Building a Better Reit

BUILDING A 20 16 BETTER REIT ANNUAL REPORT ANNUAL ABOUT CROMBIE REIT

Crombie REIT (TSX: CRR.UN, Crombie) is an open-ended real estate investment trust. Established in 2006, we are one of the country’s leading national retail property landlords. Our strategy is focused on increasing net asset value and income growth through the acquisition, ownership, management and development of high-quality grocery and drug store anchored shopping centres, freestanding stores and mixed use developments primarily in Canada’s top urban and suburban markets. As of December 31, 2016, Crombie owned a portfolio of 280 retail and office properties across Canada, comprising approximately 19.1 million square feet of gross leasable area (GLA) and approximately $4.8 billion in assets.

INSIDE THIS REPORT

IMPROVING FFO/AFFO PAYOUT RATIO 2 2016 Highlights 3 Message from the President and CEO Units of Crombie REIT offer a high yield relative to the dependable, low-risk cash 6 A Strong National Platform flow generated by our portfolio and the quality of our tenant base and retail assets. 8 High-Quality Properties 10 Active Management & Development 12 A Strong Balance Sheet ($) (%) 14 A Talented Real Estate Team 1.50 110 PAYOUT RATIO 16 Building Better Communities FFO/AFFO 1.30 100 18 Message from the Chair and Lead Independent Trustee 1.10 90 Financial Review PER UNIT

FFO/AFFO 0.90 80 20 Table of Contents 0.70 70 21 Management’s Discussion and Analysis 56 Management’s Statement of 0.50 60 2010 2011 2012 2013 2014 2015 2016 Responsibility for Financial Reporting 57 Independent Auditor’s Report 58 Consolidated Financial Statements FFO/Unit AFFO/Unit FFO Payout Ratio AFFO Payout Ratio 62 Notes to the Consolidated Financial Statements 90 Property Portfolio 92 Unitholder Information IBC Top 20 Tenants BUILDING A BETTER REIT

In the 11 years since our IPO, Crombie has transformed a small regional portfolio into a geographically diversified, retail-focused national REIT with $4.8 billion in assets across the country and a reputation for creating value by executing on a full range of commercial real estate activities. This year’s report shows how we are Building a Better REIT.

ANNUAL REPORT 2016 1 2 includes 19 exceptional properties that CROMBIE REIT 2016 HIGHLIGHTS GROSS LEASABLE AREA DEVELOPMENT PROPERTIES Crombie’s expanding development pipeline development pipeline expanding Crombie’s Vancouver, BC 2733 Broadway Davie Street across the country. the across and urban suburbanand growing markets are located of prosperous the in heart FOR A FULL TABLE OF 2016 HIGHLIGHTS, PLEASE SEE PAGE 22 IN THE MD&A. W 12THAVE ENGLISH BAY

BEACH AVE

DENMAN ST

(top), MACDONALD ST (bottom),

W BROADWAY DAVIE ST DAVIE BIDWELL ST Calgary, AB Calgary, Elbow Drive, 19,093 sq.ft. 12,598 sq.ft. 7,458 sq.ft. 23 AVE SW 2006 2016 2011

ELBOWRIVER 5 ST SW ELBOW DRSW 23 AVE SW 24 AVE SW

ENTERPRISE VALUE 4 ST SW

Oakville, ON Bronte Village,

BRONTE CREEK BRONTE

BRONTE RD BRONTE Jones St Jones

LAKESHORE RD W Sovereign St $2,044 M $4,412 M $974 M 2006 2016 2011

Halifax, NS Scotia Square, BRUNSWICK ST BRUNSWICK

DUKE ST

BARRINGTON ST BARRINGTON UPPER WATER ST WATER UPPER 19 UNENCUMBERED ASSETS Canada Properties Across Development

BARRINGTON ST BARRINGTON

St. John’s,NL Avalon Mall,

THORNBURN RD THORNBURN O’Leary Ave

KENMOUNT RD

$995 B $80 B 2006 2016 2011 $0 MESSAGE FROM THE PRESIDENT AND CEO / Donald E. Clow, FCPA, FCA

PERFORMANCE, OPPORTUNITY AND GROWTH

2016 was a strong year for Crombie REIT on all fronts. We achieved record financial results, improved the quality of our portfolio, expanded and advanced our $2 to $3 billion development pipeline opportunity, and continued to strengthen our platform for sustainable long-term growth.

The past year was one of continued geopolitical and economic same-asset net operating income grew by 4.2 percent in 2016, uncertainty as reflected by slow GDP growth, historically reflecting increased average rents from leasing activities, low interest rates, and signs of political discontent in much improved recovery rates and land-use intensification activities. of the developed world. Amid this environment, our ability Crombie’s successful growth strategy starts with the to achieve record financial and operating results was a acquisition, management and increasingly, the development testament to the soundness of Crombie’s strategy and the of great real estate properties. We continue to work with commitment of our people to Building a Better REIT. Sobeys to leverage the sustainable competitive advantage For the 12 months ending December 31, 2016, funds from that comes from our relationship with Canada’s second operations (FFO) on an adjusted basis increased 11.2 percent largest food retailer. In 2016, we acquired, expanded or to $166.2 million; or $1.17 per unit diluted. Adjusted funds from renovated more than $444 million of properties from or with operations (AFFO) increased 12.0 percent to $140.7 million; or Sobeys, several of which contain compelling redevelopment $1.00 per unit diluted. Growth in FFO and AFFO was driven by opportunities. Together, these acquisitions have increased $574 million in new acquisitions, higher renewal rents, higher our presence in everyday retailing – what we consider to be operating margins and lower financing costs. On a cash basis, the most resilient segment in commercial real estate – while

ANNUAL REPORT 2016 3 A MESSAGE FROM THE PRESIDENT AND CEO

increasing the concentration of our portfolio located in adjacent to our properties in Beaumont, Alberta, Leduc, Canada’s largest urban markets, increasing our geographic Alberta and Halifax, Nova Scotia over the past three years. diversity and adding to our growing development pipeline. All of these initiatives reflect a growing spirit of creativity in our relationships to reduce risk, gain access to capital, In 2016, we continued to build a development pipeline expertise and the best urban locations. that now includes 19 potential projects in various stages of evaluation, planning and development. Thirteen of these Crombie’s untapped development also extends to our properties are prime urban locations that came to us with the commercial properties portfolio in Atlantic Canada. Scotia 2013 acquisition of the Safeway portfolio. Our most advanced Square continues to undergo a three-year $13 million project, Davie Street in Vancouver, is expected to break refresh and expansion to strengthen its position as Halifax’s ground later this year subject to final approvals. Featured premier business location and longer term is estimated to on the cover of this annual report, Davie Street will combine hold approximately one million square feet of residential 53,000 square feet of retail space with 320 residential suites and commercial development potential. We are also master in one of the city’s top urban neighbourhoods. Four similar planning for a major redevelopment of Avalon Mall in projects are in the pre-planning stage, including 1780 East St. John’s, Newfoundland and Labrador, one of Atlantic Broadway, located at the busiest transit station in Vancouver’s Canada’s busiest shopping centres. SkyTrain system. All of these projects will help satisfy the To help fund our core growth strategies, we have become burgeoning demand for urban rental residential space, more active in recycling capital to support our core growth diversify Crombie’s revenue, and have a positive impact strategy. This included a record $196 million of dispositions, on same-asset income and net asset value per unit. primarily in secondary and tertiary markets this past year. We also continue to develop relationships in the wider We also continue to strengthen our operating platform, commercial real estate market, as evidenced by more than as evidenced by the strong performance of our property $189 million in off-market, third-party property acquisitions management and leasing teams and our continued progress during the year, and by finding new and creative ways to in filling vacancies from the departure of Target from the add value. Canadian retail landscape. With respect to Target, we have The same kind of thinking has led to the acquisition of replaced most of the income for one location and are third-party properties that feature long-term leases with committed to making the right deal at two other locations Sobeys stores, where our unique relationship with Sobeys because these are strong assets in their markets. By the end provides the opportunity to unlock value more readily of 2016, we had successfully replaced 96 percent of Zellers through intensification or development. We are also making income with tenants occupying 56 percent of the Zellers more bolt-on acquisitions, as evidenced by asset purchases space, leaving additional income upside at these locations.

TOTAL UNITHOLDER RETURN (% - March 31, 2006 to December 31, 2016)

Crombie REIT has produced a total unitholder return of 178% since its IPO, compared to 115% total return for the S&P/TSX Capped REIT Index and a 72% total return for the 10% S&P/TSX Composite Index.

250

Units in Crombie 200 CROMBIE REIT

REIT have generated 150 TSX CAPPED REIT a compound average 100 annual total return of TSX 50 10% since our IPO. 0

-50 06 07 08 09 10 11 12 13 14 15 16

4 CROMBIE REIT In addition to acquiring, managing and developing great real As I look back on Crombie’s progress over the past 11 years, estate, we are also committed to a conservative management I cannot help but be proud of how far we’ve come. Starting approach and strong financial condition. All of our relevant with an approximately $800 million property portfolio financial key performance indicators improved during the predominantly located in Eastern Canada, we have grown year including FFO per unit, AFFO per unit, AFFO payout ratio into a leading national REIT with assets of $4.8 billion and and same-asset cash net operating income. We also achieved an estimated $2–3 billion in development potential over the greater financial flexibility by reducing leverage, improving next 10 to 15 years. With the continued support of Crombie’s debt service coverage and interest coverage ratios and employees, our associates at Empire and Sobeys, and other increasing unencumbered assets to $995 million by year end. business partners, I am confident we will continue to be Building a Better REIT for many years to come. All of our progress depends, of course, on the talent and dedication of many people, both inside and outside the Sincerely, organization. To keep pace with our development as a leading national REIT, we continue to invest in the development of our people; as you will see on page 14 of this report, our efforts continue to attract the attention of leading awards programs. We also continue to foster our unique and mutually beneficial FCPA, FCA relationship with Sobeys and Empire, as well as the capable Donald E. Clow, development partners who are helping to advance our PRESIDENT AND CHIEF EXECUTIVE OFFICER progress on major development projects.

1 2 3 4 5 6 7 8 9 10 11 12 13

SENIOR MANAGEMENT TEAM

1 GLENN HYNES 3 DONALD CLOW 5 CHERYL FRASER 7 JOHN BARNOSKI 9 STEVE CLEROUX 11 FRED SANTINI Executive Vice President and Chief Talent Officer Senior Vice Vice President, General Counsel President, Chief Chief Executive Officer and Vice President, President, Corporate National Leasing and Financial Officer and Communications Development Atlantic Development 12 SCOTT MACLEAN Secretary 4 TREVOR LEE Senior Vice President, Senior Vice President, 6 TERRY DORAN 8 KEN TURPLE 10 BRADY LANDRY Eastern Canada 2 AARON BRYANT Western Canada Vice President, Office Vice President, Vice President, Vice President, Properties Accounting and Financial Analysis and 13 JEFF DOWNS Construction Financial Reporting Treasury Vice President, and Design, Enterprise Information Eastern Canada Systems

ANNUAL REPORT 2016 5 CROMBIE AT-A-GLANCE

A STRONG NATIONAL PLATFORM

Following $574 million of acquisitions in 2016, Crombie REIT is more urban-focused and geographically diversified than ever before. Today, our $4.8 billion property portfolio consists of 280 commercial assets from coast to coast and a growing development pipeline in Canada’s fastest growing metropolitan areas.

DEBT TO GBV (FV) UNENCUMBERED ASSETS MARKET CAPITALIZATION (%) (in millions of dollars) (in millions of dollars)

Crombie’s debt to gross book Unencumbered assets in our Crombie’s market capitalization reached approximately value improved to 50.3% in 2016, property portfolio reached $2 billion, with a public float of approximately $1.2 billion, reflecting the growing strength a record $1 billion in 2016, at the end of 2016. of the REIT’s balance sheet. reflecting unprecedented liquidity and financial flexibility.

53 1,000 2000

52 800 1600

51 600 1200

50 400 800

49 200 400

13 14 15 16 13 1 4 15 16 IPO 06 07 08 09 10 11 12 13 14 15 16

6 CROMBIE REIT 2000

1600

1200

800

400

0 19 Over the past 11 years, Crombie has grown Development Properties from a small regional property portfolio into Across Canada one of Canada’s larger REITs.

PROPERTIES ACROSS CANADA WEST ONTARIO QUÉBEC ATLANTIC

280 119 50 33 78

AB 1

SK 7 1 1 3 1 MB NF QB

ON PEI

1 NB 2

NS ANNUAL RENT GENERATED TOTAL 1 BY RETAIL/MIXED USE SQUARE FEET 1 96.0% 19.1 Million

GEOGRAPHIC DIVERSIFICATION REVENUE BY PROPERTY TYPE (% of annual minimum rent) (%)

At year-end 2016, 62.4% of the annual minimum rent generated by our At year-end 2016, 86.1% of the revenue from our portfolio was generated portfolio was derived outside of Atlantic Canada compared to 14.3% at by retail assets compared to 56.4% at the time of our IPO. the time of our IPO in March 2006.

ATLANTIC WEST ATLANTIC RETAIL/ RETAIL/ MIXED USE MIXED USE 85.7% 39.0% 37.6% 56.4% 86.1%

2006 ONTARIO 2006 IPO 2016 IPO 2016 11.5%

QUÉBEC ONTARIO QUÉBEC OFFICE OFFICE 2.8% 15.7% 7.7% 43.6% 13.9%

ANNUAL REPORT 2016 7 BUILDING A BETTER REIT

We acquire high-quality grocery or drug store anchored properties in Canada’s top urban and suburban markets

Acquired in 2016, our Safeway property at 8555 Granville Street in Vancouver is located in the heart of one of the city’s busiest commercial

VANCOUVER, BC VANCOUVER, and residential districts. 8555 GRANVILLE STREET GRANVILLE 8555

8 CROMBIE REIT Crombie REIT’s growth strategy is centred Crombie’s growth strategy has also driven our transformation into a primarily on the acquisition of the steadiest geographically diversified Canadian REIT. Since the time of our IPO, we performing assets in commercial real estate — have acquired $2.4 billion in accretive real estate assets through our strategic grocery and drug store anchored properties and relationship with Sobeys and Empire, freestanding stores that serve everyday needs in helping to support the expansion and development of Canada’s second largest their communities. Increasingly, they are located national food retailer. In 2016, Crombie acquired $385 million of real estate in Canada’s largest urban markets, which are properties from Sobeys and Empire with an additional $189 million in acquisitions experiencing faster than average population and through third-party relationships. per capita income growth. Today, 77 percent of the annual minimum rent from our portfolio is derived from grocery and drug store anchored properties and freestanding stores.

TOP 6 & TOP 36 MARKETS – SOURCE OF RETAIL ASSETS TOTAL PORTFOLIO ACQUIRED IN 2016 (%)

Crombie’s growth strategy is successfully increasing our presence in the largest and fastest Growing relationships in the growing urban and suburban markets across the country. commercial real estate markets led to $574 million in acquisitions in 2016.

(%) ($000s) 100 5,000 TOTAL PORTFOLIO

80 4,000 2016 60 3,000

40 2,000 TOP 6 & 36 TOP

SOBEYS 20 1,000 PROPERTY THIRD-PARTY PIPELINE RELATIONSHIPS

2006/ 2007 2008 200 9 2010 2011 2012 2013 2014 2015 2016 67.1% 32.9% IPO

% Top 6 % Top 36 Total Portfolio Value (RHS)

ANNUAL REPORT 2016 9 BUILDING A BETTER REIT

We actively manage and develop our assets to optimize financial performance and create value

1641 Davie Street in Vancouver – a partnership with Westbank – is the most advanced of Crombie’s major developments.

VANCOUVER, BC VANCOUVER, It is expected to break ground this year 1641 DAVIE STREET DAVIE 1641 subject to final approvals.

10 CROMBIE REIT In terms of quality and size as a proportion of enterprise value, Crombie’s development % pipeline opportunity is one of the best in the 4.2 industry with 19 potential urban and suburban developments in various stages of evaluation, Same asset property cash net operating planning and development. income, an important measure of performance in commercial real estate, Thirteen of these prime locations came to Crombie with the acquisition of increased 4.2% to the Safeway property portfolio in 2013. Together, these major development $235 million in 2016. opportunities hold the potential to add approximately 692,000 square feet of commercial space, and up to 5.7 million square feet of residential GLA. Based on current estimates, the total cost to develop these projects could reach $2 to $3 billion, of which Crombie may enter joint venture or other partnerships arrangements to share cost, revenue, risk and development expertise, depending on the nature of each project.

We also continue to optimize the performance of our existing assets through the strong performance of our property management, leasing and redevelopment teams. The continuous improvement in Crombie’s operations was reflected by solid increases in net operating income, FFO, AFFO and EBITDA in 2016.

SAME ASSET PROPERTY CASH NET OPERATING INCOME GROWTH (%)

Same-asset property cash net operating income has grown at an average annual rate of 2.4% over the past five years.

11 12 13 14 15 16

4 TOP PERFORMER Major redevelopment plans are in store for Avalon Mall in St. John’s, one of Atlantic Canada’s busiest 3 shopping centres.

2 ANNUAL REPORT 2016 11 1

0 BUILDING A BETTER REIT

We maximize liquidity and financial flexibility by maintaining a strong balance sheet and access to multiple sources of capital

The new proposed parkade at Avalon Mall in St. John’s represents Phase I of a masterplanned redevelopment for Newfoundland and Labrador’s AVALON MALL AVALON ST. JOHN’S, NF JOHN’S, ST. largest and busiest shopping centre.

12 CROMBIE REIT The strength of Crombie’s foundation is reflected in our balance sheet debt to gross book value, which at 50.3 percent at year end, was well below the 60 to 65 percent maximum permitted by our Declaration of Trust and relatively modest given the steady occupancy of our retail properties and the creditworthiness of our tenants.

We continued to de-risk our business, strengthen our capital structure and lower our cost of capital in 2016. We possess more liquidity and financial flexibility than ever with $278 million of unused credit facilities and $1 billion of unencumbered assets at the end of 2016. The financial covenants and weighted average remaining lease terms of our major tenants, including those of grocery and drug retailers, banks and other high-quality tenants at our properties, allow us to borrow using THE PLACE TO BE Scotia Square, Halifax’s premier business location, long debt maturities, which translates into low risk. No more than 4.8 percent of is in the midst of a $13 million, three-year refresh the GLA of our portfolio will be maturing in a single year over the next five years. and expansion.

STRONG PROPERTY GROWTH WITH STEADY OCCUPANCY

Crombie REIT’s portfolio has experienced strong growth in GLA and steady occupancy rates during challenging economic times.

(sq. ft.) (%) 9.5% 18,000 100

15,000 90 OCCUPANCY

Since Crombie’s IPO 12,000 80 in March 2006, the 9,000 70 gross leasable area in

our commercial real 6,000 60

estate portfolio has PORTFOLIO GLA 3,000 50 grown at a compound average annual IPO 06 07 08 09 10 11 12 13 14 15 16 growth rate of 9.5%.

Portfolio GLA Occupancy

ANNUAL REPORT 2016 13 BUILDING A BETTER REIT

We attract and develop great talent and foster strong relationships with our real estate partners.

Crombie’s skilled team of real estate professionals continues to grow as we expand our capabilities and geographic reach across the country. AN EXPANDING AN NATIONAL PLATFORM NATIONAL

1 2 3 4 5 6 7 8

14 CROMBIE REIT AWARDS 2016

INDUSTRY RECOGNITION

Crombie’s culture of operational excellence, continuous learning and leadership development attracted multiple employer awards in 2016 including, for the 4th year in a row, Crombie CEO Don Clow being named one of Our strategic relationship with Empire and Sobeys has been the primary driver Atlantic Business Magazine’s Top 50 CEOs. of Crombie’s evolution into a geographically diversified, retail-focused REIT over the past 11 years. Today, this relationship continues to grow as we work together to add value through major mixed use developments. As a significant Unitholder of Crombie, Empire shares a common interest in realizing the income potential and long-term asset value of our properties. We also continue to strengthen our relationships with leading residential development partners such as Westbank to engage talent, share risk, and gain access to select development opportunities.

Leading these efforts is a growing team of talented real estate professionals and an expanding national platform that includes our newly opened regional office in Western Canada. We attract and develop great people through our solid talent programs placing a strong focus on leadership development, inclusion and engagement. Over the past year, we have enhanced our talent in analytics, development, and construction to ensure we are well positioned to execute our strategy. Crombie has received Atlantic Canada’s and Nova Scotia’s Top Employer Award for the past three years.

OUR GROWING TEAM OF TALENTED REAL ESTATE PROFESSIONALS

1 ANGELA CORMIER 3 GEORGE DECOFF 5 REBECCA HEBB 7 STEPHANIE SMITH Leasing Manager Senior Project Manager Corporate Development Analyst Advisor Talent Management New Glasgow New Glasgow Toronto New Glasgow Angela joined the Crombie team Working as a Senior Project Rebecca joined Crombie in Stephanie joined Crombie in 2016 as a Lease Administrator in 2008 Manager in Atlantic Canada, 2015 as an Analyst in the Corporate with a diverse background in Talent and has since transitioned into George is involved with designing, Development group. She supports Management, Compensation and the role of Leasing Manager in constructing and managing projects the advancement of Crombie’s Benefits. Since joining Crombie, Atlantic Canada. With her extensive that allow him to collaborate with strategy through the analysis and Stephanie has been responsible for knowledge of the company’s Crombie team members and execution of acquisitions, dispositions advancing our Wellness initiatives properties, Angela continues to outside partners throughout the and other corporate development and the execution and management advance Crombie’s strategy with region. In his years with Crombie, opportunities. She holds an MBA of our Compensation programs. innovative leasing. George has been involved in projects from Dalhousie University and is ranging from site development, currently working towards becoming 8 DAN BOURQUE 2 KEVIN PRICHARD property redevelopment, retail and a CFA charter holder. Director Operations, Atlantic Manager Development Halifax Calgary office construction. 6 TARA RUSSELL Dan joined Crombie in 2003 and Kevin joined Crombie in 2015 to grow 4 LESLEY BOWES Director, Financial Analysis is responsible for oversight of the development capacity in the Senior Property Accountant New Glasgow operations in Atlantic Canada. His Western Region. He is responsible Halifax Tara joined Crombie in 2012 with her progressive leadership style has for intensifying existing sites, looking Lesley joined Crombie in 2012 CPA, CMA designation as well as her cultivated an award winning team for new development opportunities as Property Accountant with MBA from Saint Mary’s University. with a focus on customer service and working with the team on experience in Real Estate as well as With her strong background in and environmental initiatives at the Crombie’s mixed use initiatives to Construction and Steel Fabrication. budgeting, forecasting and analytics, Scotia Square mixed use complex. further enhance Crombie’s rapidly She currently oversees accounting she liaises with development, expanding portfolio. for Crombie’s portfolio of Office operations and accounting teams properties and plays a vital role across the country to bring superior on our Operations and Acquisition budgeting, forecasting and reporting and Development teams. Lesley is to Crombie. a graduate of St. Xavier University.

ANNUAL REPORT 2016 15 BUILDING BETTER COMMUNITIES

BUILDING BETTER COMMUNITIES

Crombie’s commitment to building a better REIT extends to the numerous communities that are home to our commercial real estate properties across the country. This commitment can be seen everyday, from our support for important social causes to the way we build and manage our portfolio.

MAKING A DIFFERENCE Crombie is a proud supporter of YMCA Strong Kids, an annual fundraising campaign that helps kids live healthier, happier lives.

16 CROMBIE REIT Each year, we are proud to support numerous charitable causes with direct financial support and through the generosity and volunteer efforts of our employees. These include YMCA Strong Kids, which allows more kids to participate in life-enhancing programs that build a healthy spirit, mind and body and Catapult, a non-profit leadership camp that provides a fun, high-energy learning experience focused on enhancing the leadership, social, problem-solving and decision-making skills of young Nova Scotians. Other important causes we supported in 2016 included: the Canadian Heart and Stroke Foundation, the Alberta Adolescent Recovery Centre, Princess Margaret Hospital’s Ride to Conquer Cancer, the Nova Scotia Cancer Society, Dreams Take Flight, the Mental Health Foundation of Nova Scotia, Ronald McDonald House, the Special Olympics of Pictou County and regional health care and recreational facilities.

A similar sense of responsibility extends to the environment. All of the new-build designs in our retail properties match LEEDS® equivalent standards and we continue to earn and upgrade BOMA BEST® certification for our office properties. All of our Scotia Square properties hold BOMA BEST Gold Certification while Park Lane holds a Silver Certification. Avalon Mall received Silver Certification during 2016 following the completion of numerous environmental upgrades.

As always, the year marked a number of important initiatives aimed at reducing our energy consumption and environmental impact at Scotia Square. The most intensive project completed in 2016 was a redesign of the main plant, which included the installation of variable speed drive pumps and flow meters. This project resulted in energy reduction of almost 1.5 million kilowatt hours per year and annual savings of $126,000. In total, projects completed in 2016 bring the total energy saved since we began the process of greening our buildings in 2008 to more than 19.7 million kilowatt hours.

ENVIRONMENTAL LEADERSHIP The expanded food court at Scotia Square will incorporate state-of-the-art window and lighting technologies to minimize energy consumption.

ANNUAL REPORT 2016 17 A MESSAGE FROM THE CHAIR AND LEAD INDEPENDENT TRUSTEE

ADVANCING OUR COMMITMENT TO LONG-TERM, SUSTAINABLE GROWTH

Crombie enjoyed a strong year with solid financial results, a high level of focused acquisitions and dispositions, and enhancements in its key talent while continuing to advance its strategy for sustainable growth and value creation.

Despite an ongoing scarcity of attractive retail assets on the elected and independent. The elected Trustees hold separate open market, management successfully executed more than in-camera meetings with and without the appointed Trustees $574 million in acquisitions in 2016, a testament to both the and management at each Board meeting. Empire appointed competitive advantage of Crombie’s strategic relationship Trustees do not participate in any decisions concerning with Sobeys and Empire, and the REIT’s growing expertise related party transactions or matters. in the country’s major commercial real estate markets. The Board reviews its Governance Standards regularly. In Despite having a very strong year, Crombie REIT’s total return 2017, the Board will be proposing to Unitholders amendments of 13 percent trailed the performance of both the S&P/TSX to its Declaration of Trust that are described in our Proxy Index and the Canadian REIT Index. Although valuations material. These amendments are being proposed to better for REITs in general were dampened by expectations of align our Unitholders rights and definitions with those of rising interest rates, Crombie’s unit price was also affected other REITs and incorporated public companies. by Sobeys’ recent operating difficulties. However, we are On behalf of the Board, we would like to convey our gratitude confident that Sobeys represents an attractive and stable to John Latimer, who will be retiring from the Board in May long-term tenant for our grocery anchored retail assets. 2017. He has provided great leadership and knowledge to Crombie has an engaged Board of Trustees representing the Board for the past eleven years. Mr. Latimer has served a diverse range of backgrounds and experience. We are on the Audit Committee and was most recently Chair of the committed to a strategy of long-term and stable growth Governance and Nominating Committee. We wish him the with a high standard of corporate governance. Although very best in the years to come. Empire maintains a 40.3% (fully diluted) ownership interest in Crombie REIT, the Board of Trustees is structured and operates to fairly represent the interests of all Unitholders. The Board consists of both appointed and elected trustees, Frank C. Sobey John Eby as specified in our Declaration of Trust, with a majority being TRUSTEE AND CHAIR LEAD INDEPENDENT TRUSTEE

18 CROMBIE REIT 1 2 3 4 5 6 7 8 9 10 11 12

BOARD OF TRUSTEES

1 FRANK C. SOBEY 2 JOHN EBY 7 KENT R. SOBEY 10 BRIAN A. JOHNSON Trustee and Chair Independent Trustee Independent Trustee Independent Trustee Frank Sobey has been a trustee John Eby was Vice-Chairman of Kent Sobey is founder and President Brian Johnson is a partner of of Crombie and its predecessors Scotia Capital from 2000 until his of Farmhouse Productions Ltd. He Crown Realty Partners. From 1993 since 1981 and Chair since 1998. retirement in 2006 and for 10 years is a corporate director of Blue Ant to 2007 he was President and He is a director of Empire Company prior to that Senior Vice President, Media and Hollywood Suite and Chief Executive Officer of Crown Limited, was Chairman of the Corporate and Energy Banking, The serves on the board of The North Life Insurance Company. Mr. former Oversight Committee of Bank of Nova Scotia. He is also a York Harvest Food Bank. Mr. Sobey Johnson received his B. Comm. Empire and served as a trustee of director of Wajax Corporation. Mr. received his BA from Dalhousie (Gold Medalist) from the University the Wajax Income Fund. Currently Eby received his BA and MBA in University, is a graduate of The of Manitoba and his MBA from Chairman of the Dalhousie Medical Finance from Queen’s University Vancouver Film School and has the University of Pennsylvania. He Research Foundation, Mr. Sobey is and is the founder and CEO of completed executive development also holds the Chartered Financial a graduate of the Harvard Business Developing Scholars, a not-for- at Rotman School of Management Analyst (CFA) designation. School’s Advanced Management profit organization that promotes and Queen’s University. Program and received the ICD.D educational initiatives 11 PAUL D. SOBEY designation in 2013. in Guatemala. 8 J. MICHAEL KNOWLTON Trustee Independent Trustee Paul Sobey retired as President and Michael Knowlton retired from Chief Executive Officer of Empire 3 DONALD E. CLOW 5 BARBARA F. PALK Dundee Realty Corporation as Company Limited in 2013. He sits Trustee Independent Trustee President of Dundee REIT in May on the boards of Empire Company Donald Clow became President Barbara Palk is the former President 2011 after 13 years of service. A Limited, Sobeys Inc., The Bank of and CEO in 2009 after serving of TD Asset Management Inc. She director of Tricon Capital Group Nova Scotia, and is Chancellor of as President, ECL Developments serves on the Boards of TD Asset Inc. and a trustee of both Dream Saint Mary’s University. Mr. Sobey Limited for two years and previously, Management USA Funds Inc., Industrial REIT and Dream Global received his Bachelor of Commerce as President of Southwest Ontario Teachers’ Pension Plan, REIT, Mr. Knowlton received his from Dalhousie University, attended Properties. Mr. Clow earned his First National Financial Corporation BSc (Engineering) and MBA from Harvard University Business School, BBA from Acadia University, his CA and Queen’s University (Chair). Queen’s University, earned his CA Advanced Management Program designation with KPMG and Fellow Ms. Palk has an Honours BA in designation in 1977 and his ICD.D and is a Chartered Accountant. Chartered Accountant designation Economics from Queen’s University, designation in 2011. He became a Fellow Chartered in 2002. He is a graduate of the has received the ICD.D and CFA Accountant of Nova Scotia in 2006. 9 ELISABETH STROBACK YPO President’s Program at Harvard designations and is a Fellow of the Independent Trustee 12 FRANCOIS VIMARD Business School and received his Canadian Securities Institute. Trustee ICD.D designation in 2014. Mr. Clow Elisabeth Stroback is the Managing is a trustee of Granite REIT. 6 JASON P. SHANNON Principal and Owner of Tanalex François Vimard, CPA, CA is the Independent Trustee Corp. She is the former Executive Executive Vice President of Empire 4 E. JOHN LATIMER Jason Shannon is the President and Lead, Capital Projects and Real Company Limited and served Independent Trustee Chief Operating Officer of Shannex Estate for Ryerson University and as interim CEO from July 2016 John Latimer is the Managing Inc. and previously practised prior to 1999, served as President to January 2017. Prior to this he Director of Aldert Chemicals Limited corporate law at Stewart McKelvey of Hammerson Canada Inc. She is served in various senior positions and the former President and CEO Stirling Scales. He serves on the Human Resources Compensation with both Empire and Sobeys Inc. of Monarch Corporation, a real boards of Atlantic Corporation, ITacit Committee Certified (HRCC) from and provided leadership for the estate development company, Inc., Atlantic Institute on Aging, and the Director’s College. Ms. Stroback Company’s Finance, Information from which he retired in 2000 after the Loran Scholarship Foundation, also holds a BA as well as an MA Technology, Distribution & Logistics, 22 years of service. He also served and as an advisory member on in Economics. Corporate Strategy, Real Estate, and on the Executive Committee of the Sobeys Pension Investment Legal functions. Mr. Vimard earned Taylor Woodrow plc, the London, Committee. Mr. Shannon graduated his BBA degree and Licence in U.K. based major shareholder of from Dalhousie University with a Accounting Sciences from Université Monarch. Mr. Latimer is the Audit Bachelor of Commerce (1994) Laval. He is a member of the Québec Chairman and Director of R Split III and an LL.B (1997). Chartered Accountant Order. Corp., a managed company of The Bank of Nova Scotia.

For complete biographical information on Crombie REIT’s Trustees and Executive Management, please visit us at crombiereit.ca

ANNUAL REPORT 2016 19 FINANCIAL REVIEW

Management’s Discussion Consolidated and Analysis Financial Statements 21 Introduction 56 Management’s Statement of Responsibility for Financial Reporting 25 Overview of the Property Portfolio Independent Auditor’s Report 30 Financial Results 57 Consolidated Balance Sheets 39 Liquidity and Capital Resources 58 Consolidated Statements of 44 Accounting 59 Comprehensive Income (Loss) 48 Risk Management 60 Consolidated Statements of Changes 53 Subsequent Events in Net Assets Attributable to Unitholders Controls and Procedures 53 61 Consolidated Statements of Cash Flows Quarterly Information 54 62 Notes to the Consolidated Financial Statements

EVERYDAY RETAILING Crombie’s grocery and drug store anchored properties serve steady, everyday needs for their communities.

20 CROMBIE REIT (iv) (iii) (ii) (i) following cautionary statements: informationAll forward-looking inthisMD&Aisqualified by the and arebasedoninformation currentlyavailable to management. statementsforward-looking reflect management’scurrentbeliefs similar expressions outcomes suggestingfuture orevents. Such “may”, “will”,“estimate”, “anticipate”, “believe”, “expect”, “intend” or be identified by theuse of terminology suchas forward-looking are nothistorical fact. statements generally Forward-looking can events, results,circumstances, performance orexpectations that intentions, andsimilarstatements concerning anticipated future statements concerning management’sbeliefs, plans,estimates, of Crombie.These statements include,butarenotlimited to, eventsfuture andthefinancial operating performance This MD&Acontains statements forward-looking aboutexpected 22,2017,exceptof February noted. asotherwise statements, isbasedoninformation available to managementas The information contained intheMD&A,includingforward-looking FORWARD-LOOKING INFORMATION DATE MD&A OF Standards Board (“IASB”). Information about Crombie can be found be on SEDAR at about Crombie www.sedar.com. can Information (“IASB”). Board Standards Accounting International by the issued as (“IFRS”) Standards Reporting Financial International with accordance in prepared 2015, 31, December 2016 and 31, ended for December notes year the accompanying and statements financial Crombie’s consolidated audited with conjunction in read be should MD&A This 2015. in periods comparable the of foroperations and results condition financial the to acomparison 2016, with 31, ended December quarter and for (“Crombie”) year the Investment Trust Estate of of Crombie operations Real results and condition financial consolidated of the (“MD&A”) Analysis and Discussion Management’s is following The INTRODUCTION MANAGEMENT’S DISCUSSION AND ANALYSIS locations inproximity to Crombielocations; general economic conditions andsupplyof competitive Crombie’s properties,tenant bankruptcies, theeffects of which could be impacted by changesindemandfor generating improved rentalincome andoccupancy levels, and realestate market conditions; property acquisitions orotheraccretive usesfor net proceeds by theavailability of purchasers,theavailability of accretive reinvestment of netproceeds, whichcould beimpacted the dispositionof propertiesandtheanticipated economic conditions; market cycles, theavailability of labourandgeneral and whoseactivitiescould beimpacted by realestate parties andthusarenotunderthedirectcontrol of Crombie development activitiesareprimarilyundertaken by related and rightof first offer (“ROFO”)agreements,which the cost andtimingof new propertiesunderdevelopment in interest rates; demand hasonacquisition capitalization rates andchanges impacted by demandfor propertiesandtheeffect that extent of theaccretion of any acquisitions, whichcould be the accretive acquisition of propertiesandtheanticipated

(Inthousandsof CAD dollars,except perunitamounts) (vi) (v) (xiii) (xii) (xi) (x) (ix) (viii) (vii) level of acquisition activitythatCrombieisableto achieve, relating to refinancing, which could beimpacted by the overall indebtedness levels andterms andexpectations and administrative expenses; by changesinpropertyrevenue and/orchangesingeneral a percentage of propertyrevenue, whichcould beimpacted the anticipated rate of general andadministrative expenses as and existing tenants. and successful agreementswithdevelopment partners required municipal zoning anddevelopment approvals Redevelopment” sectionandwhichassumesobtaining and factors describedunderthe“PropertyDevelopment/ actual development costs andgeneral economic conditions cycles, theavailability of financingopportunitiesandlabour, measures, allof whichmay beimpacted by realestate market value, cash flow growth, unitholder value orotherfinancial cost, development size andnature,impactonnetasset Redevelopment” includingthelocations identified, timing, statements undertheheading“PropertyDevelopment/ and thesupplyof competitive locations; and, be impacted by theeffects of general economic conditions anticipated replacement of expiring tenancies, whichcould eventual outcome; financial statements, which could beimpacted by their the effect thatany contingencies would have onCrombie’s and capital resource allocation decisions; ratios, whichcould beimpacted by resultsof operations anticipated distributions,distributiongrowth andpayout changes enacted by governmental authorities; tax exempt status,whichcan beimpacted by regulatory allocation decisionsandactualdevelopment costs; be impacted by theavailability of labour,capital resource make improvements to existing properties,whichcould asset growth andreinvesting to develop orotherwise financial liabilities; settlement value andsettlementtimingof any derivative interest rates onfloating rate debtandfluctuationsinthe subsidy payments, conversions of convertible debentures, financial liabilities,which could beimpacted by interest rate the estimated payments onderivative andnon-derivative tenants, andmarket conditions; interestopportunities, future rates, creditworthiness of major strengthen itsinvestment grade creditrating, financing future levels of indebtedness, Crombie’s abilityto maintainand

ANNUALREPORT 2016

MD&A MD&A 22

CROMBIE REIT Diluted Diluted for Diluted for operating income attributableto Unitholderspurposes for AFFO Basic numberof Unitsfor allmeasures FFO purposes purposes Weighted average numberof Unitsoutstandingfor perunitmeasurescalculations: (1) Debt Interest service AFFO payout ratio (%) service coverage Distributions coverage AFFO per AFFO per unit AFFO per unit $ AFFO – unit – FFO, asadjusted payout ratio (%) – diluted – diluted FFO, asadjusted perunit–diluted basic basic FFO, asadjusted perunit–basic FFO, FFO, as $ Operating income attributableto Unitholdersperunit–diluted as adjusted Operating income attributableto Unitholdersperunit–basic adjusted – Operating – $ diluted Property income basic Property net attributable noted) revenue otherwise as and amounts unit per except operating to dollars, CAD of thousands (In income Unitholders Debt to grossbookvalue –fair value basis Gross Number leaseable of area properties (square feet) Financial Highlightsfor thethreemonthsandyear endedDecember 31,2016and2015areasfollows: requiredby applicableotherwise securitieslegislation. them to reflect new orcurrent events orcircumstances unless MD&A andCrombieassumesnoobligationto update orrevise These statements forward-looking aremadeasatthedate of the not place unduereliance statements. ontheforward-looking These factors shouldbeconsidered carefully andareadershould statements.the resultsdiscussedorimpliedinforward-looking achievements, prospectsoropportunitiesto differ materially from “Risk Management”could cause actualresults,performance, statements. Anumberof factors, includingthosediscussedunder that actualresultswillbeconsistent withtheseforward-looking estimates and assumptions.Crombiecan give noassurance performance and,by theirnature,arebasedonCrombie’scurrent looking statements arenotguarantees events of future or or may notbeappropriate for otherpurposes.These forward- understanding Crombie’soperating environment, andmay of assistingCrombie’sUnitholdersandfinancialanalysts in These statements forward-looking arepresented for thepurpose MANAGEMENT’S DISCUSSION AND ANALYSIS FINANCIAL HIGHLIGHTS AFFO payout ratio iscalculated usingapersquarefoot chargefor maintenance expenditures (see“AFFO”section).

