Crombie REIT Annual Report 2020

Plain-text annual report

ANNUAL REPORT 2020 h t l w o r G e b a n a t s u S i d n a y t i l i b a t S n e v o r P About Crombie REIT For decades, Crombie REIT and its predecessors have invested in high- quality, sustainable real estate where people live, work, shop, and play. While our name has changed in the 60+ years we’ve been operating, our commitment to our communities, tenants, investors, and team has never wavered. With 284 investment properties nationwide, Crombie’s portfolio of approximately 18.0 million square feet, with an additional nine properties under development or owned in a joint venture, enhances local communities and is adaptable to long-term growth. We are focused on steady income growth and asset value creation through the ownership, operation, and development of high-quality grocery-anchored retail, shopping centres, industrial, and mixed- use developments in Canada’s top urban and suburban markets. About the Cover Davie Street, located in one of Canada’s great neighbourhoods, the West End of Vancouver, is Crombie’s first major mixed-use development. The approximately 54,000 square feet of wholly owned commercial space is anchored by a Safeway. The residential building, named Zephyr, is owned in partnership with Westbank and contains approximately 330 residential rental units. This community of homes sets a new standard for urban, green and sustainable living. Inside This Report Crombie At-A-Glance COVID-19 Impact Message from the President and CEO Our Business Our Purpose Crombie’s Priorities 1 3 4 6 7 9 1. Stable and Growing Portfolio 10 2. Strategtic Partnership with Empire 3. Strong Development Pipeline 4. Strong Financial Condition 5. Highly Skilled Team and Caring Culture ESG Initiatives Message from the Chair Board of Trustees Financial Review Table of Contents Management’s Discussion & Analysis Management’s Statement of Responsibility for Financial Reporting Independent Auditor’s Report Consolidated Financial Statements Notes to the Consolidated Financial Statements Property Portfolio Unitholders’ Information Top 20 Tenants 12 14 16 18 20 24 25 26 27 89 90 95 99 130 132 133 ABOUT FORWARD-LOOKING STATEMENTS This document includes statements about our objectives, plans, goals, strategies, future growth, financial condition, results of operations, cash flows, performance, business prospects and opportunities. These statements are forward-looking because they are based on management’s expectations about the future – they are not historical facts. Forward-looking statements include statements regarding our development pipeline size, timing and costs, net asset value (NAV) creation, yield on investment of development, and statements containing words like anticipates, expects, believes, estimates, could, intends, may, plans, predicts, projects, will, would, foresees and other similar expressions, or the negative of these words. For more information and a caution about using forward-looking information, see the Forward-Looking Information section in the MD&A on page 87. ABOUT NON-GAAP MEASURES Certain financial measures in this document, including FFO, AFFO, NAV, NOI, SANOI, EBITDA, D/GFV, interest coverage, and yield on cost are not defined terms under GAAP, therefore are not a reliable way to compare us to other companies. See the Non-GAAP Financial Measures section in the MD&A on page 84. Proven Stability and Sustainable Growth 2020 was a year filled with uncertainty, yet Crombie’s solid foundation and its long-term strategy remained fully intact. Our grocery-anchored portfolio stood up to the unique challenges presented, and key milestones were achieved on our major mixed-use developments. We are confident in the future we are building at Crombie. Crombie At-A-Glance Retailer- Related REIT Empire owns 41.5% interest 293 Properties including properties under development and 4 properties owned in joint ventures $4.8b fair value of investment properties $4.3– 6.1b development pipeline future investment potential Davie Street Vancouver, British Columbia Proven Stability and Sustainable Growth Delivering Value 01 01 Broadway and Commercial Rendering Vancouver, British Columbia 02 CROMBIE REIT | Annual Report 2020 COVID-19 Impact In the first quarter of 2020, the outbreak of the novel strain of coronavirus, COVID‑19, was declared a worldwide pandemic. States of emergency with varying degrees of mandatory business closures and operating restrictions were declared repeatedly in 2020 across Canada, resulting in a national economic recession. The duration and impact of these emergency measures and their impact on Crombie’s financial results into the future are not fully known. Approximately 77% of Crombie’s annual minimum rent is generated from essential grocery and pharmacy‑anchored properties and to date, Crombie has collected approximately 96% of its contractual rents for the year ended December 31, 2020. Crombie is committed to the health of communities in which we operate, which includes the health, safety, and well‑being of our employees, tenants, and customers. Our pandemic planning team, comprised of cross‑functional leaders from across the organization, has been actively managing our ongoing response to the COVID‑19 pandemic. We continuously review business needs and empower all employees to take appropriate precautions, and to respond to all confirmed or suspected COVID‑19 cases in any of our properties or offices across the country. We implemented, and regularly update, Business Continuity Plans with guidance from trusted sources (primarily the World Health Organization and Public Health Agency of Canada). COVID‑19 related impacts are further discussed in the following sections in the MD&A: “COVID‑19 Impact ‑ Operations”, “COVID‑19 Impact ‑ Financial”, “Financial Performance Review”, “Development”, “Capital Management”, “Risk Management” and “Other Disclosures”. Proven Stability and Sustainable Growth Delivering Value 03 03 Message from the President & CEO Relentless Commitment As I think back to this time last year, when we were preparing to release our year‑end results and actively planning for the year ahead, I marvel at the unexpected turmoil that we were about to experience. As we prepared for 2020, we focused on our strategic pillars: Real Estate, Financial Condition, People, and Risk. We took none of those things for granted, and we were looking ahead to a year of growth and achievement. Our unit price was at an all-time high, the market was valuing our potential, our real estate was thriving with our strong strategic partnership with Empire, low vacancy rates, and exciting development completions on the horizon, and we knew we had a highly skilled team. What we may have taken for granted was the remarkable resilience and dedication of that team. When the pandemic was declared a month later, our real estate remained strong and our team proved to be incredible. In 2020, this team solidified the foundation of all our strategic pillars. In a year when many other real estate companies struggled to adapt to the ever-changing marketplace, Crombie achieved a top-quartile unit price performance in the REIT space. The theme of this year’s annual report is Proven Stability and Sustainable Growth. We’ve proven ourselves on these measures this year. Our team has kept our balance sheet and liquidity stable, and our business on track. We continued to improve our strategic and mutually advantageous relationship with Empire through long-term planning and commitments to growth, including $133 million in modernizations, conversions, and related investments. We are excited about the further diversification of our portfolio with the completion of the Voilà par IGA Customer Fulfilment Centre, in Montreal, in late 2020. Effectively, major developments remained on time and on budget, despite numerous lockdown requests in those regions where we are under construction. We remained committed to doing what is right in the long term, even if it seems difficult in the short term. That commitment has resulted in significant reductions in energy and water consumption in many of our properties, in our ongoing effort to reduce our impact on the environment. 2020 was a year of disruption nonetheless. The COVID-19 pandemic is beyond anyone’s imagination. There was a high level of uncertainty, economies around the world shut down, businesses struggled to keep afloat, and there was no rule book for what we were experiencing. We quickly decided to rely on our values to guide us through this unprecedented situation. From Trustees to individual contributors, all members of Crombie’s team annually commit to our Code of Conduct and Ethics, and this guides our behavior across the organization. We are committed to excellence, value relationships, and have a strong sense of integrity. Given that, we acted quickly to send home all employees who could work remotely, and worked diligently to ensure that our Operations team, tenants, and visitors were safe through enhanced cleaning protocols and a commitment to follow all public health regulations. Once our people were safe, our Finance team went to work on ensuring that we had the financial strength to succeed through the pandemic, and a collaborative multi-functional team developed the Crombie Values Small Business program, to help those tenants who would be most impacted by the lockdowns. This team worked tirelessly to answer questions, provide support and assist tenants in their need for rent assistance and more. We communicated weekly with all employees and tenants, and held regular company- wide check-in calls to ensure our team stayed safe and was kept updated on our business activities. As we look ahead to 2021, the challenge of COVID-19 remains. As we continue to work our way through the pandemic, the safety and well-being of our stakeholders remains a priority. Our strategy remains unchanged, and we look forward to the exciting completion of several of our major developments. Residents are now living in Zephyr (our Davie Street JV partnership with WestBank featured on the cover of this report), and residential leasing is now underway for our Bronte Village location (JV partnership with Prince Dev). Our relationship with Empire 04 CROMBIE REIT | Annual Report 2020 Building the Crombie of Tomorrow Donald Clow President & CEO HALIFAX, NS Clinton Keay Chief Financial Officer and Secretary NEW GLASGOW, NS Glenn Hynes EVP & Chief Operating Officer NEW GLASGOW, NS Cheryl Fraser Chief Talent Officer & VP, Communications NEW GLASGOW, NS John Barnoski EVP, Corporate Development Arie Bitton SVP, Leasing & Operations TORONTO, ON TORONTO, ON Trevor Lee SVP, Development & Construction CALGARY, AB Kara Dort VP, Accounting & Financial Reporting Jelena Plecas VP, Corporate Development Strategy NEW GLASGOW, NS TORONTO, ON Fred Santini General Counsel TORONTO, ON Andrew Watt VP, Leasing TORONTO, ON Brady Landry VP, Financial Analysis & Treasury NEW GLASGOW, NS Jennifer Sieber VP, Investments TORONTO, ON Sid Schraeder VP, Construction West Terry Doran VP, Office Properties CALGARY, AB HALIFAX, NS Aaron Bryant VP, Construction East Matt Craig VP, Operations NEW GLASGOW, NS NEW GLASGOW, NS Proven Stability and Sustainable Growth Delivering Value 05 05 continues to strengthen, and we are committed to an investment of $100 million - $200 million in 