times EBITDA respectively for the six months ended June 30, 2009. The reduction in interest service coverage is attributable to the increased interest expense as Crombie has replaced short-term floating rate debt with long-term fixed rate mortgages and convertible debentures. The reduction in debt service coverage is impacted by the increased interest expense as well as the increased debt repayments on the long-term fixed rate amortizing mortgages. Crombie is well within its debt service financial covenant of 1.4 times EBITDA.

Equity Offering - Subsequent to quarter end, Crombie completed a public offering of 2,670,000 REIT Units at a price of $11.05 per Unit for gross proceeds of $29.5 million. Concurrently, Crombie completed a private placement, with ECL Developments Limited, of 1,855,000 Class B LP Units and the attached Special Voting Units at the same issue price of $11.05 per unit for gross proceeds of $20.5 million. The $50.0 million proceeds will be used to finance part of the announced Sobeys portfolio acquisition, additional acquisitions and for general trust purposes.

Convertible Debenture Offering - During the first quarter of 2010, Crombie completed an issuance of Series C unsecured convertible subordinated debentures for gross proceeds of $45.0 million at an interest rate of 5.75% per annum and a conversion price of $15.30.

Revolving Credit Facility - Through utilization of the additional proceeds from the mortgage financings and the convertible debenture issue, partially offset by funds required for the eight property acquisition in the first quarter, Crombie has reduced the balance outstanding on its Revolving Credit Facility from $106.2 million at December 31, 2009, to $54.5 million at June 30, 2010.

Mortgage Financing - During the second quarter of 2010, Crombie completed first mortgage financings totalling $16.5 million on three properties. The mortgages have ten year terms, fixed interest rates ranging from 5.88% to 6.80%, and amortization periods from 15 to 25 years.

During the first quarter of 2010, Crombie completed the refinancing of approximately $106.1 million maturing Halifax Developments mortgages. The two new mortgages are for a total of $141.0 million, with the initial $25.0 million being for a ten year term and 25 year amortization with a fixed interest of 6.52%, and the additional $116.0 million being for a ten year term and 25 year amortization with a fixed interest rate of 6.47%.

In February 2010, Crombie also completed a $33.8 million mortgage financing on five properties. The mortgages have a term of eight years, weighted average amortization period of 21.6 years, and a fixed interest rate of 5.70%.

Definition of Non-GAAP Measures

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

About Crombie

Crombie is an open-ended real estate investment trust established under, and governed by, the laws of the Province of Ontario. The trust invests in income-producing retail, office and mixed-use properties in Canada, with a future growth strategy focused primarily on the acquisition of retail properties. Crombie currently owns a portfolio of 118 commercial properties in seven provinces, comprising approximately 11.5 million square feet of rentable space.

This news release contains forward-looking statements that reflect the current expectations of management of Crombie about Crombie's future results, performance, achievements, prospects and opportunities. Wherever possible, words such as "may", "will", "estimate", "anticipate", "believe", "expect", "intend" and similar expressions have been used to identify these forward-looking statements. These statements reflect current beliefs and are based on information currently available to management of Crombie. Forward-looking statements necessarily involve known and unknown risks and uncertainties. A number of factors, including those discussed in the 2009 annual Management Discussion and Analysis under "Risk Management", could cause actual results, performance, achievements, prospects or opportunities to differ materially from the results discussed or implied in the forward-looking statements. These factors should be considered carefully and a reader should not place undue reliance on the forward-looking statements. There can be no assurance that the expectations of management of Crombie will prove to be correct.

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

Crombie's consolidated financial statements and management discussion and analysis for the period ended June 30, 2010 can be found on Crombie's web site at www.crombiereit.com or on the SEDAR web site for Canadian regulatory filings at www.sedar.com.

Conference Call Invitation

Crombie will provide additional details concerning its second quarter ended June 30, 2010 results on a conference call to be held Thursday, August 12, 2010, at 10:00 a.m. Eastern time. To join this conference call you may dial (647) 427-7450 or (888) 231-8191. You may also listen to a live audio web cast of the conference call by visiting Crombie's website located at www.crombiereit.com. Replay will be available until midnight August 26, 2010, by dialling (416) 849-0833 or (800) 642-1687 and entering pass code 90226656, or on the Crombie website for 90 days after the meeting.

Glenn Hynes, C.A., Chief Financial Officer and Secretary, Crombie REIT, (902) 755-8100