(1)

$ $ $ $ $ $ $

(Inthousandsof CAD dollars,except perunitamounts)

and, accordingly, may notbecomparable to othersuchentities. may differ fromsimilarcomputations asreported by otherentities financial performance. These measuresas computed by Crombie investors usethesemeasuresasameansof assessingrelative performance indicators to managementanditbelieves certain Management includesthesemeasuresasthey representkey (“EBITDA”), interest coverage service coverage. anddebtservice earnings before interest, taxes, depreciationandamortization adjusted fromoperations funds (“AFFO”),debtto grossbookvalue, to fromoperations Unitholders, funds (“FFO”),FFOasadjusted, same-asset propertycash NOI,operating income attributable IASB. These measuresarepropertynetoperating income (“NOI”), have astandardized meaningunderIFRSasprescribedby the There arefinancial measuresincludedinthisMD&Athatdonot NON-GAAP FINANCIAL MEASURES 31, December ended months Three 31, December ended months Three $ $ $ $ 148,038,591 148,179,446 155,502,713 155,502,713 105,269 $ 40,193 47,193 38,452 $ 75,874 $ 45,452 $ 85.8% 72.6% 31,478 $ 2016 2016 0.30 0.26 $ 0.26 $ 0.22 $ 0.21 0.21 0.31 2015 $ $ $ $ $ $ 131,182,278 131,333,794 138,657,061 135,671,986 40,052 $ 63,989 $ 92,847 $ 33,295 $ 90.5% 32,310 $ 13,945 $ 76.3% 38,311 $ 0.29 0.29 0.22 $ 2015 0.25 $ 0.25 $ 0.11 0.11

$ $ $ $ December 31, 31, December 144,400,955 140,062,763 139,919,678 147,386,030 19,093,000 Year ended December 31, December Year ended 31, December Year ended 400,001 $ 284,695 $ 125,130 140,739 $ 144,645 $ 166,235 $ 173,141 50.3% 89.3% 75.6% 2016 2016 2016 0.89 $ 0.89 0.89 2.97 1.00 $ 280 1.96 1.01 $ 1.19 1.17 2015 2015 $

$ As at As

$ $ $ $

December 31, 31, December 130,946,425 130,787,712 135,670,778 138,655,853 17,666,000 125,654 256,605 369,866 129,900 149,474 156,720 65,729 78.0% 92.8% 52.5% 0.50 0.50 0.89 0.96 0.96 2015 2.72 260 1.81 1.14 1.13

• • • • • • • • • • • would beanti-dilutive for thatcalculation. not includetheimpactof any seriesof convertible debenturesthat The diluted weighted average numberof Unitsoutstandingdoes HIGHLIGHTS

Same-asset propertycash NOIfor theyear endedDecember 31, FFO, asadjusted, payout ratio of 75.6%for theyear ended AFFO for thethreemonthsendedDecember 31,2016increased AFFO for theyear endedDecember 31,2016increased12.0% FFO, asadjusted, for thethreemonthsendedDecember 31, FFO, asadjusted, for theyear endedDecember 31,2016 — 2016 included: Crombie’s renewal activityduringtheyear ended December 31, December 31,2015. compared with94.2%atSeptember 30,2016and93.6%at Committed occupancy was 94.4%atDecember 31, 2016 $105,269, an increase of $12,422, or 13.4% over fourth quarter 2015. ended December 31,2015).Fourthquarter propertyrevenue of December 31,2016($400,001versus $369,866for the year 8.1% growth of propertyrevenue for theyear ended of approximately $196,000before closingandtransaction costs. December 31,2016totalling 1,210,000squarefeet for proceeds Completed dispositionsof 19retailpropertiesintheyear ended anchored properties. in therenovation andexpansion of 10existing Sobeys in anadditionaldevelopment property;and,invested $58,823 adjacent to existing Crombiepropertiesanda50%interest in threedistributioncentres; two parcels of development land transaction costs, including38retailproperties;a50%interest totalling 2,663,000squarefeet for $573,833 before closingand Completed acquisitions intheyear ended December 31,2016 three monthsendedDecember 31,2015). 2016 of 9.2%or$5,203($61,785compared to $56,582for the property cash NOIfor thethreemonthsendedDecember 31, for theyear endedDecember 31,2015).Increaseinsame-asset 2016 increasedby 4.2%or$9,393($234,710compared to $225,317 same periodin2015. months endedDecember 31,2016compared to 90.5%for the same periodin2015.AFFOpayout ratio of 85.8%for thethree months endedDecember 31,2016compared to 76.3%for the in 2015.FFO,asadjusted, payout ratio of 72.6%for thethree December 31,2016compared to 92.8%for thesameperiod in 2015.AFFOpayout ratio of 89.3%for theyear ended December 31,2016compared to 78.0%for thesameperiod 5.3% perunitfromthethreemonthsendedDecember 31,2015. 19.0% to $38,452; or$0.26perunitdiluted, anincreaseof $0.01or December 31,2015. or 4.6%perunitfromtheAFFOfor theyear ended to $140,739; or$1.00perunitdiluted, anincreaseof $0.04 December 31,2015. increase of $0.01or5.1%perunitfromthethreemonthsended 2016 increased18.6%to $45,452;or$0.30perunitdiluted, an of $0.04or3.9%perunitfromtheyear endedDecember 31,2015. increased 11.2%to $166,235;or$1.17perunitdiluted, anincrease over theexpiring leaserate. an average rate of $16.96persquare foot, an increase of 9.9% Renewals on499,000squarefeet of 2016expiring leasesat

• • • • Crombie plansto achieve thisby strengthening itsassetbase on generating greater rentalincome fromitsexisting properties. thus overall value. Crombie`sinternal growth strategy focuses year into itspropertiesto maintain theirproductive capacity and reinvesting approximately 3%to 5%of itspropertyrevenue each Enhance value of Crombie`sassets: cash distributions. oriented assetclass,assistsinenhancingthereliabilityof and drugstore-anchored retailproperties,astableanddefensive distributions to unitholders.Crombie`sfocus ongrocery-anchored the assetbasewithaccretive acquisitions to grow the cash focuses both onimproving thesame-assetresultswhileexpanding Generate reliableandgrowing cash distributions: 3. 2. 1. The objectives of Crombiearethreefold: and voting interest inCrombieatDecember 31, 2016. diluted holdsa41.5%(fully 40.3%)economic through asubsidiary, EmpireCompanygross leaseablearea(“GLA”). Limited (“Empire”), provinces, comprising approximately 19.1millionsquarefeet of Crombie owned aportfolio of 280investment propertiesin10 retail propertiesinCanada’stop markets. At December 31,2016, primarily ontheacquisition of anddrugstore grocery anchored use propertiesinCanada,withagrowth strategy focused Crombie invests inincome-producing retail,office andmixed Toronto Stock Exchange “CRR.UN”. (“TSX”)underthesymbol Province of Ontario.The REITUnitsof Crombietrade onthe “Declaration of Trust”) under,andgoverned by, thelaws of the of Trust 1,2006,asamendedandrestated (the dated January investment trust(REIT)establishedpursuantto theDeclaration Crombie isanunincorporated, “open-ended”realestate BUSINESS OVERVIEW BUSINESS OBJECTIVES AND OUTLOOK been adjusted outof FFOfor theyear endedDecember 31,2016. Future Shoprelated to onevacated lease.These amountshave Canada for threeleasesvacated inMay 2015andfromBestBuy/ December 31,2016related to settlementproceeds fromTarget Recognized $14,172inpropertyrevenue duringtheyear ended December 31,2015. EBITDA and1.81timesEBITDA, respectively, for theyear ended coverage was 1.96timesEBITDA, compared to 2.72times December 31,2016was 2.97timesEBITDA anddebtservice Crombie’s interest coverage service for theyear ended December 31,2016,compared to 52.5%atDecember 31,2015. Debt to gross bookvalue (fair value basis)was 50.3%at of $12.51persquarefoot. committed atDecember 31,2016atanaverage first year rate of $15.05persquarefoot. 132,000squarefeet of space was square feet atDecember 31,2016atanaverage first year rate New leasesandexpansions increasedoccupancy by 290,000 — available for distributionthroughaccretive acquisitions. Expand theassetbaseof Crombieandincreaseitscash unitholder value throughactive assetmanagement; and Enhance thevalue of Crombie’sassetsandmaximize long-term Generate reliableandgrowing cash distributions; of 5.3%over theexpiring leaserate. leases atanaverage rate of $17.05 persquarefoot, anincrease Renewals on222,000squarefeet of 2017andlater expiring

Crombieanticipates ANNUALREPORT 2016 Management

MD&A MD&A 24

CROMBIE REIT through Crombie’sexpanding baseof thirdpartyvendors. the Empire/Sobeys relationshipaswell asthegrowth realized The tablehighlightsthegrowth opportunitiesprovided through (1) December December 13, November 8, 2016 November 30, 2016 August 14, 2016 June 15, 2016 June 23, 2016 June 9, 2016 May 1, 2016 May 16, 2016 April 3, 2016 April 28, 2016 April 15, 2016 March 8, 2016 February 10, 2016 2015 5, 2016 2006 2016 Transactions withthirdpartyvendors through July 2014 July 29, June 15, 2016 2015 29, 2016 2006 2016 Transactions withEmpireandsubsidiaries through dateTransaction 2014 dollars) CAD of thousands (In The following tableoutlinesthepropertytransactions completed since theinitialpublicoffering (“IPO”). terms of tenancies, proportionof revenue fromnationaland of anchortenancies, market demographics, ageof properties, acquisitions usinginvestment criteria thatfocuses onthestrength property future third partyleases.Crombiewillseekto identify that oneof Empire’ssubsidiarieshasnegotiated incertain of their well asopportunitiesthroughtherightsof(“ROFR”) firstrefusal includes currentlyowned development andfuture properties,as (“ECLD”) andSobeys. The relationshipwithECLDandSobeys acquisitions andtherelationshipwithECLDevelopments Limited sourcespursues two of primary acquisitions whicharethirdparty properties inCanada’stop urbanandsuburbanmarkets. Crombie anddrugstore-anchoredproducing, grocery-anchored retail growth strategy focuses primarilyonacquisitions of income- Expand assetbasewithaccretive acquisitions: the portfolio. and market knowledge, assessongoingopportunities within conduct regularreviews of propertiesand,basedonitsexperience good relationswithtenants. Managementwillcontinue to with thelowest possibletransaction costs, andmaintaining properties, leasingvacant space atcompetitive market rates through judiciousexpansion andimprovement of existing MANAGEMENT’S DISCUSSION AND ANALYSIS Excluding closingandtransaction costs

(Inthousandsof CAD dollars,except perunitamounts) Crombie`sexternal

through future developmentsthrough future onbothnew andexisting sites. promising opportunitiesfor growth of Crombie’sportfolio between CrombieandECLDSobeys continue to provide approval by Crombie’selected trustees. These relationships acquire retailpropertiesfromECLDand/orSobeys, subjectto The agreements provide Crombiewithapreferential rightto and unpredictablegeneral economic conditions. market cycles, cost overruns, labour disputes, construction delays exposure to theinherentrisks of development, suchasrealestate benefits associated withpropertydevelopment whilelimitingits accretive acquisition opportunitieswhichprovide many of the exceptions. Through theserelationships,Crombieexpects to have as propertiesfromtheirdevelopment pipeline,subjectto certain income producingcommercial propertiesfromSobeys aswell has aROFOagreementwithSobeys to acquire bothexisting Crombie’sgrowthopportunities thatfurther strategy. Crombie Crombie continues to work closelywithSobeys to identify including expansion andrepositioning. management of assetsbeingacquired,through moreefficient potential for capital appreciationandpotential for increasingvalue regional tenants, opportunitiesfor expansion, securityof cash flow, made available to Crombieover the next four years. $300,000 –$500,000of propertieswhichareanticipated to be and/or owned by theseentities.There iscurrently approximately provided apreferential rightto acquire retailpropertiesdeveloped Through itsrelationshipswithSobeys andECLD,Crombieis

Number of Number properties 175 (10) 50 22 (4) (1) (1) (1) (1) (1) 9 2 4 1 1 1 1 1 1 1 1 1

8,740,700 2,090,000 $ 2,409,000 $ GLA (sq. ft.) ft.) (sq. GLA (791,000) (215,000) 232,800 $ (80,000) 117,000 (48,000) (47,000) 101,000 $ (21,000) 84,000 $ 29,000 $ 62,000 $ 58,000 $ 94,000 $ 54,000 $ 37,000 $ 21,000 $ (8,000) 6,000 $ $ $ Acquisition cost $ $ $ $ $ $ $ (disposition 1,955,393 proceeds) (143,400)

348,386 693,812 (21,750) 29,000 29,000 (10,750) 26,400 46,200 32,272 14,150 15,700 (7,500) (2,300) (9,057) 63,158 33,150 5,000 7,000 5,500 (793)

(1) • • • • acquisition anddispositionactivityconsisting of: increase of 1,457,000squarefeet or8.2%growth from of GLA During theyear endedDecember 31,2016,Crombiehadanet Total SK QC PE ON NS NL NB MB BC AB Province As atDecember 31,2016,theportfolio by distributionof theGLA province was asfollows: feet inall10provinces. of GLA At December 31,2016,Crombie’sproperty portfolio consisted of 280investment propertiesthatcontain approximately 19.1millionsquare OVERVIEW OFTHEPROPERTYPORTFOLIO loss of employment, higheroffice vacancy primarilyinAlberta impacts inspecificareassuchasAlbertaandNewfoundland with are having mixed resultsonprovincial economies withnegative Within Canada, thekey factors of low oilandlow Canadiandollar trend upwards. occasional signsof rate increasesasyieldshave recently started to Interest rates inCanadaandgloballyremainatalltimelows with weaker currencyisapotential catalyst for Canada’s export sectors. dollar relative to ourlargesttrading partner,theUnited States. A economy hasbeenhelpedby thelowering of theCanadian remains well below previous levels. Byway theCanadian of offset, recovery, aidedby supplymanagementof OPECcountries, it price of oil.Whileoilhasrecently found stabilityandslightprice prospectscontinuesfuture to betheprolongeddecreasein A significant factor impactingtheCanadianeconomy andits PROPERTY PORTFOLIO BUSINESS ENVIRONMENT

of a 54,000 squarefoot development property,inNova Scotia. 84,000 squarefoot additionto aproperty,andanacquisition acquisition of onepropertytotalling 77,000squarefeet, an totalling 8,000squarefeet; 11,000 squarefeet inpartby offset dispositionof oneproperty acquisition of onepropertyinNew Brunswick totalling totalling 21,000squarefeet; 373,000 squarefeet inpartby offset dispositionof oneproperty acquisition of ninepropertiesinBritishColumbia totalling a 37,000squarefoot additionto apropertyinAlberta; acquisition of nineproperties,totalling 951,000squarefeet and

17,666,000 3,022,000 2,386,000 1, January 1,416,000 1,582,000 5,374,000 1,414,000 1,246,000 644,000 454,000 128,000 2016

(Dispositions) Acquisitions

1,457,000 988,000 (197,000) 364,000 352,000 (29,000) (24,000) 3,000 ft.) (sq. GLA

— — — use potential. prime urbanpropertiesto take advantage of highestandbest of existing properties andcomplete redevelopments to repurpose to turninward for accretive growth withafocus onintensifications With these low cap rates andinterest rates, REITs arecontinuing see slightincreasesincap rates andsporadic acquisition interest. weaker propertiesinrural markets andsecondary continuing to their historically low cap rates andstrongbuyer interest while 2015 continues, withstrongassetsinurbanmarkets maintaining seeklong-termfunds sustainablereturns.The bifurcation noted in rates remain low andlargeinvestors suchasREITs andpension Capitalization rates have continued atrecord low levels asinterest such asOntario. economies withaheavier reliance onmanufacturing andexports impacts fromthelower oilprice andinterest rates arebeingfelt on and reduced consumer spendingandcapital investment. Positive Canada 37.6%; Central Canada23.4%;andWestern Canada39.0%. 2016, ourallocation of AnnualMinimumRentconsists of: Atlantic through growth anddivestiture opportunities.AsatDecember 31, Crombie continues itsgeographic to diversify concentration • • •

totalling 183,000squarefeet. feet, inpartby offset disposition of onepropertyinQuebec acquisition of 12propertiesinQuebectotalling 547,000square 24,000 squarefeet; and, disposition of onepropertyinPrince Edward Islandtotalling 784,000 squarefeet; square feet, by offset dispositionof 12propertiestotalling acquisition of eightpropertiesinOntariototalling 587,000 of threepropertiestotalling 190,000squarefeet; development plansarefinalized. This is offset by disposition The development propertyhasbeenexcluded until fromGLA (30,000) (25,000) (31,000) 25,000 Other 1,000 — — — — — —

31, December 19,093,000 2,850,000 5,320,000 1,383,000 1,586,000 3,374,000 1,768,000 1,610,000 644,000 454,000 104,000 2016

of Number Properties 280 20 50 55 43 33 41 15 13 8 2 GLA % of 100.0% ANNUALREPORT 2016 27.9% 14.9% 17.7% 0.5% 8.4% 2.4% 8.3% 9.3% 7.2% 3.4%

% of Annual % of Minimum 100.0% 20.7% 11.6% 21.5% 15.7% 0.6% Rent 9.8% 2.4% 5.7% 4.3% 7.7%

MD&A MD&A 26

CROMBIE REIT (1) Total Office Retail and Type Asset Mixed As atDecember 31,2015,theportfolio by distributionof theGLA assettypewas asfollows: Use (1) Total Office Retail and Type Asset Mixed As atDecember 31,2016,theportfolio by distributionof theGLA assettypewas asfollows: Use as supplementaldisclosure. While Crombiedoesnotdistinguishorgroupitsoperations onageographical orotherbasis,thefollowing sector information isprovided square foot. at December 31,2016atanaverage first year rate of $12.51per $11.29 persquarefoot. 132,000squarefeet of space was committed square feet areexpansions of existing tenants atanaverage rate of average rate of $15.40persquarefoot whiletheremaining23,000 $15.05 persquarefoot. 267,000squarefeet arenew leasesatan square feet atDecember 31,2016atanaverage first year rate of New leasesandexpansions increasedoccupancy by 290,000 increase by 35,000squarefeet to 132,000squarefeet. new leasesby 2,000squarefeet, andhadcommitted space dispositions of 1,529,000squarefeet; hadleaseexpiries outpace During 2016,Crombiehadanetincreasefromacquisitions and from 93.6%atDecember 31,2015to 94.4%atDecember 31, 2016. Overall leasedspace (occupied pluscommitted) increased (3) (2) (1) Total SK QC PE ON NS NL NB MB BC AB Province The portfolio occupancy andcommitted activityfor theyear endedDecember 31,2016were asfollows: any particularregion. Crombie believes thisdiversification addsstability to theportfolio whilereducingvulnerability to economic fluctuationsthat affectmay MANAGEMENT’S DISCUSSION AND ANALYSIS SECTOR INFORMATION PORTFOLIO OCCUPANCY AND LEASE ACTIVITY For purposesof calculating leased percentage, Crombie considers covered GLA by headleaseagreementsasoccupied. For purposesof calculating leasedpercentage, Crombieconsiders covered GLA by headleaseagreementsasoccupied. square feet atDecember 31,2015. provides morebalanced reportingof potential pendingoverall vacant space. Committed space increasedto 132,000squarefeet atDecember 31,2016,from97,000 Committed space representsleasecontracts for occupancy future of currentlyvacant space. Managementbelieves suchreporting, alongwithreported leasematurities, Other changesinclude:amendmentsto existing leases;leaseterminations andsurrenders;bankruptcies; andspace certifications. New leasesinclude:new leasesandexpansions to existing properties.

16,429,000 2,782,000 2,376,000 1,416,000 1,371,000 4,816,000 1,226,000 1,222,000 1, January 448,000 644,000 128,000 2016 (Dispositions)

Acquisitions 1,529,000 (113,000) 984,000 345,000 363,000 (29,000) (24,000) 3,000

— — —

ft.) (sq. Space Occupied 290,000 (Inthousandsof CAD dollars,except perunitamounts) 159,000 70,000 14,000 17,000 11,000 Leases 6,000 6,000 2,000 5,000 New

— (1)

Number of of Number of Number Properties Properties (292,000) (159,000)

(50,000) (28,000) (25,000) Expiries (17,000) (5,000) (7,000) (1,000) Lease 280 260 255 275 — — 5 5

previously discussed. have notbeenincludedinthecalculation of therenewal activity been amendedwithnew 20-year terms. These amendments renovation andexpansion of 10existing Sobeys, leaseshave lease rate. Inaddition,aspartof therecent investment inthe $17.05 persquarefoot, anincreaseof 5.3%over theexpiring anchor andnon-anchorexpiring leasesatanaverage rate of Crombie alsorenewed 222,000squarefeet of 2017andlater foot year onfull 2016leasematuritiesof $13.05persquarefoot. activity compares favourably withtheaverage rentpersquare an increaseof 9.9%over theexpiring leaserate. The renewal lease maturitiesatanaverage rate of $16.96per square foot, 499,000 squarefeet of 2016anchorandnon-anchortenant During theyear endedDecember 31,2016,Crombierenewed Changes (61,000) (17,000) (31,000) 19,093,000 18,093,000 (2,000) (4,000) (4,000) (4,000) 17,666,000 16,677,000 1,000,000 Other 1,000 989,000 — — — ft.) (sq. ft.) (sq. (2) GLA GLA

31, December 17,895,000 1,266,000 4,770,000 1,764,000 1,337,000 3,362,000 2,654,000 1,595,000 404,000 644,000 99,000 2016 100.0% 100.0% 94.8% 94.4% Space (sq. ft.) (sq. Space 5.6% 5.2% % of % of Committed GLA GLA 132,000 26,000 93,000 2,000 5,000 5,000 1,000 Rent Minimum Rent Minimum — — — — Annual % of Annual % of (3)

ft.) (sq. Space 100.0% 100.0% 18,027,000 2,680,000 4,863,000 96.0% 1,339,000 1,266,000 3,367,000 1,765,000 1,595,000 95.7% 4.0% 404,000 644,000 4.3% 104,000 Leased Total

December 31, 31, December 100.0% 100.0% Leased Leased Leased 89.0% 89.0%

94.0% 89.8%

99.8% 96.8% 99.8% 79.8% 94.4% 94.4% 93.8% 94.7% 93.6%

99.1% 91.4%

2016

(1) (1)

(September 30,2016–six). properties located inCentral CanadaandAtlantic Canada Alberta (four) (September 30,2016–four) andsixadditional andEdmonton, (September 30,2016–nine)andCalgary located primarilyinVancouver, BritishColumbia (nine) are 13(September 30,2016–13)propertiesinWestern Canada, of 19(September 30,2016–19)potential MajorDevelopments rental orcondominium units).IncludedinCrombie’spipeline (whichmayand 5,800units)of residentialGLA includeeither (up to 6,500units)(September 30,2016–5,100,000squarefeet square feet of commercial andupto GLA 5,700,000squarefeet potential to addupto 692,000(September 30,2016–839,000) Crombie’s currentpotential MajorDevelopments have the Potential MajorDevelopments (“Major Developments”). may includeacombination of commercial and/orresidentialuses projected to begreater than$50millionandwhereDevelopment certain properties,defined asproperties whereincurred costs are focused onevaluating andundertakingMajorDevelopments at Crombiemanagementis important realityacrossthecountry, Canada’s majorcities.With urbanintensification becoming an in November 2013,Crombieaddedanumberof locations in With theacquisition of 70Safeway propertiesfromSobeys improve netassetvalue, cash flow growth andUnitholder value. Property Development isastrategic priorityfor Crombieto Total Thereafter 2021 2020 2019 2018 2017 Year at December 31,2015. Leased space inoffice properties of 89.0%decreasedfrom89.8% December 31,2016,increasedfrom93.8%atDecember 31,2015. Leased space inretailandmixed usepropertiesof 94.7%at primarily onretailproperties. December 31,2015,reflecting Crombie’sstrategy to focus growth compared to and95.7%of annualminimumrentat 94.4%of GLA and96.0%of annualminimumrentatDecemberGLA 31,2016 Retail andmixed usepropertiesrepresent94.8%of Crombie’s REDEVELOPMENT (“DEVELOPMENT”) PROPERTY DEVELOPMENT/

these propertiescould reach$2to $3billion(September 30, Based onCrombie’scurrentestimates, total costs to develop the estimated average rentpersquarefoot atthetimeof expiry. the total of thepropertiesrepresented GLA by suchmaturitiesand options ortermination rights),therenewal area,thepercentage of do notholdover onamonth-to-month basisorexercise renewal of leasesmaturingduringtheperiodsindicated (assuming tenants The following tablesetsoutasof December 31,2016,thenumber accretion projections. reviewsome propertiesafter further andcompletion of financial Crombie may chooseto notproceed withdevelopment on horizon for certain of theseprojectscould belongerand years and/orcomplete over the next four to five years. The time projects could beunderconstruction over thenext oneto two determinable currently,Crombieexpects thatanumberof these to proceeding. Whiletheprecisetimingof each projectisnot Board,municipal/provincialnecessary andtenant approvals prior commercial andresidentialcomponents, aswell asseekingall completing duediligence full ontheopportunity,including Development of eachpropertyissubjectto management 19 locations ashaving potential to become MajorDevelopments. As atDecember 31,2016,Crombiehasidentifiedthe following accretion andBoardof Trustees approval. approvals, achieving requiredeconomic hurdlesincludingfinancial project. Eachprojectremainssubjectto normaldevelopment and development expertise dependinguponthenatureof each or otherpartnershiparrangements to sharecost, revenue, risks 2016 –$2to $3billion),of whichCrombiemay enter jointventure LEASE MATURITIES Leases of Number Number 1,574

702 223 146 178 154 171 Area Renewal 14,138,000 18,027,000 889,000 730,000 756,000 923,000 591,000 ft.) (sq. Total GLA 74.0% 94.4% $ 4.0% 4.7% 4.8% $ 3.1% 3.8% % of ANNUALREPORT 2016 Average

per sq. ft. sq. per at Expiry at 16.84 17.92 19.06 19.31 17.43 18.15 18.11 Rent

MD&A MD&A 28

CROMBIE REIT component andjointlyown therentalresidentialcomponent. Crombie would ultimately retain 100%of thenew commercial 2015 withapproval expected shortly. Under thecurrentproject, a development permitapplication was submitted inDecember units) comprised of two residentialtowers. Zoningisinplace and residential totalling upto 252,000squarefeet (upto 320rental retail,andrental with almost9,000squarefeet of ancillary a new, largerapproximately 44,000square foot store grocery development. The proposeddevelopment currentlyenvisions replacement of theexisting retailassetwithanew mixed use based development partner(Westbank Corp.) for theplanned has entered into apartnershipagreement withaVancouver storegrocery andanumberof additionaltenants. Crombie The site iscurrentlyanchoredby a32,000squarefoot Safeway residential areaof downtown Vancouver, British Columbia. Davie Streetisasingle-storey retailplaza located inahighdensity 1641 Davie Street,Vancouver, BritishColumbia Properties intheDevelopment PlanningPhase progressed beyond thepre-planningphase. The following sectionprovides moredetailfor projectsthathave construction isimminentorunderway. projects whereinternal approvals have beenobtainedand Projects describedashaving an“indevelopment’ statusinclude process of committing costs to undertake aMajorDevelopment. several areasof thepre-planningphaseandCrombieisin include projectswheresignificant progresshasbeenmadein Projects describedashaving a“development planning”status viability of theopportunity. of financingoptionsandotheractivities required to determine commercial and/orresidentialdevelopment partners,evaluation for zoning, developing imagerenderings,seekingpotential planning, whichcould includeseekingmunicipalapprovals projects thatCrombiehasundertaken potential development Projects describedashaving a“pre-planning”statusinclude 19. 18. 17. 16. 15. 14. 13. 12 11. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. Property Existing MANAGEMENT’S DISCUSSION AND ANALYSIS

Avalon Mall Scotia Square Penhorn Lands Triangle Lands Bronte Village Brampton Mall 10930 82Avenue 410 10StreetNW 524 Elbow Drive SW 813 11Avenue SW 10355 KingGeorgeBoulevard East Hastings Royal Oak 1780 EastBroadway 1170 East27Street (King Edward) 990 West 25Avenue 3410 Kingsway 2733 West Broadway 1641 Davie Street

North Vancouver, BC

Dartmouth, NS Edmonton, AB Brampton, ON Vancouver, BC Vancouver, BC Vancouver, BC Vancouver, BC Vancouver, BC Vancouver, BC St. John’s,NL Province City, Burnaby, BC Oakville, ON AB Calgary, AB Calgary, AB Calgary, Halifax, NS Halifax, NS Surrey, BC (Inthousandsof CAD dollars,except perunitamounts)

14.47 acres 31.00 acres 50.91 acres 0.68 acres 5.07 acres 2.82 acres 5.66 acres 2.59 acres 8.74 acres 2.76 acres 3.30 acres 2.44 acres 2.43 acres 1.80 acres 1.60 acres 1.09 acres 3.74 acres 1.95 acres 1.73 acres Site Size Site

Safeway/Other tenants Safeway/Other tenants Safeway/Other tenants Safeway/Other tenants Sobeys/Other tenants measures pernormal. these propertiesareincludedin FFO,AFFO,occupancy, andother same-asset propertyoperating results.Operating resultsfrom comparative reportingyears, atwhichtimethey are includedin results fromthepropertyareavailable for thecurrentand results untiltheredevelopment iscomplete andtheoperating property cash NOIandexcluded fromsame-assetoperating currently underredevelopment areincludedindevelopment when theenvironment inwhich itoperates warrants. Properties on propertiesto enhance theeconomic viabilityof alocation On aregularbasis,Crombiewillcomplete redevelopment work both productive capacity enhancement andrecoverable amounts. phases. The costs disclosedexclude directtenant costs andinclude development opportunitiesatthislocation for development future pre-planning stageof anumberof otherresidentialand/oroffice expected to beapproximately $10million.Crombieisalsointhe overall imageof thefacility. The construction cost for PhaseIIis TheGLA. new three-storey glazed facade willmodernize the floor food court expansion andseating,new streetlevel retail expansion iscomprised of new thirdfloor office space, second includes anew andmodernmainentrance into thecomplex. The approximately 25,000squarefeet (grossbuildingarea)which Phase IIisathree-level expansion onBarrington Streetof early 2014ataconstruction cost of approximately $3million. and renovation of thefood court. This projectwas completed in of thisMajorDevelopment involved acomplete re-merchandising two hotels andnearly1,300,000squarefeet of office space. PhaseI comprised of 290,000squarefeet andisdirectlyconnected to Duke Streets.The retailandmixed useportionof thepropertyis downtown Halifax businessdistrictatthecorner of Barrington and Scotia SquareComplex issituated attheentrance to the Scotia Square,Barrington Street,Halifax, Nova Scotia Properties inDevelopment Phase OTHER PROPERTY REDEVELOPMENT Office/Retail Safeway Safeway Safeway Safeway Safeway Safeway Safeway Safeway Safeway Existing Tenants Retail Retail Land Land Commercial

Expansion Potential Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Potential Residential Expansion Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No

To bedetermined “TBD” Development Planning In Development Pre-planning Pre-planning Pre-planning Pre-planning Pre-planning Status

TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD

(1) Total Bank Bank of GoodLife of Montreal Dollarama Fitness Nova Lawtons/Sobeys Scotia CIBC Pharmacy Province Cineplex of Shoppers Nova Sobeys Drug Scotia Tenant Mart percentage contribution to total annualminimumrentasatDecember 31,2016. The following tableillustrates theten largesttenants inCrombie’sportfolio of income-producing propertiesasmeasuredby their pre-planning stage. in theprevious sectionthisMajorDevelopment isinthe Development atadjacent propertyAvalon Mall.Asindicated designated for redevelopment to facilitate plannedMajor Kenmount BusinessCentre /Woodgate Plaza –hasbeen completed by Q32017. space. Development isunderconstruction andexpected to be consisting of partialdemolitionand redemisingof remaining Sydney ShoppingCentre –currentlyunderredevelopment been obtained.Construction andleasingareunderway. phased demolitionanddevelopment. Zoningapprovals have Downsview Mall–currentlyunderredevelopment consisting of underway andissubjectto managementreview andapproval. redevelopment. Initialplanninganddesignwork iscurrently County FairMall–New Minashasbeendesignated for included insame-assetresultsfor 2017. vacant anchorspace have beenexecuted. This propertywillbe Aberdeen BusinessCentre –finalleaseagreements to replace (1) NB NB NB NL NS NS NS NS Province NB NS ON Province LARGEST TENANTS LARGEST Excludes Lawtons/Sobeys Pharmacy. Excludes directtenant costs

(1)

Kenmount BusinessCentre / County FairMall–New Minas Aberdeen BusinessCentre Sydney ShoppingCentre Loch LomondPlace 1234 MainStreet/ 1222 MainStreet Woodgate Plaza Downsview Mall Riverview Place Property Algonquin Ave Mall Amherst Centre Uptown Centre GLA

268,000 Property 389,000 140,000 150,000 186,000 192,000 70,000 68,000 Property

Phased demolitionanddevelopment Partial demolitionanddevelopment

GLA Property

320,000 228,000 211,000 Leasing of AnchorSpace

Avalon MallMaster Plan

To bedetermined To bedetermined To bedetermined To bedetermined

Initial planninganddesignwork iscurrentlyunderway andis Loch LomondPlace –hasbeendesignated for redevelopment. review andapproval. design work iscurrentlyunderway andissubjectto management completed inphasesconjunction withleasing.Planningand vacant anchorspace inreadinessfor leasing.Construction willbe and Uptown Centre consists of redemisinganddeveloping The redevelopment of AlgonquinAvenue Mall,AmherstCentre is further discussedintheMaintenanceis further Expendituressection. expansion of 10propertiesanchoredby Sobeys. This spending This includes$58,823of investment intherenovation and $90,166 of investment for theyear endedDecember 31,2016. capacity enhancements onotherpropertieswhichtotals under redevelopment, Crombiealsoperforms productive In additionto MajorDevelopments andwork doneonproperties Productive CapacityEnhancement involving 1222MainStreetisunderway. 1234 MainStreethasbeencompleted. Initialplanningof PhaseII 1234 MainStreet/1222–PhaseIredevelopment of to managementreview andapproval. planning anddesignwork iscurrentlyunderway andissubject Riverview Place –hasbeendesignated for redevelopment. Initial subject to managementreview andapproval. Development

$ $ $ Construction In planning In planning In planning In planning In planning Estimated 6,909 2,572 3,274 Cost (1)

$ $ $ $ $ $ $ $ Rent Minimum % Incurred of of To Date 3,005 2,349 Annual 66.6% 52.9% 379 0.9% 0.9% 1.2% 5.1% 1.1% 1.4% 1.1% 1.0% 1.0% ANNUALREPORT 2016 — — — — —

To bedetermined To bedetermined To bedetermined To bedetermined To bedetermined Completion Lease Term Lease Remaining Estimated 10.3 years 10.3 years 14.2 years 15.4 years

11.2 years 11.3 years 8.6 years 6.4 years 1.9 1.9 years 4.3 years

Q3 2017 Q3 2017 Average Q1 2017

MD&A MD&A 30

CROMBIE REIT Distributions $ per Unit Diluted weighted average to Unitholders Basic weighted average Units Operating income attributable Operating income attributable Increase (decrease)innetassets Finance income (costs) –changeinfair value Finance costs –distributionsto Unitholders Operating income Taxes attributable – Taxes to deferred – Operating Unitholders current income before taxes $ Other items: NOI margin Property percentage NOI Property operating Property expenses revenue (1) Debt to grossbookvalue –fair value basis Total investment propertydebtandunsecured T otal noted) otherwise as and assets amounts unit per except dollars, CAD of thousands (In FINANCIAL RESULTS 44.8% of total propertyrevenue. Total propertyrevenue includes For theyear endedDecember 31,2016,Sobeys alsorepresents 1.4% of Crombie’sannualminimumrent. of annualminimumrent,noothertenant accounts for morethan minimum rentandShoppersDrugMartwhichaccounts for 5.1% rent and,otherthanSobeys whichaccounts for 52.9%of annual table isbasedonthetenant’s percentage of annualminimum Crombie’s portfolio isleasedto awidevariety of tenants. The above MANAGEMENT’S DISCUSSION AND ANALYSIS COMPARISON TO PREVIOUS YEAR See “Debtto GrossBookValue –FairValue Basis”for detailedcalculation. Units outstanding (in outstanding 000’s) (in $ 000’s) to $ Unitholders per to Unit, Unitholders Diluted per attributable to Unit, Unitholders Basic of financial instruments Finance costs General – and operations Depreciation administrative and expenses Impairment amortization of Gain investment on properties disposal of investment properties

$ (1)

(Inthousandsof CAD dollars,except perunitamounts)

$ 148,179 105,269 $ 148,039 (19,435) (25,656) (32,987) 31, December ended months Three 30,278 (6,000) 29,395 75,874 31,478 (4,266) 72.1% (1,555) 1,200 9,761 2016 0.22 $ 0.21 $ 0.21 $ (46) —

$ 15.4 years. influenced by the average Sobeys remaininglease term of approximately 12.5years. This lengthy remainingleaseterm is The weighted average remainingterm of allCrombieleasesis may directlyincurandpay operating andrealtytaxcosts. can by vary propertytype,specific tenant leasesandwhere tenants recovery income andpercentage rent.These additionalamounts annual minimumrentaswell asoperating andrealtytaxcost (24,600) (29,236) (16,789) 28,858 63,989 (12,223) 92,847 $ 131,334 131,182 68.9% (7,300) 13,945 2,200 11,784 3,068 (3,541) $ 0.22 2015 Variance $ $ 0.11 0.11 (39) 25 $

10,668 $ 18,494 (1,000) 12,422 $ (2,646) 17,533 11,885 (1,056) (3,751) December 31, 31, December 9,736 1,300

(3,114) 3.2% (725) (537) 39 2,396,199 3,963,318 $ 50.3% $ 2016 400,001 (100,156) 284,695 (125,737) 140,063 115,306 139,920 126,356 2015 125,130 (73,332)

(6,000) 37,490 (16,341) (1,200) 71.2% 2016 0.89 $ 0.89 $ 0.89 $ (295) (26) 312 $ Year ended December 31, December Year ended

December 31, December

As At As 2,170,801 3,472,193 $ $ 52.5% 256,605 369,866 $ (116,576) 130,788 130,946 (66,576) (50,791) (12,575) 64,465 65,729 (14,401) (98,611) 113,261 69.4% (2,936) 4,200 0.50 0.50 0.89 2015

56 23 Variance $

December 31, December $ 3,413,414 2,073,354

28,090 50,496 37,467 (5,400) 59,401 61,891 (2,045) 52.8% 30,135 (6,756) (1,940) (1,545) 2,910 6,575 (9,161) 1.8% 2014 256

holder andmeetthedefinition of financialliabilities under IFRS. the REITUnitsandClassBLPareputtableby the respective financial liabilitiesonthe Consolidated Balance Sheet.Each of Instruments: Presentation,Crombie’sUnitsareto beclassifiedas Crombie hasdetermined thatinaccordance withIAS 32Financial attached SpecialVoting Units(collectively the“Units”) Classification of CrombieREITUnitsandClassBLPwith Increase (decrease)innetassetsattributableto Unitholders Finance income (costs) –changeinfair value of financialinstruments Finance costs –distributionsto Unitholders Operating $ income dollars) CAD of thousands (In attributable to Unitholders • • • primarily dueto: to thethree monthsendedDecember 31,2015.The increasewas before taxes of $30,278increasedby $18,494or156.9%compared For thethreemonthsendedDecember 31,2016,Operating income Operating Results

the recognition inthefourth quarter of 2015of $7,300of the dispositionof five retailpropertiesduringthe fourth quarter, an increaseinpropertyrevenue of $12,422or13.4%whichis impairment related to oneoffice property. resulting inagainondisposalof $9,761. — inpartby:offset — — — — impacted by: properties inthefourth quarter of 2016. two retailpropertiesinthethirdquarter of 2016,andfive properties inthesecond quarter of 2016,anadditional of 10retailpropertiesinthefirstquarter of 2016,two retail reduced propertyrevenue resulting fromthedisposition Canada leases. settlement amountsof $828related to two vacated Target Best Buy/FutureShopfor oneretaillocation andadditional fourth quarter of 2015,primarilyrelated to $3,000from an increaseinleasetermination income of $4,133over the generated $549intotal propertyrevenue; and, expansion of 10existing Sobeys anchoredpropertieswhich invested $58,823onJune29,2016intherenovation and $34,000 inthefourth quarter of 2016; quarter of 2016;$26,400inthethirdquarter of 2016;and $5,500 inthefirstquarter of 2016;$492,708inthesecond include approximately $60,825inthefourth quarter of 2015; acquisition activitysince thethirdquarter of 2015.Acquisitions rates onlease renewals andnew leases; improved leasingactivityincludingincreasedaverage rental

• • impacted by: variance explanations for thethreemonthperiod,year was the year endedDecember 31,2015.Inadditionto theabove taxes of $126,356increasedby $61,891or96.0%compared to For theyear endedDecember 31,2016,Operating income before • • These improvements were by: partlyoffset against income. would berecognized asareductionto equityrather thanacharge been classifiedasequityinstruments,therelated distributions of Comprehensive Income (Loss).Hadeither,orboth,of theUnits recognized asafinance chargeonthe Consolidated Statements the Consolidated Balance Sheet,distributionsontheUnitsare As aresultof theUnitsbeingclassifiedasfinancialliabilitieson is asfollows: Statement of Comprehensive Income (Loss).The reconciliation (decrease) innetassetsattributableto Unitholdersfromthe case of Operating income attributableto Unitholders,isIncrease to themostdirectlycomparable GAAPmeasure,which,in the Financial Measures”,non-GAAPmeasuresshouldbereconciled Pursuant to CSA Notice Staff 52-306“(Revised) Non-GAAP • 31, December ended months Three

$ December 31,2016,resultinginagainondisposalof the dispositionof 19retailproperties intheyear ended $3,995 primarilyrelated to two vacated long-term leases; location. During2015,Crombiereceived termination income of well as$3,000fromBestBuy/FutureShoprelated to oneretail settlement payments onthreeleasesvacated inMay 2015as receipt fromTargetCanadaof $11,172inleasetermination for thesameperiodin2015.During2016,Crombierecorded higher leasetermination income of $14,584compared to $4,175 and renewal mortgages. property dispositionsduring2016andlower rate debtonnew inpartby2015, offset finance costs savings fromproceeds on primarily dueto acquisition activitysince thethirdquarter of an increaseinfinance costs –operations of $1,056or4.3% related to thenetacquisition activityasnoted above; and, an increaseindepreciationandamortization of $2,646or15.8% office property. impairment was recorded onthreeretailpropertiesandone Crombie recorded impairmentontwo retailproperties;in2015, a decreaseinimpairmentcosts of $6,575. During2016, $37,490; and, (32,987) 31,478 (1,555) 2016

(46) 2015 $ $ (29,236) (12,223) 13,945 3,068

$ $ Year ended December 31, December Year ended (125,737) 125,130 2016 (295) ANNUALREPORT 2016 312 2015 $ $