2021. Empire had a very successful year serving Canadians in 2020, and we are proud to work with them on further enhancing the quality of their customers’ experiences in-store and online. We have recently begun the work of reporting on our commitment to ESG. We’ve been practicing the principles of ESG for many years, and now we’re pleased to be taking the steps to submit to GRESB in 2021. Crombie leads by our values, and our goal has always been to enhance communities through long-term sustainable growth. This translates well to our ESG work, including maintaining our commitment to ethical operations, gold standard governance, sustainable design and building maintenance, and building welcoming spaces for all employees, tenants, and visitors. Sincerely, Donald Clow FCPA, FCA President & Chief Executive Officer Our Business Our Business OUR GOAL To enrich communities through long‑term sustainable growth. OUR VALUES • Commitment • Collaboration • Innovation • Integrity • Relationships • Excellence and Quality OUR CULTURE • One Team • Vibrant • Energetic • Thought Leadership Learning at all levels of the organization 1 18.0m sq. ft. ASSET TYPE 83.7% retail (15.0m sq.ft.) 5.3% office (1.0m sq.ft.) 11.0% retail-related industrial (2.0m sq.ft.) 30 projects 3 active 3 with zoning approvals [1] Includes partially-owned properties subject to proportionate consolidation 06 CROMBIE REIT | Annual Report 2020 Davie Street Vancouver, British Columbia Our Purpose We own and operate high‑quality, sustainable real estate where people live, work, shop and play. WHO WE DELIVER FOR Our Tenants and Customers Our Partners Our Unitholders Our People Our Communities WHAT WE HAVE WHAT WE DO VALUE WE CREATE Strong, stable portfolio Effective and efficient property management Strategic acquisitions / dispositions Resilient grocery-anchored needs-based properties that meet the needs of our tenants, their customers and communities Stable and growing cash flow Strategic partnership Strategically engage with Empire to complete conversions, modernizations, expansions, customer fulfilment centres and more, as well as collaborate on developments Accretively optimized portfolio designed to meet Empire and Crombie’s current and future needs, including unlocking development opportunities Development pipeline Planning and zoning of land Design and execution of projects High-quality real estate that enhances communities and provides sustainable long-term growth UNDERPINNED BY Strong financial condition Reasonable and balanced debt ladder with multiple sources of capital and ample liquidity Disciplined and innovative capital funding and management Strong balance sheet Optimize cost of capital Available capital sources Minimized financial risk A highly skilled team that generates strong returns by executing on strategy and caring about our properties, tenants, and communities Attract, develop and retain talented people who can execute our strategy and think innovatively Prioritize employee engagement, development, and community outreach Focus on environmental, social and governance (“ESG”) footprint including a commitment to the long-term sustainability of our properties and communities Diverse and inclusive team of skilled real estate professionals Experienced and focused leadership Address the needs of our employees and care for our communities Minimized environmental impact of our buildings and operations Strong governance Strong risk management and risk appetitie framework Supported communities Proven Stability and Sustainable Growth Delivering Value 07 07 Avalon Mall St. John’s, Newfoundland and Labrador 08 CROMBIE REIT | Annual Report 2020 Crombie’s Priorities 1 2 3 4 5 Page 10 12 14 16 18 Stable and Growing Portfolio Strategtic Partnership with Empire Strong Development Pipeline Strong Financial Condition Highly Skilled Team and Caring Culture Proven Stability and Sustainable Growth 09 09 Broadway and Commercial Rendering Vancouver, British Columbia Crombie’s Priorities 1 Stable and Growing Portfolio We build and own a high‑quality, resilient, and diversified portfolio, anchored primarily by grocery and pharmacy tenants that provide stable and growing long‑term earnings, cash flow, and Net Asset Value (“NAV”). Over the last decade, Crombie has grown and optimized the quality of our grocery-anchored portfolio by developing and acquiring assets in Canada’s top markets, as well as recycling properties, mostly in secondary and tertiary markets. Crombie’s 284 investment property portfolio is built on strong fundamentals, driven by record high committed occupancy of 96.4% and a lengthy weighted average lease term of 9.5 years. Rent collections throughout 2020 were strong highlighting the quality of our portfolio. However, not all tenants have been able to weather the recession caused by the pandemic. Our leasing and operations teams have worked very closely with our tenants to maintain strong relationships and provide appropriate levels of financial assistance. TOTAL 18.0m sq.ft. 96.4% Committed Occupancy Major Markets 4.6m sq.ft. 96.1% Committed Occupancy VECTOM 5.6m sq.ft. 99.0% Committed Occupancy Rest of Canada 7.8m sq.ft. 94.7% Committed Occupancy 10 CROMBIE REIT | Annual Report 2020 0.8m sq. ft. leases renewed 4.1% renewal leasing spread 9.5 years weighted average lease term $258,861 net property income (1.1)% SANOI +2.8% excluding impact of COVID-19 $0.88 AFFO/unit $1.05 FFO/unit Pointe-Claire CFC Montreal, Quebec Crombie’s Priorities 2 Strategic Partnership with Empire Our relationship with Empire is our sustainable competitive advantage. We collaborate to deliver the best solutions and work together to execute projects of mutual interest that enable operational stability, resilience, and growth. Empire has achieved great momentum with improved operating and financial performance, and market share growth. Supporting this momentum is the recent launch of Voilà by Sobeys in the Greater Toronto Area. Empire recently announced their new three-year strategy, Project Horizon, which focuses on core business expansion and the acceleration of their e-commerce network. Aligning our strategy with that of Empire enables Crombie to expand and diversify our real estate portfolio with solid risk- adjusted returns. We work closely with Empire to collectively drive high quality and defensive low-risk growth through strategic and accretive transactions such as: • Modernization and expansion of grocery stores; • Store conversions; • Accelerating Empire’s build-out of their Voilà online grocery home delivery service through investments in their network; • Land-use intensifications; and, • Unlocking of major urban developments. 12 CROMBIE REIT | Annual Report 2020 54.9% of annual minimum rent generated by Empire 57.2% (10.3m sq. ft.) of occupied portfolio GLA 12.5 years weighted average remaining Empire lease term $133m capital spend in 2020 to support Empire-related projects Crombie’s Priorities 3 Broadway and Commercial Rendering Vancouver, British Columbia Timeline Belmont Market Q1 2020 Avalon Mall Phase 1 Q3 2020 / Phase 2 Q4 2020 Strong Development Pipeline Pointe-Claire Q4 2020 Davie Street Retail Q2 2020 / Residential Q1 2021 By merging residential, retail, office, and retail‑related industrial properties, our development projects are a cornerstone for our vision of creating thriving communities where people live, work, shop, and play. Our value-enhancing major development pipeline consists of 30 properties, including three active developments. Many of these sites are strategically located within walking distance of existing and future transit corridors/nodes within growing census metropolitan areas. Four projects, with total costs of approximately $334 million, reached substantial completion in 2020. The remaining three active developments are expected to reach substantial completion in 2021. This is truly a transformational time for Crombie as a material number of development projects have reached or will reach substantial completion. These properties are expected to enhance communities, provide long-term sustainable growth, and increase our presence in the country’s top urban markets, while diversifying and improving our overall portfolio quality and income stream. Crombie expects to invest $150 million to $250 million in our development pipeline program annually. As our active developments approach completion, Crombie continues its work to entitle an additional ten projects across Canada. Crombie is committed to unlocking the significant land value embedded in our major urban market grocery stores and generate opportunities to continue our development program. 14 CROMBIE REIT | Annual Report 2020 Le Duke Q3 2021 Bronte Village Q4 2021 Spotlight on Davie Street Residential • Crombie’s first residential rental property, tenants began taking occupancy in November • Partner: Westbank 254,000 sq. ft. residential GLA 330 units Zephyr is a community of homes that set a new standard for urban, green and sustainable living in one of Canada’s great neighbourhoods, the West End. Zephyr is attempting to create a culture that is focused on living locally – the West End is Vancouver’s most walkable neighbourhood. $4.3– 6.1b development pipeline future investment potential 4 Completed 679,000 sq. ft. commercial GLA $334m total project cost 3 Active 5.3% - 5.8% estimated yield on cost1 80,000 sq. ft. commercial GLA 961,000 sq. ft. residential GLA 27 Future 1.3m sq. ft. commercial GLA 9.4m sq. ft. residential GLA 11% with zoning approvals 7% zoning application submitted [1] Please see the development section of the MD&A for disclosure on assumptions and risks. Scotia Square Halifax, Nova Scotia Crombie’s Priorities 4 Strong Financial Condition We continue to de‑risk our business and build financial strength by strategically managing our capital structure, accessing capital in a timely and cost‑effective manner, and optimizing capital allocation. Crombie improves its cost of capital through disciplined and innovative capital sourcing and strategic allocation to support NAV and AFFO growth. Historically, Crombie has funded its business with traditional equity issuances and commercial debt. Over the past few years, Crombie has achieved a more balanced approach to funding through our capital recycling program, including both full and partial interest dispositions, and unsecured notes. Recycling of capital provides organic equity funding which enables us to both lower/maintain our leverage and enhance our asset portfolio. Over many decades, a very solid foundation was built to support our business. Despite the ongoing challenges due to the COVID-19 pandemic, Crombie remains in good financial health with a strong, flexible balance sheet, and ample liquidity. The year began with an equity issuance at a price of $16.00 per unit, the highest issue price to date. Crombie issued two tranches of $150 million each of unsecured notes, achieving both the longest duration and lowest coupon in Crombie’s history, and secured two long-term mortgage financings at attractive interest rates. Both financing activities aligned with our debt strategy to increase our weighted average term to maturity and harvest interest savings. 