(116,576) (50,791) 65,729

56 31

MD&A MD&A 32

CROMBIE REIT • 2015 include: ended December 31,2016compared to thesameperiodin Variances insame-assetpropertycash NOIfor thethreemonths Same-asset property Office Retail and dollars) CAD of thousands (In Mixed $ Use Same-asset propertycash NOIisasfollows: of 19retailpropertiesduring2016. fourth quarter inpartby of 2015andin2016,offset thedisposition over thesameperiodin2015primarilydueto acquisitions inthe increased $6,459for thethreemonthsendedDecember 31,2016 Acquisitions, dispositionsanddevelopment propertycash NOI $1,029 insame-assetpropertycash NOI. investment in10Sobeys anchoredpropertieswhichgenerated land useintensifications atseveral properties;and,the$58,823 increases inexisting leases;improved recovery rates; revenues from average rentpersquarefoot fromleasingactivity;rentalrate primarily theresultof: higherleasetermination income; increased months endedDecember 31,2016over thesameperiodin2015is The $5,203or9.2%increaseinsame-assetcash NOIfor thethree rent recognition andamortization of tenant incentive amounts. Property NOI,onacash basis,excludes non-cash straight-line Same-asset property Acquisitions, dispositionsand cash Property NOI cash Non-cash tenant incentive NOI Non-cash Property straight-line rent NOI dollars) CAD of thousands (In Property NOIonacash basisisasfollows: comparative period. excluding any propertythatisclassifiedasheld for saleorthat was designated for redevelopment duringeitherthecurrentor Same-asset propertiesareowned andoperated by Crombiethroughoutthecurrentandcomparative reportingperiods, MANAGEMENT’S DISCUSSION AND ANALYSIS PROPERTY NOI

2016 and$3,000inleasetermination income. $58,823 investment inSobeys anchoredproperties onJune29, $1,029 additionalsame-assetpropertycash NOIfromthe lease activityaswell ascontinued landuseintensification, base rentandrelated recoveries driven by new andrenewal Retail andMixed Useincreased$5,216or9.7% dueto increased cash NOI development property cash amortization NOI

59,064 $ 61,785 $ 2,721 2016

$ $

31, December ended months Three 75,874 $ 75,362 61,785 $ (3,840) 13,577 (Inthousandsof CAD dollars,except perunitamounts) 3,328 31, December ended months Three 2016 56,582 $ 53,848 $ 2,734 2015 Variance

63,700 63,989 $ 56,582 $ 5,203 (2,801) 5,216 2,512 7,118 2015 Variance (13) and year endedDecember 31,2016is $3,000 inleasetermination Included insame-assetpropertycash NOIfor thethreemonths month period. was impacted by thesamefactors noted above for thethree year endedDecember 31,2016over thesameperiodin2015 The $9,393 or4.2%increaseinsame-assetcash NOIfor the transitional vacancy. second quarter of 2015andtherelated lostNOIfromtheresulting same factors, by offset leasetermination income received inthe 2016 compared to thesameperiodin2015was impacted by these Same-asset propertycash NOIfor theyear endedDecember 31, • reflects the cash generated by thepropertiesperiod-over-period. Management emphasizes propertyNOIonacash basisasit same periodin2015. and year endedDecember 31,2016,respectively, compared to the increased $2,203or3.9%and$6,3932.8%for thethreemonths Excluding this$3,000amount,same-assetpropertycash NOI income fromBestBuy/FutureShoprelated to avacated lease.

in occupancy. Office decreased$13or0.5%asaresult of changes Percent (0.5)% 9.2% $ 9.7% $ 11,885 11,662 (1,039) 5,203 $ 6,459 816 $

223,633 $ 234,710 $ 11,077 2016

284,695 $ 234,710 $ 283,441 (12,876) 48,731 11,622 2016 Year ended December 31, December Year ended Year ended December 31, December Year ended 214,579 $

225,317 $ 10,738 2015 Variance 256,605 $ 255,175 225,317 $ 29,858 (11,142) 9,712 2015 9,054 9,393 Variance 339

Percent

28,090 28,266 18,873

(1,734) 9,393 4.2% 4.2% 3.2% 1,910 • • • 2015 primarilyrelate to: year endedDecember 31,2016compared to the sameperiodsin The significant variances inpropertyNOI for thethreemonthsand Total SK QC PE ON NS NL NB MB BC AB (In thousandsof CAD dollars) completion of eachdevelopment project.The natureandextent over-period isimpacted by the timingof commencement and Change incash NOIfromdevelopment propertiesperiod- same acquisition anddispositionactivity. compared to theyear endedDecember 31,2015asaresultof the acquisitions anddispositionspropertycash NOIincreased$8,203 during thefirstquarter. Forthe year endedDecember 31,2016, by thedispositionof 19retailpropertiesduring2016,including10 result of propertyacquisitions inpart during2015and2016,offset three monthsendedDecember 31,2015.The increasewas the dispositions propertycash NOIincreased$5,252compared to the For thethreemonthsendedDecember 31,2016,acquisitions and Total acquisitions, dispositionsand Development property Acquisitions anddispositions cash dollars) CAD of thousands (In NOI Acquisitions, dispositionsanddevelopment propertycash NOIisasfollows:

retail propertyinthesecond quarter of 2016; inpartbyproperties during2015,offset thedisposition of one quarters of 2016 andadditionaldevelopment onthreeexisting properties includingoneeachduring thefirstand fourth well astheacquisition of additionaldevelopment onexisting for onepropertyinthesecond andfourth quarters of 2016as New Brunswick –leasetermination income fromTargetCanada third quarter of 2016; inpartby2015, offset thedispositionof oneretailpropertyinthe the thirdquarter, andonepropertyduringthefourth quarter of properties during2016,eightinthesecond quarter andonein British Columbia –propertyacquisitions includingnine development onanexisting propertyduring2015; and oneinthethirdquarter; and,acquisition of additional quarter; threepropertiesduring2015,two inthefourth quarter during 2016,oneinthefirstquarter andnineinthesecond Alberta –propertyacquisitions including10propertiesacquired development property cash property NOI cash NOI

$ $ $ $ Property NOI 75,874 $ 15,880 $ 14,631 14,314 9,009 13,577 $ 9,907 $ 3,670 7,303 5,544 31, December ended months Three 31, December ended months Three 3,637 3,377 1,697 2016 2016 482 2015

Property NOI 63,989 $ 13,244 $ 13,397 7,070 11,154 6,449 2,822 4,370 4,655 $ 2,463 1,826 7,118 3,310 2015 Variance 347

2016 by province was asfollows: Property NOIfor thethreemonthsandyear endedDecember 31, improvement invalue. for long-term sustainabilityandgrowth incash NOIresultingin Crombie undertakes development of propertiesto positionthem in May 2015. termination income fromTargetCanadaonthreeleasesvacated and fourth quarters of 2016,Crombierecorded receipt of lease operating resultsmay Duringthesecond notbemeaningful. Consequently, comparison of period-over-period development minimally insomeinstances andasignificant disruptioninothers. of development projectsresultsinoperations beingimpacted • • • •

quarter of 2016. inpartby2016, offset thedisposition of onepropertyinthefirst Quebec –acquisition of 12propertiesinthefirstsixmonths of property inthefourth quarter of 2016;and, fourth quarter inpartby of 2015,offset the dispositionof aretail Prince Edward Island –acquisition of aretailpropertyinthe in thethirdquarter, andoneinthefourth quarter; in 2016,ninethefirstquarter, oneinthesecond quarter, one quarter inpartby of 2016,offset thedispositionof 12properties termination income fromBestBuy/FutureShopinthefourth Canada for onepropertyinthesecond quarter of 2016andlease quarter of 2016aswell asleasetermination income fromTarget the firstsixmonths of 2016andtwo propertiesinthe fourth Ontario –propertyacquisitions includingsixpropertiesduring quarter of 2016; in partby thedispositionof threeretailpropertiesinthefourth one propertyinthesecond andfourth quarters of 2016,offset of 2015;and,leasetermination income fromTargetCanadafor development onexisting retailpropertiesinthefourth quarter property inthesecond quarter of 2016;acquisition of additional Nova Scotia –propertyacquisitions includingoneretail Variance 11,885 $ 2,560 6,459 $ 2,636 $ 5,252 $ 1,207 3,160 1,234 1,174

(129) 233 815 135 67 Property NOI 284,695 $ 59,076 $ 58,045 28,639 51,923 30,973 14,467 13,493 19,261 27,214 $ 48,731 $ 21,517 6,983 1,835 2016 2016 Year ended December 31, December Year ended Year ended December 31, December Year ended

2015

Property NOI 256,605 $ 25,609 29,858 $ 47,589 51,005 $ 52,941 10,847 27,933 19,011 12,988 17,946 12,295 7,298 1,001 2015 ANNUALREPORT 2016 Variance

Variance 28,090 18,873 10,670 8,203 5,364 8,071 4,334 5,104 2,172 1,315 706 505 (315) 834

MD&A MD&A 34

CROMBIE REIT Lease termination, cash, FFO, as adjusted Adjustments: FFO ascalculated basedon Finance costs (income) – Finance costs –distributions Taxes – Taxes –currentondisposition deferred Amortization Amortization of Depreciation of deferred Impairment of intangible leasing of investment assets costs Loss (gain)ondisposal investment properties Amortization properties Add of (deduct): tenant Increase (decrease)innetassets incentives dollars) CAD of thousands (In applicable amounts: (computed inaccordance withIFRS),adjusted for thefollowing FFO asincrease(decrease)innetassetsattributableto Unitholders Association of Canada(“REALpac”)incalculating FFOanddefines Crombie follows therecommendations of theRealProperty accordingly, may notbecomparable to othersuchissuers. differ fromsimilarcomputations asreported by otherREITs and, to Unitholders. FFOandAFFOascomputed by Crombiemay relevant to theabilityof Crombieto earnanddistribute returns MD&A because managementbelieves thisnon-GAAPmeasureis organization’s operating performance. AFFOispresented inthis financialmeasure of arealestate non-GAAP industry-wide measure prescribedunderIFRS.FFOrepresentsasupplemental an alternative to cash provided by operating activitiesorany other these non-GAAPfinancialmeasuresshouldnotbe considered as not have standardized meaningsprescribedby IFRS.Assuch, FFO andAFFOarenotmeasuresrecognized underIFRSanddo MANAGEMENT’S DISCUSSION AND ANALYSIS FUNDS FROM OPERATIONS (FFO) FFO AND AFFO included in FFO, as Lease termination adjusted Subscription Receipts Net leasetermination income REALpac recommendations financialchange infair value of instruments to Unitholders of investment properties of investment properties attributable to Unitholders income, non-cash Adjustment Payment Best from TargetCanadaand Buy/Future Shop

$ $ $ 49,280 32,987 45,452 $ 17,483 (9,761) 6,000 (3,828) (1,200) (Inthousandsof CAD dollars,except perunitamounts) 1,791 (1,555) $ 3,328 31, December ended months Three 2016 313 $ 161 46 — — —

29,236 (12,223) $ (2,200) (3,068) 15,456 7,300 38,311 38,311 $ 1,180 2,512 2015 Variance 153 (25) (10) — — — 8 $

year endedDecember 31,2016and2015isasfollows: by otherissuers.The calculation of FFOfor thethreemonthsand and accordingly may notbedirectlycomparable to FFOreported method of calculating FFOmay differ fromotherissuers’methods also addsbacktheamortization of tenant incentives. Crombie’s in thecalculation of FFOasrecommended by REALpac,Crombie depreciation andamortization of othercapital costs isaddedback other capital costs incurredto earnpropertyrevenue. Whereasthe capital innature.Crombieconsiders thesecosts comparable to in theabove list.Crombie’sexpenditures ontenant incentives are are currentlynotapplicable to Crombie,therefore notincluded REALpac provides for otheradjustmentsindetermining FFOwhich • • • • • • Change infair value of financialinstruments. Units classifiedasfinancialliabilities;and, Finance costs –distributionsonCrombie’sREITandClassBLP Deferred taxes; of tenant incentives chargedagainstpropertyrevenue; Depreciation andamortization expense, includingamortization Impairment chargesandrecoveries; income tax; Gain orlossondisposalof investment propertiesandrelated 10,668 10,969 (3,828) (9,736) (1,300) 1,000 2,027 3,751 7,141 $ 3,114 305 $ 816 611 10 — — 8

$ 179,794 125,737 166,235 $ (37,490) 66,552 (14,172) 6,000 11,622 1,200 6,170 2016 (295) $ (312) 610 412 $ 613 — — Year ended December 31, December Year ended

149,474 $ 152,435 60,498 (50,791) $ 116,576 (4,200) 12,575 2,066 (2,961) 5,480 9,712 1,214 $ 2015 598 (56) (23) — — Variance

(37,467) 50,496 27,359 (2,066) (14,172) 16,761 (6,575) 5,400 6,054 2,961 1,910 (802) 9,161 (256) 690 613 12

rent increasesin2016compared to 2015. in FFOaspreviously discussed lesstheimpactof straight-line December 31,2015.The increaserelates to the$7,141increase by $6,142or19.0%compared to thethreemonthsended For thethreemonthsendedDecember 31,2016,AFFOincreased AFFO Maintenance expenditures Straight-line rent Amortization of effective adjustment Add FFO, (deduct): as dollars) CAD of thousands (In adjusted The calculation of AFFOfor thethreemonthsand year endedDecember 31,2016and2015isasfollows: activity intheprevious 12months,includingtheacquisition of December 31,2015.The increaseprimarilyrelates to acquisition increased by $7,141or18.6%compared to thethree monthsended For thethreemonthsendedDecember 31,2016, FFO,asadjusted, based ontheseadjusted amounts. All FFO,andby extension AFFO,measureswithintheMD&Aare from FFOascalculated by following REALpacrecommendations. Crombie’s ongoingoperating resultsby removing theseamounts Management believes thatFFO,asadjusted, ismorereflective of • • • being made: $13,559 and$2,961,respectively. The following adjustments are Crombie isproviding FFOonanadjusted basisby reducingitby For theyear endedDecember 31,2016andDecember 31,2015,

During theyear endedDecember 31,2015,Crombierecognized During theyear endedDecember 31,2016,Crombieissued During theyear endedDecember 31,2016,Crombierecorded deducted fromFFOfor theyear endedDecember 31,2015. income. This non-cash leasetermination income isbeing the actualcash Crombiewillreceive fromtheleasetermination exchange for development afuture rightfee whichwillreduce development activityrightsonspecificotherpropertiesin store closure.Inrelationto theclosure,Crombiereceived $2,961 inleasetermination income related to aSobeys back to FFOfor theyear endedDecember 31,2016. whileheldintrust.Thisthe funds amountisbeingadded adjustment payment, whichisnetof any interest earnedon and Crombieincurredafinance cost of $613related to the 2016, theSubscriptionReceipts were converted to REITUnits they owned REITUnitsduringthatsameperiod.OnJune29, payment equivalent to whatthey would have earnedhad trust, theReceipt holderswere entitledto earnanadjustment fromtheSubscriptionReceiptsWhile thefunds were heldin Subscription Receipts related to apotential propertyacquisition. from FFOfor theyear endedDecember 31,2016. Due to their significant size, theseamountsarebeingdeducted $3,000 fromBestBuy/FutureShoprelated to onevacated lease. related to threeTargetCanadaleasesvacated inMay, 2015and net leasetermination income fromTargetCanadaof $11,172 on asquarefootage basis swap agreements

$ $ 38,452 $ 45,452 $ (3,840) (3,763) 31, December ended months Three 2016 603

32,310 $ 38,311 (2,801) (3,823)

2015 Variance 623

$ uses anannualrate persquarefoot asachargeagainstAFFO. square foot for thesemaintenance expenditures. Crombie Crombie’s policyisto chargeAFFOwithanormalized rate per effective interest rate swap agreements. tenant incentives (“TI”)andleasingcosts andany settlementof agreements, maintenance capital expenditures, maintenance non-cash adjustmentsto revenue, amortization of effective swap reflects cash available for distributionsafter theprovision for which willbeusedto distributionpayments. supportfuture AFFO the recurringeconomic performance of itsoperating activities Crombie considers AFFOto measureinevaluating beauseful the fourth quarter of 2016asdiscussedabove. The increase isimpacted by theimproved operating resultsduring by $16,761or11.2%compared to theyear endedDecember 31,2015. For theyear endedDecember 31,2016,FFO,asadjusted, increased of 19retailpropertiesduring2016. byresults fromleasingactivity,partiallyoffset thedisposition 22 propertiesonJune29,2016,aswell asimproved operating compared to 2015. discussed lesstheimpactof straight-line rentincreasesin2016 The increaserelates to the$16,761increaseinFFOaspreviously $15,085 or12.0%compared to theyear endedDecember 31,2015. For theyear endedDecember 31,2016,AFFOincreasedby year to year. generally incurredonaconsistent basisduringtheyear, orfrom in reported AFFOresultsfromquarter to quarter ascosts arenot adjusted ifrequired.This persquarefoot chargeremoves volatility comparative purposes.The rate willbereviewed periodically and the productive capacity enhancement of thoseexpenditures for Crombie continues to track andreportactualexpenditures and and ageof thepropertiesinportfolio asitevolves over time. anticipated costs future andany significant changesinthenature of 2016.The persquarefoot rate isaproxy for actualhistoric costs, from $0.87to $0.78persquarefoot effective for thethirdquarter expenditures, thepersquarefoot chargehasbeendecreased from thisacquisition, withminimaladditionalmaintenance result of the2,090,000squarefoot increaseinCrombie’sGLA responsible for maintenance expenses ontheproperty. Asa which have quadnetleaseterms makingthetenant primarily On June29,2016,Crombieacquired aportfolio of properties LEASING COSTS (“MAINTENANCE EXPENDITURES”) MAINTENANCE TENANT INCENTIVES AND MAINTENANCE CAPITAL EXPENDITURES, ADJUSTED FUNDS FROM OPERATIONS (AFFO) (1,039) 6,142 $ 7,141 $

(20) 60 140,739 $ 166,235 $ (15,060) (12,876) 2,440 2016 Year ended December 31, December Year ended

125,654 $ 149,474 $ (11,142) (15,198) 2,520 2015 ANNUALREPORT 2016

Variance

15,085 16,761 (1,734)

(80) 138 35

MD&A MD&A 36

CROMBIE REIT Maintenance TIanddeferred leasingcosts Less: productive capacity enhancements Total additionsto TIanddeferred leasingcosts $ dollars) CAD of thousands (In Maintenance $ Less: productive capacity enhancements andrecoverable amounts capital Total expenditures additions dollars) CAD of thousands (In to investment properties livestheir useful and deducted whencalculating AFFO. capitalized and depreciated orchargedagainstrevenue over the productive capacity of theexisting assets.These costs are expenditures arereinvestments intheportfolio to maintain Maintenance TIandleasingcosts andmaintenance capital • • There aretwo typesof TIandcapital expenditures: AFFO Adjustments for lease Lease termination Income taxes –current Change incurrentincome taxes Maintenance expenditures Non-cash distributionsto Amortization of issuepremium Amortization of deferred Unit-based compensation Change inothernon-cash expense Finance costs –distributions Add back(deduct): Cash provided by (usedin) dollars) CAD of thousands (In as follows: to themost directlycomparable IFRSmeasure,whichisinterpreted to bethecash flow fromoperating activities. The reconciliation is Pursuant to CSA Notice Staff 52-306“(Revised) Non-GAAPFinancialMeasures”,non-GAAPmeasuressuchasAFFOshouldbereconciled MANAGEMENT’S DISCUSSION AND ANALYSIS MAINTENANCE EXPENDITURES

productive capacity enhancement expenditures. expenditures thatmaintainexisting productive capacity; and, maintenance TIandleasingcosts andmaintenance capital and termination income Subscription Receipts income, non-cash investment on dispositionof properties on asquarefootage basis of Unitholders intheform DRIP Units on senior financingunsecured charges notes operating items to Unitholders operating activities

$ $ 32,987 38,452 $ 16,239 $ (3,828) (6,109) (3,763) (Inthousandsof CAD dollars,except perunitamounts) 3,799 31, December ended months Three 2016 (877) (10) 14 — — —

29,236

17,858 $ 32,310 $ (3,823) (5,141) (5,125) (729) 2015 Variance (10) (14) 45 13 — —

contained intheleases. fluctuates dependingonthesatisfaction of contractual terms improved traffic to aproperty. The timing of such expenditures more overall cash flow to Crombiethroughhigherrentsor basis thanfor new tenants. However, new tenants may provide leasing costs for existing tenants arelower onapersquarefoot tenant leasesorfor new tenants occupying aspace. Typically, Obligations for expenditures for TIsoccur whenrenewing existing over lives, theiruseful butnotdeducted whencalculating AFFO. are capitalized anddepreciated orchargedagainstrevenue overall value. Productive capacity enhancement expenditures enhance theproperty’s a minimumthreshold,orotherwise increase thepropertyNOI,orexpand of apropertyby theGLA Productive capacity enhancements arecosts incurredthat 31, December ended months Three 31, December ended months Three $ $ (3,828) 10,821 $ (4,225) (7,124) (1,619) 6,142 8,924 3,697 $ 1,048 5,273 3,751 2016 2016 (968) (148) (45) 60 10 — 4 1 2015 2015

$ $ $ 140,739 $ (15,060) 125,737 (21,661) 66,920 $ (13,559) (5,031) (3,310) 4,603 4,113 1,686 9,144 $ 5,197 2016 (594) (26) (42) 54 — — Year ended December 31, December Year ended

$ $ Year ended December 31, December Year ended 31, December Year ended 125,654 $ (68,722) 116,576 29,928 $ (21,444) (11,504) (15,198) 2,066 75,119 (2,961) (3,616) 8,484 $ 6,397 41,114 $ (1,481) 2016 2016 2015 655 (51) 54 — Variance 2015 2015 $ $ (17,064) 25,806 25,684 (13,559) 10,807 (10,157) 13,464 15,085

(2,066) (2,657)

8,620 2,961 3,167 9,161 (681)

306

138

— 9

As apercentage of propertyrevenue General Other and Rent administrative Public and expenses Professional company occupancy Salaries fees costs and dollars) CAD of thousands (In benefits The following tableoutlinesthemajorcategories of general andadministrative expenses: and August 2016,andfive inDecember 2016. properties inApril2016,anadditionalpropertyeachof July 2016 andthedispositionof 10properties inMarch2016,two 2016 and2015,includingtheacquisition of 41propertiesduring amortization increasedasaresultof net acquisition activityduring Acquisitions, dispositionsanddevelopment depreciationand not recorded whilethepropertywas classifiedasheld for sale. of 2015,representingthedepreciation andamortization thatwas and amortization totalling $673was recognized inthefirstquarter reclassified to same-assetand held for use. Asa result, depreciation as heldfor salenolongermetthecriteria andthepropertywas determined thataninvestment propertypreviously classified investment properties.Duringthefirstquarter of 2015,Crombie as aresultof capital additionsandimprovements to same-asset are amortized over theterm of tenant leasesand willincrease decrease over timeascertain components of investment property periods in2015.Same-assetdepreciationandamortization will $681 for theyear endedDecember 31,2016compared to thesame for thethreemonthsendedDecember 31,2016anddecreasedby Same-asset depreciationandamortization decreasedby $490 Depreciation and amortization Acquisitions, dispositions Same-asset depreciation dollars) CAD of thousands (In activity during2015and2016. lease renewals andnew leasesandarereflective of theleasing Maintenance TIanddeferred leasingcosts aretheresultof both deck andstructural maintenance. interior and exterior maintenance, roof repairs and ongoing parking 2016, areprimarilypayments for costs associated withbuilding Maintenance capital expenditures for theyear endedDecember 31, comparative volatility fromperiod-to-period. or paidfor evenly throughoutthefiscal year, there can be As maintenance TIandcapital expenditures arenotincurred GENERAL AND ADMINISTRATIVE EXPENSES DEPRECIATION, AMORTIZATION AND IMPAIRMENT depreciation/amortization and development and amortization

$ $ $ $ 14,459 $ 19,435 $ 4,266 $ 4,976 2,476 $ 31, December ended months Three 31, December ended months Three 2016 2016 4.1% 205 782 186 617

16,789 $ 14,949 $

1,840 1,956 $ 3.8% 3,541 $ 2015 Variance 2015 Variance 722 329 353 181

Crombie’s total fair value of investment properties,including anchored properties. for therenovation andexpansion of 10existing Sobeys ended December 31,2016,Crombieinvested $58,823inTIs and, Vaughan Harvey Plaza, Moncton, NB.Duringtheyear NS; Rockhaven Centre, Peterborough, ON;FortSt.John,BC; Square Mall,Halifax, NS;Sydney ShoppingCentre, Sydney, expansionsand GLA RoadPlaza, at:Hamlyn St.John’s,NL;Scotia December 31,2016consisted primarilyof development work Productive capacity enhancements duringtheyear ended or thesellingprice lesscosts to sell. higher of theeconomic benefits of the continued use of theasset was determined to beeachproperty’sfair value, whichisthe recoverable amountfor thatproperty. The recoverable amount which carrying value, usingthecost method,exceeded the a perpropertybasisandwas determined astheamountby than expected leasingactivity. Impairmentwas measuredon departures duringtheyear, lower occupancy rates, andslower impairments were theresultof theimpactonfair value of tenant $12,575 onthreeretailpropertiesandanoffice property. The year endedDecember 31,2015,recorded animpairmentof impairment of $6,000ontwo retailpropertiesandduringthe During theyear endedDecember 31,2016,Crombierecorded an carrying value. basis whencircumstances indicate thatfair value islessthan while impairment,ifany, isrecognized onapropertyby property until realized throughdispositionorderecognition of properties, and increasesinfair value over carrying value arenotrecognized uses thecost methodfor accounting for investment properties, December 31,2016(December 31,2015–$708,949).Crombie properties heldfor sale,exceeds carrying value by $844,033 at (0.3)% (2,646) (3,136) (520) (264)

(725) 490 $ (60) 143 (24) $ $ $ 58,410 $ 16,341 73,332 $ 14,922 10,120 $ 2,238 1,892 1,253 2016 2016 4.1% 838 Year ended December 31, December Year ended Year ended December 31, December Year ended

$ 66,576 $ 59,091 $ 14,401 $ 8,202 $ 7,485 2,201 1,695 1,386 3.9% 2015 2015 ANNUALREPORT 2016 917 Variance Variance

(0.2)%

(6,756)

(1,940) (7,437) (1,918)

(197)

681

133 (37)

79 37

MD&A MD&A 38

CROMBIE REIT as specifiedinvestment flow-through entities (“SIFTs”). applytoto trustsclassified itsunitholdersthatwould otherwise year willnotbesubject to income taxinrespectof distributions A trustthatsatisfiesthecriteria of aREITthroughoutitstaxation would have been75.0%and88.5%,respectively. FFO andAFFOpayout ratios for theyear endedDecember 31,2016 Excluding thedistributionsinJune2016onthesenew Units,our acquisitions generated minimalincome for Crombiefor June2016. resulted indistributionsof $1,135for June2016,whiletheproperty Class BLPUnitsrelated to aportfolio acquisition onthatdate. This On June29,2016,Crombieissuedatotal of 15,306,141REITand $ AFFO FFO payout Total payout ratio Distributions distributions ratio Distributions to noted) otherwise as to except dollars, CAD of thousands (In Special Unitholders Voting Details of distributionsto Unitholdersareasfollows: Unitholders on propertiesdisposedin2016. quarter inpartby of 2015andduring2016,offset finance costs in 2015primarilydueto acquisition activityduringthefourth $1,238 and$4,144,respectively, compared to the sameperiods three monthsandyear endedDecember 31,2016increasedby Acquisitions, dispositionsanddevelopment finance costs for the properties onJune29,2016. the renovation andexpansion of 10existing Sobeys anchored byoffset finance costs associated withthe$58,823invested in dispositions. The decreaseinsame-assetfinance costs ispartially sum repayments of mortgages fromproceeds received on debt, regularrepayment of existing mortgages andlump primarily dueto lower interest rates onnew andrefinanced compared to thesameperiodsin2015.The decreasesare December 31,2016decreasedby $310 and $2,826,respectively, Same-asset finance costs for thethreemonthsand year ended Finance costs Amortization of effective swaps – operations Subscription Receipts Acquisitions, dispositionsand Same-asset finance dollars) CAD of thousands (In costs property revenue, increased0.2%compared to theyear ended general andadministrative expenses, asapercentage of increasing 13.4%.Fortheyear endedDecember 31,2016, with expenses increasing$725or20.5%andpropertyrevenue were 4.1%,anincreaseof 0.3%fromthesameperiodin2015, administrative expenses, asapercentage of propertyrevenue, For thethreemonthsendedDecember 31,2016,general and MANAGEMENT’S DISCUSSION AND ANALYSIS INCOME TAXES FINANCE COSTS – OPERATIONS and deferred Adjustment financingPayment charges development finance costs

$ $ $ 20,607 $ 25,656 $ (Inthousandsof CAD dollars,except perunitamounts) 3,569 1,480 31, December ended months Three 2016 —

24,600 $ 20,917 $

1,352 2,331 2015 Variance

—

Receipt holderswere entitledto earnanadjustmentpayment fromtheSubscriptionReceiptsthe funds were heldintrust,the Subscription Receipts related to apropertyacquisition. While During theyear endedDecember 31,2016,Crombieissued impacts salariesandbenefits. impacted by markto market adjustmentsto theUnitswhich vesting periodandthevaluation of theRestricted UnitPlanis which recognizes aportionof long-term compensation over a by theimplementationof Crombie’sRestricted UnitPlanin2015 property revenue increasingby 8.1%.The increaseisimpacted December 31,2015,withexpenses increasing$1,940or13.5%and subsidiaries which aresubjectto corporate income taxes. by non-capital lossesfor Crombie’swholly-owned corporate provision relatingto thedifference intaxandbookvalues offset The deferred tax taxliabilityof $75,400representsthefuture year can onlybeascertained attheendof theyear. as suchtheactualstatusof Crombiefor any particular taxation relevant tests applythroughoutthetaxation year of Crombieand met theREITcriteria throughout2016andcontinues to doso.The structure andoperations to supportCrombie’sassertionthatit have completed anextensive review of Crombie’sorganizational the definition of aREIT. Crombie’smanagementanditsadvisors criteria contained inregardto intheIncome TaxAct (Canada) Crombie hasorganized itsassetsandoperations the to satisfy ensure thatCrombiewillnotbeliablefor income taxes. to thenetincome andnetrealized capital gainsof Crombie,to distributions to Unitholdersof notlessthanthe amountequal intends, subjectto approval of theBoardof Trustees, to make to bedetermined by theTrustees attheirdiscretion.Crombie Pursuant to Crombie’sDeclaration of Trust, cash distributionsare while they were heldintrust. finance cost of $613,whichisnet of interestfunds earnedonthe Receipts were converted to REITUnitsandCrombieincurreda Units duringthatsameperiod.OnJune29,2016,theSubscription equivalent to whatthey would have earnedhadthey owned REIT FINANCE COSTS – DISTRIBUTIONS 31, December ended months Three 32,987 $ 19,502 $ 85.8% 72.6% 13,485 (1,056) (1,238) 2016 (128) 310 $ — 2015 $ 100,156 $ 29,236 $ 90.5% 17,308 $ 81,444 $ 11,928 12,349 76.3% 5,750 2016 613 Year ended December 31, December Year ended

Year ended December 31, December Year ended 125,737 $ 84,270 $ 98,611 74,375 $ 89.3% 75.6% 51,362 8,205 6,136 2016 2015 — Variance 2015 $ 116,576 47,560 69,016 78.0% 92.8% (4,144) 2,826 (1,545) (613) 386

Debt Covenants”. to certain otherfinancial covenants. See“Borrowing Capacityand tofunds bedrawn pursuantto therevolving creditfacility, subject BorrowingCrombie hadsufficient Base to permit$398,007 of to certain financial covenants of Crombie. AsatDecember 31,2016, defined under“Borrowing CapacityandDebt Covenants”) relative determined withreference to thevalue of theBorrowing Base(as available for drawdown pursuantto therevolving creditfacility are facility remains securedormigrates to anunsecuredstatus.Funds Crombie’s unsecuredbondrating withDBRSandwhetherthe rate. The spreadorspecifiedmarginchangesdependingon acceptance rates plusaspreadorspecifiedmargin over prime certain properties.The floatinginterest rate isbasedonbankers’ facility issecured by apoolof firstandsecond mortgages on credit) was drawn asatDecember 31,2016.The revolving credit of which$120,374($125,401includingoutstandingletters of credit facility of upto $400,000(the“revolving creditfacility”), Crombie hasinplace anauthorized floating rate revolving Revolving creditfacility Special Voting UnitsandClassB Crombie Convertible REIT Senior debentures Unitholders Investment unsecured property dollars) CAD of thousands (In notes Capital Structure debt growth:future Crombie hasthefollowing sources of financing available fund to Crombie expects to refinance debtobligationsasthey mature. TI costs anddistributionsto Unitholders. in theportfolio throughcapital expenditures, aswell asfunding costs ondebt,general andadministrative expenses, reinvestment source ofrepresents theprimary liquidityusedto thefinance fund Cash flow generated fromoperating thepropertyportfolio The ishighlycapital realestate industry intensive. LIQUIDITY ANDCAPITAL RESOURCES 2011 2012 per 2013 per $ 2014 per $ of 2015 per $ of distribution per Taxation $ of distribution $ of distribution The following tablesummarizes thelastfive years of thetaxation of distributionsfromCrombie: of distribution distribution the after-tax returnto Unitholders. income taxpurposes.The composition for taxpurposesof distributionsfromCrombiemay changefromyear to year, thusaffecting of thedistributionsfromCrombiearetreated asreturnsof capital andarenottaxable to CanadianresidentUnitholdersfor Canadian Crombie, throughitssubsidiaries,hasalargeassetbasethatisdepreciablefor Canadianincome taxpurposes.Consequently, certain LIQUIDITY AND FINANCING SOURCES TAXATION OF DISTRIBUTIONS Limited Partnership Unitholders Year

$ $ 3,786,345 1,865,477 398,588 834,203 555,943 132,134 2016 31, December

100.0% $ 22.0% 49.3% $ 10.5% 14.7% 3.5%

$100,000, of which$100,000was drawn atDecember 31,2016; rate revolving creditfacility, maturingMay 16,2018,of upto (ii) unsecuredshort-term financingthroughanauthorized floating December 31,2016; ($125,401 includingoutstandingletters of credit)was drawn at $400,000, subjectto available borrowing base,of which$120,374 year revolving creditfacility, maturingJune30,2019,of upto (i) securedshort-term financingthroughanauthorized three average term to maturityof 5.90years. Empire underanOmnibusSubsidy Agreement) andaweighted rate of 4.46%(after givingeffect to theinterest rate subsidyfrom debt adjustmentof $3,726),carrying aweighted average interest outstanding of $1,652,091($1,655,817after includingthefair value As of December 31,2016,Crombiehadfixed rate mortgages Mortgage debt rating withDBRS. margin changesdependingonCrombie’sunsecuredbond or specificmargin over prime rate. The specifiedspreador interest rate isbasedonbankers’ acceptance rates plusaspread financing for acquisitions anddevelopment activity. The floating by Crombiefor working capital purposesandto provide temporary December 31,2016,andmaturesMay 16,2018.The facility isused amountofamount ofwhichwas $100,000,thefull drawn asat The unsecuredbilateral creditfacility hasamaximumprincipal Unsecured Bilateral CreditFacility (vi) theissuance of new units. debentures; and, (v) (iv) theissuance of additionalsenior unsecurednotes; (iii) theissuance of additionalunsecured convertible secured mortgage andterm debtonunencumberedassets; of Return 1,641,203 3,318,031 398,080 694,484 131,518 452,746 Income Income Capital December 31, 2015 31, December 90.2% 64.4% 62.5% 56.3% 67.1%

Investment 100.0% $ 20.9% 28.8% 49.5% $ 32.9% 18.1% 12.0% 37.5% 13.6% 4.0% 9.8% 3,256,668 1,624,547 Dividend 467,289 175,215 273,592 716,025 December 31, 2014 31, December 13.4% 0.0% 0.0% 0.0% 0.0% ANNUALREPORT 2016

100.0% Capital

22.0% 49.9% 14.3% 17.5% Gains 0.0% 0.0% 0.0%

8.4% 5.4%

1.5%

MD&A MD&A 40

CROMBIE REIT TSX for the20consecutive trading days trading endingonthefifth volume-weighted average trading price of theREITUnitson the thereof plusaccrued andunpaidinterest, provided thatthe prior notice, ataredemptionprice equalto theprincipalamount or inpart,onnotmorethan60days’ andnotlessthan30days’ which theconvertible debenturesmay beredeemed,inwhole of convertible debentureshasaperiod,lastingtwo years, during to redeemtheconvertible debentures, after which,eachseries For thefirstthree years fromthedate of issue,thereisnoability Units andapplyingtheproceeds itsinterest obligation. to satisfy option to pay interest onany interest payment date by issuingREIT March 31andSeptember 30of eachyear andCrombiehasthe Debentures (issuedAugust 14,2013)pay interest semi-annuallyon The SeriesDDebentures(issuedJuly3,2012)andtheE for SeriesDDebenturesand4,338,192for SeriesEDebentures. Maximum REITUnitsissuableatDecember 31,2016was 2,985,074 Deferred Series E(CRR.DB.E) financing Series D(CRR.DB.D) charges Convertible debentures There arenorequiredperiodicprincipalpayments, face withthefull value of theNotes dueontheirrespective maturity dates. Deferred Unamortized financingSeries Series charges Series C B Series B issue A premium Senior unsecurednotes Of thematuringdebtbalances, only18.4%of fixed rate debt,and30.2% of total maturingdebtbalances mature over thenext three years. (1) Total Thereafter December 31, $ December 2021 31, December 2020 31, December 2019 31, December 2018 31, 2017 Ending 12 Months dollars) CAD of thousands (In Principal repayments of thedebtarescheduledasfollows: interest rate swap agreements. debts withoutanexchange of theunderlyingprincipalamount(see“Risk Management”).Crombiecurrentlyhasnosuchoutstanding From timeto time,Crombiehasentered into interest rate swap agreementsto managetheinterest rate profilefuture of itscurrentor MANAGEMENT’S DISCUSSION AND ANALYSIS Excludes fair value debtadjustmentof $3,726anddeferred financingcharges of $10,714.

(1)

$ $ $

Rate Fixed 1,304,943 $ (Inthousandsof CAD dollars,except perunitamounts) 750,518 225,241 124,973 64,666 50,363 $ $ $ 89,182 Conversion

20.10 Price 17.15 Balances Debt Maturing 100,000 120,374 Floating 220,374 $

Rate — — — $ — September 30,2019

February February 10, 2020 October 31, 2018 amount plusaccrued andunpaid interest. debentures to Crombieataprice equalto 101%of theprincipal convertible debenture holdershave therightto puttheconvertible or maturity,asapplicable. Uponchangeof control of Crombie, REIT Unitsfor astipulated periodpriorto thedate of redemption by 95%of thevolume-weighted average trading price of the amount of theconvertible debenturesthenoutstanding divided part, by issuingthenumberof REITUnitsequalto theprincipal debentures atmaturityoruponredemption,inwhole itsobligation to paysatisfy theprincipal amountof theconvertible not acurrentevent of default, Crombiewillhave theoptionto thereof plusaccrued andunpaidinterest. Provided thatthereis any timeattheredemption price equalto theprincipalamount convertible debentures may beredeemed,inwholeorpart,at year periodfromthedate of issue,andto thematuritydate, the exceeds 125%of theconversion price. After theendof thefive day preceding thedate onwhichnotice of redemptionisgiven March 31,2021 1,525,317 245,347 June 1, 2021 164,666 750,518 225,241 50,363 89,182 Total Effective Maturity Maturity Date Date

% of Total% of 100.0% $ 49.2% 10.8% 14.8% 16.1% 5.8% 3.3% $ Interest Rate Interest 3.900% Interest 3.986% $ 2.775% 5.00% 5.25% Rate Principal of Payments

347,148 $ 118,470 40,204 48,357 49,290 $ 42,028 48,799 $ December 31, December December 31, December

100,000 132,134 125,000 398,588 $ 175,000 $ 60,000 74,400 Payments (2,266) (1,652) Required 1,872,465 2016 2016 868,988 267,269 129,386 294,146 213,023 240 99,653 Total 2015 2015 $

December 31, December December 31, December % of Total% of 100,000 398,080 125,000 131,518 175,000 100.0% 60,000 74,400 46.4% (2,882) 15.7% 14.3% (2,214) 11.4% 6.9% 5.3% 294

prepaid expenses anddepositsinthequarter. in non-cash operating items primarilyrelates to anincreasein as anincreaseinleasetermination income. The decreaseof $8,924 acquisitions andstrongerresultsfromexisting propertiesaswell improvement inoperating income resulting fromgrowth through in 2015.Cashfromoperations increased$7,221asaresultof the operating activitiesdecreasedby $1,619over thesameperiod For thethreemonthsendedDecember 31,2016, cash from Cash provided by (usedin) Income Non-cash taxes operating paid Net assetsattributableto items Cash provided by (usedin): dollars) CAD of thousands (In Operating Activities Net changeduringtheperiod Investing Financing activities Operating activities Cash provided by (usedin): activities dollars) CAD of thousands (In of $93,400. a price of $14.70perClassBLPUnitfor grossconsideration received 6,353,741ClassBLPUnitsandtheattachedSVUsat exchange for SubscriptionReceipts, subsidiariesof Empire On June29,2016,concurrently withtheREITUnitsissuedon were automatically exchanged for oneCrombieREITUnit. Empire, eachof the8,952,400outstandingSubscriptionReceipts 2016, inconjunction withtheclosingof propertyacquisitions from per Subscription Receipt, for gross proceeds of $131,600. On June 29, deal basis,of 8,952,400SubscriptionReceipts, ataprice of $14.70 On May 31,2016,Crombieclosedapublicoffering, onabought Voting Units REIT UnitsandClassBLPtheattachedSpecial SOURCES AND USES OF FUNDS operating activities Unitholders and non-cash items

$ $ $ $ 20,038 $ (10,475) 16,239 $ 16,239 $ (5,764) (3,799) 31, December ended months Three 31, December ended months Three 2016 2016 — —

(75,852) 59,051 17,858 $ 17,858 $ 12,817 1,057 5,125 2015 Variance 2015 Variance (84)

debentures beconverted. total of 7,323,266REITUnitsbeingissuedshouldalloutstanding Crombie hasconvertible debentureswhichcould resultina 31,2017, In additionto thetotal unitsoutstandingatJanuary (1) Special Voting Units Units Total 31,2017,were asfollows: unitsoutstandingatJanuary to market prices asdetermined undertheDRIP. reinvestment plan(the“DRIP”)atathreepercent (3%)discount REIT Unitsand657,901ClassBLPunderitsdistribution For theyear endedDecember 31,2016,Crombieissued927,701 the DRIPparticipationrate over 2015. results asnoted above aswell asanincreaseof $11,157 in The increaseprimarilyrelates to theimproved operating activities increased$25,806over thesameperiodin2015. For theyear endedDecember 31,2016,cash fromoperating $ one basis. the economic equivalent of aUnit,andareexchangeable for Unitsonaone-for- Class BLPUnits.These ClassBLPUnitsaccompany theSpecialVoting Units,are of Crombie,hasalsoissued60,753,209 Crombie Limited Partnership,asubsidiary

(69,526) 70,088 (8,924) (1,057) 7,221 (1,619) (1,619)

84 $ $ $ $ (1)

(463,361) 395,384 68,606 $ 66,920 $ 66,920 $ (1,686) (1,057) 2016 2016 — Year ended December 31, December Year ended 31, December Year ended

(116,332) 41,114 75,664 43,224 $ 41,114 (3,591) 1,481 2015 2015 446 ANNUALREPORT 2016 Variance Variance $ $

60,753,209 $ 87,855,116

(347,029) 319,720 25,806 25,806 25,382 (1,503) (3,167) 3,591

MD&A MD&A 42

CROMBIE REIT market value of assetssubjectto afirstsecurity positionand60% Crombie isentitled to borrow amaximumof 70%of the fair Under theamendedterms governing therevolving creditfacility, of five retailproperties for netproceeds of $31,369. existing propertyfor netcash of $21,039aswell as the disposition completed two propertyacquisitions andanadditionto an 2015. DuringthethreemonthsendedDecember 31,2016,Crombie December 31,2016decreasedby $70,088over thesameperiodin Cash usedininvesting activitiesfor thethreemonthsended Cash provided by (usedin) Additions Additionsto deferred to Proceeds ondisposalof leasing tenant Additions costsincentives Acquisitionto of investment properties investmentCash provided by (usedin): properties dollars) CAD of thousands (In Investing Activities the quarter. the new mortgage financing fund propertyacquisitionsto in repaid $7,575inmaturingmortgages andutilized aportionof During thethreemonthsendedDecember 31,2015,Crombie and utilized theproceeds to reduce floating rate credit facilities. in new mortgages withaweighted average interest rate of 3.72% issued $123,731(threemonthsendedDecember 31,2015–$113,650) 2015. DuringthethreemonthsendedDecember 31,2016,Crombie December 31,2016decreasedby $69,526 fromthesameperiodin Cash fromfinancingactivities for thethreemonthsended financingCash provided by (usedin) activities Other items Net issueof REITUnitsand (net) Net issue(redemption)of Net issueof senior Deferred financingcharges– Net issue(repayment) on Lump sumprincipalrepayment Regular principalrepayment Issuance Cash provided by (usedin): of dollars) CAD of thousands (In new mortgages Financing Activities MANAGEMENT’S DISCUSSION AND ANALYSIS BORROWING CAPACITY AND DEBT COVENANTS investing activities investment properties Class B convertible LP debentures Units unsecured notes investment property credit debt facilities of mortgages of mortgages

$ $ $ $ (120,997) 123,731 (21,039) (12,055) (10,475) (10,821) 31,369 (4,893) (5,764) $ (1,099) (Inthousandsof CAD dollars,except perunitamounts) 31, December ended months Three 31, December ended months Three 2016 2016 (380) (55) — — — —

$ $ 113,650 (75,852) $ (12,404) (33,663)

(61,511) 59,051 $ (5,063) (7,575) (9,144)

(880) 2015 Variance 2015 Variance (134) (77) — — — — $

Cash fromfinancingactivities for the year endedDecember 31, (the “Borrowing Base”).The revolving creditfacility provides assets subjectto asecond securitypositionoranegative pledge of the excess of fair market value over firstmortgage financing of related to thetransaction thatclosedJune29,2016. of $550,863 andadditionsto tenant incentives of $74,071,primarily $192,549 aswell ascompleting propertyacquisitions for netcash 2016, Crombiedisposedof 19retailpropertiesfor netproceeds of 2016 increasedby $347,029over thesameperiodin2015.During Cash usedininvesting activitiesfor theyear endedDecember 31, Subordinated Debentures. the outstanding5.75%SeriesCConvertible Unsecured The raised funds were usedto repay maturingmortgages and through theissuance of 2.775%Series CNotes (seniorunsecured). During theyear endedDecember 31,2015,Crombieraised funds of $219,111andincreasedfloating rate debtduring theperiod. 8,952,400 REITUnitsand6,353,741ClassBLPfor netproceeds of propertiescompleted onJune29,2016,Crombie issued and repay maturingmortgages. Inconjunction withthepurchase of retailpropertieswere used to reduce therevolving creditfacility the year endedDecember 31,2016,proceeds fromthedisposition 2016 increasedby $319,720over thesameperiodin2015.During $ (69,526) 70,088 (87,334) 40,472 31,369 10,081 $ (1,677) 7,575 (246) (219) 349 170 22 — — —

$ $ $ (550,863) $ (463,361) 395,384 $ 192,549 (29,928) (49,864) (49,774) 193,401 $ (74,071) 90,374 219,111 (4,897) (2,967) (1,048) 2016 2016 — — Year ended December 31, December Year ended Year ended December 31, December Year ended

$ $ (116,332) (48,390) (15,000) (25,684) (79,954) (44,795) 124,012 (58,162) 119,134 (12,638) 75,664 $ (1,020) 2,770 (826) 2015 2015 (115) — Variance Variance $ $ (470,909) (347,029) 189,779 (124,012) 319,720 105,374 (61,433) 44,795 74,267 219,111 (4,782) (4,244) (1,947) (1,474) 8,388 (222)

borrowing capacity. and bankdebt, Crombie continues to maintainleverage atanappropriate level whilestaying conservatively withinitsmaximum Crombie’s managementbelieves thatthroughtheissuance of Notes, convertible debentures,mortgage financings,refinancings (1) Otherassetsexclude Tenant incentives andAccrued straight-line rentreceivable. Debt to grossbookvalue –fair value basis Gross bookvalue –fair value basis Fair value adjustmentto deferred taxes Interest rateInvestment Deferredsubsidy in Cash financingjoint Other assets,cost and charges ventures Long-term cash Investment receivables equivalents Debt properties, $ Less: Applicable fair value debtadjustment at Total fair Bilateral debt value Revolving credit outstanding Convertible credit facility Senior debentures facility Fixed unsecured payable noted) otherwise as except rate dollars, CAD of thousands (In notes mortgages properties measuredatfair value withallothercomponents of Debt to grossbookvalue onafair value basisincludesinvestment of bookvalue. Crombie anditsconsolidated subsidiariesmay beusedinstead of theindependenttrustees, theappraised value of theassetsof indirect acquisitions of certain properties.Ifapproved by amajority liability arisingoutof thefair value adjustmentinrespectof the any debtassumedby Crombieand(ii)theamountof deferred tax the amountof any receivable reflecting interest rate subsidieson and cost of any below-market component of propertiesless(i) depreciation andamortization inrespectof Crombie’sproperties subsidiaries plusdeferred financingcharges,accumulated the bookvalue of theassetsof Crombieanditsconsolidated and distributionspayable. Grossbookvalue means,atany time, trade payables course andaccruals of business intheordinary with acquisitions, excluding specific deferred taxes payable, borrowed money includingobligationsincurredinconnection under theterms of theDeclaration of Trust asobligationsfor When calculating debtto grossbookvalue, debtisdefined • • • must maintaincertain covenants: The terms of therevolving creditfacility alsorequirethatCrombie Borrowing Base,subjectto compliance withcertain conditions. Crombie withflexibility to addorremove propertiesfromthe DEBT TO GROSS BOOK VALUE – FAIR VALUE BASIS

distributions to Unitholdersarelimited to 100%of distributable annualized NOIonallpropertiesmustbeaminimumof annualized NOIfor theprescribedpropertiesmustbea income asdefined intherevolving credit facility. requirements; and, 1.4 timesthecoverage of allannualized debtservice requirements; debt service minimum of 1.4timesthecoverage of therelated annualized

(1)

$ $

$ Dec. 31, 2016 31, Dec. 4,752,000 $ 2,409,139 $ 1,655,817 4,786,410 400,000 2,410,591

100,000 134,400 120,374 (34,120) 34,567 19,969 50.3% 14,631 (1,452) (1,452)

815 —

$ Declaration of Trust. Onalong-term basis,Crombie intends to including convertible debentures,aspermitted by Crombie’s These leverage ratios arebelow themaximum60%,or65% 52.5% atDecember 31,2016andDecember 31,2015,respectively. The debtto grossbookvalue onafair value basiswas 50.3%and Crombie’s financialstatements. gross bookvalue measuredatthecarrying value includedin remained incompliance withalldebtcovenants. by theAggregate Borrowing Base.At December 31,2016,Crombie standby letters of creditoutstandingof $5,027)andwas limited the revolving creditfacility was $278,000(priorto reductionfor At December 31,2016,theremainingamountavailable under as defined intherevolving credit facility. which isbasedonamodified calculation of theBorrowing Base, letters of credit,may notexceed the“Aggregate Borrowing Base”, drawn undertherevolving creditfacility plusany outstanding at any time.This covenant provides thattheaggregate of amounts amount whichmay beutilized undertherevolving creditfacility The revolving creditfacility alsocontains acovenant limitingthe the debtto grossbookvalue ratio since December 31,2015. investment propertiesresulted inthesignificant reduction of of proceeds fromtheUnitsissuance andincreasedfair value of investment propertiesdecreased0.27%to 5.88%.The combination average cap rate used inthedetermination of thefair value of its being usedto pay down debt.Inaddition,Crombie’sweighted $196,000, before closingandtransaction costs, withtheproceeds disposed of 19retailpropertiesfor proceeds of approximately through theissuance of REITUnitsand ClassBLPUnitsand During theyear endedDecember 31,2016,Crombieraised $219,111 strengthen itsinvestment grade rating. maintain reasonableoverall indebtedness soasto maintainand $ Sep. 30, 2016 30, Sep. 1,528,048 2,402,310 $ 4,732,000 $ 4,759,370 2,403,819 400,000 100,000 134,400 (34,299) 241,371 28,872 14,409 50.5% 19,897 (1,509) (1,509)

— — $ $ Jun. 30, 2016 30, Jun. 4,697,000 $ 2,399,019 $ 2,400,586 1,518,846 As at As 400,000 4,743,162 100,000 247,340 134,400 (34,299) 53,224 50.6% 14,646 14,158 (1,567) (1,567) — — $ $ Mar. 31, 2016 Mar. 31, 1,509,925 4,109,000 $ 2,051,395 $ 2,053,031 4,129,779 400,000 134,400 (34,299) 14,039 14,558 49.7% 28,117 8,706 (1,636) (1,636) ANNUALREPORT 2016 — — — $ $ Dec. 31, 2015 31, Dec. 2,183,758 4,143,000 1,521,079 2,185,479 4,159,748 400,000

130,000 134,400 (34,645) 14,972 52.5% 23,152 13,933 (1,721) (1,721) 1,057

— —

MD&A MD&A 44

CROMBIE REIT $ transactions withentitiesassociated withCrombiethrough interest inCrombie.Related partytransactions primarilyinclude diluted ECLD,holdsa41.5%(fully 40.3%)indirect subsidiary As atDecember 31,2016,Empire,throughitswholly-owned $ ACCOUNTING $ Debt $ Interest service Adjusted service coverage Lump sumpayments onmortgages debt coverage ratio Advances (payments) relatingto creditfacilities repayments ratio {(1)/((2)+(3))} Payments relatingto interest rate subsidy (3) {(1)/(2)} Change infair value debtpremium Debt repayments Adjusted Amortization of effective(advances) swap agreements interest Amortization of deferred financingcharges expense Finance (2) costs EBITDA General – (1) Property and operations Adjusted operating administrative Amortization property expenses expenses Property of revenue noted) otherwise as revenue except dollars, CAD of thousands (In tenant incentives • • The improvement inthecoverage ratios isattributableto: times EBITDA, respectively, for theyear endedDecember 31,2015. EBITDA, respectively. This compares to 2.72timesEBITDA and1.81 ended December 31,2016were 2.97timesEBITDA and1.96times Crombie’s interest coverage anddebtservice ratios for theyear MANAGEMENT’S DISCUSSION AND ANALYSIS RELATED PARTY TRANSACTIONS INTEREST AND DEBT SERVICE COVERAGE RATIOS

an increaseinadjusted interest expense of $1,931or2.1%as Crombie’s improved operating results,withEBITDA increasing interest rates; and, Crombie continues to finance new andmaturingdebtatlower $28,060 or11.1%; $ $ (Inthousandsof CAD dollars,except perunitamounts)

that usedby otherentities. Crombie’s measurementof EBITDA may notbecomparable to capitalrequirements, fund projectsandacquire properties. believes itisanindicative measureof itsabilityto debt service IFRS. EBITDA isnotanIFRSfinancialmeasure;however, Crombie activities orany othermeasureof operations asprescribedby income attributableto Unitholders,cash provided by operating EBITDA shouldnotbeconsidered analternative to operating • by therelated parties. which istheamountof consideration establishedandagreedto Related partytransactions aremeasuredattheexchange amount, post-employment benefit plans. include transactions withkey managementpersonneland Empire’s indirectinterest. Related partytransactions also

ended December 31,2016to acquisitions. partiallyfund issued $219,111innew REITandClassBLPUnitsduringtheyear

2016

Year 31, December ended 400,001 $ (115,306) 279,976 $ 100,156 $ (16,341) 411,623 (49,774) 94,406 $ 90,374 48,562 $ 11,622 (2,440) (3,310) 8,192 $ (269) 2.97 1.96 39

369,866 379,578 (58,050) (113,261) (15,000) 121,440

251,916 47,071 (14,401) 92,475 (2,520) 98,611 (3,616) 9,712 (482) 2015 (837) 2.72 1.81

• In additionto theabove: (f) (e) (d) (c) (b) (a) Finance costs –distributionsto Unitholders Finance costs –operations General andadministrative expenses Property operating expenses Property revenue Crombie’s transactions withrelated partiesareasfollows:

in againondisposalof $959. before closingand transaction costs. This transaction resulted including 21,300squarefeet of grossleaseableareafor $9,057 disposition of aretailpropertyinBritishColumbia to Empire and transaction costs. Inaddition,Crombieclosedonthe square feet of grossleaseableareafor $26,400before closing property inBritishColumbia fromEmpireincluding61,600 During thethirdquarter of 2016,Crombieacquired aretail Interest Interest income Interest rate $ on subsidy convertibleOther general andadministrative expenses Property debentures management services Lease recovered Head termination Property lease income revenue income with anannualinterest rate of 5.00%. Empire holds$24,000of SeriesDConvertible Debentures under aleasethatendedinMay 2015. Crombie previously leaseditsheadoffice space fromECLD Cost SharingAgreement. previous cost sharingarrangement covered by aManagement and administrative expenses. This Agreement replaces the Agreement isbeingrecognized asareduction of General 1,2016.RevenueJanuary generated fromtheManagement basis pursuantto aManagementAgreement effective owned by certain subsidiariesof Empireonafee for service and environmental managementto specificproperties Crombie provides propertymanagement,leasingservices 1,2016. January sharing basispursuantto aManagementAgreement effective tosupport services certain subsidiariesof Empireonacost financial, leasing,administrative, andotheradministration employees of Crombie provide general management, Certain executive managementindividualsandother costs –operations. and theinterest rate subsidyisnetted againstFinance ECLD. The rentalincome isincludedinPropertyrevenue Developments Limited, CrombieLimited Partnershipand Subsidy Agreement dated March23,2006,between Crombie income andinterest rate subsidiespursuantto anOmnibus For various periods,ECLDhasanobligationto provide rental subsidiaries of Empire. Crombie earnedpropertyrevenue fromSobeys Inc.andother

Note

(d) (b) (b) (e) (a) (c) $ (f) $

• • • • • • • 31, December ended months Three

$ $ $ $ $ $ Crombie issuedto Empire6,353,741ClassBLPUnitsandthe closing andtransaction costs. Aspartialconsideration, The transaction total was approximately $418millionbefore and expansion of 10existing Sobeys anchoredproperties. portfolio of propertiesandtheinvestment intherenovation On June29,2016,Crombiecompleted theacquisition of a cost was $2,676,includingclosing andtransaction costs. Partnership (“SDLP”). Crombie’s50%portionof theacquisition lands inBritishColumbia withSobeys Developments Limited During thefirstquarter of 2015,Crombieacquired development put optionisinexcess of thecarrying value of theproperty. terminate theagreementswithwrittennotice. The fixed price for aperiodof five years witheitherpartyhaving theability to scheduled to matureinMarch2016andhave beenextended The rentalincome guarantee andputoptionwere originally option onapropertyCrombieacquired fromECLDin2006. negotiated anextension of arentalincome guarantee andput During theyear endedDecember 31,2015,Crombieand ECLD termination income. will reduce theactualcash Crombiewillreceive fromthelease properties inexchange for afee developments onfuture which activity rightsintheirleasesonspecificotherCrombie closures, Sobeys hasassignedto development Crombiefuture which isnon-cash consideration. Inrelationto oneof thestore lease termination income intheamountof $3,849,aportionof stores onCrombiepropertiesfor whichCrombierecognized During thesecond quarter of 2015,Sobeys closedtwo retail occupied space. in Nova Scotia, contains approximately 7,500squarefeet of fully excluding closingandtransaction costs. The property, located space fromEmpireonapre-existing retailpropertyfor $2,333 On April1,2015,Crombieacquired additionaldevelopment square feet occupied of fully space. Island, Manitoba andQuebec,contain approximately 225,300 properties, located inAlberta,BritishColumbia, Prince Edward Empire for $60,825excluding closingandtransactions costs. The properties andadditionsto two existing retailpropertiesfrom During thefourth quarter of 2015,Crombieacquired four retail under theDRIP. 657,901 (December 31,2015–383,036)ClassBLPUnitsto ECLD During theyear endedDecember 31,2016,Crombieissued consideration of $93,400. attached SVUsataprice of $14.70per ClassBLPUnitfor gross (13,687) $ 54,504 $ 2016 (302) $

205 $ 170 $ (79) 118 $ (19) $ 64 $ 57 $ 2015 $ 38,048 $ (12,130) $ (303) $ (101) 170 $ 179 $ 231 $ 99 $ 38 — $

$ $ Year ended December 31, December Year ended 183,411 (52,171) $ (1,203) $ 2016 (281) 269 $ 949 $ ANNUALREPORT 2016 453 $ 651 $ (64) $ 64 $ 2015 $ $ 160,470 (48,369) (1,200)

3,999 (385) 869 482 242 736

711 45

MD&A MD&A 46

CROMBIE REIT lease term, adjusted for theestimated probability of renewal. respective tenants renew theirleasesattheendof theinitial relationships, basedonestimated costs avoided shouldthe Intangible Assets of the buildinganditscomponents andsignificant parts. Buildings estimate of itsfair value. Land Crombie allocates thepurchaseprice basedonthefollowing: economic conditions. available, and anticipated trends,local markets andunderlying are basedonfactors that includehistorical operating results,if of market information available. Estimates cash of future flow discount andcapitalization rates andany other relevant sources based oncash flow projectionsthattake into account relevant assets andliabilities.Crombieassessesconsiders fair value and liabilitiesallocates thepurchaseprice to theacquired fair value of theproperties’related tangibleandintangibleassets return to theUnitholders.Crombieperforms anassessmentof the are capable of beingmanagedfor the purposeof providing a a business;beinganintegrated setof activitiesandassets that combination iftheacquired propertymeetsthedefinition of combination. Atransaction isconsidered to beabusiness is to beaccounted for asanassetacquisition orabusiness properties beingacquired to determine whethertheacquisition Upon acquisition, Crombieperforms anassessmentof investment Investment propertyacquisitions if therevision periods. affects bothcurrentandfuture only thatperiodorintheof the revision periods andfuture in theperiodwhichestimate isrevised ifthe revisions affect ongoing basis.Revisions to accounting estimates arerecognized The estimates andunderlyingassumptionsarereviewed onan these estimates. may undertake Actual inthefuture. results could differ from best knowledge of current events andactionsthatCrombie estimates arebasedonhistorical experience andmanagement’s price allocations andfair value of financialinstruments. These benefits, incomefuture taxes, investment properties,purchase estimate and assumptionitems includeimpairment,employee assets andliabilities,income andexpenses. Significant judgment, that affect theapplication of policiesandreported amountsof management to make judgments,estimates andassumptions The preparation of consolidated financialinformation requires Other bonusandothershort-term employeeSalary, benefits long-term benefits The remuneration of membersof key managementduringtheperiodwas approximately asfollows: and thethreeotherhighestcompensated executives. Crombie. The following areconsidered to beCrombie’skey managementpersonnel:theChief Executive Officer, Chief FinancialOfficer Key managementpersonnelarethosepersonshaving authorityandresponsibilityfor planning,directingandcontrolling theactivitiesof MANAGEMENT’S DISCUSSION AND ANALYSIS CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS USE OF ESTIMATES AND JUDGMENTS KEY MANAGEMENT PERSONNEL COMPENSATION –The amountallocated to landisbasedonanappraisal –Buildingsarerecorded atthe estimated fair value –Intangibleassetsarerecorded for tenant $ (Inthousandsof CAD dollars,except perunitamounts)

depreciation andarereviewed periodically for impairment. assets. Investment propertiesarecarried atcost lessaccumulated Investment propertiesincludeland,buildingsandintangible rental income. Investment propertiesarewhichheldto earn Investment properties at acquisition. and market interest rates onlong-term liabilitiesassumed determined basedonthedifferential between contractual Fair value of debt incidental income, arerecognized onanaccrual basis. agreements. Realtytaxandoperating cost recoveries, andother are obligated to pay suchrentundertheterms of therelated lease property revenue. Percentage rentsarerecognized whentenants existing leasesandtheamortization isshown asareductionin incentives areamortized onastraight-line basisover theterm of that iscontractually duefromthetenants. Inaddition,tenant the straight-line rentrecorded aspropertyrevenue andtherent accrued rentreceivable isrecorded for thedifference between straight-line basisover theterm of thelease.Accordingly, an in rates. Crombierecords therentalrevenue fromleases ona rental payments that changeover theirterm dueto changes cost recoveries, andotherincidentalincome. Certain leaseshave lease agreements,percentage rent,realtytaxandoperating Property revenue includesrentsearnedfrom tenants under Revenue recognition lifeuseful of the related assets. amortizing thecumulative changesover theremainingestimated accounting estimate andareaccounted for prospectively by livesuseful of investment propertiesconstitute achangein livesactual useful may bedifferent. Revisions to theestimated properties arebasedonmanagement’sbestestimate andthe life.in useful Estimated lives useful of significant investment reviewed whenever events orcircumstances indicate achange The estimated lives useful of significant investment propertiesare lifeChange inuseful of investment properties over theexpected life useful of theimprovement. capitalized to thebuildingandamortized onastraight-line basis or, inthecase of majoritems thatconstitute acapital asset,are Repairs andmaintenance improvements areexpensed asincurred components, significant partsandresidual value. lifeuseful of thebuilding(notexceeding 40years) andits method withreference to eachproperty’scost, theestimated Depreciation of buildingsiscalculated usingthestraight-line 31, December ended months Three $ 2016 785 811 $ 26 2015 –Values ascribedto fair value of debtare $ 859 $ 835 24

$ Year ended December 31, December Year ended 3,265 $ 3,153 2016 112 2015

2,860 2,962 102 the netannualcash flows to arrive attheproperty valuation. the specificrisks inherentinthenet cash flows, isthen applied to obtained fromanindependent valuation company, whichreflects aggregate cash flows received fromleasingthe property. Ayield internally generated valuation models preparedby considering the compulsion. Internal quarterly revaluations areperformed using parties hadeachacted knowledgeably, prudentlyandwithout an arm’slengthtransaction after propermarketing whereinthe be agreeduponbetween awillingbuyer andawillingsellerin of thevaluation, representanestimate of theprice thatwould maximum periodof four years. The fair values, basedonthedate Crombie’s investment propertyportfolio onarotatingbasisover a in thelocation andcategory of propertiesbeingvalued, value recognized professional qualifications andrecent experience External, independentvaluation companies, having appropriate Investment propertyvaluation appraisals of Crombie’s defined benefit obligations. to medical cost trends,whichmay significantly vary future in liability. Estimationuncertainties exist particularlywithregard terms to maturityapproximating theterms of therelated pension in thecurrencywhichbenefits willbepaidandthathave reference to highqualitycorporate bondsthataredenominated Discount factors aredetermined eachreportingperiodby account increases. future salary Crombie’sspecificanticipation of of inflation,medical cost trendsandmortality. Italsotakes into of Crombie’sdefined benefit liabilityisbasedonstandard rates outcome may dueto estimationuncertainties. vary The estimate with theassistance of independent actuaries; however, theactual Management estimates thedefined benefit liabilityannually Defined benefit liability immediately inoperating income. in priorperiods.Areversal of impairmentlossisrecognized have beendetermined ifnoimpairmentlosshadbeenrecognized revised estimate, butislimited to thecarrying amountthatwould amount of theasset(orcash generating unit)isincreasedto the Where animpairmentlosssubsequentlyreverses, thecarrying in operating income. An impairmentlossisrecognized asanexpense immediately (or cash generating unit)isreduced to therecoverable amount. less thanitscarrying amount,thecarrying amountof theasset amount of anasset(orcash generating unit)isestimated to be unit(s) to which theassetbelongs.Whenrecoverable Crombie estimates therecoverable amountof thecash generating not generate cash flows thatareindependentfromotherassets, fair value lesscosts to sellandvalue inuse.Wheretheassetdoes of impairmentloss(ifany). The recoverable amountisthehigherof amount of theassetisestimated inorderto determine theextent may notberecoverable. Ifsuchanindication exists, therecoverable circumstances thatindicate thatthecarrying value of theassets for impairmentateachreportingperiodfor events orchangesin Long-lived tangibleanddefinite life intangibleassetsarereviewed intangible assets Impairment of long-lived tangibleanddefinite life amount of assetsandliabilitiesareasfollows: with asignificant risk of material adjustment to the carrying financial statements thathave significanteffect andestimates Judgments madeby managementinthepreparation of these CRITICAL JUDGMENTS

rental income. Investment propertiesincludeland,buildings Investment propertiesarewhichheldto earn Purchase price allocation determination ismade. income taxanddeferred taxbalances intheperiodwhensuch these estimates, suchdifferences willhave animpactonthe Where theactualliabilityarisingfromtheseissuesdiffers from judgment asto theultimate taxdetermination of certain items. estimation of thelikely taxes due,whichrequiressignificant Crombie recognizes expected liabilitiesfor taxbasedonan and circumstances. assessed individuallyby managementbasedonthespecific facts subject to certain legaloreconomic limitsoruncertainties are recognized The infull. recognition of deferred taxassetsthatare be usedwithoutatimelimit,thatdeferred taxassetisusually the probableuseof adeferred taxasset,especiallywhenitcan tax lossorcredit.Ifapositive forecast of taxable income indicates income andexpenses andspecificlimits to theuse of any unused latest budget forecast, whichisadjusted for significant non-taxable which deferred taxassetscan beutilized isbasedonCrombie’s The assessment of taxable theprobabilityof future income in Deferred taxes Level 3 or indirectly. Level for theassetorliability,eitherdirectly 1thatareobservable Level 2 assets orliabilities. Level 1 of significantbased onobservability inputs,as follows: Fair value determination isclassifiedwithinathree-level hierarchy, market participantsatthemeasurementdate. transfer afinancial liabilityinanorderlytransaction between that Crombiewould receive to sellafinancialassetorpay to The fair value of afinancialinstrumentisthe estimated amount market transactions. of theamountsCrombiemightpay orreceive inactual and risks. Suchfair value estimates arenotnecessarily indicative current market conditions for instrumentswithsimilarterms discounted cash future flows usingdiscount rates thatreflect The fair value of otherfinancialinstrumentsisbasedupon length transaction. settled, by Crombieandaknowledgeable, willingpartyinanarm’s amount for whichaninstrumentcould beexchanged, oraliability The fair value of marketable financialinstrumentsistheestimated Fair value of financialinstruments inflation rates, renewal rates andleasing costs. not limited to, estimated cash flows, discount rates, lease-up rates, number of estimates andunderlyingassumptionsincluding,but the purchaseprice of theacquisition. This allocation contains a and intangibleassets.Uponacquisition, managementallocates FINANCIAL INSTRUMENTS –quoted prices (unadjusted) inactive markets for identical – unobservable inputsfor theassetorliability. –unobservable –inputsotherthanquoted prices includedwithin

ANNUALREPORT 2016

MD&A MD&A 48

CROMBIE REIT are asfollows: more significant risks, andthe actiontaken to managethem, of financial risks that can affect itsoperating performance. The In thenormalcourse of business,Crombieisexposed to anumber RISK MANAGEMENT contracts totalling $53,310 of which$37,292hasbeenpaid. As atDecember 31,2016,Crombie hadsignedconstruction year endedDecember 31,2015–$354and$1,418,respectively). land leasepayments to third partylandlords(threemonthsand December 31,2016,Crombiepaid$364and$1,431,respectively, in including renewal options.Forthethree monthsandyear ended Land leaseshave terms ranging varying fromeightto 73years credit arelikely to bedrawn upon. Crombie doesnotbelieve thatany of thesestandby letters of on theseoperating results. such contingencies would nothave asignificant adverse effect the opinionof management,any liabilitythatwould arisefrom coursewith arisingoutof of theordinary businessoperations. In There arevarious claimsandlitigationwhichCrombieisinvolved $ senior unsecurednotes areLevel 2. $ and thelong-term receivables, investment propertydebtand The fair value of convertible debenturesisaLevel 1measurement $ Total Convertible other Senior debentures financial Investment unsecured liabilities Financial liabilities property notes Total debt Long-term other Financial assets receivables financial assets • • sheet date: financial instrumentsapproximates their fair value atthebalance Due to their short-term nature,thecarrying value of thefollowing ended December 31,2016. There were notransfers between Level 1andLevel 2duringtheyear Financial assets The following tableprovides information onfinancialassetsandliabilitiesmeasuredat fair value asatDecember 31,2016: $ Total mortgage financingsonredevelopmentMortgage lendersprimarilyto satisfy properties outstanding Construction work beingperformed oninvestment properties letters of credit MANAGEMENT’S DISCUSSION AND ANALYSIS COMMITMENTS AND CONTINGENCIES

Trade receivables Cash andcash equivalents Total financialassetsmeasuredat fair value Marketable securities

$ $ (Inthousandsof CAD dollars,except perunitamounts)

carrying value: financial instrumentswhichhave a fair value different fromtheir following tablesummarizes theestimated fair value of other conditions for instrumentswithsimilarterms andrisks. The cash flows usingdiscount rates thatreflect currentmarket The fair value of otherfinancialinstrumentsisbasedondiscounted • • lease willberenewed orthe tenant replaced. The terms of any Upon theexpiry of any lease,therecan benoassurance thatthe favourable leaseterms. properties becomes vacant andcannot beleasedoneconomically their leasesorifasignificant amount of available space inthe number of tenants areunableto meettheirobligationsunder available for distributionwillbeadversely affected ifasignificant regardless of whetherapropertyisproducingany income. Cash be madethroughouttheperiodof ownership of realproperty mortgage payments, insurance costs andrelated chargesmust significant expenditures, includingproperty taxes, groundrent, upon thevacancy rates of theproperties.Inaddition,certain depend onthecreditandfinancialstability of tenants and The value of real propertyandany improvements thereto All realpropertyinvestments aresubjectto elementsof risk. Real PropertyOwnershipandTenant Risks related to: 2016, Crombiehasatotal of $5,027inoutstandingletters of credit mortgage financingrequirements.AsatDecembersatisfying 31, respect to construction work onitsinvestment propertiesand Crombie obtainsletters of creditto supportitsobligations with against certain claims. Crombie maintainsinsurance policiesthatmay provide coverage particular employees, inaccordance withCrombie’spolicies. itstrustees andofficers,Crombie hasagreedto and indemnify

$ Trade andotherpayables (excluding embeddedderivatives). Restricted cash Fair Value 2,500,599 $ 1,959,091 $ 402,361 139,147 December 31, 2016 31, December 19,999 $ 19,999 $ Level 1 Level — $ —

Carrying Value Carrying $ ,7, 1 9 1,876,1 2,410,591 400,000 134,400

Level 2 Level 19,969 $ 19,969 $ — $ —

2016 $ $

$ $ Fair Value 2,326,484 $ 1,782,776 405,348 138,360 December 31, 2015 31, December Level 3 Level 13,968 $ 13,968 $ 5,027 3,000 2,027 2,290 $ 2,290 December 31, December

$ $ Carrying Value Carrying 1,651,079 2,185,479 400,000

134,400 13,933 13,933

2,290 2,290 1,425 1,425 Total 2015 —

rents chargedorconcessions granted. Crombie’s abilityto leasespace initspropertiesandonthe pressures insuchmarkets could have anegative effect on better ableto withstandaneconomic downturn. Competitive better capitalized andmay bestrongerfinanciallyandhence located inthesamemarkets asCrombie’spropertiesmay be Crombie’s properties.Somepropertyowners withproperties located, lesslevered orhave strongeranchortenants than the samemarkets asCrombie’spropertiesarenewer, better Crombie inseekingtenants. Someof thepropertieslocated in developers, managersandowners of propertiescompete with The realestate businessiscompetitive. Numerousother since December 31,2015. There have beennosignificant changes to Crombie’screditrisk Provision for accounts, doubtful endof year Write-offs Recoveries Additional Provision for accounts, doubtful beginningof year provision • annual minimumrentandtotal propertyrevenue of major tenants. In measuringtenant concentration, Crombieconsiders boththe and renewing tenants. mix andassetconducting creditassessmentsfor new bothitstenant utilizing staggeredleasematurities,diversifying Crombie mitigates creditriskby geographical diversification, anticipated collectability risks. commitments. Aprovision for accounts doubtful istaken for all experience andbeunable fulfilltheirlease financialdifficulty to Credit riskarisesfromthepossibilitythattenants may asset typealsohelpsto mitigate thisrisk. of ourpropertyportfolio by geographic location, tenant mixand amounts of space inany given year. Inaddition,thediversification maturities sothatCrombieisnotrequiredto leaseunusuallylarge and various otherfactors. Managementutilizes staggeredlease for leasedpremises,competition fromotheravailable premises estate markets, changingdemographics, supplyanddemand many factors, includinggeneral economic conditions, local real properties inwhichCrombiehasaninterest willbeaffected by of anexisting lease.The abilityto rentunleasedspace inthe subsequent leasemay belessfavourable to Crombiethanthose COMPETITION CREDIT RISK

Upon completion of theJune29,2016 propertytransactions, annual minimumrent,and; No othertenant accounts for morethan5.1%of Crombie’s minimum rent;anincreasefrom49.9%atDecember 31,2015. Crombie’s largesttenant, Sobeys, represents 52.9%of annual

updates itsestimate of provision for accounts doubtful based respective receivable account onthebalance sheet.Crombie independent accounts andisrecorded asareduction to its sheet date. Aprovision istaken onaccounts receivable from The provision for accounts doubtful isreviewed ateachbalance receivable balances areconsidered impaired. balances over 30days areconsidered pastdue.Noneof the other tenant billingsaredue30days after invoiced, andingeneral, significant. Generally, rentsareduethefirst ofeachmonthand from tenants. The balance of accounts receivable pastdueisnot Receivables aresubstantiallycomprised of currentbalances due of thegrossleaseableareaof Crombiewillexpire inany oneyear. Over thenext five years, leasesrepresentingnomorethan4.8% • Portfolio section. properties asat December 31,2016isdetailedunder theProperty properties andpercentage of annualminimumrentof Crombie’s Crombie’s financial condition. The geographic breakdown of any onespecificgeographic regioninCanada could have on Canada, andreduced theadverse impactaneconomic downturn Crombie hasreduced itsgeographic concentration inAtlantic property acquisitions anddispositionsover thelastfour years, historically heavily concentrated inAtlantic Canada.Through financial condition. Crombie’sportfolio of properties was general consumer spendingcould adversely impactCrombie’s properties. Consequently, changesintheretailenvironment and Crombie’s portfolio of propertiesisheavily weighted inretail Retail andGeographic Concentration on thesustainableoperation by Sobeys intheselocations. owned and/oroperated by Sobeys. Therefore, Crombieisreliant from Crombie’spropertiesisderived fromanchortenants thatare minimum rentand44.8%of total propertyrevenue generated number of retailoperators. Specifically, 52.9% of theannual Crombie’s anchortenants areconcentrated inarelatively small Significant Relationship and areprovided for whencollection isconsidered uncertain. long-term accounts receivable arereviewed onaregularbasis on pastduebalances onaccounts receivable. Currentand RISK FACTORS RELATED TO THE BUSINESS OF CROMBIE

subsidiaries of Empire. $38,048 and$160,470,respectively) fromSobeys Inc.andother 31, 2016(threemonthsandyear endedDecember 31,2015– respectively, for thethreemonthsandyear endedDecember Crombie earnedtotal propertyrevenue of $54,504and$183,411, may directlyincurandpay operating andrealtytaxcosts. by propertytype,specific tenant leasesandwhere tenants recovery income andpercentage rent.These amountscan vary Total propertyrevenue includesoperating andrealtytaxcost

$ $

December 31 December Year ended 2016 (120) ANNUALREPORT 2016 195 127 60 (8) ,

$ $ December 31, December Year ended

2015

(38) 60 20 59

MD&A MD&A 50

CROMBIE REIT There have beennosignificant changes to Crombie’s liquidityrisksince December 31,2015. (2) (1) Total Floating rate debt Convertible debentures Senior unsecured Fixed rate mortgages notes The estimated payments, includingprincipal andinterest, onnon-derivative financialliabilities to maturitydate areas follows: fromrefinancing Crombie’s maturingdebtobligations. funded to Unitholders.Debtrepayment requirementsareprimarily well tenant asfund incentive costs andmake distributions reinvest intheportfolio throughcapital expenditures, as interest general ondebt,fund andadministrative expenses, source ofrepresents theprimary liquidityusedto the service Cash flow generated fromoperating theproperty portfolio they arise. obligations asthey matureormeetitsongoingobligationsas $ and equitycapital to itsgrowth fund program, refinance debt is theriskthatCrombiemay nothave access todebt sufficient The ishighlycapital realestate industry intensive. Liquidityrisk risk since December 31,2015. There have beennosignificant changes to Crombie’sinterest rate Year Year endedDecember 31,2016 ended Three monthsendedDecember 31,2015 December Three monthsendedDecember 31,2016 31, facility credit revolving rate floating the on changes rate 2015 interest of Unitholders to attributable income operating on Impact • As atDecember 31,2016: a speculative basis. agreements. Crombiedoesnotenter into interest rate swaps on floating rate debtand,onoccasion, utilizinginterest rate swap staggered debtmaturitiesandlimitingtheuseof permanent increases ininterest rates. Crombiemitigates thisriskby utilizing Interest rate riskisthepotential for financiallossarisingfrom to 37.6% atDecember 31,2016. Atlantic Canadahasdecreasedfrom43.4%atDecember 31,2013 risk. The percentage of annualminimumrentto beearnedin has beenpredicated onreducingthegeographic concentration Crombie’s growth strategy of expansion outsideof Atlantic Canada MANAGEMENT’S DISCUSSION AND ANALYSIS LIQUIDITY RISK INTEREST RATE RISK

Crombie’s weighted average term to maturityof itsfixed rate Reduced by theinterest rate subsidypayments to bereceived fromECLD. Contractual cash flows include principalandinterest andignore extension options. mortgages was 5.90years;

(2) $

$ $

$ Contractual Cash Cash Flows 2,022,289 $ 2,854,266 $ 2,622,619 (Inthousandsof CAD dollars,except perunitamounts) 441,079 231,647 159,251

(1)

170,090 $

197,100 $

191,403 14,407 6,906 5,697

2017

changes would have hadthefollowing impact: rate change would reasonablybeconsidered possible.The debt. Basedontheprevious year’s rate changes,a0.5%interest Crombie’s operating income related to theuseof floating rate A fluctuationininterest rates would have hadanimpacton swap agreementsasof December 31,2016. during theyear endingDecember 31,2017,basedonallsettled comprehensive income (loss)willbereclassified to finance costs Crombie estimates that$2,348of accumulated other • • • provided by Crombie. letters of credit,andcannot exceed theborrowing basesecurity utilized underthefacility andtheamountof any outstanding Access to therevolving creditfacility islimited by theamount risk utilizingaconservative approachto capital management. acceptable to Crombie.Crombiemitigates itsexposure to liquidity to aREITunitoffering issuefromCrombiewithfinancial terms also ariskthattheequitycapital markets may notbereceptive mitigate thisriskby staggeringitsdebtmaturitydates. There is acceptable to Crombieoratany terms atall.Crombieseeks to maturing fixed rate andfloating rate debton termsand conditions There isariskthatthedebtcapital markets may notrefinance and recycling capital frompropertydispositions. a combination of accessing thedebt andequitycapital markets Property acquisition through requirementsarefunded funding

of floating rate mortgage debt. Crombie hasinterest rate swap agreementsinplace on$123,731 December 31,2016;and, to amaximum of $100,000withabalance of $100,000at Crombie hasafloating rate bilateral credit facility available with abalance of $120,374atDecember 31,2016; a maximumof $400,000,subjectto available Borrowing Base, Crombie hasafloating rate revolving credit facility available to 104,047 477,274 $ 188,244 178,077 $ 373,227 6,906 2018 Year ending December 31, December Year ending