16 CROMBIE REIT | Annual Report 2020 $1.4b fair value of unencumbered assets 5.3 years weighted average term to maturity $472m available liquidity 49.4% D/GFV 48.8% net of cash Crombie’s Priorities 5 Highly Skilled Team and Caring Culture We are proud of the smart, engaged people who enable Crombie to live up to our promise of enriching the communities in which we operate. Our Operations teams keep our properties safe and our tenants supported, and our office teams maintain a focused commitment to keeping our strategy on track. Even in the midst of a global pandemic, our people showed remarkable resilience and a continued commitment to our core values of integrity, collaboration, excellence, and relationships. These are just a few of the many people who strengthen Crombie’s foundation through their fine work every day. 18 CROMBIE REIT | Annual Report 2020 Michael Glynn Project Manager Thehani Guruge Lawyer “Crombie’s culture creates a sense of family, and I work with a really great team who make me feel like a part of that family. This sets the organization apart from other places I’ve worked in the past, and really inspires me to work hard and contribute to Crombie’s ongoing success.” “As part of the construction team, Crombie’s pipeline of development projects is very exciting to me. I’m enabled to contribute to the success of the organization by driving projects with the skills I’ve acquired through experience, continued learning, and personal development opportunities. I learn from my colleagues, and that pushes me to set ambitious goals and continually work toward achieving them.” Carla Quigley Senior Manager, Internal Reporting Kaitlyn Siddall Communications Specialist “In my work, I love to challenge and improve current processes, and Crombie empowers me to do what I do best. My colleagues are passionate about what they do and understand the value of teamwork. As an organization, we collaborate together as one team which is a strong contributor to the company’s success.” “Crombie understands that its people are at the center of its success, and it shows. The company culture encourages personal development, prioritizes employee well-being, and promotes continual growth. When I joined the organization in 2019, I realized very quickly that Crombie is the right fit for me to build a fulfilling career.” Patrick Langille Analyst, Corporate Realty Tax Ian MacDonald Manager, Development Rebecca MacNeil Ruth Martin Manager, Recruitment and Employee Engagement Director, Investor Relations and Financial Analysis “Crombie has constantly progressed over the course of my four years with the company. Its evolution to a national REIT and developer of large mixed- use properties is what inspires me about Crombie’s future.” “Sustainable design and construction is embedded in Crombie’s development process, and I love being a part of an organization that considers building an environmentally sustainable future a key focus. Working directly on Crombie’s developments that are enriching the communities where we live and work, is something that fuels me to continue to build my career with Crombie.” “Although we are spread out across Canada, we are a tight-knit, dedicated, and strong team, all working toward common goals. My job is to help find the right people to build an engaged, skillful team that not only contributes to Crombie’s success today, but ensures we have a talented team to support Crombie’s future. My colleagues are some of the best in the industry.” “From my perspective, the most important of Crombie’s guiding values are commitment, collaboration, integrity, and relationships. I feel that these values drive a business, and without them, it’s challenging to make forward progress or have a healthy culture. Crombie lives these values every day through its commitment to enriching communities, supporting its tenants, and empowering employees. This dedication makes me a proud member of the team.” Annie Smith Analyst, Corporate Development “I’m proud of how resilient Crombie has proven to be over the past year, navigating through the COVID-19 pandemic. The team has demonstrated great agility and adaptability through strong communication and collaboration.” Karen Solursh-Smith Director, Leasing Ryan Sun Property Accountant “Crombie has evolved its portfolio to include mixed-use, larger scale developments. This evolution and quality of our portfolio is an exciting transformation toward the future success of the company. Crombie’s strong relationship with Empire, our preferred partner, builds on this success and helps establish us as a leader in Canadian real estate.” “Crombie is an engaging, motivating, and supportive workplace. Senior leadership keeps us involved with strategic goals of the company, cares about employee career development, and we’re offered a flexible and supportive work environment. My colleagues are some of the most hard-working, dedicated, and inspiring people I have worked with. They make me a proud member of the team and Crombie family.” Mike Verge Director, Information Systems and Technology “As a large, successful organization, it’s important to set ambitious goals and focus on the future; but it’s also important to stay true to company roots and values. Crombie does an excellent job of balancing future plans and aspirations with the foundational culture that’s helped to build its success.” ESG Initiatives ESG Initiatives Since our earliest days, Crombie has been committed to the well‑being of communities. The locations of many of our properties allow our visitors to access essential needs close to their homes, reducing transportation time and, therefore, environmental impact. Crombie has been and remains committed to embedding sustainability principles into the way we do business, our decision-making processes, and everyday activities. In order to better understand sustainability performance at Crombie, we are committed to improving the measurement of our baseline performance in all three categories of sustainability (environmental, social, and governance). We are developing the policies and procedures that will set the targets and actionable processes necessary to achieve our short- and long-term ESG goals. Our sustainability agenda is a critical component of our culture. Environmental Performance Corporate Governance Good governance is about having a skilled and diverse Board of Trustees and implementing best practices of Board governance. Good governance must be implemented by talented people who have the integrity, knowledge and experience to set and support achieving the goals of the company. Crombie understands that we have a responsibility to consider the impacts of our activities and we commit to manage those impacts, mitigate risks, and identify value-add opportunities. We also commit to future collaborations with stakeholders to determine material issues for consideration in our sustainability journey. We have recently conducted an internal materiality analysis of key ESG topics that are important to Crombie and, we believe, to our stakeholders. From this analysis, we will focus on the following material ESG topics: • Sustainable Design and Construction • Energy Consumption • Building and Attracting Talent • Diversity, Equity and Inclusion • Health, Safety and Wellness • Risk Management • Board Composition and Governance As a real estate company, we understand that our properties can have a significant impact on our environment, both through construction and operations. Crombie is increasing our commitment to: • Enhancing our inclusion of environmental considerations in the design of all new projects; • Increasing opportunities for efficiencies at existing buildings; and • Continuing operation of our properties and business in ways that minimize our impact on the environment. Social Impact Recognizing that building stronger communities requires an investment of additional resources, Crombie is committed to: • offering our employees a safe, welcoming, diverse and inclusive workplace that actively encourages continued well-being, development, growth, and a positive overall work experience; • prioritizing our people and promoting a culture where our employees share in our company’s sustainability vision; and • supporting charitable organizations that play a role in improving the health and well-being of their communities through donations of money, time, and space. 20 CROMBIE REIT | Annual Report 2020 Avalon Mall received the BOMA Newfoundland and Labrador Earth Award – Retail Crombie was named BOMA NL’s Company of the Year in 2019 Looking ahead: ESG Program Advancement – 2021 Goals 2021 will be transformational for our ESG program. We will report publicly our ESG strategy and operating model, our priority ESG objectives, and we will publish an ESG Report with commitments that authentically reflect our values. We will report our performance in alignment with the GRESB framework, which is an investor-grade, industry- recognized tool specifically designed to measure ESG performance in real estate. We are currently collecting and reviewing relevant information, which will be used to highlight existing best practices, which are significant but unreported, and identify areas where we have opportunity to improve our performance. We look forward to continuing work with our Board of Trustees to develop comprehensive ESG measurement and reporting. In collaboration with Sobeys, there have been LED retrofits at 147 properties across Canada. Case Study: Avalon Mall Avalon Mall has received several environmental awards since its major redevelopment commenced in 2018. Clean St. John’s awarded Avalon the Golden Broom Corporate Award in 2020 for its efforts to reduce waste through the implementation of multi-stream waste bins and installation of an industrial composter which, to date, has helped divert nearly 20,000kgs of organic waste from the landfill. Avalon Mall received the BOMA Newfoundland and Labrador Earth Award – Retail, and Crombie was named BOMA NL’s Company of the Year in 2019. Several energy-saving projects contributed to these awards, including the completion of upgrades to the NOVAR Building Management System, which allowed for better control of heating and cooling set points and time control for lighting. Installing occupancy sensors in all secondary corridors and upgrading all common area lighting to LED further controls and reduces overall energy consumption at the property. Energy Consumption As we evolve, so too does our commitment to our communities, and to the planet at large. Across the country, Crombie continues to implement initiatives to improve our environmental impact on the communities in which we operate. Avalon Mall St. John’s, Newfoundland and Labrador Proven Stability and Sustainable Growth Delivering Value 21 21 ESG Initiatives Sustainable Design and Construction Building and Attracting Talent Major Developments offer us the opportunity to start protecting the environment from the onset of a project. For all new builds, we start with a project visioning exercise that looks at the micro market in which we are building to determine the best way to further enhance that community for the future. It is important to us to understand what matters to each community, and provide the right space and amenities as we move forward. In addition, we closely examine the impact we will have on the planet and build for the betterment of all. Davie Street, Vancouver, British Columbia • Public art feature “Zephyr” to enhance the streetscape. Over