235,086 $ 308,673 430,576 $ 121,903 66,156 7,431 2019

129,346

313,864 $ 447,116 $ 447,116 3,906 2020 rate in Decrease $ —

interest rate change rate interest Impact of a 0.5% a0.5% of Impact 1,130 $ 347,764 $ 347,764 170,736 $ 101,651 635 $ 373 $ 172 75,377 2021 — Thereafter

Increase in rate in Increase $

954,436 954,436 954,436 (1,130)

(635) (373) (172)

— — — Crombie andEmpire oranotherrelated party. trustees suchasany propertyacquisitions ordispositionsbetween require theapproval of amajorityof theindependentelected “conflict of interest” guidelines,as well asoutlining which matters setting limitsto thenumberof Empireappointees to theBoard, of provisions to managepotential conflicts of interest including Agreement. Aswell, theDeclaration of Trust contains anumber Agreement, ManagementAgreement and Development of interest willbedealtwith,includingaNon-Competition into anumberof agreementsto outlinehow potential conflicts these potential conflicts, CrombieandEmpirehave entered these personscould conflict withthose of Crombie. To mitigate that conflict withtheinterests of the foregoing. The interests of business activities.Crombiemay become involved intransactions affiliates areengagedinawide variety of realestate andother toor otherservices Empireanditsaffiliates. Empireandits officers of Empireand/oritsaffiliates orwillprovide management officers andemployees of Crombiearedirectors and/orsenior Conflicts may exist due to the fact that certain trustees, senior trustees only. a conflict of interest mustbemade by amajority of independent addition, certain decisionsregardingmatters thatmay give riseto and transactions andto refrain fromvoting onthosematters. In requiring thetrustees to disclosetheirinterests incertain contracts The Declaration of Trust contains conflict of interest provisions interests of thesepersonscould conflict withthose of Crombie. be seekinginvestments similarto thosedesiredby Crombie.The deal withpartieswhomCrombiemay bedealing,ormay The trustees will,fromtimeto time,intheirindividualcapacities, Potential Conflicts of Interest to manageexposure to liability. manage andmonitor environmental conditions atitsproperties Crombie hasimplemented policiesandprocedures to assess, authoritiesinconnectionregulatory withany of itsproperties. pending orthreatened investigations oractionsby environmental environmental laws atany of itsproperties,andisnotaware of any Crombie isnotaware of any material non-compliance with where recommended inaPhaseIenvironmental site assessment. have PhaseIIenvironmental site assessmentwork completed environmental consultant, priorto acquiring apropertyandto site assessment,conducted by anindependentandexperienced Crombie’s operating policyisto obtainaPhaseIenvironmental Crombie by publicorprivate partiesby way of civilaction. collateral security, andcould potentially resultinclaimsagainst valuethe full of suchpropertyorborrow usingsuchpropertyas adversely affect Crombie’sabilityto sellsuchproperty,realize addresssuchsubstances orproperties,ifany,otherwise may be presentatorunderitsproperties.The failure to remove or of hazardous, toxic orotherregulated substances thatmay into theenvironment, andtheremoval orotherremediation to therelease of hazardous, toxic orotherregulated substances environmental harm,damageorcosts, includingwithrespect Such laws provide thatCrombiecould become liablefor to environmental matters. Canadian federal, provincial andmunicipallaws relating in realpropertyCanada,Crombieissubjectto various increasingly importantinrecent years. Asanowner of interests Environmental legislationandregulationshave become ENVIRONMENTAL MATTERS

Crombie’s financial condition. their obligationsto Crombie,suchfailure could adversely impact Sobeys orsuchaffiliates areunableorotherwise fail fulfill to provided any securityto guarantee theseobligations.IfEmpire, with theseagreements.Empireandspecificsubsidiarieshave not will beableto perform itsobligationsto Crombieinconnection maximum permitted amount.There isnocertainty thatEmpire of certain propertiesacquired by CrombiefromEmpireto a Crombie inrespectto thecost of environmental remediation affiliates of Empire.Finally,Empirehasobligations to indemnify of Crombie’srentalincome willbereceived fromtenants thatare under “Related PartyTransactions”. Inaddition,asignificant portion provided theOmnibusEnvironmental Indemnitydescribedabove lease andagroundlease.Empirespecificsubsidiarieshave Subsidy Agreement andto pay ongoingrentpursuantto ahead Empire hasagreedto supportCrombieunderanOmnibus Reliance onEmpire,Sobeys andOtherEmpireAffiliates insurance onany of itskey employees. Crombie’s financial condition. Crombiedoesnothave key-man could have anadverse effect onCrombieandadversely impact key personnel.The lossof of theservices any key personnel The management of of Crombiedependsontheservices certain Reliance onKey Personnel within Empirefor thispurpose. security for itsobligationsand isnotrequiredto maintainany cash Crombie ifany suchbreachoccurs. Empirehasnotprovided any and warranties or thatEmpirewillbeinapositionto indemnify protectedfully intheevent of abreachof suchrepresentations and warranties. There can beno assurance thatCrombiewillbe Crombiefor breachesof suchrepresentations will indemnify provides, subjectto certain conditions andthresholds,thatEmpire indemnity to CrombieunderthePortfolio Acquisition which its existing andcontingent liabilities.Empire alsoprovided an properties, includingwithrespectto thescope andamountof representations andwarranties to Crombiewithrespectto the Pursuant to thePortfolio Acquisition, Empiremadecertain 61 propertiesonApril22,2008(the“Portfolio Acquisition”). Crombie LPacquired fromEmpiredirectlyandindirectly to maintainany cash withinEmpirefor thispurpose. has notprovided any securityfor itsobligationsandisnotrequired Crombieifanyposition to suchbreachoccurs. indemnify Empire such representationsandwarranties orthatEmpirewillbeina protectedthat Crombiewillbefully intheevent of abreachof such representationsandwarranties. There can benoassurance Crombiefor breachesof thresholds, thatEmpirewillindemnify the acquisition whichprovides, subjectto certain conditions and liabilities. Empirealsoprovided anindemnityto Crombieunder capital andthescope andamountof itsexisting andcontingent respect to CDL,includingwithrespectto thestructureof itsshare made certain representationsandwarranties to Crombiewith and othermodifications. Pursuant to theacquisition, Empire predecessors hasbeensubjectto various transfers, redemptions the realestate sector. Inaddition,thesharecapital of CDLandits and have since beeninvolved invarious commercial activitiesin of predecessor companies whichbegantheiroperations in1964 (“CDL”). CDListhecompany resultingfromtheamalgamation all of theoutstandingsharesof CrombieDevelopments Limited Crombie Limited Partnership(“CrombieLP”)acquired fromEmpire Prior Commercial Operations

ANNUALREPORT 2016

MD&A MD&A 52

CROMBIE REIT receive acash distribution. in theirtaxable income, notwithstandingthatthey donot directly to includeanamountequalto thefair market value of thoseUnits the form of additional Units.Unitholderswillgenerally berequired and netrealized capital gainswillbedistributed to Unitholders in cash available for distributionintheyear, suchexcess net income net realized capital gainsof Crombieinataxation year exceeds the Wheretheamountof netincomeIncome and TaxAct (Canada). tonecessary eliminate Crombie’sliabilityfor tax underPartIof the Crombie intends to make distributionsnotlessthantheamount Tax-Related RiskFactors beyond thecontrol of Crombie. in themarkets for equitysecuritiesandnumerousotherfactors affected by changesingeneral market conditions, fluctuations of theUnits.Inaddition,market price of theUnitsmay be yield, whichaccordingly could adversely affect themarket price rates may leadpurchasersof Unitsto demandahigherannual is theannualyieldonUnits.Anincreaseinmarket interest One of thefactors thatmay influence themarket price of theUnits Potential Volatility of UnitPrices after theredemptiondate. days duringthe10-day trading periodcommencing immediately for trading) ontheredemptiondate for morethanfive trading a stock exchange, onany market onwhichtheUnitsarequoted stock exchange onwhichtheUnitsarelisted (or,ifnotlisted on and, (iii)thetrading of Unitsisnotsuspendedorhalted onany sole discretion,provides fair market value prices for theUnits; quoted onanothermarket whichtheTrustees consider, intheir Units mustbelisted for trading onastock exchange ortraded or the timesuchUnitsaretendered for redemption,theoutstanding limitation may bewaived atthediscretionof theTrustees); (ii)at same calendar monthmustnotexceed $50(provided thatsuch of suchUnitsandallothertendered for redemptioninthe limitations: (i)thetotal amountpayable by Crombieinrespect upon theredemptionof theirUnits is subjectto thefollowing investments. The entitlementof Unitholdersto receive cash mechanismfor holdersof Unitsto liquidateprimary their It isanticipated thattheredemptionof Unitswillnotbethe Restrictions onRedemptions return for investors. tax purposesmay changeover timeandmay affect theafter-tax be significant. Inaddition,the composition of cash distributions for andthatdeteriorationmaintain itsdistributioninthefuture, may market value of theUnitswilldeteriorate ifCrombieisunableto to reduce distributionsinorderto accommodate suchitems. The any. Crombiemay berequiredto usepartof itsdebtcapacity or commissions, capital expenditures andredemptionsof Units,if of items suchasprincipalrepayments, tenant allowances, leasing to distributionsmay fund belimited fromtimeto time because and capital expenditure requirements.Cashavailable to Crombie facilities, thesustainabilityof income derived fromanchortenants financial performance, obligationsunderapplicable credit and itssubsidiaries,aresubjectto various factors including entirely dependentontheoperations andassetsof Crombie make cash distributionsandtheactualamountdistributed are be generated by Crombie’sproperties.The abilityof Crombieto There can benoassurance regardingtheamountof income to Cash DistributionsAreNotGuaranteed MANAGEMENT’S DISCUSSION AND ANALYSIS RISK FACTORS RELATED TO THE UNITS (Inthousandsof CAD dollars,except perunitamounts)

and higherrecapture of depreciationorcapital gainsontheir in correspondingly lower deductions for taxation purposes CDL willbelower thantheirfair market value, generally resulting The cost amountfor taxation purposesof various propertiesof market values. if ithadacquired thepropertiesatataxcost equalto theirfair by CrombieLPwillbeinexcess of thatwhichitwould have been properties aredisposedof, thegainfor taxpurposesrecognized than theirfair market value. Accordingly ifoneormoreof such deferred basis,whereby thetaxcost of thesepropertiesisless Certain propertieshave beenacquired by CrombieLPonatax amount of cash available for distribution. such achallengewere to succeed, itcould adversely affect the expense deducted onthedebtowing by CDLto CrombieLP. If authorities willnotseekto challengetheamountof interest circumstances; however, therecan benoassurance thattaxation in thestructureof Crombieissupportableandreasonableinthe payable. Managementbelieves thattheinterest expense inherent interest expense, whichreduces earningsandtherefore income tax amount of inter-company orsimilardebt,generating substantial corporate suchasCDLgenerally involve subsidiary asignificant Income orREITstructuresinwhichthereisasignificant fund have anadverse impactonCrombieoritsUnitholders. other governmental authoritywillnotundertake initiatives which can benoassurance or thattheDepartment of Finance (Canada) under theAct andthusbeexempt fromthedistributiontax,there Notwithstanding thatCrombiemay meetthecriteria for aREIT the year. particular taxation year can onlybeascertained attheendof of Crombieand,assuch,theactualstatusof Crombiefor any years. The relevant tests applythroughoutthetaxation year contained intheAct throughoutthe2008through2016fiscal Crombie’s assertionthatitmeetstheREITtechnical tests Crombie’s organizational structureandoperations to support anextensiveCrombie anditsadvisorsunderwent review of Canadian REITs. accommodatefully thebusinessstructuresusedby many asaREIT.entities would qualify These technical tests didnot proposed anumberof technical tests to determine which While REITs were exempted fromtheSIFTtaxation, theAct restrictions onitsgrowth thatwould applyto SIFTs. in respectof distributionsto itsunitholdersor be subjectto the throughout itstaxation year willnotbesubjectto income tax throughout theworld. Atrustthatsatisfiesthecriteria of aREIT estate investment vehicles,” whicharewell-established structures provided to “recognize androleof collective theuniquehistory real real estate investment trusts(“REITs”). The exemption for REITs was corporate taxrates, beginningin2011,subjectto anexemption for trusts, orspecifiedinvestment flow-through entities(“SIFTs”), to trusts andpartnerships.The Act subjectsallexisting income related to thefederal income taxation of publiclytraded income Implementation Act, 2007(the“Act”) was passedinto law. The Act On June22,2007,taxlegislationBillC-52,theBudget to Unitholderswould likely bereduced. subject to corporate income tax,thecash available for distribution taxable income throughcash distributions.IfCDLshouldbecome disposition. Inaddition,CDL(unlike Crombie)may notreduce its

performance andotherfactors. prevailing interest rates, themarket for similarNotes, Crombie’s at adiscount fromtheirinitialoffering price, dependingupon there isnoguarantee thatitwillcontinue. The Notes may trade Even ifanactive trading market for theNotes doesdevelop, • • • • • factors, including: prices of theNotes may bevolatile andwilldependonmany favourable may notbeableto selltheirNotes ataparticulartimeor and liquidityof theNotes. Insuchcase, theholdersof theNotes be maintained,whichwould adversely affect themarket price Therefore, anactive market for theNotes may notdevelop or include theNotes inany automated quotationsystem. does notintend to listtheNotes onany securitiesexchange or There isnomarket throughwhichtheNotes may besold.Crombie Ownership of SeniorUnsecuredNotes (“Notes”) prospects. and future Crombie’s financial condition, historic financialperformance the market price of theUnits,general economic conditions and prevailing interest rates andthemarkets for similarsecurities, depending onmany factors, includingliquidityof theDebentures, The Debentures may trade atlower thanissuedprices Ownership of Debentures will occur could alsoproduce sucheffect. Units could fall. The perception amongthepublicthatthesesales and sellstheseUnitsinthepublicmarket, themarket price of the amounts of itsClassBLPUnitsorexchanges suchunitsfor Units with respectto theaffairs of Crombie.IfEmpiresellssubstantial it. Thus, Empire isinapositionto exercise acertain influence number of Trustees basedonthepercentage of Unitsheldby the Declaration of Trust, Empireisentitledto appointacertain providing for voting rightsinCrombie.Furthermore,pursuantto Crombie andwillbeattachedto aSpecialVoting Unitof Crombie, be exchangeable attheoptionof theholderfor oneUnitof Pursuant to theExchange Agreement, eachClassBLPUnitwill Crombie throughtheownership of REITandClassBLPUnits. dilutedEmpire holdsa41.5%(fully 40.3%)economic interest in Indirect Ownership of Units by Empire

the market for similarsecurities. them; and, the interest of securitiesdealersinmakingamarket for Crombie’s operating performance andfinancial condition; prevailing interest rates; the numberof holdersof Notes; price. Ifatrading market were to develop, trading future

management, includingitsPresidentandChief Executive Officer by Crombieisaccumulated andcommunicated to Crombie’s designed to ensurethatinformation requiredto bedisclosed the securitieslegislationandincludecontrols andprocedures summarized andreported withinthetimeperiodsspecifiedin submitted by itundersecuritieslegislationisrecorded, processed, Crombie initsannualfilings,interim filingsorotherreportsfiled designed to ensurethatinformation requiredto bedisclosedby Crombie maintainsasetof disclosurecontrols andprocedures CONTROLS ANDPROCEDURES (b) (a) SUBSEQUENT EVENTS material changesto Crombie’sinternal controls duringtheyear. ICFR was effective basedonthatevaluation. There have beenno ICFR asatDecember 31,2016,andhave concluded thatourcurrent theeffectiveness of thedesignandoperationtheir supervision, of CEO andCFOhave evaluated, orcaused to beevaluated under Organizations of theTreadway Further,our Commission (COSO). Framework (2013) assess theeffectiveness of ICFRis 52-109. The control framework managementusedto designand statements for external purposesasdefined inNationalInstrument reliability of financialreportingand thepreparation of financial reporting (“ICFR”)to provide reasonableassurance regardingthe internal controlsdesigned undertheirsupervision, over financial In addition,ourCEOandCFOhave designed,orcaused to be disclosure controls andprocedures areeffective. of December 31,2016.They have concluded thatourcurrent and effectiveness of ourdisclosurecontrols and procedures as regarding disclosure.OurCEOandCFOhave evaluated thedesign (“CFO”),asappropriate, to allowand Secretary timelydecisions (“CEO”) andExecutive Vice President,Chief FinancialOfficer February 28,2017. February be paidonMarch15,2017,to Unitholdersof record asof 28,2017.to The andincluding, February distributionswill 7.417 cents 1,2017 perUnitfor theperiodfromFebruary 16,2017,Crombiedeclareddistributionsof On February 31,2017. January 15,2017,to Unitholdersof recordpaid onFebruary asof 31,2017.to The andincluding, January distributionswere 7.417 cents 1,2017 perUnitfor theperiodfromJanuary 20,2017,Crombiedeclareddistributionsof On January

issuedby The Committee of Sponsoring Internal Control-Integrated ANNUALREPORT 2016

MD&A MD&A 54

CROMBIE REIT (1) FFO, as adjusted AFFO Distributions amounts) unit per except dollars, CAD of thousands (In Operating income Operating income Increase (decrease)innet Finance income (costs) – Finance costs – Operating income Taxes – Taxes – deferred current Operating income Impairment Depreciation and Finance costs General – and operations Expenses: administrative Gain (loss) on Property netoperating disposal $ Property operating Property revenue amounts) unit per except dollars, CAD of thousands (In distributions andperunitamountsfor theeightmostrecently completed quarters. The following tableshows information for revenues, expenses, increase(decrease)innetassetsattributableto Unitholders,AFFO,FFO, QUARTERLY INFORMATION MANAGEMENT’S DISCUSSION AND ANALYSIS distributions perunitdeclaredduringthe specificperiod. series of convertible debenturesoutstanding duringtheperiod,excluding any seriesthatisanti-dilutive. Distributionsperunitfor eachperiodarebasedonthetotal FFO andAFFOperunitarecalculated onadiluted basis.The diluted weighted average numberof total UnitsandSpecialVoting Unitsincluded theconversion of all Payout ratio Per unit–Diluted Per $ unit Basic – Basic Payout ratio Per unit–Diluted Per $ unit Basic $ – Basic Per unit Distributions per unit $ – per Diluted $ unit – to Unitholders Basic assets attributable financial instruments change infair value of Unitholders distributions to before taxes amortization income expenses

(1) (1) $ $

$ $ $

$ 105,269 $ Dec. 31, Dec. 31, Dec. (25,656) (32,987) 30,278 (6,000) (19,435) 32,987 $ 29,395 38,452 $ 75,874 45,452 $ 85.8% 72.6% (4,266) 31,478 (1,555) 1,200 9,761 2016 2016 0.30 $ 0.26 $ 0.26 $ 0.22 $ 0.21 $ 0.21 $ 0.31 $ (46) —

$ (Inthousandsof CAD dollars,except perunitamounts) 30, Sep. 30, Sep. (32,890) (25,342) 38,808 $ 32,890 $ (19,933) 98,757 $ 23,429 45,567 $ 27,732 84.8% 71,025 23,126 72.2% (8,975) (3,546) 1,225 (300) 2016 2016 0.26 $ 0.26 $ 0.22 $ 0.16 $ 0.16 $ 0.31 $ 0.31 $ 789 (3) —

$ 30, Jun. 30, Jun. (30,538) (24,793) 27,208 101,031 $ 27,308 (17,514) 30,538 $ 27,538 37,256 $ 82.0% 73,493 97.2% 31,432 $ (3,727) (4,122) 0.28 $ 0.28 $ 2016 2016 0.22 $ (100) 0.24 $ 0.24 $ (397) 0.21 $ 0.21 $ 244 — —

$ Three Months Ended Months Three Three Months Ended Months Three (29,322) (24,365) (16,450) 45,341 26,260 Mar. 31, Mar. 31, 30,641 32,048 $ 37,961 94,944 $ (2,000) 64,303 29,322 $ (4,407) 13,962 43,318 77.2% 91.5% 2016 2016 0.29 $ 0.29 $ 0.22 $ 0.24 $ 0.24 $ 0.33 $ 0.33 $ (23) (34) — 2015 2015 $

$ (24,600) (16,789) (29,236) 28,858 11,784 31, Dec. 31, Dec. 63,989 (12,223) 92,847 $ 29,236 $ 90.5% 13,945 (7,300) 32,310 $ 76.3% 2,200 3,068 38,311 $ (3,541) 0.29 $ 0.29 $ 0.22 $ 0.25 $ 0.25 $ 0.11 $ 0.11 $ (39) 25 2015 2015

$ 30, Sep. 30, Sep. (24,306) (16,340) 30,694 $ 26,892 29,153 (29,153) 89,611 (14,336) 95.0% 80.3% 18,150 62,719 17,929 36,312 $ (3,923) (3,112) 0.28 $ 0.28 $ 0.22 $ 0.23 $ 0.23 $ 400 (621) 0.14 $ 0.14 $ — — 2015 2015 $ $ $ 30, Jun. 30, Jun. (16,925) (24,287) 94,907 $ 39,079 $ (11,590) 67,579 27,328 88.9% 32,733 $ 17,629 17,153 29,111 74.5% (2,276) (29,111) (5,275) (3,463) 1,800 0.30 $ 0.30 $ 0.22 $ 0.25 $ 0.25 $ 0.13 $ 0.13 $ 368 — 2015 2015 $

$ (29,076) (16,522) 29,076 (12,642) (25,418) 16,902 Mar. 31, Mar. 31, 92,501 16,702 35,772 30,183 29,917 62,318 97.2% (3,474) 81.3% (200) (268) 0.22 0.27 0.27 0.23 0.23 0.13 0.13 (2) — —

– – – – – • ongoing events: been influenced by the following specific transactions and Variations inquarterly resultsover thepasteightquarters have

Property acquisitions anddispositions(excluding closing periods were: and transaction costs) for eachof theabove threemonth

price of $60,825; two additionsto existing retailpropertiesfor atotal purchase December 31,2015–acquisition of four retailpropertiesand for proceeds of $143,400; purchase price of $5,500anddisposition of 10retailproperties March 31,2016–acquisition of oneretail propertyfor atotal of $8,293; $502,683, anddispositionof two retailpropertiesfor proceeds to existing Crombiepropertiesfor atotal purchaseprice of development andtwo parcels of development landadjacent interest in three distributioncentres, apropertyfor June 30,2016–acquisition of 33retailproperties,a50% of $11,357; $32,858, anddispositionof two retailpropertiesfor proceeds one development propertyfor atotal purchaseprice of September 30,2016–acquisition of oneretailpropertyand proceeds of $32,500; price of $34,000,anddispositionof five retailproperties for an additionto anexisting office property for a total purchase December 31,2016–acquisition of two retailpropertiesand

Dated: February 22,2017 Dated: February filingsatwww.sedar.com.for Canadianregulatory Annual Information Form,can befound ontheSEDAR website Additional information relatingto Crombie,includingitslatest • • – – – New Glasgow, Nova Scotia, Canada

REIT UnitsandClassBLPUnits. results asdetailedabove andby thetimingof theissuance of Per unitamountsfor FFOandAFFOareinfluenced by operating paving androof repairs. summer andfall periodsincludeparticularexpenses suchas these sameperiods.Propertyoperating expenses duringthe recoverable expense, thusincreasingpropertyrevenue during particular expenses suchassnow removal, whichisa Property operating expenses duringwinter monthsinclude Crombie’s businessissubjectto seasonalfluctuations. Property revenue andpropertyoperating expenses –

property for atotal purchaseprice of $12,650. March 31,2015–acquisition of anadditionto anexisting retail property for atotal purchaseprice of $2,333;and, June 30,2015–acquisition of anadditionto anexisting retail a total purchase price of $20,500; September 30,2015–acquisition of oneretailpropertyfor

ANNUALREPORT 2016

MD&A FINANCIAL STATEMENTS 56

CROMBIE REIT 22,2017 February Chief Executive Officer President and Donald E.Clow, FCPA, FCA the Audit Committee. in approving theannualconsolidated financialstatements to beissued to unitholders. The external auditors havefull andfreeaccess to financial information andthesafeguarding of assets. The Audit Committee reportsitsfindings totheBoard of Trustees for consideration independent of, theTrust, meetregularlywithfinancialmanagementand itselfas externalto reliabilityandintegrity auditors of to satisfy and systems of internal control. The Audit Committee, whichischairedby andcomposed solelyof trustees whoareunrelated to, and The Board of Trustees, throughitsAudit Committee, oversees management incarrying outitsresponsibilitiesfor financialreporting financial reporting. integrity of theconsolidated financialstatements, thesafeguard of Trust assets,andtheprevention anddetection of fraudulent Management of theTrust hasestablishedandmaintainsasystem of internal control thatprovides reasonableassurance asto the in thereportisconsistent withthatcontained intheconsolidated financialstatements. International FinancialReportingStandardsandreflect management’sbestestimates andjudgments.Allotherfinancialinformation in thereportisresponsibilityof management.The consolidated financialstatements have beenpreparedinaccordance with Preparation of theconsolidated financialstatements accompanying thisannualreportandthepresentation of allotherinformation MANAGEMENT’S STATEMENT OF RESPONSIBILITY FOR FINANCIAL REPORTING February 22,2017 February and Secretary Executive Vice President,Chief FinancialOfficer FCPA,Glenn R.Hynes, FCA

February 22,2017 February Halifax, Canada Licensed PublicAccountants Chartered Professional Accountants, who expressed 24,2016. anunmodifiedopiniononthosefinancialstatements onFebruary The financialstatements of CrombieRealEstate Investment Trust for the year endedDecember 31,2015 were audited by anotherauditor Other matter International FinancialReportingStandards. subsidiaries asatDecember 31,2016andtheirfinancialperformance andtheir cash flows forthe yearthenendedin accordance with In ouropinion,theconsolidated financialstatements present fairly, inallmaterial respects,thefinancial position ofCrombieandits Opinion We believe thattheauditevidence we have andappropriate obtainedissufficient to provide abasis for ourauditopinion. estimates madeby management,aswell asevaluating theoverall presentationof theconsolidated financialstatements. internal control. Anauditalsoincludesevaluating theappropriateness of accounting policiesusedandthereasonablenessof accounting procedures thatareappropriate inthecircumstances, but notfor thepurposeof expressing anopinionontheeffectiveness of theentity’s control relevant to theentity’spreparation andfair presentationof theconsolidated financialstatements inorder to designaudit of theconsolidated financialstatements, whetherdue to fraud orerror.Inmakingthoseriskassessments,theauditor considers internal statements. The procedures selected dependontheauditor’s judgment,includingtheassessmentof therisks of material misstatement An auditinvolves performing procedures to obtainauditevidence abouttheamountsanddisclosuresinconsolidated financial material misstatement. and planperform theauditto obtainreasonableassurance aboutwhethertheconsolidated financialstatements arefreefrom accordance withCanadiangenerally accepted auditingstandards.Those standardsrequirethatwe comply withethical requirements Our responsibilityisto express anopinionontheseconsolidated financialstatements basedonouraudit. We conducted ourauditin Auditor’s responsibility preparation of consolidated financialstatements thatarefreefrommaterial misstatement, whetherdue to fraud orerror. International FinancialReportingStandards,andfor suchinternal control asmanagementdetermines to isnecessary enablethe Management isresponsiblefor thepreparation andfair presentationof theseconsolidated financialstatements inaccordance with Management’s responsibilityfor theconsolidated financialstatements of significanta summary accounting policiesandother information. explanatory income, changesinnetassetsattributableto unitholdersandcash flows for the year thenended,andtherelated notes, which comprise subsidiaries, whichcomprise theconsolidated balance sheetasatDecember 31,2016andtheconsolidated statements of comprehensive We have audited theaccompanying consolidated financialstatements of CrombieRealEstate Investment Trust (“Crombie”)andits TO THE BOARD OF TRUSTEES OF CROMBIE REAL ESTATE INVESTMENT TRUST INDEPENDENT AUDITOR’S REPORT

ANNUALREPORT 2016 57

FINANCIAL STATEMENTS FINANCIAL STATEMENTS 58

CROMBIE REIT Lead Trustee John Eby “Signed JohnEby” Approved onbehalfof theBoardof Trustees See accompanying notes to theconsolidated financialstatements. Subsequent Commitments events and contingencies Net assetsattributableto Unitholdersrepresented by: Current liabilities Non-current liabilities Liabilities Total Assets Current assets Non-current assets Assets dollars) CAD of thousands (In CONSOLIDATED SHEETS BALANCE CONSOLIDATED FINANCIAL STATEMENTS $ $ Special Voting UnitsandClassBLimited PartnershipUnitholders Crombie REIT Net Unitholders Total liabilitiesexcluding netassetsattributableto Unitholders assets attributable Trade to Employee and Unitholders Investment future other property benefits payables debt obligation Trade Employee and Deferred future other Convertible taxes benefits payables Senior debentures obligation Investment unsecured property notes debt Investment Long-term properties Other receivables held Cash assets for and sale cash Long-term equivalents Other receivables Investment assets Investment in properties joint ventures

$ Audit Committee Chair J. MichaelKnowlton “Signed J. MichaelKnowlton”

Note 24 23 10 12 12 13 13 11 8 8 9 6 6 4 5 5 7 3 $

December 31, December

1,390,146 2,388,549 3,914,886 3,716,720 $ 1,765,824 3,963,318 1,390,146 $ 2,573,172 398,588 834,203 $ 555,943 184,623 75,400 191,247 84,688 132,134 99,653 48,432 34,567 13,865 8,493 6,104 8,110 2016 282 815 — —

December 31, December 3,202,886 1,147,230 2,324,963 3,304,377 1,548,648 2,166,843 3,472,193 1,147,230 398,080 694,484 452,746 100,891 158,120 167,816 119,448 74,200 92,555 33,978 131,518 65,319 13,333 7,736 6,661 1,057 2015 600 246 —

See accompanying notes to theconsolidated financialstatements. Comprehensive income (loss) Other comprehensive income Items thatwillbesubsequentlyreclassified to Increase(decrease) Items thatwillnotbesubsequentlyreclassified to Increase(decrease) Other comprehensive income Increase (decrease)innetassetsattributableto Unitholders Change infair value of financialinstruments Distributions Finance costs –other to Operating income attributableto Unitholders Unitholders Taxes Taxes – Operating income before taxes – deferred Finance current General costs Amortization of deferred leasingcosts and – Amortization administrative operations Depreciation of expenses Impairment of intangible Gain ondisposalof investment properties of investment assets Net propertyincome investment properties Property properties Property operating revenue dollars) CAD of thousands (In expenses CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) in netassetsattributableto Unitholders: in netassetsattributableto Unitholders:

to Costs incurredonderivatives designated ascash flow hedgestransferred finance costs –Unamortized actuarialgains(losses) inemployee benefit obligation future operations

Note 16 12 14 $ 17 13 11 11 3 3 3 3 3

December 31, December Year ended 400,001 $ (100,156) 115,306 284,695 (125,425) (125,737) 126,356 (66,552) 125,130 (6,000) 37,490 (16,341) (1,200) (6,170) 2,440 2,035 $ 2,330 2016 (295) (610) (110) ANNUALREPORT 2016 (26) 312

December 31, December Year ended 256,605 369,866 (116,520) (60,498) (116,576) (12,575) 113,261 (50,791) (47,919) 64,465 65,729 (14,401) (98,611) (5,480) (2,936) 4,200 2,520 2,872 (598) 2015 352 56 23

FINANCIAL STATEMENTS FINANCIAL STATEMENTS 60

CROMBIE REIT See accompanying notes to theconsolidated financialstatements. Balance, December 31,2015 Units issued Statements of comprehensive under Conversion DRIP Adjustments of 1,2015 Balance, January related debentures to dollars) CAD of thousands (In EUPP Balance, December 31,2016 Unit issueproceeds, netof Units issuedunderDistribution Statements of comprehensive Adjustments 1,2016 Balance, January related to dollars) CAD of thousands (In EUPP CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS income (loss) costs of Reinvestment $5,889 Plan income (“DRIP”) (loss)

Units BLP Class BLPUnits Class Voting Special Voting Special $ $

$ $ REIT Units, REIT REIT and Units and Units 1,473,885 $ 1,473,885 1,714,724 $ 1,462,101 (Note 18) (Note 18) 219,111 11,504 21,661 Units, 205 67 75 — —

Unitholders to $ $ Unitholders to Attributable Attributable Assets Net Assets Net (265,010) (316,003) (315,750) (315,750) (50,791) (295) 42 51 — — — — Accumulated Comprehensive Comprehensive $ $ $ $ (Loss) Income (Loss) Income Accumulated (10,905) (10,905) (13,777) (8,575) Other Other 2,872 2,330 — — — — — —

$ $ $ $ 1,147,230 1,183,314 1,390,146 $ 1,147,230 (47,919) 219,111 11,504 21,661 2,035 Total Total 205 109 126

$ $ Units REIT Units REIT 694,484 $ 694,484 834,203 $ 716,025 (28,595) 125,971 12,666 6,723 Attributable to Attributable Attributable to 205 973 109 126

$ $

LP Units LP LP Units 467,289 452,746 452,746 555,943 Class B Class Class B Class (19,324) 93,140 8,995 1,062 4,781 — — —

See accompanying notes to theconsolidated financialstatements. Cash andcash equivalents, endof year Cash andcash equivalents, beginningof year Net changeincash andcash equivalents Cash provided by (usedin)investing activities Additions to deferred leasingcosts Additions Proceeds ondisposalof investment properties to Additions tenant Acquisition of investment propertiesandintangibleassets to incentives Investing Activities investment Cash provided by (usedin)financingactivities properties Collection of (increasein)long-term receivables Repayment REIT UnitsandClassBLPissuecosts of REIT UnitsandClassBLPissued EUPP Redemption loans Deferred financingcharges–seniorunsecurednotes of receivable Issue convertible Advance (repayment) of floating rate credit facilities of debentures Repayment senior Deferred financingcharges–investment propertydebt of unsecured Issue mortgages notes Financing Activities of Cash provided bymortgages (usedin)operating activities Income Change inothernon-cash operating items taxes Items paid Increase (decrease)innetassetsattributableto Unitholders not Operating Activities affecting Cash flows provided by (usedin) operating dollars) CAD of thousands (In cash CONSOLIDATED STATEMENTS OF CASH FLOWS

Note 19 19

$ December 31, December Year ended (550,863) 225,000 (463,361) 193,401 395,384 192,549 (98,566) (29,928) 66,920 (74,071) 90,374 68,901 (6,036) (5,889) (2,967) (1,048) (1,686) (1,057) 1,057 2016 (295) ANNUALREPORT 2016 67 — $ — — — — 2015

$ December 31, December Year ended (116,332) (106,440) 125,000 (15,000) 119,134 (25,684) (79,954) (44,795) (50,791) (12,638) 75,664 94,015 (1,020) 2,770 (3,591) 41,114 1,057 (988) 1,481 (826) (302) 446 611 75 — —

FINANCIAL STATEMENTS NOTES 62

CROMBIE REIT of the building(notexceeding 40years) anditscomponents, significant partsandresidual value. Depreciation of buildingsiscalculated usingthestraight-line method withreference to eachproperty’scost, the estimated life useful in Note 2(w). intangible assets.Investment properties arecarried atcost lessaccumulated depreciationandare reviewed for impairmentasdescribed Investment propertiesarewhichheld to earnrentalincome. Investment propertiesincludeland,buildingsand (e) Investment properties entities inlinewiththepoliciesof Crombie. entities have thesamereportingperiodasCrombieandadjustments, ifany, aremadeto bringtheaccounting policiesof jointventure cost withsubsequentadjustmentsfor Crombie’sshareof theresultsof operations and any changeinnetassets.Crombie’sjointventure Investment injoint ventures isaccounted for usingtheequitymethod.Undermethod,investment isinitiallyrecorded at about thesignificant relevant activities of thearrangement requireunanimous consent of thepartiessharing control. the netassetsof thejointventure. Jointcontrol exists wherethere isacontractual agreementfor sharedcontrol andwhereindecisions A jointventure isanentityover whichCrombiesharesjointcontrol withotherparties andwherethejointventure partieshave rightsto Joint ventures expenses of thejointoperation intherelevant categories of Crombie’sfinancialstatements. related to thearrangement. Forjointoperations, Crombierecognizes itsproportionate shareof theassets,liabilities,revenues and A jointoperation isanarrangement whereinthepartiesto thearrangement have rightsto theassetsandobligationsfor theliabilities Joint operations ventures dependingonthecontractual arrangements related to therightsandobligationsof thepartiesto thearrangement. sharing of control over thedecisionsrelated to therelevant activities.Jointarrangements areclassifiedaseitherjointoperations orjoint Joint arrangements arebusinessarrangements whereby two ormorepartieshave jointcontrol. Jointcontrol isbasedonthecontractual (ii) Jointarrangements from theeffective date of acquisition, orupto theeffective date of disposal,asapplicable. Operating income (loss)andothercomprehensive income (loss)of subsidiariesacquired ordisposedof during theperiodarerecognized entity perspective. unrealized lossesonintercompany assetsalesarereversed onconsolidation, theunderlyingassetisalsotested for impairmentfroman All intercompany transactions, balances, income andexpenses areeliminated inpreparingtheconsolidated financialstatements. Where entities over whichCrombie hascontrol. Allsubsidiarieshave areportingdate of December 31,2016. Crombie’s financialstatements entitiesasatDecemberconsolidate those of Crombieandall31,2016.Subsidiariesare of itssubsidiary (i) Subsidiaries (d) Basisof consolidation comparative period. statements; or(iii)reclassifiesitems onthebalance sheet,itwillpresentanadditionalbalance sheetasatthebeginning of theearliest When Crombie:(i)appliesanaccounting policyretrospectively; (ii)makes aretrospective restatement of items initsfinancial (c) Presentationof financialstatements (“FVTPL” classification) ordesignated as available for sale(“AFS”)thathave beenmeasuredat fair value. and liabilitiesclassifiedas fair value withchangesin fair value recognized inIncrease(decrease)netassetsattributable to Unitholders to thenearest thousand.The consolidated financialstatements arepreparedonahistorical cost basis except for any financialassets The consolidated financialstatements arepresentedfunctional andreportingcurrency,rounded inCanadiandollars(“CAD”); Crombie’s (b) Basisof presentation issued by theInternational Accounting StandardsBoard(“IASB”). These consolidated financialstatements have beenpreparedinaccordance withInternational FinancialReportingStandards(“IFRS”)as (a) Statement of compliance 2 The consolidated financialstatements were authorized for issue by theBoard of 22,2017.Trustees onFebruary Exchange “CRR.UN”. (“TSX”)underthesymbol December 31,2015includetheaccounts entities. The of Crombieandallof itssubsidiary unitsof Crombiearetraded ontheToronto Stock Suite 200, New Glasgow, Nova Scotia, Canada,B2H3S2.The consolidated financialstatements for the years endedDecember 31,2016and office andmixed usepropertiesinCanada.Crombieisregistered inCanadaandtheaddress of itsregistered office is610EastRiver Road, the Declaration of Trust 1,2006,asamended.The dated January principalbusinessof Crombieisinvesting inincome-producing retail, Crombie RealEstate Investment Trust (“Crombie”)isanunincorporated “open-ended”realestate investment trustcreated pursuant to 1 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL INFORMATION AND NATURE OF OPERATIONS (Inthousandsof CAD dollars)

Comprehensive Income (Loss). recognized atfair value. Subsequentto initialrecognition, changesinfair value arerecognized intheConsolidated Statements of conditions. The multipleembeddedderivative features aretreated asasinglecompound embedded derivative liabilityandinitially The embeddedderivative features includeaholderconversion optionatany timeandanissuerredemptionoptionundercertain interest method. derivative features. Subsequentto initialrecognition, thedebtcomponent ismeasuredatamortized cost usingtheeffective component of theconvertible debenturesisrecognized initiallyatthefair value of asimilardebtinstrumentwithouttheembedded Upon issuance, convertible debenturesareseparated into theirdebtcomponent and embeddedderivative features. The debt are redeemableby theissuerundercertain conditions (Note 10). Convertible debenturesissuedby Crombieareconvertible into afixed number of REITUnits (a liability)attheoption of theholderand (h) Convertible debentures includes apropertytypeorgeographic areaof operations. operating resultsarepresented separately intheConsolidated Statements of Comprehensive Income (Loss).Acomponent of Crombie Assets thatareclassifiedasheld for saleandthat constitute a component of Crombiearepresented asdiscontinued operations andtheir not to sell. recognized haditbeencontinuously classifiedasheldandinuse,itsestimated fair value atthedate of thesubsequentdecision value amountbefore itwas classifiedasheld for sale,adjusted for any depreciationandamortization expense that would have been are notdepreciated andamortized. Apropertythatissubsequentlyreclassifiedasheldandinusemeasuredatthelower of its carrying sale arecarried atthelower of theircarrying values andestimated fair value lesscosts to sell.Inaddition,assetsclassifiedasheld for sale to thecurrentestimated fair value of the property,andthesaleisexpected to becompleted withinaoneyear period.Propertiesheldfor committed to aplanto sellthepropertyandisactively locating apurchaserfor thepropertyatasalesprice thatisreasonableinrelation continuing use.Apropertyisclassifiedasheld for saleatthepointintime when itis available for immediate sale,managementhas A non-currentassetisclassifiedasheld for saleifits amountwillberecoveredcarrying principallythroughasaletransaction rather than (g) Assetsheldfor saleanddiscontinued operations date of acquisition. Cash andcash equivalents aredefined as cash onhand, cash inbankandguaranteed investments withamaturitylessthan90days at (f) Cashandcash equivalents accounted for prospectively by amortizingthecumulative changesover theremainingestimated life useful of therelated assets. may bedifferent. Revisions to theestimated lives useful of investment propertiesconstitute achangeinaccounting estimate andare life. Estimated lives useful of significant investment propertiesarebasedonmanagement’sbestestimate lives andtheactualuseful The estimated lives useful of significant investment propertiesarereviewed whenever events orcircumstances indicate achangeinuseful lifeChange inuseful of investment properties and liabilitiesassumedfromtheacquiree aremeasured attheirfair value ontheacquisition date. liabilities assumed,consideration transferred andany goodwillorbargainpurchase)arerecognized andmeasured.The assetsacquired For businesscombinations, theacquisition method isusedwhereinthecomponents of thebusinesscombination (assets acquired, liabilities assumedatacquisition. Fair value of debt leases attheendof theinitialleaseterm, adjusted for theestimated probabilityof renewal. Intangible assets Buildings Land the following: the acquisition date. Assetacquisitions donotgive riseto goodwill.Fairvalue of suchassetsandliabilitiesisdetermined basedon For assetacquisitions, thetotal cost isallocated to theidentifiableassetsandliabilitiesonbasis of theirrelative fair values on assets thatarecapable of beingmanagedfor thepurposeof providing areturnto theUnitholders. acquired propertymeetsthedefinition of abusinessunderIFRS3–Business Combinations; beinganintegrated set of activitiesand to beaccounted for asanassetacquisition orabusinesscombination. Atransaction isconsidered to beabusinesscombination ifthe Upon acquisition, Crombieperforms anassessmentof investment propertiesbeingacquired to determine whethertheacquisition is to thebuilding andamortized onastraight-line basisover theestimated life useful of theimprovement. Repairs andmaintenance items areexpensed asincurredor,inthecase of majoritems thatconstitute acapital asset,arecapitalized Amortization of intangibleassetsiscalculated usingthestraight-line methodover theterm of thetenant lease. –theamountallocated to landisbasedonanappraisal estimate of itsfair value. –arerecorded attheestimated fair value of thebuildinganditscomponents andsignificant parts. –arerecorded for tenant relationships,basedonestimated costs avoided shouldtherespective tenants renew their –values ascribedaredetermined basedonthedifferential between contractual andmarket interest rates onlong-term