the past several years, Crombie has consistently won Atlantic Canadian and Nova Scotian Employer of the Year awards because of our commitment to our people and culture. In 2020, we also won a Top Canadian Small and Medium Enterprise award. These awards are recognition of the work we do to engage our people in building a strong, caring culture. We actively recruit smart people who have diverse ways of thinking, are passionate about learning, thrive at solving problems, and are highly committed to our core values. We focus on true engagement metrics, identifying and addressing when there are opportunities to further enhance people’s sense of purpose in their work. We support professional development and learning opportunities and encourage our employees to develop their unique skills and talents for future growth. • LEED Gold Equivalent project. Health, Safety and Wellness • 6 Shared Vehicle Stalls on site. • 409 bicycle stalls (1.25 per residential unit). • 18 short term bicycle parking stalls for public use. • Public bike share facility on Cardero Street. • Designed to be able to connect to a Neighbourhood Energy System when it becomes available in the future. • Electric vehicle charging stations provided for Residential and Commercial use. Like so many others, Crombie’s office employees moved to home offices last year, and most still work remotely at the time of this writing. Our Operations employees maintained our properties’ high health and safety standards throughout the pandemic, upholding Crombie’s commitment to the communities in which we operate. Our people’s health, safety, and well-being were our highest priority during the most significant pandemic our world has experienced in a century. We took every precaution to protect them from COVID-19, and we all worked diligently to adhere to public health advice. With much of the country in lockdown, we knew that mental health was also suffering, so we provided increased communications and resources to our employees to keep them well. Our leaders met weekly to discuss how to best support their teams, we held regular company-wide check-in calls, and our CEO sent weekly emails and met with employees virtually to answer questions and provide guidance. Diversity, Equity and Inclusion at Crombie Building and maintaining a diverse, equitable and inclusive culture that is reflective of the communities in which we operate is instrumental to Crombie’s continued success. Our commitment to workforce diversity means we will create an inclusive culture and a sense of belonging for everyone. Through leadership and action, Crombie’s diversity, equity, and inclusion goals are intended to ensure that Crombie is reflective of the diversity inherent across all levels of our communities and Canadian society, and that Crombie benefits from the range of perspectives, ideas and experiences that diversity provides. 2020 Actions: • Updated our Diversity, Equity and Inclusion Policy to include goals, accountabilities, and commitments. • Launched a Diversity Advisory Group that includes diverse employee representation from across the organization. • Held Virtual Inclusion Conversations. • CEO signed BlackNorth Pledge. 22 CROMBIE REIT | Annual Report 2020 Le Duke Montreal, Quebec Board Composition and Governance Crombie has always taken a conservative approach to governance and ethics. While we have a strategic relationship with Empire, who owns a 41.5% interest in Crombie, we take every effort to ensure our independence. All “related party” transactions must be voted on by our elected Trustees only, while Empire-appointed Trustees abstain. We are committed to engaging with our stakeholders through quarterly conference calls, our annual general meeting and regular investor relations meetings. In addition, unitholders can contact the Chair of our Board via email at chair@crombie.ca. Risk Management To monitor and mitigate risk, an extensive risk management framework is in place, and is reviewed annually by the Board and its individual committees. At Crombie, we are guided by our values and commitments, and “doing right while doing good” is ingrained in our culture. Each year, our Trustees and all employees at Crombie sign an extensive Code of Conduct and Business Ethics. From the Chair of the Board to our operations and office staff, everyone at Crombie is expected to act with integrity and the upmost regard for ethical decision making. Included in the code is an ethics “whistleblower” line that is available for any employee to report a breach of our Code. Proven Stability and Sustainable Growth Delivering Value 23 23 Message from the Chair Message from the Chair The commitment of Crombie’s Board of Trustees is to serve in the best interest of our unitholders, regardless of the daily challenges the business may face. To say 2020 was an unusual and challenging year is an understatement. The pandemic played a huge role in how organizations around the world operated, and Crombie was no exception. The disruptive impact of COVID-19 was significant for the retail REIT sector in Canada, and many retailers faced incredibly difficult conditions during the ongoing national lockdowns. Crombie is fortunate to hold the most resilient asset class, essential needs retail, including our largest tenant Empire, whose business thrived in these challenging conditions. Our relationship with Empire strengthened in 2020, as everyone worked together to prioritize the safety and well-being of employees and customers across the country. The Board has supported management through their response to COVID-19. Our Trustees have been supportive of the major development projects that are underway and of those in the pipeline. The pandemic didn’t affect that support; we didn’t make any changes that would impact the long-term strategic direction of the organization. Crombie continues to offer a sustainable return to our unitholders. Management worked diligently this year to strengthen the business and get things done in a way that would ensure our performance remained strong. They were quick on their feet in reacting to the changing business requirements, kept our employees and business safe, and diligently maintained our properties. The company remains strong and committed to its strategic growth path. In 2020, we welcomed Karen Weaver to our Board. In addition to her robust financial leadership experience, Karen’s wealth of knowledge in governance has been invaluable. One of the key priority areas of focus for the Board and the company over the next year is creating a full ESG plan along with a strategy for implementation. Crombie has been built on a foundation of sustainable long- term commitment to its stakeholders, and this work will allow the company to plan for and measure its successes in this important work. 24 CROMBIE REIT | Annual Report 2020 I thank all our Trustees for their commitment and dedication in 2020 and commend the Management team for a successful year. Sincerely, J. Michael Knowlton Chair “Management worked diligently this year to strengthen the business and get things done in a way that would ensure our performance remained strong. They were quick on their feet in reacting to the changing business requirements, kept our employees and business safe, and diligently maintained our properties.” J. MICHAEL KNOWLTON CHAIR Board of Trustees J. Michael Knowlton Independent Trustee & Chair Paul Beesley Independent Trustee Donald E. Clow Trustee Jim M. Dickson Independent Trustee* John C. Eby Independent Trustee Barbara Palk Independent Trustee Jason P. Shannon Independent Trustee Jana Sobey Independent Trustee* Paul D. Sobey Independent Trustee* Karen Weaver Independent Trustee *Empire appointed Trustee Bronte Village Oakville (Toronto), Ontario Proven Stability and Sustainable Growth Delivering Value 25 25 Key Highlights Management’s Discussion and Analysis Key Performance Indicators COVID-19 Impact – Operations COVID-19 Impact – Financial Glossary of Terms Portfolio Review Market Class Asset Type Tenant Profile Acquisitions and Dispositions Operational Performance Review Occupancy and Leasing Activity Lease Maturities Financial Performance Review Development Capital Management Capital Management Framework Capital Structure Debt Metrics Cash Flows Liquidity Financial Instruments Risk Management Other Disclosures Related Party Transactions Use of Estimates and Judgments Controls and Procedures Non-GAAP Financial Measures Forward-Looking Information Consolidated Financial Statements Management’s Statement of Responsibility for Financial Reporting Independent Auditor’s Report Consolidated Financial Statements Notes to the Consolidated Financial Statements Property Portfolio Unitholders’ Information Top 20 Tenants 27 30 32 35 36 36 38 39 41 43 43 46 47 55 61 61 62 63 69 71 73 74 79 79 79 81 84 87 89 90 95 99 130 132 133 The following Management’s Discussion and Analysis (“MD&A”) of the consolidated financial condition and financial performance of Crombie Real Estate Investment Trust (“Crombie”) should be read in conjunction with Crombie’s audited consolidated financial statements as at and for the years ended December 31, 2020 and 2019. Except for per unit, gross leasable area (“GLA”) and square footage (“sq. ft.”) amounts and where otherwise noted, all amounts in this MD&A are reported in thousands of Canadian dollars. The information contained in the MD&A, including forward-looking statements, is based on information available to management as of February 24, 2021, except as otherwise noted. Additional information relating to Crombie, including its latest Annual Information Form, can be found on the SEDAR website for Canadian regulatory filings at www.sedar.com. For definitions of certain acronyms and specialized terms we use in this document, refer to the “Glossary of Terms” on page 35. FOOTNOTES (*) NON-GAAP FINANCIAL MEASURES Some of the financial measures we provide in this document are non-GAAP financial measures that have no standardized meaning under International Financial Reporting Standards (IFRS) and therefore may not be comparable to similar measures presented by other companies. See “Non-GAAP Financial Measures”, starting on page 84, for more information on Crombie’s non-GAAP financial measures and reconciliations thereof. FORWARD-LOOKING STATEMENTS Some of the information we provide in this document is forward-looking and therefore could change over time to reflect changes in the environment in which we operate and compete. See “Forward-looking Information”, starting on page 87, for more information. 