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CROMBIE REIT related leaseagreements.Realtytaxandoperating cost recoveries, and otherincidentalincome, arerecognized onanaccrual basis. a reductioninpropertyrevenue. Percentage rentsarerecognized whentenants areobligated to pay suchrentundertheterms of the In addition,tenant incentives are amortized onastraight-line basisover theterm of existing leasesandthe amortization is shown as for thedifference between thestraight-line rentrecorded aspropertyrevenue andtherentthatis contractually duefromthetenants. the rentalrevenue fromleasesonastraight-line basisover theterm of thelease.Accordingly, anaccrued rentreceivable isrecorded and otherincidentalincome. Certain leaseshave rentalpayments thatchangeover theirterm dueto changesinrates. Crombierecords Property revenue includesrentsearnedfrom tenants under leaseagreements,percentage rent,realtytaxandoperating cost recoveries, (l) Revenue recognition Crombie hasaDRIPwhichisdescribedinNote 18. (k) Distributionreinvestment plan(“DRIP”) Alternatively,Crombie willbeissuedfromtreasury. anRUParticipantmay electto convert theirRUsto DUsunderCrombie’sDU Plan. the vesting date, withthemarket value of eachRUdetermined by themarket value of aREITUnit.NoUnitsorothersecuritiesof any applicable withholdingtaxes) equalto thenumberof vested RUsheldby theRUParticipantmultipliedby themarket value on which endsonthevesting date. Onthevesting date, eacheligibleRUParticipantshallbeentitledto receive acash amount(netof (“RUs”). The RUsareaccounted for underIAS 19Employee benefits andtheliability expense arerecognized over period the service each year to participate intheRUPlanandreceive alloraportionof theirannuallong-term incentive planawards inrestricted units Crombie hasanRUPlanfor certain eligibleexecutives andemployees (“RUParticipants”),whereby theRUParticipantsmay elect (ii) Restricted UnitPlan(“RUPlan”) value recognized intheConsolidated Statements of Comprehensive Income (Loss). measurement purposes,eachDUismeasuredbasedonthemarket value of aREITUnitatthebalance sheetdate withchangesinfair as acash payment orinstead receive CrombieREITUnitsfor redeemedDUsafter deductingapplicable withholdingtaxes. Forfair value the REITUnit’smarket price onredemptiondate, lessapplicable withholding taxes. The Participantmay electto receive thisnetamount receive thenetvalue of thevested DUsbeingredeemed,withthenetvalue determined by multiplyingthenumberof DUsredeemedby redemption willalsooccur astheresultof specific events suchastheretirement of aParticipant.Uponredemption,Participantwill administrative expenses. AParticipantmay redeemtheir vested DUsinwholeorpartbywritten filinganotice of redemption; vestedDUs arefully atthetimethey areallocated, withthevalue of theaward recorded asaliabilityandexpensed asgeneral and portion of theireligiblecompensation determined by indeferred theBoard(oritsdesignated units(“DUs”).Unless otherwise Committee), Crombie provides DUPlanwhereby avoluntary eligibletrustees, officers andemployees (the“Participants”)may elect to receive allora (i) Deferred UnitPlan(“DUPlan”) (j) Unitbasedcompensation plans In measuringitsdefined benefit liability,Crombierecognizes actuarialgainsandlossesdirectly toother comprehensive income (loss). introduction of, orchangesto, cost theplan,past service willberecognized immediately. the average perioduntilthebenefit becomes vested. To the extent thatthebenefits arealready vested immediately following the The impactof changesinplanprovisions willberecognized inbenefit costs onastraight-line basis over aperiodnot exceeding employment benefit planareunfunded. currency, having terms of maturitywhichaligncloselywiththeperiodof maturityof theobligation.The defined benefit planandpost- defined benefit obligationisbasedonthediscount rate determined by reference totheyield ofhighquality corporate bonds ofsimilar expected growth rate of healthcare costs. The fair value of any planassetsisbasedoncurrentmarket values. The presentvalue of the will berecognized. Otherfactors considered escalation, for otherbenefit plansincludeassumptionsregardingsalary retirementagesand unit creditmethodto determine thefair value of theplanassetsandtotal actuarialgainsandlossestheproportionthereof which value of thedefined benefit obligationandcurrentservice costisdetermined bydiscounting theestimated benefits usingtheprojected techniques, of theamountof benefits employees have earnedinreturn inthecurrentandpriorperiods. for theirservices The present they The renderservices. cost of defined benefit pensionplansandotherbenefit plansis accruedbasedonestimates, usingactuarial The cost of Crombie’spensionbenefits for defined contributionplansis expensed foremployees inrespect oftheperiodinwhich (i) Employee benefits obligation future of Comprehensive Income (Loss). derivative extinguished asof thedate of redemption,andany gainorlossonredemptionisrecogni NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Inthousandsof CAD dollars)

Crombie willberequiredto settletheobligation;and,areliableestimate can bemadeof theamountof theobligation. Provisions arerecognized when: Crombiehasapresentobligation(legalorconstructive) asaresultof apastevent; itisprobablethat (t) Provisions income (loss),hasbeenincluded intheConsolidated Statements of Changes in NetAssetsAttributable to Unitholders. changes innetassetsattributableto Unitholdersandothercomprehensive income (loss)for theyear. Accumulated othercomprehensive and circumstances fromnon-unitholdersources. Crombiereports aconsolidated statement of comprehensive income (loss),comprising Comprehensive income (loss)isthechange innetassetsattributableto Unitholdersduringaperiodfromtransactions andotherevents (s) Comprehensive income (loss) in interest rates onthehedgeditems. Crombie assessesonanongoingbasiswhetherany existing derivative financialinstrument continues to be effective changes in offsetting eachother. offset in operating income. To theextent thefair value hedgeiseffective, thechangesinfair value of thehedgeandhedged item will value hedgesandtherelated hedgeditems arerecognized onthebalance sheetatfair value withany changesinfair value recognized income (loss)arereclassified to operating income inthesameperiods whichthehedgeditem isrecognized inoperating income. Fair ineffective portionof thecash flow hedgeisrecognized inoperating income. Amountsrecognized inaccumulated other comprehensive balance sheetatfair value withtheeffective portionof thehedgingrelationshiprecognized inothercomprehensive income (loss).Any Crombie may usecash flow hedges to manage exposures to increasesin variable interest rates. Cashflow hedgesarerecognized onthe (r) Hedges income (loss)orchangeinnetassets,respectively. cash flow hedges)ordirectlyinchangenetassets,which case therelated deferred tax isalsorecognized inother comprehensive except wherethey relate to items thatarerecognized inothercomprehensive income (loss)(suchastheunrealized gainsandlosseson same taxation authority. Changesindeferred taxassetsorliabilitiesarerecognized asacomponent of income orexpense inoperations, Deferred onlywhenCrombiehasarightandintention taxassetsand/orliabilitiesareoffset to taxassetsandliabilitiesfromthe setoff expected to reverse. are computed usingsubstantively enacted corporate income taxrates for theyears inwhichtax andaccounting basisdifferences are tax consequences of differences between thecarrying amountof balance sheetitems andtheircorresponding taxvalues. Deferred taxes Income taxes areaccounted for usingtheliabilitymethod.Underthismethod,deferred taxes arerecognized for theexpected deferred Deferred taxassetsand/orliabilitiesof Crombierelate to taxandaccounting basisdifferences of allincorporated subsidiariesof Crombie. amounts incurredinitsincorporated subsidiaries. to make to distributionsnotlessthantheamountnecessary ensurethatCrombiewillnotbeliableto pay income tax,except for the Crombie istaxed trust”for asa“mutualfund income taxpurposes. Itistheintention of Crombie,subjectto approval of thetrustees, (q) Income taxes declared payable by thetrustees, Crombiehasnocontractual obligationto pay cash distributionsto Unitholders. The determination to declareandmake payable distributionsfromCrombieisatthediscretionof theBoardof Trustees and,until (p) Finance costs –distributionsto Unitholders related. All otherfinance costs –operations are expensed intheperiodwhichthey areincurred. redevelopment, assetarecapitalized construction orproductionof aqualifying asacomponent of thecost of theassetto whichitis Finance costs –operations primarilycomprise interest onCrombie’sborrowings. Finance costs directly attributableto theacquisition, (o) Finance costs –operations costs –operations usingtheeffective interest method,over theterm of therelated debt. Deferred financingcharges consist of costs directlyattributable to theissuance of debt. These chargesareamortized infinance (n) Deferred financingcharges amount of equipmentandvehicle leasesthatareexpensed to general andadministrative expenses asincurred. Operating leasesconsist mainlyof landleaseswhichareexpensed to propertyoperating costs asincurred.Crombiealsohasasmall (ii) revenue recognition policy(Note 2(l)). Crombie hasdetermined thatallof itsleaseswithtenants areoperating leases.Revenue isrecorded inaccordance withCrombie’s (i) Operating leases to thelessee. Allotherleasesareclassifiedasoperating leases. Leases areclassifiedasfinance leaseswhenever the terms ofthelease transfer substantiallyalltherisks and rewards ofownership (m) Leasing Crombieaslessee Crombie aslessor

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CROMBIE REIT or liability,assumingthatmarket participantsactintheireconomic bestinterest. The fair value of anassetoraliabilityismeasuredusingtheassumptionsthat market participantswould usewhenpricingthe asset advantageous market mustbeaccessible by Crombie. or liabilityor,intheabsence of aprincipalmarket, inthemostadvantageous market for theassetorliability. The principalorthemost on thepresumptionthattransaction to selltheassetortransfer theliabilitytakes place eitherintheprincipalmarket for the asset financial liabilityinanorderlytransaction between market participantsatthemeasurementdate. The fair value measurementisbased The fair value of financialinstrumentsisthe estimated amountthatCrombie would receive to sellafinancialassetor pay to transfer a (v) Fairvalue measurement policies relatingto convertible debenturesaredescribedinNote 2(h). and issuerredemptionoptionsinCrombie’sconvertible debenturesareconsidered to beembeddedderivatives. Crombie’saccounting Embedded derivatives arerequiredto beseparated andmeasuredatfair values ifcertain criteria aremet.The holderconversion option the event any debtisextinguished, theassociated unamortized financing costs are expensed immediately. costs incurredto establishrevolving creditfacilities aredeferred andamortized onastraight-line basisover theterm of thefacilities. In fair value of thefinancialassetor financialliabilityoninitialrecognition andamortizedeffective usingthe interest method.Financing Transaction costs, otherthanthoserelated to financialinstrumentsclassifiedasFVTPLthatare expensed asincurred,areadded tothe investment properties,deferred taxes andemployee benefits obligationarenotfinancialinstruments. future Other balance sheetaccounts, including,butnot limited to, prepaid expenses, accrued straight-line rentreceivable, tenant incentives, Senior unsecurednotes Convertible debentures(excluding embeddedderivatives) Investment propertydebt Accounts payable andotherliabilities(excluding convertible Derivative financialassetsandliabilities Marketable Long-term receivables securities Restricted cash Trade receivables Cash andcash equivalents Asset/Liability Crombie’s financialassetsandliabilitiesaregenerally classifiedandmeasuredas follows: interest method,dependingupontheirclassification. recognized. Subsequentmeasurementfor theseassetsandliabilitiesisbasedoneither fair value oramortized cost usingtheeffective measured atamortized cost withgainsandlossesrecognized incomprehensive income (loss)intheperiodthatliabilityisnolonger value withchangesinfair value recognized inincrease(decrease)netassetsattributableto Unitholdersfor theperiod;and,b)other– period thattheassetisnolongerrecognized orimpaired.Classification choices for financialliabilitiesinclude:a)FVTPL–measuredat fair – recorded atamortized cost withgainsandlossesrecognized inincrease(decrease)netassetsattributableto Unitholdersinthe other comprehensive income (loss)for thecurrentperioduntilrealized throughdisposalorimpairment;and,d)loansandreceivables period thattheassetisderecognized orimpaired;c)available-for-sale –measuredat fair value withchangesinfair value recognized in – recorded atamortized cost withgainsandlossesrecognized inincrease(decrease)netassetsattributableto Unitholdersinthe with changesinfair value recognized inincrease(decrease)netassetsattributableto Unitholdersfor theperiod;b)heldto maturity thereto for thepurposeof ongoingmeasurement. Classification choices for financialassetsinclude:a)FVTPL–measuredat fair value Crombie classifiesfinancialassetsandliabilities according totheircharacteristics andmanagement’schoices andintentions related (u) Financialinstruments Crombie’s provisions areimmaterial andareincludedintrade andotherpayables. reliable estimate of theobligation.Changesinprovision arerecognized intheperiodof thechange. Provisions for thecost of eachclosureandrehabilitationprogram arerecognized atthetimeof occurrence andwhenCrombiehasa required andtheassociated costs aredependentontherequirementsof therelevant authoritiesandCrombie’senvironmental policies. Environmental liabilitiesarerecognized whenCrombiehasanobligationrelatingto site closureorrehabilitation.The extent of thework receivable can bemeasuredreliably. Provisions reflect Crombie’sbestestimate atthereportingdate. third party,thereceivable isrecognized asan assetifitisvirtuallycertain thatreimbursementwillbereceived andtheamountof the of money ismaterial. Whensomeorallof theeconomic benefits required to settleaprovision are expected to berecovered froma flows estimated to settlethepresentobligation,its amountisthepresent value of those carrying cash flows, wherethetime value sheet date, takinginto account therisks anduncertainties surroundingtheobligation.Whereaprovision ismeasuredusingthecash The amount recognized asaprovision isthebestestimate of theconsideration requiredto settlethepresentobligat NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS debentures embeddedderivatives andinterest rate swaps)

(Inthousandsof CAD dollars)

Loans andreceivables Loans andreceivables Loans andreceivables Loans andreceivables Other liabilities Other liabilities Other liabilities Other liabilities Classification FVTPL FVTPL

Amortized cost Amortized cost Amortized cost Amortized cost Amortized cost Amortized cost Amortized cost Amortized cost Measurement Fair value Fair value

• • • The components of Comprehensive income (loss)areallocated between REITUnitsandClass BLPUnitsasfollows: (v) Allocation of Comprehensive income (loss) Earnings perShare,thereisnodenominator for purposesof calculation of perunitmeasures. As aresultof theclassification of allunitsasfinancialliabilities,Crombiehasnoequityinstrument;therefore, in accordance with IAS 33 (iv) Presentationof perunitmeasures attributable to Unitholdersto reflect the absence of anequity component on theBalance Sheet. to Unitholdersasafinance cost. Inaddition, terminology suchasnetincome hasbeen replaced by Increase(decrease)innetassets As aresultof theclassification of allunitsasfinancialliabilities,theStatement of Comprehensive Income (Loss)recognizes distributions (iii) Statement of Comprehensive Income (Loss)presentation as netassetsattributableto Unitholdersreflects that,in total, theinterests of theUnitholdersislimited to thenetassets of Crombie. classified asfinancialliabilitiesaregenerally required toberemeasured to fair valueateachreportingperiod,thealternative presentation REIT UnitsandClassBLPwithattachedSVUsarecarried ontheBalance Sheetatnetassetvalue. Althoughputtable instruments (ii) Balance Sheetmeasurement operating resultsattributableto Unitholders. as netassetsattributableto Unitholdersdoesnotalter theunderlyingeconomic interest of theUnitholdersinnetassetsand for equityclassificationqualifying onitsBalance Sheetpursuant to IFRS. The classification ofallunitsasfinancialliabilitieswithpresentation in classification asequity;however, Crombie’sunitsdonotmeetthe exception requirements. Therefore, Crombiehasnoinstrument puttable instruments,meetingthedefinition of financialliabilitiesin IAS 32. Thereare exception testswithin IAS 32which couldresult generally classifiedasfinancialliabilities.Crombie’sREITUnitsandClassBLPwithattachedSpecial VotingUnits(“SVU”)areboth In accordance withInternational Accounting Standard (“IAS”) 32FinancialInstruments:Presentation,puttableinstrumentsare (i) Balance Sheetpresentation (x) Netassetsattributableto Unitholders periods. Areversal of impairmentlossisrecognized immediately inoperating income. estimate, butislimited to thecarrying amountthat would have beendetermined ifnoimpairmentlosshadbeenrecognized inprior Where animpairmentlosssubsequentlyreverses, thecarrying amountof theasset(orcash generating unit)isincreased to the revised impairment lossisrecognized asanexpense immediately inoperating income. to belessthanitscarrying amount, thecarrying amountof theasset(orcash generating unit)isreduced to therecoverable amount.An of thecash generating unit(s)to whichtheassetbelongs.Whenrecoverable amountof anasset(orcash generating unit)isestimated in use.Wheretheassetdoesnotgenerate cash flows thatareindependentfromotherassets,Crombieestimates therecoverable amount in orderto determine theextent of impairmentloss(ifany). The recoverable amountisthehigherof fair value lesscosts to sellandvalue the carrying value of theassetsmay notberecoverable. Whensuchanindication exists, therecoverable amountof theassetisestimated Long-lived tangibleanddefinite life intangibleassetsarereviewed for impairmentwhen events orchangesincircumstances indicate that (w) Impairmentof long-lived tangibleanddefinite life intangibleassets • • • When determining thehighestandbestuseof non-financialassetsCrombietakes into account the following; the assetinitshighestandbestuseorby sellingitto anothermarket participantthatwould usetheassetinitshighestandbestuse. A fair value measurementof anon-financialassettakes into account amarket participant’sability to generate economic benefits byusing swap isestimated by discounting netcash flows of the swaps interest using forward rates for swaps of thesameremainingmaturities. value, maximizingtheuseof relevant inputs.The inputsandminimizing theuseof unobservable observable fair value of any interest rate Crombie usesvaluation techniques thatare appropriate inthecircumstances andfor dataare whichsufficient available to measure fair

use thatisfinancially feasible –Crombieassesseswhetherause of theassetthatisphysically possibleandlegallypermissiblegenerates use thatislegallypermissible–Crombieassessesany legalrestrictionsontheuseof theassetthatmarket participantswould take into use of theassetthatisphysically possible–Crombieassessesthephysical characteristics of theassetthatmarket participantswould accumulation allocation rate. outstanding duringthereporting period,decreasesinpreviously accumulated amountsaredrawn down basedontheaverage Accumulated other comprehensive income (loss)–increasesareallocated basedon theweighted average numberof units Distributions to Unitholders–basedontheactualdistributionspaidto eachseparate unitclass. Operating income –basedontheweighted average numberof unitsoutstandingduringthereporting period. asset putto thatuse. adequate income orcash flows to produce aninvestment returnthatmarket participants would require fromaninvestment inthat account whenpricingtheasset;and, take into account whenpricingtheasset;

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CROMBIE REIT of investment properties andthesignificant components thereof to calculate depreciation andamortization. Investment propertiesarecarried atcost lessaccumulated depreciation.Crombieestimates theresidualvalue lives anduseful (iii) Investment properties and liabilitiesof thearrangement orto thenetassetsof thejointarrangement. agreements andcontractual arrangements; and,determining whetherCrombie’srightsandobligationsaredirectlyrelated to theassets determining thesignificant relevant activitiesandassessing thelevel of control orinfluence Crombiehas over suchactivitiesthrough Crombie makes judgmentsindetermining theappropriate accounting for investments inother entities.Suchjudgmentsinclude: (ii) Investment injointarrangements Notes 3and21. might pay orreceive inactualmarket transactions. The significant methodsandassumptionsusedinestimating fair value aresetoutin conditions for instrumentswithsimilarterms andrisks. Suchfair value estimates arenotnecessarily indicative of theamountsCrombie are notavailable, Crombieestimates thefair value basedondiscounted cash future flows usingdiscount rates that reflect currentmarket In estimatingthefair value of anassetoraliability,Crombieusesmarket-observable datato theextent itisavailable. WhereLevel 1inputs fair value. A numberof assetsandliabilitiesincluded inCrombie’sconsolidated financialstatements requiremeasurementat,and/ordisclosure of, (i) Fairvalue measurement statements relate to thefollowing: estimates. The estimates andassumptionsthatarecritical to thedetermination of theamountsreported intheconsolidated financial statements andthereported amountsof revenues andexpenses duringthereportingperiod.Actual resultsmay differ fromthese reported amountsof assetsandliabilities the disclosureof contingent assetsandliabilitiesatthedate of theconsolidated financial The preparation of theconsolidated financialstatements requiresmanagement to make estimates andassumptionsthataffect the (z) Critical accounting estimates andassumptions differences willhave animpactontheincome taxanddeferred taxbalances intheperiodwhensuchdetermination ismade. to theultimate taxdetermination of certain items. Wheretheactualliability arisingfromtheseissuesdiffers fromtheseestimates, such Crombie recognizes expected liabilitiesfor taxbasedonanestimationof thelikely taxes due,whichrequiressignificant judgmentas legal oreconomic limitsoruncertainties areassessedindividuallyby managementbasedonthespecific facts andcircumstances. without atimelimit,thatdeferred taxassetisusuallyrecognized The infull. recognition of deferred taxassetsthataresubjectto certain loss orcredit.Ifapositive forecast of taxable income indicates theprobableuseof adeferred taxasset,especiallywhenitcan beused budget forecast, whichisadjusted for significant non-taxable income and expenses andspecificlimits totheuse of any unusedtax The assessmentof taxable theprobabilityof future income inwhichdeferred tax assetscan beutilized isbasedonCrombie’slatest (v)Income taxes instrument exception. inherent inthispolicyrelate to applyingthecriteria setoutinIAS 32,“FinancialInstruments: Presentation”,relatingto theputtable Crombie’s accounting policiesrelatingto theclassification of UnitsasliabilitiesaredescribedinNote 2(x). The critical judgments (iv) Classifications of Unitsasliabilities be operating leases. ground leaseswhereCrombieisthelesseeareoperating leases.Alltenant leaseswhereCrombieisalessorhave beendetermined to and thepropertymeetsdefinition of investment property,areoperating orfinance leases.Crombiedetermined thatalllong-term Crombie makes judgmentsindetermining whethercertain leases,inparticularlong-term groundleaseswhereCrombieisthelessee (iii) Leases and contractual arrangements. determining thesignificant relevant activitiesandassessingthelevel of influence Crombiehas over suchactivities throughagreements Crombie makes judgmentsindetermining theappropriate accounting for investments inotherentities.Suchjudgmentsinclude: (ii) Investment injointventures asset acquisitions. are considered to beassetacquisitions orbusinesscombinations. Crombiehasdetermined thatallpropertiesacquired to date are in determining whethercertain costs areadditionsto thecarrying amountof aninvestment propertyandwhetherpropertiesacquired Crombie’s accounting policiesrelatingto investment propertiesaredescribedinNote 2(e).Inapplyingthesepolicies,judgmentisapplied (i) Investment properties significant effect onthe consolidated financialstatements: The following arethecritical judgmentsthathave beenmadeinapplyingCrombie’saccounting policiesandthathave themost (y) Critical judgmentsinapplyingaccounting policies NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Inthousandsof CAD dollars)

financial statements. applied retrospectively. Managementiscurrentlyassessing theimpactadoptionof this standardwillhave onCrombie’sconsolidated customers. IFRS15iseffective 1,2018,withearlyadoptionpermitted andisto for be annualperiodsbeginningonorafter January Programmes. This standardoutlinesasingle comprehensive modelfor entitiesto account for revenue arisingfromcontracts with In May 2014,theIASB issuedIFRS15whichreplaces IAS 11Construction Contracts, IAS 18Revenue and IFRIC13Customer Loyalty (ii) IFRS15–Revenue fromContracts withCustomers the impactadoptionof thisstandardwillhave onCrombie’sconsolidated financial statements. effective 1,2018,withearlyadoptionpermitted. Managementiscurrently assessing for annualperiods beginningonorafter January hedged items andrisks eligiblefor hedgeaccounting andalignshedgeaccounting morecloselywithriskmanagement. IFRS9is recognition lifetime of full expected lossesifcertain criteria aremet.Anew modelfor hedgeaccounting expands thescope of eligible instruments notmeasuredatFVTPLthatrequiresrecognition of expected lossesatinitial recognition of afinancialinstrument andthe instead of increase(decrease)innetassetsattributableto Unitholders.IFRS9alsointroduces animpairmentmodelfor financial designated atFVTPL,IFRS9requiresthepresentationof theeffects of changesinourown creditrisk inothercomprehensive income financial liabilitiesremaingenerally unchanged,withthe exception of financialliabilitiesrecorded atFVTPL.Forfinancialliabilities permit measurementatamortized cost orfair value throughothercomprehensive income. The classification andmeasurement of cash flow characteristics of thefinancialassets.FinancialassetswillbemeasuredatFVTPLunless certain conditionsaremetwhich The new standardrequiresassetsto beclassifiedbasedonthebusiness model for managingthefinancialassetsand contractual IFRS 9hasthreemainphases:classification andmeasurement,impairment andgeneral hedging. In July2014,theIASB issuedIFRS9FinancialInstrumentswhich replaces IAS 39–FinancialInstruments:Recognition andMeasurement. (i) IFRS9–FinancialInstruments is currentlyevaluating policiesonitsconsolidated theimpactof thesefuture financialstatements. below areonlythosestandardsthatmay have amaterial impactontheconsolidated financialstatementsfuture periods.Management in The IASB hasissuedanumberof standardsandinterpretations withaneffective date after thedate of these financialstatements. Setout (aa) Futurechangesinaccounting standards costs andtermination costs. estimated cash flows, discount rates, lease-up rates, inflation rates, renewal rates, tenantincentive allowances, costrecoveries andleasing a numberof estimates andunderlyingassumptions including,butnotlimited to, highestandbestusefair value of theproperties, assets. Uponacquisition, managementallocates thepurchaseprice of theacquisition asdescribedinNote 2(e).This allocation contains Investment propertiesarewhichheldto earnrentalincome. Investment propertiesincludeland,buildingsandintangible (vii) Purchaseprice allocation benefit obligations. uncertainties exist particularlywithregardto medical cost trends,whichmay significantly vary future appraisals in of Crombie’sdefined which thebenefits willbepaidand thathave terms to maturityapproximating the terms of therelated pensionliability. Estimation factors aredetermined eachreportingperiodby reference to highqualitycorporate bondsthataredenominated inthecurrency inflation, medical cost trendsandmortality. Italsotakes into account increases.Discount futuresalary Crombie’sspecificanticipation of outcome may dueto estimationuncertainties. vary The estimate of Crombie’sdefined benefit liabilityisbasedonstandard rates of Management estimates thedefined benefit liabilityannuallywiththeassistance ofindependentactuaries; however, theactual (vi) Defined benefit liability property income, isthenappliedto thenetannualpropertyincome to arrive atthepropertyvaluation. leasing theproperty. Ayieldobtainedfromanindependentvaluation company, whichreflects thespecificrisks inherentinthenet performed usinginternally generated valuation modelspreparedby considering theaggregate netpropertyincome received from to transfer aliabilityinanorderlytransaction between market participantsatthemeasurementdate. Internal quarterly valuations are period of four years. The fair values, basedonthemeasurementdate, representtheprice thatwould bereceived to sellanassetorpaid location andcategory of propertiesbeingvalued, value Crombie’sinvestment propertyportfolio onarotatingbasisover amaximum External, independent valuation companies, having appropriate recognized professional qualifications andrecent experience inthe (v) Investment propertyvaluation periods. Areversal of impairmentlossisrecognized immediately inoperating income. estimate, but islimited to thecarrying amountthatwould have beendetermined ifnoimpairmentlosshadbeenrecognized inprior Where an

ANNUALREPORT 2016

NOTES NOTES 70

CROMBIE REIT the higherof theeconomic benefits of the continued use of the assetorthesellingprice less costs to sell. exceeded therecoverable amount for thatproperty. The recoverable amountwas determined to beeachproperty’sfair value whichis Impairment was measured onaperpropertybasisandwas determined as theamountby whichcarrying value, usingthecost method, the resultof thefair value impactof tenant departuresduringtheyear; lower occupancy rates; andslower thanexpected leasingactivity. ended December 31,2015,recorded animpairmentof $12,575onthreeretailpropertiesandanoffice property. The impairments were During theyear ended December 31,2016,Crombierecorded animpairmentof $6,000ontwo retailproperties andduringtheyear at thetimeof impairment. over carrying value arenotrecognized untilrealized throughdispositionorderecognition of properties,whileimpairmentisrecognized 2016 (December 31,2015–$708,949).Crombieusesthecost method for accounting for investment properties,andincreasesinfair value Crombie’s total fair value of investment properties,includingpropertiesheldfor sale,exceeds carrying value by $844,033atDecember 31, Net carrying value, December 31,2015 Balance, Transfer frominvestment propertiesheldfor sale(Note 7) December Transfer to investment propertiesheldfor sale(Note 7) 31, Impairment 2015 Disposition Depreciation Opening and balance, amortization Accumulated depreciationandamortization January Balance, 1, Transfer frominvestment propertiesheldfor sale(Note 7) December 2015 Transfer to investment propertiesheldfor sale(Note 7) 31, Disposition 2015 Additions Acquisitions Opening Cost $ balance, January 1, 2015 value,Net carrying December 31,2016 Balance, Transfer to investment propertiesheldfor sale(Note 7) December Impairment 31, Disposition 2016 Depreciation Opening and balance, amortization Accumulated depreciationandamortization January Balance, December 31,2016 1, Transfer to investment propertiesheldfor sale(Note 7) 2016 Disposition Additions Acquisitions Opening Cost $ balance, January 1, 3 2016 that applyIFRS15.Managementiscurrentlyassessingtheimpactof IFRS16onCrombie’sconsolidated financialstatements. practice. The standardiseffective 1,2019,withearlyapplication for annualperiodsbeginningonorafter January permitted for entities with limited exceptions for short-term leasesorof low value assets.Lessoraccounting remainssimilarto currentaccounting the accounting by lessees,introducingasingle,on-balance sheetaccounting modelthatissimilarto currentfinance leaseaccounting, controls theassetbeingleased.Forthoseassetsdetermined to meetthedefinition of alease, IFRS16introduces significant changes to control modelto theidentification of leases,distinguishing between aleaseandservice contract onthebasis of whetherthecustomer 2016,theIASB issuedIFRS16whichreplacesIn January IAS 17,“Leases”anditsassociated interpretative guidance. IFRS16appliesa (iii) IFRS16–Leases NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

and and impairment INVESTMENT PROPERTIES

impairment

$ (Inthousandsof CAD dollars) 1,221,084 1,223,441 976,002 976,002 976,002 $ 259,796 977,895 $ 20,503 (13,503) (31,619) (1,453) 2,357 2,357 Land 3,537 Land 7,139 1,310 (164) — — — — — — — — — — — $

$ 2,500,700 2,500,700 $ 2,820,193 2,434,462 Buildings 2,479,018 $ Buildings 2,178,075 322,625 322,625 (103,315) 312,684 263,391 385,731 (23,572) 60,498 (18,424) 30,849 66,552 74,229 (7,020) 28,319 12,575 23,155 4,608 3,643 (706) (468) (69) (23) $ $ Intangibles Intangibles 114,549 57,098 45,607 52,529 52,529 99,019 $ 57,451 50,913 18,285 98,136 98,136 $ (3,956) (4,432) (1,846) 5,480 3,457 (1,591) 6,170 (26) (10) 92 92 — — — — — — $ $ Costs Leasing Costs Leasing Deferred Deferred 7,800 6,780 6,780 $ 5,540 $ 3,202 4,077 2,965 3,578 3,578 3,723 $ 1,185 (332) 1,118 (165) (217) 598 454 232 610 (111) — — — — — — — —

$ 3,202,886 3,716,720 4,165,983 3,561,472 3,581,618 3,581,618 (139,698) 590,765 449,263 378,732 378,732 (39,086) 317,269 (22,597) 36,004 66,576 98,189 27,810 33,344 73,332 6,000 (8,722) 12,575 (2,159) 4,932 Total Total (658) (79) (23)

December December 31, 31, 2015 2016 capitalization rate of 0.25%would resultinanincrease(decrease)thefair value of theinvestment propertiesasfollows: Crombie hasutilized thefollowing weighted average capitalization rates andhasdetermined thatanincrease(decrease) in thisapplied be moreappropriate thantherate previously used,thefair value of theinvestment propertieswould increaseordecreaseaccordingly. provided capitalization rate ranges changefromonereportingperiodto thenext, orshouldanotherrate withintheprovided ranges Crombie utilizes capitalization anddiscount rates withintheranges provided by external valuations. To theextent thatthe externally As atDecember 31,2016,allpropertieshave beensubjected to external, independentappraisal over thepastfour years. of notmorethanfour years. (iii) External appraisals redevelopment. method whenthecapitalized netoperating income methodindicates ariskof impairmentorwhenapropertyiswillbeundergoing the discount rate appliedover theinitial term of thelease,aswell asleaserenewals andnew leasingactivity. Crombieemploys this terms of theleaseorleasesfor thatspecificpropertyandassumptionsas to renewal andnew leasing activity. The key assumptionsare (ii) The discounted cash flow method appropriate rate for eachpropertyfromtherange provided. Crombiegenerally employs thismethodto determine fair value. of rates for various geographic regionsandfor various typesandqualitiesof propertieswithineachregion.Managementselectsthe quarterly capitalization rate reportsfromexternal, knowledgeable propertyvaluators. The capitalization rate reportsprovide arange revenue lesspropertyoperating expenses). The key assumptionisthecapitalization rates for eachspecificproperty. Crombiereceives (i) The capitalized netoperating income method out below: The valuation techniques andsignificant inputsusedindetermining the unobservable fair value of investment propertiesareset use asadevelopment propertywould resultinhigherfair values. each property’scurrentuseasarevenue generating investment property. Crombieowns several propertieswherethehighestandbest The fair reflects the value includedinthissummary fair value of thepropertiesasatDecember 31,2016and2015,respectively, basedon received to sellanassetorpaidto transfer aliabilityinanorderlytransaction between market participantsatthemeasurementdate. The fair value of investment propertiesisaLevel 3fair value measurement.The fair value representstheestimated price thatwould be Total Investment carrying Tenant properties value Accrued incentives held Investment straight-line for properties rent sale receivable value consistsCarrying of thenetcarrying value of: December December 31,2016 31, 2015 The estimated fair values of Crombie’sinvestment propertiesareasfollows:

–Crombiehasexternal, independentappraisals performed onallpropertiesarotationalbasisover aperiod $ $ $ –Underthismethod,discount rates areappliedto theforecasted cash flows reflecting theinitial –Underthismethod,capitalization rates areappliedto netoperating income (property

Capitalization Impact of a 0.25% Change in Capitalization Rate Capitalization in Change a0.25% of Impact Weighted Average 5.88% $ 6.15% Note Rate 5 5 7 3 $

$ December 31, 31, December 4,752,000 $ 4,143,000 3,907,967 $ 3,716,720 Fair Value

(163,000) (191,000) $ Increase 132,022 in Rate 59,225 2016 ANNUALREPORT 2016 — 2015 $ $

$ Carrying Value Carrying December 31, 31, December 3,202,886 3,434,051 3,907,967 3,434,051 Decrease 208,000 177,

50,050 119,448 in Rate 61,667 000

NOTES NOTES 72

CROMBIE REIT of one property’slandthroughapartialexpropriation. The carrying value of theportiondisposedwas derecognized atthattime. carrying value of theportiondisposedwas derecognized atthat time. Duringthefourth quarter of 2015,Crombiedisposed of aportion During thefirstquarter of 2015,Crombiedisposed of aportion of oneproperty’sland and buildingthroughapartial expropriation. The The initialacquisition prices stated above exclude closingandtransaction costs. (2) EmpireincludesCompany Limited, arelated party,anditssubsidiaries. (1) Relates to anacquisition of anaddition to apre-existing retailproperty. December 23,2015 November 3,2015 November 3,2015 August April 1,2015 18, 2,2015 February 2015 Date Transaction 2015 The initialacquisition (disposition)prices stated above exclude closingandtransaction costs. which hassince beendemolishedaspartof aredevelopment planfor theproperty. The remainingacquisitions anddispositionswere transacted withthirdparties.The acquisition onJune23,2016was avacant building existing Crombieproperties,withaninitialacquisition price of $9,975. distribution centres. Inadditionto the22propertiesincluded intheabove schedulewere two parcels of development landadjacent to or itssubsidiaries(“Empire”),arelated party. The June29,2016acquisition included19retailpropertiesanda50%interest inthree The dispositiononJuly15,2016andtheacquisitions onJuly 29,2016andJunewere transacted withEmpireCompany Limited which isnotincludedintheabove schedule.This investment isbeingaccounted for asajointoperation. On July8,2016,Crombieacquired a50%interest inadevelopment propertywithathirdpartyfor aninitialacquisition price of $5,250 (1) EmpireincludesCompany Limited, arelated party,anditssubsidiaries. December 13,2016 December 8,2016 November November 30, August 15,2016 14, 2016 July 29,2016 2016 July 15,2016 June 29,2016 June June 23, June 9, 2016 May 1, 2016 May 16, 2016 April 28,2016 3, 2016 April 15,2016 2016 April March 10,2016 8, February 2016 5, Date Transaction 2016 2016 date of disposition. The operating resultsof acquired propertiesareincludedfromtherespective date of acquisition andfor disposedpropertiesupto the Investment PropertyAcquisitions andDispositions NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (1)

(1)

Vendor/Purchaser Vendor/Purchaser (Inthousandsof CAD dollars) Third party Third party Third party Third Third party Third party party Third Third party Third party Third party Third party Third party party Third party Third Third party party Third party Third party Empire Empire Empire Empire Empire Empire Empire

(1) (1) (1) (2) (2) (2) (2)

Properties Properties (Disposed) (Disposed) Acquired Acquired (10) 22 (4) — — — — (1) (1) (1) (1) (1) 9 2 4 1 1 1 1 1 1 1 1 1 Initial Initial Approximate Approximate 2,090,000 1,442,000 $ (791,000) (215,000) (80,000) Footage Footage 333,800 $ (48,000) 183,800 (47,000) 117,000 (21,000) 50,000 84,000 29,000 62,000 58,000 94,000 54,000 37,000 34,800 Square Square 21,000 $ 51,000 $ (8,000) 6,000 6,700 7,500 (Disposition) (Disposition) (Disposition) Acquisition Acquisition (143,400) 363,058 $ 348,386 29,000 29,000 20,500 (10,750) 46,200 26,400 (21,750) 96,308 $ 48,845 15,700 32,272 12,650 $ (7,500) (2,300) (9,057) 5,000 7,000 14,150 5,500 $ 8,450 3,530 2,333 Price Price Price (793)

Mortgages Mortgages Assumed Assumed 39,902 16,093 12,077 17,556 12,017 5,479 8,041 3,751 — — — — — — — — — — — — — — — — — —

Tenant Accrued incentives Restricted straight-line Prepaid cash rent Marketable expenses receivable Net securities and $ Provision for accounts doubtful trade deposits Trade receivables receivables 5 The entityhadnooperating resultsduringthereportingperiods. Crombie’s Net investment Current assets in Non-current liabilities joint Current liabilities ventures Non-current assets assets The following tablerepresents100%of thefinancialresults of theequityaccounted entitiesasatDecember 31,2016: at Davie Street,Vancouver, BC. The 19,2016,isengagedinthedevelopment entity,whichwas created onJanuary of amixed use(retailandresidential)propertylocated 1600 Davie Limited The following representsCrombie’sinterest initsequityaccounted investments: Partnership 4 Gain on disposal values derecognizedCarrying Selling Gross costs proceeds disposed: Investment property Assumed Net mortgages Fair value debtadjustmentonassumedmortgages purchase Intangibles price Buildings Land net: acquired, property Investment The allocation of thetotal cost of theacquisitions (includingclosingandtransaction costs) isasfollows:

Provisions Accrued Tenant straight-line Deferred Incentives rent Intangibles leasing Buildings costs Land

INVESTMENT IN JOINT VENTURES OTHERASSETS

$ $ $ $ $ $ $ $ Current 34,567 12,104 11,498 11,625 2,290 8,675 (127) — — Non-current

$ $ December 31, 2016 31, December 132,022 191,247 59,225 — — — — — — $

132,022 225,814 $ 59,225 12,104 11,498 11,625 $ 2,290 8,675 Total

(127)

Current 33,978 $ 10,624 $ 10,548 10,564 2,874 7,952 1,965 (60) 75 Non-current 2016 2016

December 31, 2015 31, December December 31, December 31, December Year ended Year ended (101,842) 549,791 589,693 259,796 $ 100,891 $ (39,902) 192,549 312,684 (45,288) 195,621 $ 37,490 $ 18,285 47,176 (3,072) 53,715 (3,434) (1,072) (3,701) (747) (173) ANNUALREPORT 2016 126 — — — — — — $ Limited

2015 2015 $ December 31, December December 31, December 31, December Partnership Year ended Year ended 1600 Davie 1600 134,869 50,050 20,503 61,667 (17,556) 79,954 74,229 50.0% 10,624 10,548 10,564 97,510 2,770 (1,453) 3,457 1,849 3,323 1,629 1,965 Total (1,151) 2016 (679) (683) (553) 540 793 573 (60) 815 75 23 — — — —

NOTES NOTES 74

CROMBIE REIT depreciation and amortization notrecorded during theperiodpropertywas classifiedasheld for sale. on theproperty. As aresult,depreciationandamortization totalling $673was recognized inthefirstquarter of 2015,representingthe the criteria andwas reclassified to in use. The determination was basedonthedecision to defer thesale to maximize Crombie’s return During thefirstquarter of 2015,Crombiedetermined thataninvestment propertypreviously classified asheld forsalenolongermet as heldfor sale. sale asatDecember 31,2015was disposedof onApril28,2016.AsatDecember 31,2016,noproperties metthecriteria for classification 10 retailpropertiestoOn March10,2016,Crombiedisposed of athirdparty. The remainingpropertywhichwas classifiedasheld for Net carrying value, December 31,2015 Assets transferred fromheldfor sale Assets transferred to heldfor sale Balance, January 1, 2015 Net Derecognition Assets transferredthrough to heldfor sale disposition Additions Balance, January 1, 2016 7 See Note 21(a) for fair value information. The loanisrepayable March31,2017. During March2014,Crombieadvanced of Empireto partiallyfinance $11,856to asubsidiary theiracquisition of development lands. The amountreceivable fromathirdpartypertainsto adevelopment propertywhichwas acquired onJuly8,2016. Amount Amount receivable Interest receivable from Capital rate from third expenditure subsidy related party program$ party 6 See Note 21(a) for fair value information. included intenant incentive additionsandisbeingamortized over the20year amendedleaseterms. On June29,2016,Crombieinvested $58,823intherenovation andexpansion of 10existing Sobeys anchoredproperties.The amountis Balance, Transfer frominvestment propertiesheldfor sale(Note 7) December Transfer to investment propertiesheldfor sale(Note 7) 31, Disposition 2015 Amortization Additions Balance, January Balance, December 31,2016 1, Transfer to investment propertiesheldfor sale(Note 7) Disposition 2015 Amortization Additions Balance, January Tenant Incentives 1, 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

INVESTMENT PROPERTIES HELD FOR SALE LONG-TERM RECEIVABLES carrying value,

December $ 31, 2016 $ $ $ $ $ $ $ $ — Current (31,785) 13,865 $ 13,762 31,619 31,619 31,619 (7,139) Land Land 7,139 $ 103 164 — — $ 2 Non-current

December 31, 2016 31, December $ $ — (Inthousandsof CAD dollars) Buildings Buildings (85,290) 84,891 (23,711) 84,891 84,891 23,711 5,607 6,104 $ 399 392 105 $ — —

Deferred

$ $

$ $ — Intangibles Intangibles 19,969 $ 13,762 5,607 Total (492) 495 476 476 476 $ 105 $ 16 — — $ —

Deferred

$ $ Leasing Costs Costs Leasing — 107,122 Current 107,122 $ 187,162 $ 83,092 94,825 $ 12,509 (3,049) (4,625) 13,333 $ 13,111 4,413 Cost (222) 222 $ 222 (119) 115 115 115 $ (3) — — — — — — $ 4

Non-current Amortization $

December 31, 2015 31, December $ Accumulated

— Incentives Incentives Tenant Tenant 45,455 $ 45,455 $ 35,574 $ 55,140 $ (2,506) (2,278) 11,622 2,347 $ 2,347 2,506 $ (1,936) (2,321) 2,347 $ 1,907 9,712 600 $ 540 495 105 $ (28) — — — — (1) 2

— Net Carrying Net (120,007) 119,448 119,448 119,448 132,022 (33,578) 83,092 (11,622) 61,667 12,509 33,578 61,667 59,251 13,933 (2,347) Value 2,506 (9,712)

13,111 (1,113) Total

Total Total (540) 717 105 581 (22)

(2) —

unsecured bond rating withDBRS andwhetherthefacility remainssecured or migrates to anunsecuredstatus. acceptance rates plusaspreadorspecific margin over prime rate. The specified spreadormarginchanges dependingonCrombie’s is subjectto available borrowing base(December 31,2016–borrowing baseof $398,007).The floatinginterest rate isbasedonbankers’ development activity. Itissecuredby apoolof firstandsecond mortgages on certain propertiesandthemaximumprincipalamount June 30,2019.The facility isusedby Crombie for working capital purposesandto provide temporary financing for acquisitions and The floating rate revolving credit facility has a maximumprincipalamount of $400,000 (December 31,2015–$300,000)andmatures Floating Rate Revolving Credit Facility December 31, ended: year the For 2015 December 31, ended: year the For 2016 Mortgage Activity in otherassets. properties, investment propertiesheldfor sale,aswell asaccrued straight-line rentreceivable andtenant incentives whichareincluded pledged assecurityfor mortgages orprovided assecurityfor thefloating rate revolving credit value includesinvestmentfacility. Carrying Specific investment propertieswitha value of $2,974,237asatDecembercarrying 31,2016(December 31,2015–$2,686,589)arecurrently Unamortized Deferred fair financingvalue Thereafter charges debt December adjustment December 31, December 31, 2021 December 31, 2020 December 31, 2019 31, Ending 12 Months 2018 2017 As atDecember 31,2016,debtretirementsfor thenext five years are: Deferred Floating rate revolving creditfacility financing Fixed rate mortgages charges Deferred Unsecured financingFloating rate revolving creditfacility bilateral charges Fixed rate mortgages credit facility 8

INVESTMENT PROPERTY DEBT $ $ $ $ $ $ $ Repayment Repayment Assumed Assumed Type New New Type

Mortgages of Number of Number Mortgages 10 12 11 11 2 4

Principal Payments Principal

2.70 –6.90% 2.35 –6.90% Fixed Rate 347,148 $ 118,470 40,204 49,290 $ 42,028 48,799 Range 48,357 Range 4.02% 4.88% 2.85% 4.85% 3.48% 4.81% Rates Rates

Average Weighted Average Weighted Rate Interest Rate Interest Fixed Rate Maturities Weighted Weighted 1,304,943 $ Terms in Average Terms in Average 750,518 225,241 124,973 64,666 50,363 $ 89,182 2.48% 4.62% 2.64% 4.46% 2.54% Years Years 4.9 6.7 4.7 3.5 — —

Weighted

Weighted Years in Period Years in Period Average Term Amortization Amortization Floating Rate Floating Average Term Amortization Amortization Maturity to Maturity to Maturities 5.90 years 2.50 years 1.37 years 6.6 years 2.5 years 100,000 120,374 220,374 24.8 $ 24.9 $ 12.6 ANNUALREPORT 2016 21.3 — — — $ — — —

$ $ (Repayments) December 31, December

December 31, December (Repayments) 1,865,477 1,521,079 1,641,203 1,655,817 Proceeds Proceeds 1,872,465 1,865,477 100,000 193,402 868,988 120,374 130,000 183,530 267,269 294,146 129,386 213,023 119,134 (49,774) (10,714) (58,162) 39,902 78,528 99,653 (10,714) 17,556 (9,876) 3,726 Total 2016 2015

NOTES NOTES 76

CROMBIE REIT See Note 21(a) for fair value information. to Crombieataprice equalto 101%of theprincipalamountplusaccrued andunpaidinterest. of redemption ormaturity,asapplicable. Uponchangeof control of Crombie,Debentureholdershave therightto puttheDebentures outstanding dividedby 95%of thevolume-weighted average trading price of theREITUnitsfor astipulated periodpriorto thedate or uponredemption,inwholepart,by issuingthe numberof REITUnitsequalto theprincipal amount of theDebenturesthen a currentevent of default, Crombiewillhave itsobligationto pay theoptionto satisfy theprincipalamountof the Debenturesatmaturity at any timeattheredemption price equalto theprincipalamountthereof plusaccrued andunpaidinterest. Provided that thereisnot the endof thefive year periodfromthedate of issue,and to thematuritydate, theDebenturesmay beredeemed,inwholeorpart, tradingending onthefifth day preceding thedate onwhichnotice of redemptionisgiven exceeds 125% of the conversion price. After interest, provided thatthevolume-weighted average trading price of theREITUnitsonTSX for the20consecutive trading days 60 days’ andnotlessthan30days’ priornotice, ataredemptionprice equalto theprincipalamountthereof plusaccrued andunpaid debentures hasaperiod,lastingtwo years, during whichtheDebenturesmay beredeemed,inwholeorpart,onnotmorethan For thefirstthree years fromthedate of issue,thereisnoability to redeemtheDebentures,after which,eachseries of convertible 2,985,074 REITUnitsand4,338,192Units,respectively, subjectto anti-dilutionadjustments. and theSeriesEConvertible Debentureswere exercised, asatDecember 31,2016,Crombiewould berequiredto issueapproximately and 58.3090REITUnitsfor SeriesEConvertible Debentures.Ifallconversion rightsattachingto theSeriesDConvertible Debentures conversion rate peronethousanddollarsof principalamountof approximately: 49.7512REITUnitsfor SeriesDConvertible Debentures at theoptionof thedebentureholder atany timeupto thematuritydate, attheconversion price indicated inthetable above, beinga its interest obligation.The SeriesDandEConvertible Debentures(collectively the“Debentures”)areconvertible into REITUnits each year. Crombiehastheoptionto pay interest onany interest payment date by issuingREIT unitsandapplyingtheproceeds to satisfy The SeriesD(issuedJuly3,2012)andEAugust 14,2013)Debenturespay interest semi-annuallyonMarch31andSeptember 30 REIT Units Series Issued C Debenture Conversions Deferred Series E(CRR.DB.E) financing Series D(CRR.DB.D) charges 10 See Note 21(a) for fair value information. Deferred Unamortized financingSeries Series charges Series C B Series B issue A premium 9 See Note 21(a) for fair value information. depending onCrombie’sunsecuredbondrating withDBRS. rate isbased onbankers’ acceptance rates plusaspreadorspecificmargin over prime rate. The specifiedspreadormarginchanges Crombie for working capital purposesandto provide temporary financing for acquisitions anddevelopment activity. The floatinginterest The unsecured bilateral creditfacility hasamaximumprincipalamountof $100,000andmaturesMay 16,2018.The facility isusedby Unsecured Bilateral CreditFacility NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SENIOR UNSECURED NOTES CONVERTIBLE DEBENTURES

$ $ $ $ Price Conversion

$ $ (Inthousandsof CAD dollars) 20.10 17.15

September 30,2019

February February 10, 2020 October 31, 2018 March 31,2021 Maturity Date Maturity Date Maturity June 1, 2021

Conversion Price Interest Rate Interest Rate Interest 3.986% $ 3.962% 2.775% 5.00% 5.25% 15.30 $

2016 $ December 31, December 31, December December 31, December

Year ended 100,000 125,000 $ 175,000 398,588 $ 60,000 132,134 $ 74,400 (2,266) (1,652) 2016 2016 240 — — $ — $ 2015 2015 2015 $

December 31, December 31, December December 31, December Year ended 100,000 398,080 125,000 175,000 60,000 131,518 74,400

(2,882) 13,398 (2,214)

205 205 294

employees. Full-timeemployees must be over age55to beeligiblefor thepost-employment benefits program. medical benefits for grandfathered employees andemployees retiredprior to May 1,2011as well ascritical illness coverage for other The post-employment benefits program offered to Crombieemployees andretireesinCanadaisanopenplanthatprovides life and The normalform of pension payment pension. isa60% jointandsurvivor month by whichtheearlyretirementprecedes age60(62for amemberwhowas designated asamemberonorafter June25,2009). Once participantsattainage55and5years of continuous they service, can retire.The total pensionpayable isreduced by 5/12%for each benefit plansareunfunded. which determine thelevel requiredto of funding meetthetotal obligationasestimated atthetimeof thevaluation. Crombie’sdefined balance. The employer contributions arenotspecifiedordefined withintheplan text; they arebasedonthe result ofactuarial valuations of eligibleearnings.Employee contributions, ifrequired,pay for partof thecost of thebenefit, andtheemployer fund the contributions contribution pensionplananddeferred profit sharingplan. The final average earningsare12timesthe average ofthe60highestmonths multiplied by years of credited (to service amaximumof 30years) over theestimated retirementincome provided underthedefined recognizing lengthof andfinal service average earnings. The annualpension payable atage65isequal to 2% of thefinal average earnings The retirementbenefit provides pensionbenefits tomembersdesignatedwriting in bytheBoard of Trustees basedona formula Defined benefit plans and investment returns over theperiodof planmembership,andtheannuitypurchaserates atthetimeof theemployee’s retirement. retirement income (for example, annuitypurchase)can beachieved withthecombined total of employee andemployer contributions The contributions requiredby theemployee andtheemployer arespecified. The employee’s pensiondependsonwhatlevel of Defined contribution pensionplans its employees. Crombie hasanumberof defined benefit and defined contributionplans providing pensionandotherretirementbenefits tomost of 12 There arenocorporate taximplications to Crombiefromany of thecomponents of accumulated othercomprehensive income. Taxes –deferred Taxes –current The taxrecovery (expense) consists of thefollowing: Deferred Tax assetrelatingto non-capital losscarry-forward tax Tax liabilitiesrelatingto difference intaxandbookvalue liability The deferred taxliabilityof the wholly-owned corporate subsidiarieswhicharesubjectto income taxes consist of thefollowing: year of Crombieand,assuch,theactualstatusof Crombiefor any particulartaxation year can onlybeascertained attheendof theyear. support Crombie’sassertionthatitmeetstheREITtechnical tests contained intheAct. The relevant tests applythroughoutthetaxation Crombie’s managementandtheiradvisorshave completed anextensive review of Crombie’sorganizational structureandoperations to to itsUnitholders orbesubjectto therestrictionsonitsgrowth thatwould applyto SIFTs. (“REITs”). Atrustthatsatisfiesthecriteria of aREITthroughoutitstaxation year willnotbesubject to income taxinrespect of distributions investment flow-through entities(“SIFTs”), to corporate taxbeginningin2011,subject to an exemption for realestate investment trusts to thefederal income taxation of publiclytraded income trustsandpartnerships.The Act subjectsallexisting income trusts,orspecified On September 22,2007,taxlegislationBillC-52,theBudgetImplementationAct, 2007(the“Act”) was passedinto law. The Act related 11

Total Taxes –gainsondisposalof investment properties deferred taxes Tax effect of income attributionto Crombie’sUnitholders Provision for income taxes attheexpected rate Total Taxes –operating income earnedincorporate subsidiaries current Taxes –gainsondisposalof investment properties taxes

INCOME TAXES EMPLOYEE FUTURE BENEFITS $ $ $

2016

$ $ $ December 31, December December 31, December Year ended (38,339) 75,400 $ 82,486 37,139 (7,086) (1,200) (1,200) 2016 ANNUALREPORT 2016 (26) (26) — — 2015 2015

$ $ $ $ $ December 31, December 31, December Year ended (19,362) 74,200 21,496 (11,615) (2,066) 85,815 (2,936) 2,134 4,200 2,066 (870)

NOTES NOTES 78

CROMBIE REIT Net Interest expense Current cost Net expense service Accrued benefit obligationrecorded asaliability cost Non-current Current portion Funded portion Fair status Benefitsvalue, – paid Employer end deficit Fair value, beginningof theyear contributions of Plan Assets year $ Balance, Benefitsend paid Actuarial of Interest losses year Current cost (gains) Balance, service Accrued benefit obligation beginning cost of year Information aboutCrombie’sdefined benefit plansareas follows: Crombie usesDecember 31asameasurementdate for accounting purposesfor itsdefined benefit pension plans. cost for allactive members. The projected unitcreditmethodisusedto determine thepresentvalue of thedefined benefit obligationandtherelated currentservice pension obligation.Otherassumptionsarebasedoncurrentactuarialbenchmarks andmanagement’shistorical experience. to year-end by reference to market yieldsof highquality corporate bondsthathave amaturityapproximating theterms of therelated These assumptionswere developed by managementwiththeassistance of independentactuaries.Discount factors aredetermined close assumed. The cumulative rate isexpected to decrease0.25%annuallyto 5.00%in2020. For measurementpurposes,a5.75%(2015–6.50%)annualrate increaseinthepercapita cost of covered healthcare benefits was Rate Discount rate –accrued benefit obligation of compensation increase The significant actuarialassumptionsadopted inmeasuringthe Company’s accrued benefit obligationsandpension costsareas follows: Post-Employment Benefit Plans Senior ManagementPensionPlan of planparticipantsoverparticipants. Assuch,anincreaseinthesalary thatanticipated willincreasetheplan’sliability. risk–The(iii) Salary present value of thedefined benefit planliabilityis calculated by reference oftheplan totheanticipated futuresalary plan’s liability. participants bothduringandafter theiremployment. Anincreaseinthelife expectancy of theplanparticipantswillincrease (ii) Mortalityrisk–The presentvalue of thedefined benefit planis calculated by reference tothebestestimate ofthe mortality ofplan on highqualitycorporate bondswillincreaseCrombie’sdefined benefit liability. as atthemeasurementdate, onhighqualitycorporate bondsof similarduration to theplans’liabilities.Adecreaseinmarket yield (i) Interest rate risk–The presentvalue of thedefined benefit liabilityis calculated usingdiscount rates that reflect the average yield, The plantypically exposes Crombieto actuarialrisks suchas:interest rate risk. risk,mortalityrisk and salary $546 (year endedDecember 31,2015–$531). The total defined benefit costrelated topensionplansandpost-employment benefit plans forthe yearended December 31,2016 was NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS $ $

(Inthousandsof CAD dollars)

$ Management Management Pension Plan Pension Plan Most recent valuation date valuation recent Most December 31, 2016 31, December December 31, 2016 31, December Senior Senior 3.50% 3.75% 4,258 $ 4,533 4,533 4,533 4,333 (200) (200) 200 200 352 $ 179 $ 179 123 173 173 — — December 31,2016 Employment Employment

January 1,2016 January $ Benefit Plans Benefit Plans

3.75% 3,859 3,859 3,859 Post- Post- 3,724 $ 3,777 N/A 150 150 194 $ (46) (46) (13) 82 46 44 $ 44 — —

Senior Senior $ Management Management Pension Plan Pension Pension Plan Pension Next required valuation date valuation required Next December 31, 2015 31, December December 31, 2015 31, December 4.00% 3.50% 4,058 4,258 4,258 4,258 4,160 $ (200) (200) 200 200 330 $ 159 159 (32) 171 $ 171 — — December 31,2018 December 31,2017

$ Benefit Plans Benefit Benefit Plans Benefit Employment Employment

4.00% 3,882 3,678 3,724 3,724 3,724 Post- Post-

(320) N/A 201 156 156 (39) (39) 46 45 45 39 — —

participant shall beentitledto receive acash amount(netof any applicable withholdingtaxes) equalto thenumber of vested RUsheld RUs fromdeemed distributionsisexpensed to general andadministrative expenses atthetimeof allocation. Onthevesting date, each the numberof REITUnitsthatwould have beenissuedhadthevested RUs been treated asaREITUnit.The value of theseadditional value of aREITUnitontheaward grant date, plus(b)deemed distributionsonRUsduringthevesting periodata rate equivalent to continuing employment. The vest numberof RUs whichfully isdetermined by: (a) thedollaramount of theaward dividedby themarket on thefinalday of thethirdquarter of thethird calendar year of theRUs term. The RUsaresubject to vesting conditions including Participants willreceive theirlong-term incentive planawards inRUs.The RUsvest over aperiodof notmorethan three years, ending the specificemployees of CrombieanditsUnitholders;assistinattracting, retainingandrewarding specificemployees. RU Crombie hasanRUPlanavailable to eligibleRUParticipants,whichisdesignedto promote agreater alignmentof interests between (ii) Restricted UnitPlan deducting applicable withholdingtaxes. may electto receive thisnet amountasacash payment orinstead receive oneCrombieREITUnitissuedfor eachDUredeemedafter the numberof DUsredeemedby theREITUnit’smarket price onredemptiondate, lessapplicable withholdingtaxes. The Participant redemption, aParticipantwillreceive thenetvalue of thevested DUsbeing redeemed,withthenetvalue determined by multiplying as noted above andthevalue of theadditionalDUscredited isexpensed to general andadministrative expenses onallocation. Upon value of aUnitasdetermined inaccordance withtheDUPlan.Additional DUsissuedasaresultof distributionsvest onthesamebasis Participant’s DUaccount ontheREITdistributionrecord date by thedistributionpaidperREITUnit,anddividingresultby themarket paid onREITUnits,additionalDUswillbecredited to theParticipant’sDUaccount, determined by multiplyingthenumberof DUsinthe than thosenoted below) orrightsonliquidation.DuringthetimethataParticipanthasoutstandingDUs,whenever cash distributionsare not CrombieREITUnitsanddoentitleaParticipantto any Unitholderrights,includingvoting rights,distributionentitlements(other determined by theBoardorHRC,DUsgrantedUnless otherwise vested under theDUPlanarefully atthetimethey areawarded. DUsare Trustees (the“Board”)orHumanResources Committee (“HRC”)decidesthatspecialcompensation isto beprovided intheform of DUs. Trustees, officers andemployees unlessCrombie’sBoard of of CrombieanditsUnitholders.ParticipationintheDUPlanis voluntary Crombie hasaDUPlanavailable to eligibleParticipants,whichisdesignedto promote agreater alignmentof interests between the (i) Deferred UnitPlan Unit basedcompensation plans Deferred Unit revenue Distributions based payable compensation Finance costs oninvestment property plans Prepaid Property rents operating Tenant incentives and costs 13 2015 –$689). For theyear endedDecember 31,2016,thenetdefined contribution pensionplans expense was $756(year endedDecember 31, (2) (1) Impact Growth rate of healthcosts of: Impact of: Discount Rate analysis fromprioryears. benefit obligationorbenefit plan expenses. There wasnochange tothemethodandassumptionsusedinpreparingsensitivity calculated independently. Changestoorreduce morethanoneassumptionsimultaneouslymay theimpactonaccrued amplify obligations andrelated expenses of Crombie’spensionandotherbenefit plans. The sensitivity of each key assumptionhasbeen The tablebelow outlinesthesensitivityof thefiscal 2016 key economic assumptionsusedin measuringtheaccrued benefit plan

Gradually decreasingto 5.0%in2020andremainingatthatlevel thereafter. Reflects theimpactoncurrentservice costs, theinterest cost andthe expected returnonassets. debt, notes and debentures capital expenditures TRADE AND OTHER PAYABLES

(2)

$ $ Current 84,688 $ 28,894 $ 29,457 10,385 11,007 4,827 118 — Non-current

December 31, 2016 31, December $ 1% decrease 1% decrease $ $ 1% increase 1% increase 8,493 $ 3,846 4,647 — — — $ — —

$ Senior Management Pension Plan Obligations Benefit 28,894 $ 29,457 93,181 10,385 11,007 3.75% 4,827 3,846 4,765 Total

(529) $ 646 $

Benefit Cost Current 23,858 16,648 $ 65,319 $ 3.75% 10,163 4,782 9,755 113 (12) $ 13 $ — Non-current (1)

December 31, 2015 31, December Post-Employment Benefit Plans Obligations Benefit 5.75% 3.75% 6,661 $ 1,947 4,714 (452) (543) $ 548 $ 675 $ ANNUALREPORT 2016 — — — $ — —

$ Benefit Cost

23,858 71,980 16,648 5.75% 3.75% 10,163 4,827 4,782 9,755 1,947 Total (22) (12) 27 7 (1)

NOTES NOTES 80

CROMBIE REIT Future $ minimum lease payments ranging fromeightto 73years includingrenewal options: Operating leasepayments primarilyrepresentrentalspayable by Crombiefor allof itslandleases.These landleaseshave terms varying Crombie asaLessee $ Future minimum rental income December 31,2016,isasfollows: Crombie’s operations includeleasingcommercial realestate. Futureminimumrentalincome undernon-cancellable tenant leasesasat Crombie asaLessor 15 Sobeys Inc. The following tablesetsouttenants thatcontributed inexcess of 10%of total propertyrevenue: will berecognized asrevenue whenthe amountisdeterminable andthereiscertainty of receipt. Lease terminations include$11,172related to threeleasesvacated by TargetCanadain2015.The amount,ifany, of additionalsettlement Lease Tenant terminations Straight-line incentive Contingent rent amortization Rental revenue contractually duefromtenants rental recognition revenue 14 Total changeinfair value of financialinstruments Marketable Deferred securities Unit (“DU”) Plan Change infair value of financialinstruments: prepayment hasalsobeendeferred andwillberecognized asareductioninpropertyoperating expenses over theterm of thelandlease. land lease.Inaddition,Crombiereceived aprepayment, fromarelated obligationunderalandsub-lease.This party,of theirfuture of fair value of thelandhave beendeferred andwillberecognized asareductioninpropertyoperating expenses over theterm of the During 2014,Crombiecompleted asale-leasebackof thelandcomponent of aninvestment property. The proceeds received inexcess Deferred Revenue assettlementof anyNo REITUnitsorothersecuritiesof obligationundertheRUPlan. Crombiewillbeissuedfromtreasury an RUParticipantwhoiseligibleemployee onthevesting date may electto convert theirvested RUsto DUsunderCrombie’sDUPlan. by theRUParticipantmultipliedby themarket value onthevesting date, asdetermined by themarket value of aREITUnit.Alternatively, NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

OPERATING LEASES PROPERTY REVENUE

$ $ $

274,648 $ 1,508 $ 2017 2017

(Inthousandsof CAD dollars) 264,622 $ 1,548 $ 2018 2018 31, December Year Ending 31, December Year Ending

254,235 $ 1,562 $ 2019 2019 Revenue 179,166 December 31, 2016 31, December

Percentage

243,108 $ 2020 2020 1,576 $

44.8% $ Year ended 231,599 $

1,595 $ 2021 2021 $ $ December 31, December 31, December

Year ended Year ended Revenue 400,001 $ 382,428 156,289 December 31, 2015 31, December Thereafter Thereafter (11,622) 12,876 14,584 2,173,805 $ 1,735 2016 2016 325 312 136,811 $ (13) Percentage 2015 2015

$ $ $ December 31, 31, December 31, December Year ended Year ended 3,442,017 369,866 362,699 144,600 42.3% (9,712) 11,142 1,562 4,175 Total Total (18) 56 74

Balance, Conversion December Units of 31, Net changeinEUPPloansreceivable issued debentures 2015 Balance, under January DRIP 1, 2015 Balance, December 31,2016 Units issued(proceeds arenet Units Net changeinEUPPloansreceivable issued 1,2016 Balance, January under DRIP 18 Finance costs –operations, paid Amortization of deferred financingcharges Amortization of issuepremiumonseniorunsecurednotes Amortization of effective swap agreements Change inaccrued finance costs Amortization of fair value debtadjustment andaccretion income Finance costs –operations Subscription Convertible receipts Senior debentures payment Floating rate term, revolving anddemandfacilities unsecured Fixed notes rate mortgages 17 Post-employment Wages benefits and salaries Crombie’s payroll expenses areincludedinpropertyoperating expenses andingeneral andadministrative expenses. (b) Employee benefit expense Occupancy Professional and Salaries and other and public benefits company (a) General andadministrative expenses costs 16

of issue costs)

FINANCE COSTS – OPERATIONS CORPORATE EXPENSES UNITS OUTSTANDING

$ $ $ $ $ 77,857,608 $ 77,857,608 $ 77,304,079 $ 87,737,709 $ 8,952,400 Number Number Number Number Number Number Units of Units of 927,701 Units REIT Crombie Units REIT Crombie 540,131 13,398 — —

1,016,285 Amount Amount 877,581 870,578 877,581 125,971 12,666 6,723 205 67 75

Units Voting Special attached Units Voting Special attached 60,669,944 $ 53,658,302 $ 53,658,302 $ 53,275,266 $ 6,353,741 Units of Units of 383,036 Class B LP Units and Units BLP Class and Units BLP Class 657,901

— — —

Amount Amount 596,304 596,304 698,439 591,523

93,140 8,995 4,781 — — —

December 31, 31, December 31, December 31, December

148,407,653 $ Year ended Year ended Year ended 131,515,910 131,515,910 130,579,345 $ 15,306,141 1,585,602 Units of Units of 100,156 923,167 24,003 $ 72,289 $ 95,587 $ 24,759 $ 16,341 $ (2,440) 10,120 $ 13,398 14,915 (3,310) 3,076 3,145 7,523 4,816 1,349 2016 2016 2016 (222) 756 ANNUALREPORT 2016 613 54 — — Total Total 2015 2015 2015 $

December 31, 31, December 31, December 31, December Year ended Year ended Year ended 1,473,885 1,714,724 1,473,885 Amount Amount 1,462,101 22,906 92,648 14,401 23,595 71,871 14,506 (2,520) 219,111 11,504 98,611 21,661 8,202 (3,616) (1,272) 8,549 3,685 3,081 3,118 1,391 205 689 67 54 75 —

NOTES NOTES 82

CROMBIE REIT the declaration. Crombierecognizes thenet proceeds inNetassetsattributableto Unitholders. days immediately preceding therelevant distributionpayment date, whichistypically onoraboutthe15thday of themonthfollowing Crombie REITataprice equalto 97%of thevolume-weighted average trading price of the REITunitsontheTSXfor thefive trading have theirdistributionsreinvested of inadditionalREITunits.Unitsissuedunder theDRIPwillbeissueddirectlyfromtreasury During thefourth quarter of 2014,Crombieinstituted aDRIPwhereby CanadianresidentREITunitholdersmay electto automatically Distribution Reinvestment Plan The compensation expense related to theEUPPfor theyear endedDecember 31,2016was $42(year endedDecember 31,2015–$42). value of theREITUnitsheldascollateral atDecember 31,2016was $1,913. repaid by December 31,2023.Loanrepayments willresult inacorresponding increaseto netassetsattributableto Unitholders. Market after-tax amountsof alldistributionsreceived ontheREITUnits,aspayments oninterest andprincipal.The loansarerequiredto be which areclassifiedasareduction to netassetsattributable to Unitholders. The loansarebeing repaidthroughtheapplication of the As atDecember 31,2016,thereareloansreceivable fromexecutives of $1,789underCrombie’sEUPP,representing 140,855REITUnits, the EUPPwas replaced withanRUPlanaspecific vesting periodandnoemployee loans. Crombie previously provided for REITUnitpurchaseentitlementsundertheEUPPfor certain seniorexecutives. AsatDecember 31,2014, Employee UnitPurchasePlan(“EUPP”) consideration for propertyacquisitions completed onthatsamedate. Class BLPUnitsandtheattachedSVUsataprice of $14.70perClassBLPUnitfor grossproceeds of $93,400whichformed partof the On June29,2016,concurrently withtheREITUnitsissuedonexchange for SubscriptionReceipts, subsidiariesof Empirereceived 6,353,741 Each ClassBLPUnitentitlestheholderto receive distributionsfromCrombie,prorata withdistributionsmadeby Crombie onREITUnits. one basisfor Crombie’sREITUnitsattheoptionof theholder,underterms of theExchange Agreement. The of Crombieto ClassBLPUnitsissuedby ECLDevelopments asubsidiary Limited (“ECLD”)areindirectlyexchangeable onaone-for- by Crombie. are exchanged inaccordance withtheExchange Agreement, alike numberof SVUswillberedeemedandcancelled for noconsideration Units to whichthey areattachedandwillbeautomatically transferred uponthetransfer of suchClassBLPUnit.IftheUnits providing voting rightsproportionate to thevotes of Crombie’sREITUnits.The SVUsarenottransferable separately fromtheClassBLP The Declaration of Trust andtheExchange Agreement provide for theissuance of SVUsto theholdersof ClassBLPUnitsusedsolelyfor Crombie REITSpecialVoting Units(“SVU”)andClassBLP at theconversion price of $15.30perunit. During theyear endedDecember 31,2015,$205of SeriesCConvertible Debentureswere converted for atotal of 13,398REITUnits Empire, eachof the8,952,400outstanding SubscriptionReceipts were automatically exchanged for oneCrombieREITUnit. Subscription Receipt, for grossproceeds of $131,600.OnJune29,2016,inconjunction withtheclosingof propertyacquisitions from On May 31,2016,Crombieclosedapublicoffering, onaboughtdealbasis,of 8,952,400SubscriptionReceipts, ataprice of $14.70per days duringthe10day trading periodcommencing immediately after theRedemptionDate. on astock exchange, inany market wheretheREITUnitsarequoted for trading) ontheRedemptionDate orfor morethanfive trading (iii) thenormaltrading of REITUnitsisnotsuspendedorhalted onany stock exchange onwhichtheREIT Unitsarelisted (orifnotlisted value prices for theREITUnits;and, or quoted on any otherstock exchange ormarket whichtheTrustees consider, intheirsole discretion, provides representative fair market (ii) calendar monthmustnotexceed $50(provided thatsuchlimitationmay bewaived atthediscretionof theTrustees); (i) thetotal amountpayable by Crombieinrespectof suchREITUnitsandallothertendered for redemption,inthesame REIT Unitsissubjectto thelimitationthat: REIT Unitswere tendered for redemption,provided thattheentitlementof Unitholdersto receive cash upontheredemptionof their month willbesatisfied by way of a cash payment inCanadiandollarswithin30days after theend of the calendar monthinwhichthe The aggregate redemptionprice payable by Crombieinrespectof any REITUnitssurrenderedfor redemptionduringany calendar equal to the price of Crombie’sREITUnitsonthedate of redemption,asdefined intheDeclaration of Trust. average price perCrombieREITUnitduringtheperiodof thelastten days duringwhichCrombie’sREITUnitstraded; and(ii)anamount REIT Unitsareredeemableatany timeondemandby theholdersataprice perREITUnitequalto thelesserof: (i)90%of theweighted outstanding REITUnitsmay besubdividedorconsolidated fromtimeto timeby theTrustees withouttheapproval of theUnitholders. Crombie isauthorized to issueanunlimited numberof REITUnitsandanunlimited numberof SV NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS atthetimesuchREITUnitsaretendered for redemption,theoutstandingREITUnitsmustbelisted for trading ontheTSXortraded (Inthousandsof CAD dollars)

Finance costs –distributions to Unitholders Finance costs –operations General andadministrative expenses Property operating expenses Property revenue Crombie’s revenue (expense) transactions withrelated partiesareasfollows: to by therelated parties. Related partytransactions aremeasuredattheexchange amount,whichistheamountof consideration establishedandagreed interest. Related partytransactions alsoincludetransactions withkey managementpersonnelandpost-employment benefit plans. Crombie. Related partytransactions primarilyincludetransactions withentitiesassociated withCrombiethroughEmpire’sindirect As atDecember diluted ECLD,holdsa41.5%(fully 40.3%)indirectinterest in 31,2016,Empire,throughitswholly-owned subsidiary 20 Payables Prepaid expenses anddepositsotherassets and Trade other Cash provided by (usedin): receivables liabilities b) Changeinothernon-cash operating items Change infair value of financialinstruments Income Taxes tax $ Non-cash distributionsto Unitholdersintheform of DRIPUnits – expense Amortization of issuepremiumonseniorunsecurednotes deferred Amortization Amortization of Unit of deferred Amortization based effective financing Amortization of compensation swap charges Depreciation of deferred agreements Impairment of intangible leasing Loss (gain)ondisposalof investment properties of investment assets costs Amortization investment properties Straight-line of properties Items notaffecting operating cash: rent tenant recognition incentives a) Items notaffecting operating cash 19

$ Interest Interest income Interest onconvertible debentures rate subsidy Other general andadministrative expenses Property management services Lease recovered Head termination Property lease income revenue income

SUPPLEMENTARY CASH FLOW INFORMATION RELATED PARTY TRANSACTIONS

$ $ $ $ $

Note (d) (b) (b) (e) (a) (c) (f)

$ $ $ $ $ $ $ December 31, December December 31, 31, December December 31, December Year ended Year ended Year ended (37,490) (12,876) 66,552 (10,156) 68,901 $ 183,411 $ (52,171) 6,000 21,661 11,622 (1,686) (1,203) 9,404 2,440 1,200 6,170 3,310 2016 2016 2016 (934) (281) 269 $ 949 $ (312) ANNUALREPORT 2016 453 $ 610 651 $ (64) (54) 26 64 $ 42 2015 2015 2015

$ $ $ $ $ $ $ December 31, 31, December December 31, 31, December 31, December Year ended Year ended Year ended 160,470

(48,369) 60,498 11,504 (4,200) 94,015 12,575 (1,200) (11,142) (1,989) 5,480 2,520 3,616 3,999 2,936 1,481 9,712 3,130 (385) 869 340 598 482 242 736 (56) (54) (23) 711 51

NOTES NOTES 84

CROMBIE REIT Other bonusandothershort-term employeeSalary, benefits long-term benefits The remuneration of membersof key managementduringtheperiod was approximately asfollows: and thethreeotherhighestcompensated executives. of Crombie.The following areconsidered to beCrombie’skey managementpersonnel:theChief Executive Officer, Chief FinancialOfficer Key managementpersonnelarethosepersonshaving authorityandresponsibilityfor planning, directingandcontrolling theactivities Key managementpersonnelcompensation • • • • • • • • • In additionto theabove: (f) (e) (d) (c) (b) (a) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

During thefourth quarter of 2015,Crombieacquired four retailpropertiesandadditionsto two existing retailpropertiesfromEmpire During theyear endedDecember 31,2016,Crombieissued657,901(December 31,2015–383,036)ClassBLPUnitsto ECLDunder the On June29,2016,Crombiecompleted theacquisition of aportfolio of propertiesandtheinvestment intherenovation andexpansion On July15,2016,Crombiedisposedof aretailpropertyinBritishColumbia to Empireincludingapproximately 21,000squarefeet On July29,2016,Crombieacquired aretailpropertyinBritishColumbia fromEmpireincludingapproximately 62,000squarefeet Partnership (“SDLP”).Crombie’s50%portionof theacquisition cost was $2,676,includingclosingandtransaction costs. During thefirstquarter of 2015,Crombieacquired development landsinBritish Columbia withSobeys Developments Limited agreements withwrittennotice. The fixed price putoptionisin excess of the value of theproperty.carrying on apropertyCrombieacquired fromECLDin2006. The extension endsin2021witheitherpartyhaving theabilityto terminate the During theyear endedDecember 31,2015,CrombieandECLDnegotiated anextension of arentalincome guarantee andputoption for afee developments onfuture whichwillreduce theactualcash Crombiewillreceive fromtheleasetermination income. Sobeys hasassignedto development Crombiefuture activityrightsintheirleasesonspecificotherCrombieproperties in exchange termination income intheamountof $3,849,a portionof whichisnon-cash consideration. Inrelationto oneof thestore closures, During thesecond quarter of 2015,Sobeys closedtwo retailstores onCrombiepropertiesfor whichCrombierecognized lease closing andtransaction costs. The property,located inNova Scotia, contains approximately 7,500squarefeet occupied of fully space. On April1,2015,Crombieacquired additionaldevelopment space fromEmpireonapre-existing retailpropertyfor $2,333,before and Quebec,contain approximately 225,300squarefeet occupied of fully space. for $60,825,before closingandtransactions costs. The properties,located inAlberta,BritishColumbia, Prince Edward Island,Manitoba DRIP (Note 18). for grossconsideration of $93,400. partial consideration, Crombieissuedto Empire6,353,741Class BLPUnitsandtheattachedSVUsataprice of $14.70perClassBLPUnit of 10existing Sobeys anchoredproperties.The transaction total was approximately $418millionbefore closingandtransaction costs. As of grossleaseableareafor $9,057before closingandtransaction costs. of grossleaseableareafor $26,400before closingandtransaction costs.

Empire holds$24,000of SeriesDConvertible Debentureswithanannualinterest rate of 5.00%. Crombie previously leaseditsheadoffice space fromECLDunder aleasethatendedinMay 2015. replaces theprevious cost sharingarrangement covered by aManagementCost SharingAgreement. from theManagementAgreement isbeingrecognized asareductionof General andadministrative expenses. This Agreement subsidiaries of Empireonafee for basispursuantto service aManagementAgreement 1,2016.Revenue effective January generated Crombie provides andenvironmental propertymanagement,leasingservices managementto specificproperties owned by certain a ManagementAgreement 1,2016. effective January administrative, andotheradministration to supportservices certain subsidiariesof Empireona cost sharingbasispursuantto Certain executive managementindividualsandotheremployees of Crombieprovide general management,financial,leasing, Agreement dated March23,2006,between CrombieDevelopments Limited, CrombieLimited PartnershipandECLD. For various periods,ECLDhasanobligationto provide rentalincome andinterest rate subsidiespursuantto anOmnibusSubsidy Crombie earnedtotal propertyrevenue fromSobeys Inc.andothersubsidiariesof Empire. $

(Inthousandsof CAD dollars)

$ December 31, December Year ended 3,265 $ 3,153 2016 112 2015 $ December 31, 31, December Year ended

2,860 2,962

102

• In measuringtenant concentration, Crombieconsiders boththeannualminimum rentandtotal propertyrevenue of majortenants: asset mixandconducting creditassessmentsfor new andrenewing tenants. Crombie mitigates creditriskby geographical diversification, bothits tenant mixand utilizingstaggeredleasematurities,diversifying A provision for accounts doubtful istaken for allanticipated collectability risks (Note 5). Credit riskarisesfromthepossibilitythattenants may experience andbeunable fulfilltheirlease financialdifficulty to commitments. Credit risk significant risks, andtheactionstaken to managethem,areas follows: In thenormalcourse of business,Crombieisexposed to anumberof financialrisks that can affect itsoperating performance. The more b) RiskManagement • • • • sheet date: Due to theirshort-term nature,thecarrying value of thefollowing financialinstrumentsapproximates their fair value atthebalance $ $ unsecured notes areLevel 2. The fair value of convertible debenturesisaLevel 1measurementandthelong-term receivables, investment property debt andsenior $ Total Convertible other Senior debentures financial Investment unsecured liabilities Financial liabilities property notes Total debt Long-term other Financial assets receivables financial assets have afair value different fromtheircarrying value: for instrumentswithsimilarterms andrisks. The following tablesummarizes theestimated fair value of otherfinancialinstrumentswhich The fair value of otherfinancialinstrumentsisbasedondiscounted cash flows usingdiscount rates that reflect currentmarket conditions There were notransfers between Level 1andLevel 2duringtheyear endedDecember 31,2016. Financial assets The following tableprovides information onfinancialassetsandliabilitiesmeasuredat fair value asatDecember 31,2016: Fair value determination isclassifiedwithinathree-level hierarchy, of significant basedonobservability inputs,as follows: a financialliabilityinanorderlytransaction between market participantsatthemeasurementdate. The fair value of afinancialinstrumentistheestimated amountthatCrombie would receive to sellafinancialassetor pay to transfer a) Fairvalue of financialinstruments 21

minimum rent. rent; anincreasefrom49.9%atDecember 31,2015.Excluding Sobeys, noothertenant accounts for morethan5.1%of Crombie’s Upon completion of theJune29,2016propertytransactions, Crombie’s largesttenant, Sobeys, represents 52.9%of annualminimum Trade andotherpayables (excluding embeddedderivatives). Restricted cash Trade receivables Cash andcash equivalents Level 3 Level 2 Level 1 Total financialassetsmeasuredat fair value Marketable securities FINANCIAL INSTRUMENTS – – – unobservable inputsfor theassetorliability.unobservable inputs otherthanquoted prices includedwithinLevel for theassetorliability,eitherdirectlyindirectly. 1thatareobservable quoted prices (unadjusted) inactive markets for identical assetsorliabilities.