27 Message from the Chair KEY PERFORMANCE INDICATORS KEY HIGHLIGHTS We use financial, operational, and growth metrics to measure our performance. These key metrics are highlighted below: FINANCIAL METRICS (in thousands except GLA and per unit amounts) Property revenue Q4 2020 Year 2020 $97,060 $388,733 Q4 2019 $96,823 +0.24% Year 2019 $398,741 -2.51% Property revenue on a quarterly basis has increased slightly compared to the fourth quarter of 2019. The decrease in property revenue of 2.51% on an annual basis is primarily due to property dispositions in 2019. Due to COVID-19, parking revenue has been negatively impacted by reduced demand and rental revenue has been decreased by abatements primarily resulting from the implementation of the federal government’s Canada Emergency Commercial Rent Assistance (“CECRA”) program. In addition, tenant incentive amortization increased as a result of modernizations and energy upgrades. Operating income attributable to Unitholders Q4 2020 $17,157 Year 2020 $67,608 Q4 2019 $44,149 -61.14% Year 2019 $161,875 -58.23% The quarterly and annual decrease in operating income attributable to Unitholders is driven primarily by a gain on disposal of $81,803 from property dispositions in 2019, as well as 2020 increased rent abatements, and increased bad debt expense as a result of estimates for credit losses on rents receivable as a result of COVID-19. This is offset slightly by reduced general and administrative expenses and, on an annual basis, by lower finance costs due to the repayment of mortgages related to 2019 asset sales. Same-asset property cash NOI* Q4 2020 +1.85% Year 2020 -1.14% Q4 2020 $61,805 Year 2020 $237,522 Q4 2019 $60,680 Year 2019 $240,250 FFO* per unit Q4 2020 $0.27 Year 2020 $1.05 Q4 2019 $0.28 -3.57% Year 2019 $1.16 -8.99% FFO* payout ratio Q4 2020 83.2% Year 2020 84.6% Q4 2019 80.1% +3.10% Year 2019 76.9% +7.69% The quarterly increase in same-asset property cash NOI of $1,125 or 1.85% compared to the fourth quarter of 2019 is primarily due to higher supplemental rents from modernizations and capital improvements, offset in part by the impact of COVID-19 on parking revenue and rent abatements. On an annual basis, in addition to decreased parking revenue and rent abatement increases resulting from the impact of COVID-19, bad debt expense increased significantly on same-asset properties compared to 2019. FFO per unit for both the quarter and on an annual basis was impacted by the increase in the number of Units outstanding from the Unit issuance in Q1 2020. On an annual basis, the decrease in FFO is driven by bad debts and rent abatements related to the impact of COVID-19, reduced net property income resulting from the disposition of properties in 2019, and severance costs in the second quarter of 2020. This is offset in part by a decrease in general and administrative expenses and the impact of decreased unit price on unit-based compensation plans. Higher FFO payout ratios for the quarter and on an annual basis are a direct result of the combined effects of decreased FFO and higher total distributions due to an increase in the number of Units outstanding from the Unit issuance in Q1 2020. 27 Proven Stability and Sustainable GrowthKEY PERFORMANCE INDICATORS FINANCIAL METRICS (CONTINUED) AFFO* per Unit Q4 2020 $0.23 Year 2020 $0.88 Q4 2019 $0.24 -4.17% Year 2019 $0.98 -10.20% AFFO* payout ratio Q4 2020 98.7% Year 2020 101.0% Q4 2019 93.8% +4.92% Year 2019 90.8% +10.20% OPERATIONAL METRICS Renewals (GLA) Q4 2020 Year 2020 200,000 758,000 Q4 2019 699,000 -499,000 Year 2019 1,626,000 -868,000 Renewal spreads Q4 2020 4.5% Year 2020 4.1% Q4 2019 3.9% +0.57% Year 2019 3.9% +0.24% Committed Occupancy Economic Occupancy Year 2020 96.4% Year 2020 94.0% Year 2019 96.1% +0.30% Year 2019 95.4% -1.40% 28 The quarterly decrease in AFFO per unit is primarily due to the higher number of units outstanding and the conclusion of the amortization of effective swap agreements resulting from mortgage maturities, in addition to items affecting FFO. On an annual basis, AFFO decreased primarily due to lower FFO, partially offset by a decrease in maintenance expenditures on a square footage basis resulting from property dispositions. The increased number of Units outstanding from the Unit issuance in Q1 2020 resulted in higher total distributions. This, combined with the reduction in AFFO, resulted in an increase to payout ratios. The decreased 2020 renewal variances on a quarterly and annual basis are primarily related to 684,000 square feet of Empire leases executed in 2019. During 2020, 758,000 square feet was renewed at rents 4.1% over the expiring rental rate. The primary driver of the renewal growth in the quarter was retail enclosed renewals on approximately 81,000 square feet, at an increase of 6.8% over expiring rental rates. On an annual basis, growth was a result of strong renewal activity in the retail plaza portfolio with approximately 404,000 square feet of renewals, at an increase of 5.0% over expiring rental rates. Economic occupancy was negatively impacted by the addition of approximately 345,000 square feet of vacant development GLA at Avalon Mall and Pointe-Claire CFC with economic occupancy expected in early 2021. This was partially offset by new leases of 248,000 square feet, outpacing lease expiries by 181,000 square feet. Notable new leases include H&M at Avalon Mall, The Brick at Woodgate Plaza, and Giant Tiger at North Bay. 432,000 square feet of committed space at year end led to record high committed occupancy of 96.4%. Approximately 350,000 square feet of committed space is at Avalon Mall, Belmont Market and Pointe-Claire CFC. Additionally, approximately 49,000 square feet is in our office portfolio. CROMBIE REIT | Annual Report 2020KEY PERFORMANCE INDICATORS FINANCIAL CONDITION METRICS Interest coverage ratio* Q4 2020 2.77x Year 2020 2.90x Q4 2019 2.99x -0.22x Year 2019 2.95x -0.05x Debt to gross fair value* (D/GFV) Q4 2020 49.4% Q4 2019 48.9% Q4 2019 48.9% -0.50% Q4 2017 51.0% +2.11% The quarterly reduction in interest coverage ratio is due to the increase in finance costs primarily resulting from the premium paid relating to partial early redemption of unsecured notes. On an annual basis, reduced EBITDA resulting from lower property revenue from 2019 dispositions and the impacts of COVID-19 described above is the main driver in the reduction of the ratio. The increase in D/GFV is due to spending on major developments, offset in part by increased cash equivalents of $63,293 related to a mortgage at our Pointe-Claire development and increased value in investment properties from development. Debt to gross fair value*, applying cash and cash equivalents to reduce debt, is 48.8% at Q4 2020. Debt to trailing 12 EBITDA* (D/EBITDA) months Q4 2020 9.73x Q4 2019 8.52x -1.21x D/EBITDA increased on an annual basis due to spending on major developments, and reduced EBITDA resulting from property dispositions in 2019 and the impacts of COVID-19 on parking revenue, rent abatements, and bad debt expense in 2020. Debt to trailing 12 months EBITDA*, applying cash and cash equivalents to reduce debt, is 9.48x at Q4 2020. Available liquidity – unutilized credit facilities Q4 2020 $471,708 Q4 2019 $449,016 Available liquidity improved over 2019 primarily as a result of increasing the maximum principal amount of the unsecured bilateral credit facility to $130,000 from $100,000. 29 Proven Stability and Sustainable GrowthCOVID-19 IMPACT – OPERATIONS In the first quarter of 2020, an outbreak of the novel strain of coronavirus, COVID‑19, was declared a worldwide pandemic. States of emergency with varying degrees of mandatory business closures and operating restrictions were declared repeatedly in 2020 across Canada, resulting in a national economic slowdown. The duration and impact of these emergency measures and their impact on Crombie’s financial results into the future are not fully known. Approximately 77% of Crombie’s annual minimum rent is generated from essential grocery and pharmacy‑anchored properties and to date, Crombie has collected approximately 96% of its contractual rents for the year ended December 31, 2020. Crombie is committed to enriching the neighbourhoods in which we operate, which includes the health, safety, and well-being of our employees, tenants, customers and communities. Our pandemic planning team, comprised of cross-functional leaders from across the organization, has been actively managing our ongoing response to the COVID-19 pandemic. We continuously review business needs and empower all employees to take appropriate precautions, and to respond to all confirmed or suspected COVID-19 cases in any of our properties or offices across the country. We implemented, and regularly update, Business Continuity Plans with guidance from trusted sources (primarily the World Health Organization and Public Health Agency of Canada). OUR EMPLOYEES In early March, following guidelines provided by these trusted sources, we asked our employees to cancel all work-related travel, reinforced the need to practice good sanitation/handwashing techniques, and to stay home and consult a physician if ill. In keeping with guidelines to facilitate physical distancing, we implemented a work-from-home program in mid-March for most of our workforce, ensuring technology solutions were in place with little to no disruption to business operations. These same protocols remain in place today, and many of our employees continue to work productively and safely from home. We continue to pay close attention to our employee engagement and culture data, and have committed to increased regular two-way communications with our teams. We maintain these open lines of communication across the organization through effective leveraging of technology and coaching our people leaders to have regular contact with their remote team(s). Continued wellness is a priority, so we share information from federal and provincial authorities about the importance of following public health guidelines to keep our communities safe. We also care deeply about our employees’ mental health, so we ensure that all employees have access to mental health resources and supports. The continued level of uncertainty around how the COVID-19 situation will evolve may require us to take further, longer-term decisions to ensure the well-being of our people, as well as that of our tenants, customers, and suppliers, and we will always do our part to support the objectives of leading health organizations. Crombie is extremely proud of the efforts made by our team. While most office employees continue to work from home, our Operations teams ensure our properties are operational, clean and safe, and their work helps ensure that goods and services are readily accessible to the communities we serve. OUR TENANTS AND CUSTOMERS During this time, we have continued to maintain and proactively augment health and safety protocols at all our properties. Our regular cleaning activities remain of utmost importance as a protective measure against the virus in our offices and at each of our properties. Public health authorities have advised that regular cleaning practices should be increased, and we have done so by increasing the frequency of our cleaning efforts and ensuring a focus on touch points. Hand sanitizer dispensers are available in all common areas. Our on-site Operations employees are asked to wear masks and maintain physical distancing at all times. We also maintain open lines of communication with our tenants. We provide regular updates and have established clear expectations around sharing known presumptive or confirmed cases on our properties, so we can take the necessary steps to inform and protect all tenants, employees, customers and service providers. Many tenants are faced with substantial changes to the way they serve their customers, and we have supported them with physical distancing protocols and site signage. We have a comprehensive communication plan that connects Operations, Talent Management and Executive teams, ensuring immediate awareness of any concerns. The health and safety of tenants, visitors and employees at our sites remains a priority to our team. Our Business Continuity Plan contains steps to mitigate the risk of business interruption and ensure that we continue to deliver the same level of service and experience to which our tenants and customers are accustomed. We implemented a Crombie Values Small Business (“CVSB”) program in March, as a way of supporting our small business tenants throughout the pandemic. We have provided additional assistance to tenants requiring rent relief through the federal government’s Canada Emergency Commercial Rent Assistance (“CECRA”) program and Canada Emergency Rent Subsidy (“CERS”). We continue to support tenants through the pandemic’s ongoing and changing economic impacts. As of the end of January 2021, 97% of leased GLA was open for business. 