$ $

$ Fair Value 2,500,599 $ 1,959,091 $ 402,361 December 31, 2016 31, December 139,147 19,999 $ 19,999 $ Level 1 Level

— $ —

Carrying Value Carrying $ 2,410,591 1,876,191 400,000 134,400

Level 2 Level 19,969 $ 19,969 $ — $ —

$ $ Fair Value 2,326,484 $ 1,782,776 $ 405,348 138,360 December 31, 2015 31, December Level 3 Level 13,968 $ 13,968 $ 2,290 $ 2,290 ANNUALREPORT 2016

$ Carrying Value Carrying 2,185,479 1,651,079 400,000 134,400 13,933 13,933 2,290 2,290 Total

NOTES NOTES 86

CROMBIE REIT $ There have beennosignificant changes to Crombie’sinterest rate risk. Year Year endedDecember 31,2016 ended facility credit revolving rate floating the on December changes rate interest of Unitholders to attributable income operating on Impact 31, 2015 following impact: on recent years’ rate changes,a0.5%interest rate changewould reasonablybeconsidered possible.The changeswould have hadthe A fluctuationininterest rates would have hadanimpactonCrombie’soperating income related to theuse of floating rate debt.Based ending December 31,2017,basedonallsettledswap agreementsasof December 31,2016. Crombie estimates that$2,348of accumulated othercomprehensive income (loss)willbereclassified to finance costsduringthe year • • • • As atDecember 31,2016: does notenter into interest rate swaps onaspeculative basis. debt maturitiesandlimitingtheuseof permanentfloating rate debtand,onoccasion, utilizinginterest rate swap agreements.Crombie Interest rate riskisthepotential for financiallossarisingfromincreasesininterest rates. Crombiemitigates thisrisk by utilizingstaggered Interest rate risk There have beennosignificant changes to Crombie’screditrisk. Provision for accounts, doubtful endof year Write-offs Recoveries Additional Provision for accounts, doubtful beginningof year provision provided for whencollection isconsidered uncertain. based onpastduebalances onaccounts receivable. Currentandlong-term accounts receivable arereviewed onaregularbasisandare as areductionto itsrespective receivable account onthebalance sheet.Crombieupdates itsestimate of provision for accounts doubtful accounts isreviewed ateachbalance sheetdate. Aprovision istaken onaccounts receivable fromindependentaccounts andisrecorded balances over 30days areconsidered pastdue.Noneof thereceivable balances areconsidered impaired.The provision for doubtful significant. Generally, rentsareduethefirst ofeachmonthandother tenantbillingsaredue30 afterdays invoiced, andingeneral, Receivables aresubstantiallycomprised of currentbalances duefromtenants. The balance of accounts receivable pastdueisnot • • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Crombie hasinterest rate swap agreementsinplace on$123,731of floating rate mortgage debt. 2016; and, Crombie hasanunsecuredbilateral creditfacility available to amaximumof $100,000withabalance of $100,000atDecember 31, balance of $120,374atDecember 31, 2016; Crombie hasafloating rate revolving credit facility available to amaximum of $400,000,subject to available borrowing base,witha Crombie’s weighted average term to maturityof itsfixed rate mortgages was 5.90 years; Over thenext five years, nomorethan4.8% of thegrossleasablearea of Crombiewill expire inany one year. 4.4% of Crombie’stotal propertyrevenue. December 31,2016,Sobeys represents44.8%of total propertyrevenue. Excluding Sobeys, noothertenant accounts for morethan property type,specific tenant leasesandwhere tenants may directlyincurandpay operating andrealtytax costs. Forthe year ended Total propertyrevenue includesoperating andrealtytaxcost recovery income andpercentage rent.These amountscan by vary

(Inthousandsof CAD dollars)

rate in Decrease $ $ December 31, December Year ended interest rate change rate interest Impact of a 0.5% a0.5% of Impact 2016 1,130 $ (120) 635 $ 195 127 60 (8) 2015 Increase in rate in Increase $ $ December 31, 31, December Year ended

(1,130)

(635) (38) 60 20 59 19

• $ • the restrictionspursuantto Crombie’sDeclaration of Trust would include,amongotheritems: of Trust, thecriteria contained inregardto intheIncome thedefinition of aREITand TaxActexisting debt (Canada) covenants. Some of At aminimum,Crombie’scapital structureismanagedto ensurethatitcomplies withthelimitationspursuantto Crombie’s Declaration SVU andClassBLPUnitholders Crombie Convertible REIT Senior debentures Unitholders Investment unsecured property notes debt Crombie’s capital structureconsists of thefollowing: conservative payout ratios. at reasonablelevels, utilize staggereddebtmaturities,minimize long-term exposure to excessive levels of floating rate debtandmaintain Crombie’s objective whenmanagingcapital onalong-term basisisto maintainoverall indebtedness, includingconvertible debentures, 22 There have beennosignificant changes to Crombie’sliquidityrisk. (2) Reduced by theinterest rate subsidypayments to bereceived fromECLD. (1) Contractual cash flows includeprincipalandinterest andignore extension options. Total Floating rate debt Convertible debentures Senior unsecured Fixed rate mortgages notes The estimated payments, includingprincipalandinterest, onnon-derivative financialliabilities to maturitydate areas follows: of credit,andcannot exceed theborrowing basesecurityprovided by Crombie. Access to therevolving creditfacility islimited by theamountutilized underthefacility andtheamountof any outstandingletters to capital management. acceptable to Crombie.AsdiscussedinNote 21,Crombiemitigates itsexposure to liquidityriskutilizingaconservative approach also ariskthattheequitycapital markets may notbereceptive to aREITunitoffering issuefromCrombiewithfinancial terms acceptable to Crombieoratany terms atall.Crombieseeks to mitigate thisriskby staggeringitsdebtmaturitydates. There is There isarisk thatthedebtcapital markets may notrefinance maturingfixed rate andfloating rate debton termsand conditions markets andrecycling capital frompropertydispositions. obligations. Propertyacquisition throughacombination requirementsarefunded funding of accessing thedebtand equitycapital and make distributionsto Unitholders.Debtrepayment fromrefinancing Crombie’smaturingdebt requirementsareprimarilyfunded generalfund andadministrative expenses, reinvest intheportfolio throughcapital expenditures, aswell tenant asfund incentive costs Cash flow generated fromoperating source thepropertyportfolio representstheprimary ofliquidityused theinterestto service ondebt, capital to itsgrowth fund program, refinance debtobligationsasthey matureormeetitsongoingobligationsasthey arise. The ishighlycapital realestate industry intensive. LiquidityriskisthethatCrombiemay nothave access todebtandequity sufficient Liquidity risk

A restrictionthatCrombieshallnotincurindebtedness of morethan60%of grossbookvalue (65%includingany convertible debentures). indebtedness would exceed 75%of themarket value of anindividualproperty;and, A restrictionthatCrombieshallnotincurindebtedness (otherthanby theassumptionof existing indebtedness) wherethe

CAPITAL MANAGEMENT

(2) $

$ $

Contractual Contractual Cash Cash Flows 2,022,289 $ 2,854,266 $ 2,622,619 441,079 231,647 159,251

(1)

170,090 $ $ 197,100 191,403 14,407 6,906 5,697 2017

104,047 477,274 $ 188,244 178,077 $ 373,227 6,906 2018 Year ending December 31, December Year ending

235,086 $ 308,673 430,576 $ 121,903 66,156 7,431 2019

129,346

313,864 $ 447,116 447,116 $ 3,906 2020 December 31, December —

3,786,345 $ 1,865,477 $ 398,588 834,203 555,943 132,134 2016 347,764 347,764 $ 170,736 $ ANNUALREPORT 2016 101,651 75,377 2021 2015 — Thereafter December 31, 31, December

1,641,203 3,318,031 398,080

694,484 452,746 954,436 954,436 954,436 131,518

— — —

NOTES NOTES 88

CROMBIE REIT to itsdebtfacilities. As atDecember 31,2016,Crombieisincompliance withallexternally imposedcapital requirementsand allcovenants relating • • • • certain covenants: to asecond securitypositionoranegative pledge. The terms of therevolving creditfacility alsorequirethatCrombiemustmaintain value of assetssubjectto afirstsecuritypositionand60% of the excess fair market value over firstmortgage financing ofassetssubject Under theamendedterms governing the revolving creditfacility, Crombieisentitledto borrow amaximumof 70%of thefair market Other Tenant assets, Add: incentive cost Other accumulated assets amortization per Other assetsarecalculated asfollows: Note 5 (1) $ Debt Gross to Fair value adjustmentto deferred taxes bookgross Interest book value Investment propertiesheldfor sale,cost rate value Investment subsidy Deferred in Cash financingjoint Other and charges ventures Long-term assets, cash Below-market leasecomponent, cost receivables cost equivalents Investment (see Debt properties, below) Less: Applicable fair value debtadjustment cost Total Bilateral debt Revolving credit outstanding Convertible credit facility Senior debentures facility Fixed unsecured rate notes mortgages defined inCrombie’sDeclaration of Trust isas follows: of ClassBLPUnits,asshown onthebalance sheetasNetassetsattributableto Unitholders.Crombie’sdebtto grossbookvalue as For debtto grossbookvalue calculation, Crombiedoesnotincludeintotal debtthefinancialliabilities to REITUnitholdersand to holders NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

distributions to Unitholdersarelimited to 100%of distributableincome asdefined in the revolving credit facility. letters of creditnotto exceed theborrowing basesecurityprovided by Crombie;and, access to therevolving creditfacility islimited by theamountutilized underthefacility and theamountof any outstanding requirements; service annualized netoperating income onallpropertiesmustbeaminimumof 1.4timesthecoverage of allannualized debt annualized requirements; debtservice annualized netoperating income for theprescribedpropertiesmustbeaminimumof 1.4timesthecoverage of therelated Below-market leasecomponent isincludedinthecarrying value of investment propertiesandassetsheldfor sale.

(1)

$ $ $ $ $

(Inthousandsof CAD dollars)

December 31, December December 31, 31, December

4,532,726 $ 2,409,139 $ 1,655,817 $ 4,165,983 400,000 2,410,591 100,000 134,400 120,374 280,954 $ 280,954 225,814 $ (34,120) 85,946 19,969 55,140 14,631 53.1% (1,452) (1,452) 2016 2016 815 — — 2015 2015

December 31, 31, December December 31, 31, December

3,972,495 1,521,079 2,183,758 3,581,618 2,185,479 400,000 134,400 130,000 180,324 180,324 134,869 144,323 (34,645) 45,455 72,634 55.0% 14,972 13,933 (1,721) (1,721) 1,057 — —

maintains insurance policiesthatmay provide coverage againstcertain claims. itstrustees andofficers,Crombie hasagreedto andparticularemployees, indemnify inaccordance withCrombie’spolicies.Crombie 26 Crombie hasasinglereportablesegmentfor disclosurepurposes. performance ormakingoperating decisions,doesnotdistinguishorgroupits operations onageographical orotherbasis.Accordingly, Crombie owns andoperates primarily retailandoffice realestate assetslocated inCanada. Management,inmeasuringCrombie’s 25 (b) (a) 24 $ As atDecember 31,2016,Crombiehadsignedconstruction contracts totalling $53,310of which$37,292hasbeenpaid. land leasesaredisclosedinNote 15. paid $1,431inlandleasepayments to thirdpartylandlords(year endedDecember 31,2015–$1,418).Crombie’scommitments underthe Land leaseshave terms ranging varying fromeightto 73years includingrenewal options.Fortheyear endedDecember 31,2016,Crombie Crombie doesnotbelieve thatany of thesestandby letters of credit arelikely to bedrawn upon. Total mortgage financingsonredevelopmentMortgage lendersprimarilyto satisfy properties outstanding Construction work beingperformed oninvestment properties letters of credit mortgage financing requirements.AsatDecember 31,2016,Crombiehasa total of $5,027inoutstandingletters of creditrelated to: Crombie obtainsletters of creditto supportitsobligationswithrespectto construction work onitsinvestment propertiesandsatisfying maintains insurance policiesthatmay provide coverage againstcertain claims. itstrustees andofficers,Crombie hasagreedto andparticularemployees, indemnify inaccordance withCrombie’spolicies.Crombie financial statements. opinion of management,any liabilitythatwould arisefromsuchcontingencies would nothave asignificant adverse effect onthese There arevarious claimsandlitigationwhich Crombieisinvolved course witharisingoutof theordinary businessoperations. Inthe 23

INDEMNITIES COMMITMENTS AND CONTINGENCIES SEGMENT DISCLOSURE SUBSEQUENT EVENTS February 28,2017. TheFebruary distributionswillbepaidonMarch15,2017,to Unitholdersof record28,2017. asof February 16,2017,Crombiedeclareddistributionsof 7.417On February cents 1,2017to andincluding, perUnitfor theperiodfromFebruary 31,2017. TheJanuary 15,2017,to Unitholdersof distributionswere record31,2017. paidonFebruary asof January 20,2017,Crombiedeclareddistributionsof 7.417On January cents 1,2017to andincluding, perUnitfor theperiodfromJanuary

$ 3,000 2,027 5,027 $ 2016 December 31, December ANNUALREPORT 2016 2015 $ 1,425 1,425 — 89

NOTES PROPERTY PORTFOLIO

GLA % GLA % (approx. Occu- (approx. Occu- Property City Description sq. ft.) pancy Property City Description sq. ft.) pancy

NEWFOUNDLAND & LABRADOR Mountain Road Moncton Retail – Plazas 17,000 100.0 Northwest Centre, 2A Commerce St. Deer Lake Retail – Plazas 18,000 100.0 Mountain Road Moncton Retail – Freestanding 52,000 100.0 10 Elizabeth Ave St John’s Retail – Freestanding 80,000 100.0 Prospect St Plaza Fredericton Retail – Plazas 22,000 100.0 21 Cromer Ave Grand Falls Retail – Freestanding 27,000 100.0 Riverview – Findlay Blvd Riverview Retail – Plazas 66,000 98.3 45 Ropewalk Lane St John’s Retail – Freestanding 50,000 100.0 Riverview Place Riverview Mixed Use 150,000 50.1 69 Blockhouse Rd Placentia Retail – Freestanding 20,000 100.0 Tracadie Tracadie Retail – Plazas 40,000 83.8 71 Grand View Blvd Grand Bank Retail – Freestanding 19,000 100.0 Uptown Centre Fredericton Retail – Plazas 320,000 62.5 Avalon Mall St John’s Retail – Enclosed 572,000 98.5 Vaughan Harvey Plaza Moncton Retail – Plazas 85,000 100.0 Conception Bay Plaza Conception Bay Retail – Plazas 65,000 100.0 Hamlyn Road Plaza St John’s Retail – Plazas 38,000 65.2 1,586,000 79.8 Kenmount Woodgate St John’s Mixed Use 66,000 100.0 Random Square Clarenville Retail – Enclosed 108,000 99.9 QUÉBEC Topsail Rd Plaza St John’s Retail – Plazas 158,000 99.3 50 Rue Bourgeoys Bromptonville Retail – Plazas 27,000 84.6 Torbay Rd Plaza St John’s Retail – Plazas 162,000 86.3 88-90 Boul. D’Anjou Chateauguay Retail – Freestanding 58,000 100.0 1,383,000 96.8 254 del’Hotel de Ville Riviere du Loup Retail – Plazas 72,000 100.0 1450 rue Royale Malartic Retail – Plaza 29,000 100.0 PRINCE EDWARD ISLAND 551 du Phare Est Matane Retail – Freestanding 30,000 100.0 645 rue Thibeau Cap de la Kinlock Plaza Stratford Retail – Plazas 54,000 100.0 Madeleine Retail – Freestanding 49,000 100.0 University Avenue Charlottetown Retail – Freestanding 50,000 100.0 680 avenue Chaussee Rouyn-Noranda Retail – Freestanding 43,000 100.0 104,000 100.0 714 boul St-Laurent Louiseville Retail – Freestanding 23,000 100.0 871 rue Principale Saint-Donat Retail – Freestanding 34,000 100.0 NOVA SCOTIA 1101 Blvd Piniere Ou Terrebonne Retail – Freestanding 235,000 100.0 1205 rue de Neuville Gatineau Retail – Plazas 31,000 100.0 2 Forest Hills Parkway Dartmouth Retail – Freestanding 44,000 100.0 1295 Chemin Ridge Huntingdon Retail – Freestanding 19,000 100.0 293 Foord Street Stellarton Retail – Freestanding 24,000 100.0 1500 Rue Bretagne Baie Comeau Retail – Freestanding 50,000 100.0 39 Pitt St. Sydney Mines Retail – Freestanding 18,000 100.0 2959 rue King Ouest Sherbrooke Retail – Freestanding 13,000 100.0 75 Emerald St New Waterford Retail – Freestanding 26,000 100.0 3260 Blvd, Lapiniere Brossard Retail – Plazas 48,000 94.1 133 Church St. Antigonish Retail – Freestanding 51,000 100.0 3950 Rue King Ouest Sherbrooke Retail – Freestanding 52,000 100.0 Russell Lake Dartmouth Retail – Plazas 62,000 100.0 5651 rue de Verdun Montreal Retail – Freestanding 6,000 100.0 279 Herring Cove Road Spryfield Retail – Freestanding 73,000 100.0 8980 Boul Lacroix St Georges 634 Reeves Street Port de Beauce Retail – Freestanding 44,000 100.0 Hawkesbury Retail – Freestanding 34,000 100.0 Beauport Plaza Beauport Retail – Plazas 68,000 96.5 22579 Hwy #7 Sheet Harbour Retail – Freestanding 9,000 100.0 Ile Perrot Ile Perrot Retail – Freestanding 24,000 100.0 Aberdeen Business Lebourgneuf Charlesbourg Retail – Freestanding 59,000 100.0 Centre New Glasgow Mixed Use 390,000 89.4 Les Saules, DeLormiere Quebec Retail – Plazas 69,000 100.0 Amherst Centre Amherst Retail – Enclosed 228,000 45.0 McMasterville, Laurier Blvd McMasterville Retail – Plazas 54,000 98.7 Amherst Plaza Amherst Retail – Plazas 25,000 100.0 Mercier blvd Mercier Retail – Plazas 58,000 100.0 Blink Bonnie Plaza Pictou Retail – Plazas 45,000 93.7 Paspebiac Plaza Paspebiac Retail – Plazas 73,000 92.9 County Fair Mall New Minas Retail – Enclosed 268,000 50.2 Saint Apollinaire Plaza Saint Apollinaire Retail – Plazas 62,000 100.0 Dartmouth Crossing – Shawinigan Shawinigan Retail – Plazas 67,000 100.0 Cineplex Dartmouth Retail – Freestanding 45,000 100.0 Marche St-Augustin Mirabel Retail – Plazas 38,000 100.0 Downsview Mall Lower Sackville Retail – Plazas 71,000 100.0 Marche St-Charles-de- Downsview Plaza Lower Sackville Retail – Plazas 226,000 96.3 Drummond Drummondville Retail – Plazas 48,000 100.0 Elmsdale Plaza Elmsdale Retail – Plazas 147,000 97.9 St Lambert St Lambert Retail – Freestanding 19,000 100.0 Fall River Plaza Fall River Retail – Plazas 98,000 97.8 Saint Romuald Plaza Saint Romuald Retail – Plazas 70,000 100.0 Fundy Trail Centre Truro Retail – Enclosed 125,000 97.5 Vanier Vanier Retail – Freestanding 17,000 100.0 Hemlock Square Bedford Retail – Plazas 159,000 99.3 1 Westminster Ave N Montreal Retail – Freestanding 21,000 100.0 Highland Square New Glasgow Retail – Enclosed 201,000 100.0 Park West Plaza Halifax Retail – Plazas 143,000 96.5 1,610,000 99.1 Mill Cove Plaza Bedford Retail – Plazas 144,000 95.2 North & Windsor Streets Halifax Retail – Freestanding 50,000 100.0 ONTARIO North Shore Centre Tatamagouche Retail – Plazas 17,000 100.0 34 Livingstone Ave Grimsby Retail – Freestanding 36,000 100.0 Panavista Dr Dartmouth Retail – Freestanding 48,000 100.0 142 Dundas Street Cambridge Retail – Freestanding 4,000 100.0 Park Lane Halifax Mixed Use 273,000 86.9 215 Park Ave W, Chatham Retail – Freestanding 48,000 100.0 Penhorn Plaza Dartmouth Retail – Plazas 104,000 100.0 385 Springbank Woodstock Retail – Plazas 55,000 94.6 Penhorn Plaza Dartmouth Retail – Freestanding 77,000 100.0 400 First Ave South Kenora Retail – Freestanding 36,000 100.0 Prince Street Plaza Sydney Retail – Plazas 71,000 98.7 409 Bayfield Street Barrie Retail – Freestanding 48,000 100.0 Queen St Plaza Halifax Retail – Freestanding 54,000 87.8 417 Scott Street Fort Frances Retail – Freestanding 43,000 100.0 Sydney Shopping Centre Sydney Retail – Plazas 186,000 75.9 680 Longworth Bowmanville Retail – Plazas 42,000 100.0 Tantallon Plaza Tantallon Retail – Plazas 157,000 96.2 807 King Street East Cambridge Retail – Freestanding 9,000 100.0 West Side Plaza New Glasgow Retail – Plazas 71,000 92.4 977 Golf Links Road Ancaster Retail – Freestanding 65,000 100.0 Scotia Square Properties 3130 Danforth Avenue Scarborough Retail – Freestanding 6,000 100.0 Barrington Place Halifax Mixed Use 191,000 100.0 3362-3370 Yonge Street Toronto Retail – Freestanding 28,000 100.0 Barrington Tower Halifax Office 186,000 98.7 5931 Kalar Rd Niagara Falls Retail – Freestanding 36,000 100.0 Brunswick Place Halifax Mixed Use 256,000 100.0 8265 Huntington Woodbridge Retail – Freestanding 397,000 100.0 CIBC Building Halifax Office 208,000 84.8 Algonquin Avenue Mall North Bay Retail – Plazas 211,000 44.8 Cogswell Tower Halifax Office 204,000 98.0 Bradford Bradford Retail – Freestanding 35,000 100.0 Duke Tower Halifax Office 251,000 89.5 Brampton Mall Brampton Retail – Plazas 103,000 89.8 Scotia Square Mall Halifax Mixed Use 260,000 79.7 Brampton Plaza Brampton Retail – Plazas 76,000 100.0 Scotia Square Parkade Halifax Mixed Use Bronte Village Oakville Retail – Plazas 54,000 100.0 5,320,000 91.4 Burlington Plaza Burlington Retail – Plazas 56,000 100.0 Dorchester Road Centre Dorchester Retail – Freestanding 18,000 100.0 NEW BRUNSWICK Village Square Centre Dorchester Retail – Plazas 32,000 100.0 Eglinton Centre Toronto Retail – Freestanding 17,000 100.0 273 Pleasant St Newcastle Retail – Freestanding 20,000 100.0 Glendale Ave Mountain 501 Regis St. Dieppe Retail – Freestanding 25,000 100.0 Locks Plaza St Catharines Retail – Plazas 85,000 98.2 850 St. Peters Avenue Bathurst Retail – Freestanding 18,000 100.0 Grimsby Centre Grimsby Retail – Freestanding 29,000 100.0 1234 Main Street Moncton Office 151,000 69.9 Grimsby Mews Grimsby Retail – Plazas 34,000 100.0 Brookside Mall Fredericton Retail – Freestanding 43,000 100.0 Havelock Centre Havelock Retail – Freestanding 15,000 100.0 Catherwood St Saint John Retail – Freestanding 46,000 100.0 Lansdowne Centre Champlain Place Sobeys Dieppe Retail – Freestanding 52,000 100.0 Rockhaven Peterborough Retail – Plazas 48,000 49.4 Charlotte Mall St Stephen Retail – Plazas 119,000 92.9 Lansdowne Plaza Peterborough Retail – Plazas 67,000 100.0 Edmundston Edmundston Retail – Freestanding 42,000 100.0 Lindsay Street Centre Fenelon Falls Retail – Freestanding 35,000 100.0 Elmwood Drive Moncton Retail – Plazas 74,000 100.0 London Pine Valley South London Retail – Plazas 39,000 100.0 Fairvale Plaza Rothesay Retail – Freestanding 52,000 100.0 Markham Plaza Toronto Retail – Plazas 39,000 89.3 Loch Lomond Place Saint John Mixed Use 192,000 67.1 Milltowne Plaza Burlington Retail – Plazas 11,000 100.0

90 CROMBIE REIT GLA % GLA % (approx. Occu- (approx. Occu- Property City Description sq. ft.) pancy Property City Description sq. ft.) pancy

Milligan Corners Napanee Retail – Plazas 25,000 100.0 McKenzie Towne Drive Calgary Retail – Freestanding 19,000 100.0 Niagara Falls Centre Niagara Falls Retail – Freestanding 17,000 100.0 Cassils Road West Safeway Brooks Retail – Plazas 54,000 100.0 Niagara Plaza Niagara Falls Retail – Plazas 64,000 100.0 Castleridge Boulevard Orleans – 5150 Innes Rd Orleans Retail – Plazas 63,000 100.0 NE Safeway Calgary Retail – Freestanding 56,000 100.0 Parry Sound Parry Sound Retail – Plazas 46,000 100.0 Chestermere Station Perth Mews Perth Retail – Plazas 103,000 79.0 Way Safeway Chestermere Retail – Freestanding 43,000 100.0 Queensway Plaza Toronto Retail – Plazas 67,000 100.0 Clearwater Landing Fort McMurray Retail – Plazas 143,000 100.0 Riddell Rd Orangeville Retail – Freestanding 46,000 100.0 Crowfoot Cresent NW Sinclair Place Georgetown Retail – Plazas 28,000 100.0 Safeway Calgary Retail – Plazas 75,000 100.0 Southdale London Retail – Plazas 20,000 100.0 Crowfoot Way NW Calgary Retail – Freestanding 10,000 100.0 Stittsville Corner Stittsville Retail – Plazas 80,000 97.4 Elbow Drive Safeway Calgary Retail – Freestanding 25,000 100.0 Stoney Creek Plaza Stoney Creek Retail – Plazas 12,000 100.0 Fairway Plaza Road Taunton & Wilson Plaza Oshawa Retail – Plazas 107,000 100.0 South Safeway Lethbridge Retail – Plazas 64,000 100.0 Upper James Square Hamilton Retail – Plazas 114,000 100.0 Forest Lawn Sobeys Calgary Retail – Freestanding 42,000 100.0 Village Square Mall Nepean Retail – Plazas 92,000 99.1 Franklin Avenue & JW Weston Rd Shoppers Toronto Retail – Freestanding 16,000 100.0 Mann Drive Safeway Fort McMurray Retail – Freestanding 40,000 100.0 White Horse Plaza Simcoe Retail – Plazas 93,000 86.7 Gaetz South Plaza Red Deer Retail – Plazas 74,000 100.0 2,850,000 94.0 Gateway Ave Canmore Retail – Freestanding 50,000 100.0 Guardian Road NW Safeway Edmonton Retail – Freestanding 49,000 100.0 MANITOBA Marten Street Safeway Banff Retail – Freestanding 19,000 100.0 Manning Crossing Edmonton Retail – Freestanding 49,000 100.0 498 Mountain Avenue Millwood Commons Edmonton Retail – Plazas 58,000 100.0 Safeway Neepawa Retail – Freestanding 18,000 100.0 Namao Centre Edmonton Retail – Freestanding 37,000 100.0 594 Mountain Avenue Namao Centre Safeway Winnipeg Retail – Freestanding 18,000 100.0 167 Ave. 95 St Edmonton Retail – Plazas 34,000 94.5 1305-1321 Pembina Saddletowne Circle NE Calgary Retail – Freestanding 51,000 100.0 Highway Safeway Winnipeg Retail – Plazas 39,000 100.0 South Park Drive Safeway Stony Plain Retail – Freestanding 44,000 100.0 2155 Pembina Highway Winnipeg Retail – Freestanding 46,000 100.0 Red Deer Cineplex Hwy II Red Deer Retail – Freestanding 40,000 100.0 Bird’s Hill Road Plaza Birds Hill Retail – Freestanding 39,000 100.0 Town Centre Lethbridge Retail – Plazas 29,000 100.0 Jefferson Avenue Winnipeg Retail – Freestanding 55,000 100.0 West Lethbridge Lethbridge Retail – Plazas 105,000 93.8 Kildare Avenue East Winnipeg Retail – Freestanding 43,000 100.0 10907 82 Avenue Edmonton Retail – Freestanding 21,000 100.0 Kildonan Green Winnipeg Retail – Plazas 74,000 100.0 3,374,000 99.8 Marion Street Winnipeg Retail – Freestanding 38,000 100.0 Manitoba Avenue Selkirk Retail – Freestanding 42,000 100.0 BRITISH COLUMBIA Osborne Street Safeway Winnipeg Retail – Freestanding 20,000 100.0 Portage La Praire Shoppers Portage 2nd Avenue West Safeway Prince Rupert Retail – Plazas 52,000 100.0 la Prairie Retail – Freestanding 20,000 100.0 8th Street Safeway Dawson Creek Retail – Freestanding 43,000 100.0 Portage Avenue Safeway Winnipeg Retail – Freestanding 55,000 100.0 27 Street East Safeway North River Avenue Safeway Winnipeg Retail – Plazas 59,000 100.0 Vancouver Retail – Freestanding 37,000 100.0 River East Plaza Winnipeg Retail – Plazas 78,000 100.0 30 Avenue Safeway Vernon Retail – Freestanding 29,000 100.0 644,000 100.0 32 Street Safeway Vernon Retail – Freestanding 56,000 100.0 100 Street Safeway Fort St. John Retail – Freestanding 55,000 100.0 SASKATCHEWAN 120 Street Safeway Surrey Retail – Plazas 53,000 100.0 152nd Street Safeway Surrey Retail – Freestanding 56,000 100.0 1 Avenue NW Safeway Moose Jaw Retail – Freestanding 39,000 100.0 4655 Lakelse Avenue Terrace Retail – Freestanding 43,000 100.0 2 Avenue West Safeway Prince Albert Retail – Freestanding 56,000 100.0 20871 Fraser Highway 13th Avenue Regina Retail – Plazas 41,000 100.0 Safeway Langley Retail – Freestanding 48,000 100.0 McOrmond Drive Safeway Saskatoon Retail – Freestanding 50,000 100.0 27566 Fraser Highway Albert Street South Regina Retail – Plazas 41,000 100.0 Safeway Langley Retail – Freestanding 45,000 100.0 River City Center Saskatoon Retail – Plazas 160,000 69.0 8475 Granville Street Vancouver Retail – Freestanding 47,000 100.0 Territorial Drive Plaza North Battleford Retail – Plazas 30,000 100.0 Alder Avenue 100 Mile House Retail – Plazas 28,000 100.0 University Park Regina Retail – Freestanding 37,000 100.0 Baker Street Safeway Cranbrook Retail – Freestanding 48,000 100.0 454,000 89.0 Baker Street Cranbrook Retail – Freestanding 8,000 100.0 Bernard Avenue Safeway Kelowna Retail – Freestanding 30,000 100.0 ALBERTA Bernard Avenue Kelowna Retail – Freestanding 19,000 100.0 Blundell Road Richmond Retail – Freestanding 28,000 100.0 606 4th Avenue South Lethbridge Retail – Freestanding 20,000 100.0 Columbia Avenue Safeway Castlegar Retail – Freestanding 27,000 100.0 4th Street NW Safeway Calgary Retail – Plazas 48,000 100.0 Columbia Street West 304 5 Avenue West Cochrane Retail – Freestanding 54,000 100.0 Safeway Kamloops Retail – Freestanding 50,000 100.0 10 Street NW Safeway Calgary Retail – Freestanding 38,000 100.0 Davie Street Safeway Vancouver Retail – Plazas 37,000 100.0 11th Avenue SW Safeway Calgary Retail – Freestanding 40,000 100.0 East Hastings Burnaby Retail – Freestanding 4,000 100.0 16th Avenue NW Safeway Calgary Retail – Freestanding 42,000 100.0 East Broadway Safeway Vancouver Retail – Freestanding 42,000 100.0 23rd Street North Safeway Lethbridge Retail – Freestanding 45,000 100.0 Hastings Street Burnaby Retail – Plazas 61,000 97.9 32nd Avenue NE Safeway Calgary Retail – Freestanding 69,000 100.0 King Edward Avenue West Vancouver Retail – Freestanding 28,000 100.0 34th Avenue SW Safeway Calgary Retail – Plazas 48,000 100.0 King George Blvd. Surrey Retail – Freestanding 62,000 100.0 4607 50th Street Stettler Retail – Freestanding 31,000 100.0 Kingsway Burnaby Retail – Plazas 33,000 100.0 5700 50th Street Beaumont Retail – Plazas 21,000 100.0 Fortune Drive Safeway Kamloops Retail – Freestanding 56,000 100.0 Leduc Centre Leduc Retail – Plazas 138,000 99.2 Kingsway Safeway Vancouver Retail – Plazas 51,000 100.0 100 Street Safeway Grande Prairie Retail – Plazas 66,000 100.0 Lerwick Road Courtenay Retail – Plazas 97,000 96.8 2304 109 Street NW Safeway Edmonton Retail – Freestanding 48,000 100.0 Lougheed Highway Safeway Mission Retail – Plazas 55,000 100.0 8204 109 Street NW Safeway Edmonton Retail – Plazas 34,000 100.0 McBride Boulevard Safeway New 114th Avenue Safeway Grand Prairie Retail – Plazas 62,000 100.0 Westminster Retail – Freestanding 43,000 100.0 118th Avenue NW Edmonton Retail – Freestanding 44,000 100.0 Mount. Seymour Rd Safeway North Vancouver Retail – Freestanding 36,000 100.0 South Trail Plaza Calgary Retail – Plazas 79,000 100.0 Main Street Safeway Penticton Retail – Plazas 59,000 100.0 137th Avenue NW Safeway Edmonton Retail – Freestanding 55,000 100.0 Robson Street Vancouver Retail – Freestanding 41,000 100.0 94 MacLeod Ave Spruce Grove Retail – Freestanding 51,000 100.0 Reid Street Safeway Quesnel Retail – Freestanding 30,000 100.0 395 St. Albert St. St. Albert Retail – Freestanding 52,000 100.0 Second Avenue Safeway Trail Retail – Plazas 32,000 100.0 Strathcona Square Calgary Retail – Plazas 80,000 95.5 Shaughnessy Street Safeway Port Coquitlam Retail – Freestanding 49,000 100.0 615 Division Ave Medicine Hat Retail – Freestanding 43,000 100.0 West Broadway Safeway Vancouver Retail – Plazas 55,000 100.0 688 Wye Road, Nottingham Sherwood Park Retail – Freestanding 46,000 100.0 Yale Road Safeway Chilliwack Retail – Freestanding 52,000 100.0 1109 James Mowatt Trail Yellowhead Highway Southbrook Sobeys Edmonton Retail – Freestanding 45,000 100.0 Safeway Smithers Retail – Freestanding 43,000 100.0 1200 Railway Ave Canmore Retail – Freestanding 53,000 100.0 1,768,000 99.8 1818 Centre St NE Calgary Retail – Freestanding 35,000 100.0 260199 High Plains Blvd. Rocky View Retail – Freestanding 655,000 100.0 TOTAL 19,093,000 94.4 Beaumont Plaza Beaumont Retail – Plazas 59,000 100.0 Big Rock Lane Safeway Okotoks Retail – Freestanding 42,000 100.0

ANNUAL REPORT 2016 91 UNITHOLDERS’ INFORMATION

Board of Trustees Crombie REIT Counsel Donald E. Clow Head Office: Stewart McKelvey Trustee, President and 610 East River Road, Suite 200 Halifax, Nova Scotia Chief Executive Officer New Glasgow, Nova Scotia, B2H 3S2 Telephone: (902) 755-8100 Auditors John Eby Fax: (902) 755-6477 PricewaterhouseCoopers, LLP Independent Trustee and Lead Trustee Internet: www.crombiereit.com Halifax, Nova Scotia Brian A. Johnson Independent Trustee Unit Symbol Multiple Mailings REIT Trust Units – CRR.UN If you have more than one account, you J. Michael Knowlton may receive a separate mailing for each. Independent Trustee Stock Exchange Listing E. John Latimer Toronto Stock Exchange If this occurs, please contact Independent Trustee CST Trust Company at (800) 387-0825 Investor Relations and Inquiries or (416) 682-3860 to eliminate Barbara Palk Unitholders, analysts, and investors should multiple mailings. Independent Trustee direct their financial inquiries or requests to: Jason P. Shannon Glenn R. Hynes, FCPA, FCA Independent Trustee Executive Vice President, Frank C. Sobey Chief Financial Officer and Secretary Trustee and Chairman Email: [email protected]

Kent R. Sobey Communication regarding investor records, Independent Trustee including changes of address or ownership, Paul D. Sobey lost certificates or tax forms, should be Trustee directed to the company’s transfer agent and registrar, CST Trust Company. Elisabeth Stroback Independent Trustee Distribution Record and Payment Dates for Fiscal 2016 Francois Vimard Trustee Record Date Payment Date

Officers January 31, 2016 February 13, 2016 February 29, 2016 March 15, 2016 Frank C. Sobey March 31, 2016 April 15, 2016 Chairman April 30, 2016 May 13, 2016 Donald E. Clow May 31, 2016 June 15, 2016 President and Chief Executive Officer June 30, 2016 July 15, 2016 July 31, 2016 August 15, 2016 Glenn R. Hynes August 31, 2016 September 15, 2016 Executive Vice President, Chief Financial September 30, 2016 October 14, 2016 Officer and Secretary October 31, 2016 November 15, 2016 Cheryl Fraser November 30, 2016 December 15, 2016 Chief Talent Officer and Vice President December 31, 2016 January 13, 2017 Communications Transfer Agent Scott R. MacLean CST Trust Company Senior Vice President, Eastern Canada Investor Correspondence Trevor Lee P.O. Box 700 Senior Vice President, Western Canada Montreal, Quebec, H3B 3K3 Telephone: (800) 387-0825 John Barnoski Email: [email protected] Senior Vice President, Corporate Website: www.canstockta.com Development

Fred Santini General Counsel Design: Craib Design & Communications www.craib.com Printed in Canada Printed www.craib.com Design & Communications Design: Craib

92 CROMBIE REIT TOP 20 TENANTS

Crombie’s portfolio is home to a wide diversity of regional and national tenants, most of whom serve the everyday needs of Canadian consumers. Also characterized by long average lease terms, such properties are among the steadiest performing assets in commercial real estate.

Average Tenant % of Annual Remaining (As at December 31, 2016) Minimum Rent Lease Term Sobeys (1)(2) 52.9% 15.4 years Shoppers Drug Mart 5.1% 11.3 years Cineplex 1.4% 8.6 years Province of Nova Scotia 1.2% 1.9 years CIBC 1.1% 14.2 years Lawtons/Sobeys Pharmacy 1.1% 10.3 years Dollarama 1.0% 6.4 years GoodLife Fitness 1.0% 10.3 years Bank of Nova Scotia 0.9% 4.3 years Bank of Montreal 0.9% 11.2 years Mark’s Work Wearhouse 0.7% 2.3 years Canadian Tire 0.6% 11.4 years Public Works Canada 0.6% 1.1 years Royal Bank of Canada 0.5% 3.1 years Winners 0.5% 5.4 years Reitmans (Canada) 0.5% 2.4 years Tim Hortons 0.6% 6.9 years Best Buy 0.5% 3.0 years The Brick Warehouse 0.5% 8.8 years Staples 0.4% 4.1 years

(1) Excludes Lawtons/Sobeys Pharmacy (2) Represents 44.8% of total property revenue • • • • • • • segments incommercial realestate. in oneof themostreliableanddefensive income growth andcapital appreciation the opportunityto achieve steady An investment inCrombieREITprovides WHY CROMBIE? Strong management leverage andampleliquidity Strong capital structure,moderate and improving fundamentals Investment grade rating –strong pipeline opportunity Large development track record Proven growth andvalue creation anchoredretailportfoliogrocery High quality,diversified anddefensive Strong UnitholderReturn CROMBIEREIT.CA

20 16 16 ANNUAL REPORT