30 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 Davie Street Vancouver, British Columbia OUR MAJOR DEVELOPMENTS Although not significant, COVID-19-related inefficiencies and delays have increased risk around date and cost completion as well as future residential lease-up schedules on our major development program. The shutdown of nonessential construction in Quebec from March 24th to May 11th extended the completion date of the Le Duke development to Q3 2021. Despite this shutdown, Pointe-Claire achieved substantial completion of the base building construction in the fourth quarter of 2020. COVID-19-related measures and procedures caused slight delays in other major developments in British Columbia and Ontario. The 160,000 square foot Belmont Market development achieved substantial completion in 2020, with the remaining 17,000 square feet of construction delayed due to pre-leasing disruption, to be completed by Q4 2021. Davie Street retail development achieved substantial completion in 2020 with the residential development projected to be substantially complete in early 2021. Please refer to the “Active Major Developments” section of this MD&A for further details on each project. OTHER CONSTITUENTS Crombie’s Business Continuity Plan contains mechanisms to ensure we complete all public company filings on a timely basis, maintain key internal and disclosure controls and continue to meet all other ordinary course business obligations. COVID-19 related impacts are further discussed in the following sections of this MD&A: “COVID-19 Impact – Financial”, “Financial Performance Review”, “Development”, “Capital Management”, “Risk Management” and “Other Disclosures”. 31 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthCOVID-19 IMPACT – FINANCIAL COVID-19 IMPACT – FINANCIAL Crombie has provided relief to qualifying small business tenants impacted by the COVID‑19 pandemic through our own CVSB assistance program and the federal government’s CECRA and CERS programs. On March 27, 2020, Crombie announced the launch of CVSB, our small business support program, which included relief that deferred rent payments to assist small businesses during this unprecedented time. Effective April 1, 2020, small businesses within Crombie’s portfolio that demonstrated a need for assistance qualified to defer a portion or all of their rent for two months. A team was established to deal with the needs of our tenants and assess eligibility of tenants who requested rent relief. In order to ensure Crombie is doing its part to contribute to the survivability of its tenants during the pandemic, management has been actively working with tenants seeking rental concessions or who have stated that they are not going to pay their rent during the pandemic. To address certain needs, Crombie deferred amounts for qualifying tenants which are due to be repaid over a 12-month period. As of December 31, 2020, there was approximately $188 or 0.2% of the quarter's contractual rent deferred. This amount also includes rent deferral arrangements with our larger tenants who have been adversely affected by COVID-19. Most of Crombie’s leases require that rent be paid on the first day of each month. During the three months and year ended December 31, 2020 and for the month of January, we have collected or expect to collect the following approximate contractual rents: Three months ended December 31, 2020 Year ended December 31, 2020 January 2021 % of Gross Rent Collected % of Gross Rent, Total Portfolio % of Gross Rent Collected % of Gross Rent, Total Portfolio % of Gross Rent Collected % of Gross Rent, Total Portfolio Retail Office Retail-related industrial Total 98% 99% 100% 98%1 91% 6% 3% 100% 96% 99% 100% 96%1 91% 6% 3% 100% 98% 99% 100% 98%1 91% 6% 3% 100% (1) Avalon Mall was significantly impacted by the pandemic. Since reopening on June 8th, we continue to see improvements at Avalon Mall. As of the end of January 2021, close to 100% of leased GLA is open for business, traffic counts continue to improve, rent collection has improved from 38% in May to 94% in January and approximately 90% of the new expansion space is now leased. Crombie assesses, on a tenant-by-tenant basis, losses expected with its rent receivables in determining the provision for doubtful accounts. Crombie takes into account the payment history and future expectations of likely default events (i.e., tenant requests for rental concessions/ abatements, applications for rental relief through government programs such as the CECRA and CERS programs, or stating they will not be making rental payments on the due date) based on actual or expected insolvency filings or company voluntary arrangements and likely deferrals of payments due, and potential abatements to be granted by the landlord through tenant negotiations or under CECRA. Crombie’s assessment is subjective due to the forward-looking nature of the situation. As a result, the provision for doubtful accounts is subject to a high degree of uncertainty and is made based on assumptions which may not prove to be accurate with the unprecedented uncertainty caused by COVID-19. In April, the federal government, in cooperation with all 10 provinces, unveiled the Canada Emergency Commercial Rent Assistance (“CECRA”) program, which subsidized 50% of small and medium-sized business rent for six months for qualifying businesses and required landlords to reduce their rent receivable by 25%, effectively reducing rent payments for the tenants by 75%. Crombie actively supported its tenants in the application for rent relief through the CECRA program, which ended as of September 2020. Crombie filed 286 tenant applications under the program, representing approximately 5% of gross monthly rent. Crombie elected to treat the 25% reduction in rent receivable under the CECRA program as a credit loss under IFRS 9, where qualifying tenants had accounts receivable balances. Where no balance exists, the 25% reduction was considered a lease modification in accordance with IFRS 16 and averaged over the life of the lease as straight-line rent. The Canada Emergency Rent Subsidy (“CERS”) was announced in October by the federal government to replace the CECRA program by providing support for commercial rent and property expenses to small businesses affected by COVID-19. It subsidizes a percentage of eligible expenses, on a sliding scale, up to a maximum of 65% until June 2021. As application for CERS is the responsibility of the tenant, Crombie has reached out to those small business tenants who would qualify in order to gauge interest in the program. Management is currently reviewing the potential impacts, if any, of CERS. 32 CROMBIE REIT | Annual Report 2020COVID-19 IMPACT – FINANCIAL Based on its review, Crombie recorded a bad debt expense of $10,894 in 2020, reducing property operating income for the year ended December 31, 2020. The following table further outlines total bad debt expense for the three months and year ended December 31, 2020. (In thousands of CAD dollars) Total tenant billings1 Less: amounts received and deferrals repaid to date Less: CECRA collections Balance outstanding Total rents expected to be collected as per rent deferral arrangements Total rents to be collected excluding collectible deferrals Less: bad debt expense Balance expected to be recovered Three months ended December 31, 2020 % of total tenant billings Year ended December 31, 2020 % of total tenant billings $ $ 101,883 (100,012) — 1,871 445 2,316 (67) 2,249 100.0% $ (98.2)% —% 1.8% 0.5% 2.3% (0.1)% 2.2% $ 410,179 (384,231) (7,958) 17,990 (2,452) 15,538 (10,894) 4,644 100.0% (93.7)% (1.9)% 4.4% (0.6)% 3.8% (2.7)% 1.1% (1) Total tenant billings is the amount billed to tenants for the period per their contractual obligations. It does not include other components of property revenue, such as accrued recovery revenue, contingent rental revenue, straight-line rent recognition, tenant incentive amortization, lease termination income, or parking revenue. (In thousands of CAD dollars) Expense recognized for CECRA-eligible tenants (25% landlord share) Expense recognized for tenants with negotiated rent abatements Expense recognized for additional expected credit losses Bad debt expense Three months ended December 31, 2020 Year ended December 31, 2020 $ $ — $ 473 (540) (67) $ (1,696) (3,002) (6,196) (10,894) The following table further outlines what management estimates to be the material impacts of COVID-19 on Crombie’s operating performance for the three months ended December 31, 2020: (In thousands of CAD dollars, except per unit amounts and as otherwise noted) FFO* AFFO* Same-asset property cash NOI* Same-asset property cash NOI* growth $ Per unit $ Per unit $ $ % Actual results – Q4 2020 $ 42,305 $ 0.27 $ 35,679 $ 0.23 $ 61,805 $ 1,125 1.9% Adjusted for: Bad debt expense Rent abatements1 Parking revenue2 67 365 854 Adjusted results – Q4 2020 Q4 2019 $ $ 43,591 42,132 $ $ — — 0.01 0.28 0.28 67 377 854 $ $ 36,977 36,006 $ $ — — 0.01 0.24 0.24 30 178 854 30 178 854 $ $ 62,867 $ 2,187 60,680 —% 0.3% 1.4% 3.6% (1) Total amount of rent abatements recognized for AFFO* purposes was $377. Where qualifying tenants had accounts receivable balances, Crombie has elected to treat the abatements as a credit loss under IFRS 9. In cases where insufficient accounts receivable balances exist, Crombie has applied IFRS 16 and treated the abatement as a lease modification which is averaged over the life of the lease as straight-line rent. For purposes of FFO*, the abatements are partially offset by the straight-line rent impact of $(12). (2) Parking revenue is calculated as the decrease in parking revenue from the same quarter in 2019, which Crombie has attributed to the impact of COVID-19. 33 Proven Stability and Sustainable GrowthCOVID-19 IMPACT – FINANCIAL The following table further outlines what management estimates to be the material impacts of COVID-19 on Crombie’s operating performance for the year ended December 31, 2020: For further information on these impacts, see the “COVID-19 Impact – Operations” section of this MD&A. (In thousands of CAD dollars, except per unit amounts and as otherwise noted) FFO* AFFO* Same-asset property cash NOI* Same-asset property cash NOI* growth $ Per unit $ Per unit $ $ % $ 165,850 $ 1.05 $ 138,963 $ 0.88 $ 237,522 $ (2,728) (1.1)% Actual results Adjusted for: Bad debt expense1 Rent abatements2 Parking revenue3 Organizational realignment severance costs Adjusted results – Year 2020 Year 2019 $ $ 180,893 175,539 $ $ 9,807 1,012 2,715 1,509 0.06 0.01 0.02 0.01 1.15 1.16 9,807 2,315 2,715 1,509 $ $ 155,309 148,632 $ $ 0.06 0.01 0.02 0.01 0.98 0.98 $ $ 5,228 1,490 2,715 — 5,228 1,490 2,715 — 246,955 $ 6,705 240,250 2.2% 0.6% 1.1% —% 2.8% (1) Crombie considers bad debt expense for Q2 to Q4 2020 only to be attributed to the impact of COVID-19. (2) Total amount of rent abatements recognized for AFFO* purposes, primarily related to CECRA, was $2,315. Where qualifying tenants had accounts receivable balances, Crombie has elected to treat the abatements as a credit loss under IFRS 9. In cases where insufficient accounts receivable balances exist, Crombie has applied IFRS 16 and treated the abatement as a lease modification which is averaged over the life of the lease as straight-line rent. For purposes of FFO*, the abatements are partially offset by the straight-line rent impact of $(1,303). (3) Parking revenue is calculated as the decrease in parking revenue for Q2 to Q4 2020 from the same period in 2019, which Crombie has attributed to the impact of COVID-19. 34 CROMBIE REIT | Annual Report 2020GLOSSARY OF TERMS AFFO* AMR CFC CMA Adjusted Funds from Operations. Crombie follows the recommendations of REALPAC’s February 2019 white paper in determining AFFO. Annual Minimum Rent. Customer Fulfilment Centre. Census Metropolitan Area. Committed occupancy Represents current economic occupancy plus future occupancy of currently vacant space for which lease contracts are currently in place. CRU D/GFV* EBITDA* Commercial Rental Units. Debt to gross fair value. Represents Earnings Before Interest, Taxes, Depreciation and Amortization excluding certain items such as amortization of tenant incentives, impairment of investment properties and gain (loss) on disposal of investment properties. EBITDA is a non-GAAP measure that is used as an input in several of our debt metrics. Economic occupancy Represents space currently occupied (excluding residential). ESG Fair value FFO* Future Estimated Density GHG GLA IFRS Major Markets Environmental, Social and Governance. The amount at which an asset or liability could be exchanged between two knowledgeable, willing and unconnected parties in an arm’s length transaction. Funds from Operations. Crombie follows the recommendations of REALPAC’s February 2019 white paper in determining FFO. Estimated buildable areas or site area multiples based on general community plans, guidelines, or management estimates of same based on area precedents which have not yet been officially approved or endorsed by municipal authorities. Greenhouse Gas Emissions. Gross Leasable Area. International Financial Reporting Standards. A Crombie-specific definition that includes Abbotsford-Mission, Barrie, Chilliwack, Halifax, Hamilton, Kitchener- Cambridge-Waterloo, Oshawa, Quebec City, Regina, Saskatoon, Victoria, and Winnipeg, as defined by Statistics Canada 2016 CMA/CA boundaries. Modernization Income Income earned from a capital investment to modernize/renovate Crombie owned grocery store properties in exchange for a defined return and potential extended lease term. NAV Net Asset Value. Net property income Property revenue less property operating expenses, which excludes certain expenses such as interest expense and indirect operating expenses. Pre-leased space Refers to GLA of properties under development reserved by prospective tenants for a future rental period. Property cash NOI* Property NOI on a cash basis, excluding non-cash straight-line rent recognition and non-cash tenant incentive amortization. Proportionate share basis Represents Crombie’s proportionate interest in the financial position and results of operations of its entire portfolio, REALPAC taking into account the difference in accounting for joint ventures using proportionate consolidation versus equity accounting. Real Property Association of Canada. Rest of Canada (“RoC”) A Crombie-specific definition that includes all remaining geographies outside of VECTOM and Major Markets. Retail Includes our substantial retail portfolio with commercial reflecting certain few additional properties which comprise both retail and office space. These properties have been consistently included in our retail category. Retail-related Industrial Retail-related Industrial includes retail distribution centres and Customer Fulfilment Centres (CFC) owned in major urban markets. Same-asset properties* Properties owned and operated throughout the current and comparative reporting periods, excluding any property that was designated for redevelopment during either the current or comparative period. Sq. ft. Square footage. Unencumbered assets Represents assets that have not been pledged as security or collateral under a credit agreement or mortgage. VECTOM WATM Zoning Applications Submitted Zoning Approved Vancouver, Edmonton, Calgary, Toronto, Ottawa-Gatineau, Montreal, as defined by Statistics Canada 2016 CMA/CA boundaries. Weighted Average Term to Maturity. A formal municipal re-zoning application has been submitted for the purpose of achieving a new land use (ie. residential, mixed-use) and generally to obtain higher levels of density and height. Property has received municipal approval for a new land use designation which generally permits different uses (ie. residential, mixed-use) and higher levels of density and height. * See “Non-GAAP Financial Measures”, starting on page 84, for more information on Crombie’s non-GAAP financial measures and reconciliations thereof. 35 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthPORTFOLIO REVIEW As at December 31, 2020, Crombie’s property portfolio consisted of full ownership interests in 225 investment properties, and partial ownership interests in 59 investment properties. The partial ownership interests are subject to proportionate consolidation, the results of which are reflected in our consolidated balance sheet and income statement, based on our proportionate interest in such joint operations. Together these 284 properties contain, at Crombie’s share, approximately 18.0 million square feet of GLA in all 10 provinces. Crombie also holds partial ownership interests in four joint venture properties that are subject to equity-accounting. As such, the results of these equity-accounted investments are not included in certain financial metrics, such as net property income, property cash NOI* and same- asset property NOI*, nor in operating metrics such as occupancy and GLA, unless specifically indicated that such metrics are presented on a proportionate consolidation basis. MARKET CLASS We are increasing Crombie’s presence in high-growth VECTOM and Major Markets through acquisitions and large-scale, mixed-use development, to strategically elevate our portfolio quality and strength. PORTFOLIO GLA BY MARKET CLASS (SQ. FT.) PORTFOLIO FAIR VALUE BY MARKET CLASS (%) as at December 31, 2020 as at December 31, 2020 7,793,000 43.3% 5,588,000 31.0% 35.3% 41.5% 4,619,000 25.7% 23.2% VECTOM Major Market Rest of Canada VECTOM Major Market Rest of Canada 36 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020Crombie’s portfolio diversification by market class as at December 31, 2020 and 2019 is as follows: GLA (sq. ft.) January 1, 2020 Acquisitions (Dispositions) Other1 December 31, 2020 VECTOM 5,295,000 2,000 291,000 5,588,000 Major Markets 4,597,000 Rest of Canada 7,666,000 (17,000) 46,000 39,000 81,000 4,619,000 7,793,000 Total 17,558,000 31,000 411,000 18,000,000 Number of Investment Properties 89 59 136 284 % of AMR 32.3% 26.3% 41.4% % NOI 33.1% 26.7% 40.2% 100.0% 100.0% Economic Occupancy Committed Occupancy 93.5% 94.8% 93.8% 94.0% 99.0% 96.1% 94.7% 96.4% GLA (sq. ft.) January 1, 2019 Acquisitions (Dispositions) Other1 December 31, 2019 VECTOM 5,231,000 69,000 (5,000) 5,295,000 Major Markets 4,993,000 (371,000) (25,000) 4,597,000 Rest of Canada 8,672,000 (1,096,000) 90,000 7,666,000 Total 18,896,000 (1,398,000) 60,000 17,558,000 Number of Investment Properties 89 60 136 285 % of AMR % NOI 32.1% 26.5% 41.4% 30.9% 27.0% 42.1% 100.0% 100.0% Economic Occupancy Committed Occupancy 98.9% 96.3% 92.5% 95.4% 99.0% 96.7% 93.7 % 96.1% (1) Changes in GLA included in Other include increases for completed developments and additions/expansions to GLA on existing properties, and decreases primarily related to GLA removals in preparation for property redevelopment. When compared to December 31, 2019, the percentage of total annual minimum rent generated from VECTOM increased by 20 basis points, while Major Market total annual minimum rent decreased by 20 basis points. The increase in VECTOM is primarily due to the opening of CRU tenants at Davie Street retail, modernization and new leasing activity at West Broadway, both located in Vancouver, and the acquisition of a retail plaza in Montreal. As at December 31, 2020, committed and economic occupancy stand at 96.4% and 94.0% respectively. Committed occupancy increased by 30 basis points when compared to December 31, 2019, which marked record committed occupancy levels for Crombie. Economic occupancy decreased by 140 basis points. The decrease is primarily driven by the addition of development GLA in the fourth quarter with the tenant not yet entering economic occupancy. Strong leasing throughout the year resulted in 248,000 square feet of new leases at an average rate of $18.04 per square foot. Approximately 81.0% of Crombie’s committed leases are at active or completed major development properties, demonstrating continued progress in leasing our development space. 37 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthASSET TYPE Retail properties represent 83.7% of Crombie’s GLA and 91.8% of annual minimum rent at December 31, 2020 compared to 84.9% of GLA and 91.7% of annual minimum rent at December 31, 2019. The main driver of the decrease is due to the addition of 300,000 square feet of GLA to retail-related industrial. This is partially offset by additions to retail GLA as a result of development (46,000 square feet at Woodgate Plaza and 45,000 square feet at Avalon Mall, both located in St. John’s, Newfoundland and Labrador), and 31,000 net square feet of retail acquisition activity. PORTFOLIO GLA BY ASSET TYPE (SQ. FT.) PORTFOLIO FAIR VALUE BY ASSET TYPE (%) as at December 31, 2020 as at December 31, 2020 15,064,000 83.7% 1.0% 8.5% 3.2% 87.3% 1,983,000 11.0% 953,000 5.3% Retail Office Retail-related industrial Retail Office Retail-related industrial Other1 (1) Other includes Properties Under Development (PUD) and Land. Crombie’s portfolio diversification by asset type as at December 31, 2020 and 2019 is as follows: GLA (sq. ft.) January 1, 2020 Acquisitions (Dispositions) December 31, 2020 Other1 Number of properties % of AMR Economic Occupancy Committed Occupancy Retail Office 14,910,000 31,000 123,000 15,064,000 Retail-related industrial 1,683,000 965,000 — — (12,000) 953,000 300,000 1,983,000 275 5 4 91.8% 4.0% 4.2% 95.5% 89.1% 84.9% 94.0% 96.0% 94.2% 100.0 % 96.4% Total 17,558,000 31,000 411,000 18,000,000 284 100.0% GLA (sq. ft.) January 1, 2019 Acquisitions (Dispositions) Other1 December 31, 2019 Number of properties % of AMR Economic Occupancy Committed Occupancy Retail Office 16,609,000 (1,795,000) 96,000 14,910,000 1,000,000 — (35,000) 965,000 Retail-related industrial 1,287,000 397,000 (1,000) 1,683,000 277 5 3 91.7% 4.2% 4.1% Total 18,896,000 (1,398,000) 60,000 17,558,000 285 100.0% 95.2% 91.6% 100.0% 95.4% 95.8 % 93.1 % 100.0 % 96.1 % (1) Changes in GLA included in Other include increases for additions/expansions to GLA on existing properties and decreases primarily related to GLA removals in preparation for property redevelopment. During 2020, economic occupancy decreased, while committed occupancy increased compared to December 31, 2019. The main driver of the decrease in economic occupancy relates to the addition of 300,000 square feet of retail-related industrial GLA at Crombie’s major development in Pointe- Claire, outside of Montreal, Quebec. The lease for this space is included in committed occupancy. Economic and committed occupancy in our retail 38 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020portfolio increased as the result of strong leasing activity, including the development space at Avalon Mall. Committed occupancy in our office portfolio increased to 94.2% primarily due to the execution of an approximate 49,000 square foot lease with one tenant, signed in the fourth quarter of 2020. Our mixed-use development strategy enables Crombie to evolve from defensive grocery-anchored retail to a balance of grocery-anchored retail and industrial, as well as large-scale mixed-use properties, creating long-term value for retail tenants, residential tenants, and local communities. Over the next year, we expect to see a further evolution in our portfolio. Grocery-anchored retail will continue to grow and, as a result of our development strategy, we expect our residential and retail-related industrial asset types will make up an even greater percentage of our total portfolio. TENANT PROFILE We build and own a high-quality, resilient, and diversified portfolio, backed primarily by grocery and pharmacy tenants, that deliver consistent long-term earnings and cash flow stability. As at December 31, 2020, 77% of our annual minimum rent was generated from grocery and pharmacy-anchored properties compared to 76% at December 31, 2019. The increase is primarily due to the acquisition of two Empire properties in 2020, as well as modernization income and contractual rental step-ups on other grocery properties. This is partially offset by the disposition of five properties in 2020 containing Shoppers Drug Marts. This highlights the quality and resilience of Crombie’s portfolio and the stability of underlying cash flows and income as necessity-based tenants are more resilient to changes in economic cycles and evolving retail trends, and form a solid foundation for organic same-asset property cash NOI* and AFFO* growth. TENANTS BY INDUSTRY (% OF AMR) 1.7% 1.5% 2.0% 3.0% 3.5% 4.1% 4.2% 4.4% 5.1% 1.8% 4.1% 6.4% 58.2% Necessity-Based Retailers1 Office & Hotel Tenants Restaurants — Quick Service & Cafe Restaurants — Full Service Medical, Professional & Personal Services Bank and Financial Services Industrial Tenants Apparel & Accessories Value-Focused Retailers Entertainment, Sporting Goods & Stationary Retails Home Improvement, Furniture & Auto Supplies Fitness Facilities & Supplements Other (1) Necessity-based retailers include tenants that provide essential products and services, and predominantly fall into the following categories: grocery, pharmacy, liquor, cannabis, convenience store, gasoline and pet supplies. 39 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthThe following table illustrates the 20 largest tenants in Crombie’s portfolio of investment properties, as measured by their percentage contribution to total annual minimum rent, as at December 31, 2020. % of AMR 54.9% 3.3% 1.5% 1.4% 1.2% 1.2% 1.1% 1.1% 1.1% 1.0% 1.0% 0.7% 0.7% 0.6% 0.6% 0.6% 0.6% 0.5% 0.5% 0.4% 74.0% Average Remaining Lease Term 12.5 years 7.5 years 7.1 years 5.6 years 3.2 years 12.0 years 2.4 years 8.1 years 9.4 years 6.8 years 4.0 years 7.3 years 5.3 years 2.8 years 4.2 years 6.6 years 5.8 years 4.3 years 7.6 years 3.0 years DBRS Credit Rating BBB (low) BBB A (high) BBB AAA AA AA AA BBB AA (high) BBB (high) BBB AA (low) Same‑asset properties Same-asset properties are properties owned and operated by Crombie throughout the current and comparative reporting periods, excluding any property that was designated for redevelopment during either the current or comparative period. Same-asset property NOI* reflects Crombie’s proportionate ownership of jointly-operated properties (excludes any properties held in joint ventures). Crombie measures certain performance and operating metrics on a same-asset basis to evaluate the period-over-period performance of those properties owned and operated by Crombie since January 1, 2019, inclusive. “Same-asset” refers to those properties that were owned and operated by Crombie for the entire two years ended December 31, 2020. Development properties are included in same-asset after completion and once a full year of post-development comparative data is available. Properties that will be undergoing a redevelopment in a future period, including adjacent parcels of land, and those having planning activities underway are also in this category until such development activities commence and/or tenant leasing/renewal activity is suspended. Tenant Empire Company Limited1 Shoppers Drug Mart Province of Nova Scotia Dollarama Government of Canada CIBC Bank of Nova Scotia Goodlife Fitness Cineplex Bank of Montreal Canadian Tire Corporation Leon’s Furniture Restaurant Brands International Royal Bank of Canada Bell Canada Metro SAQ/Province of Quebec Giant Tiger TJX Canada2 Staples Total (1) Includes Sobeys and all other subsidiaries under Empire Company Limited. (2) TJX Canada’s parent company, The TJX Companies, Inc., is rated A2 by Moody’s. Other than Empire, which accounts for 54.9% of annual minimum rent and Shoppers Drug Mart, which accounts for 3.3% of annual minimum rent, no other tenant accounts for more than 1.5% of Crombie’s annual minimum rent. For the year ended December 31, 2020, Empire also represents 54.0% of total property revenue. Total property revenue includes annual minimum rent, as well as operating and realty tax cost recovery income and percentage rent. These additional amounts can vary by property type, specific tenant leases and where tenants may directly incur and pay operating and realty tax costs. Crombie continues to work in partnership with Empire to align our strategies to maximize value creation through modernizations, store conversions (including the FreshCo discount format in Western Canada and Farm Boy in Ontario), participation in the build-out of Empire’s Voilà e-commerce home delivery hub-and-spoke network, land-use intensifications, and the unlocking of major developments. Crombie acknowledges that not all retail is created equal. Recognizing that, Crombie is focused on fostering relationships in our needs-based properties that are performing very well in the evolving retail landscape and are poised for future growth. The weighted average remaining term of all Crombie leases is approximately 9.5 years, which decreased by 0.7 years as compared to December 31, 2019. This remaining lease term is influenced by the average Empire remaining lease term of 12.5 years, which decreased by 0.9 years from December 31, 2019. 40 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020Same-asset properties Adjustments Acquisitions – 2020 Acquisitions – 2019 Other1 Active and Completed Major Developments2 Total Crombie Owned Properties Investment Properties (“IP”) Properties Under Development (“PUD”) 270 3 2 5 4 14 284 — 2 — 3 — 5 5 Additional Properties in Joint Ventures (“JV”) — — — 1 3 4 4 Sub-total 270 5 2 8 4 19 289 Total 270 5 2 9 7 23 293 (1) Other includes investment properties that have been designated for repositioning, land parcels included in PUD, or non-active major developments within a JV. (2) Active and Completed Major Development includes: Davie Street retail (IP) Avalon Mall retail (IP) Belmont Market retail and Office (IP) Pointe-Claire (IP) Davie Street residential (JV) Le Duke (JV) Bronte Village (JV) Davie Street is being developed as both a commercial (Crombie owned) and residential (Joint Venture owned) development. Davie Street is treated as two properties, one Crombie owned Investment Property (retail) and a separate Active Major Development (residential rental property) within the 1600 Davie Limited Partnership Joint Venture (Additional Properties in Joint Ventures – Active and Completed Major Developments). In the fourth quarter of 2020, Crombie’s major development in Pointe- Claire, outside of Montreal, Quebec, reached substantial completion and was transferred from Properties Under Development to Investment Properties. Therefore, the corresponding property count is now included under Investment Properties – Active and Completed Major Developments (previously included in Properties Under Development – Active and Completed Major Developments). STRATEGIC ACQUISITIONS AND DISPOSITIONS As at December 31, 2020, GLA at Crombie’s interest was 18.0 million square feet compared to 17.6 million square feet as at December 31, 2019. The increase in GLA of approximately 400,000 was driven by 363,000 of development square footage entering GLA and 125,000 square feet of acquisitions. This was partially offset by 94,000 square feet of dispositions. ACQUIRED GLA BY MARKET CLASS (SQ. FT.) DISPOSED GLA BY MARKET CLASS (SQ. FT.) year ended December 31, 2020 year ended December 31, 2020 84,000 67.2% 41,000 32.8% 39,000 41.5% 38,000 40.4% VECTOM Rest of Canada VECTOM Major Market Rest of Canada 17,000 18.1% 41 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth STRATEGIC ACQUISITIONS Through strategic and selective acquisitions of high-quality assets, Crombie intends to continue to enhance overall portfolio quality in urban and top tier markets. Crombie’s acquisitions are intended to add strategic value to the portfolio, while leading to strong AFFO* accretion and NAV growth. During the year ended December 31, 2020, Crombie completed acquisitions of three income-producing properties, one land addition to an existing income-producing property and two development (PUD) properties for a total aggregate purchase price of $40,790. These acquisitions added 125,000 square feet of income-producing properties and potential for future density to be added to Crombie’s GLA. Through these acquisitions, Crombie strengthened its presence in VECTOM and Major Markets in line with our urbanization strategy. Date Property Location Vendor Strategy Ownership Number of Investment Properties Interest Sq. ft. Price1 Antigonish, NS Third Party Income-producing — 100% — $ 280 2020 First Quarter January 9, 2020 2020 Second Quarter Antigonish Land Addition May 28, 2020 Williams Lake 2020 Third Quarter Williams Lake, BC Empire Income-producing July 7, 2020 Development Land Toronto, ON Third Party Development 2020 Fourth Quarter October 5, 2020 Notre-Dame Street Montreal, QC Third Party Income-producing November 4, 2020 Don Reid Drive Ottawa, ON Third Party Development December 15, 2020 Cliffe Avenue Courtenay, BC Empire Income-producing Total acquisitions for the year ended December 31, 2020 Total acquisitions for the year ended December 31, 2019 (1) Prices are stated before transaction and closing costs STRATEGIC DISPOSITIONS 1 — 1 — 1 2 3 2 100% 30,000 4,535 100% — 4,575 100% 100% 100% 41,000 — 54,000 95,000 11,000 3,300 17,100 31,400 125,000 $ 40,790 481,000 $ 156,433 Over the past two years, Crombie has worked to optimize our portfolio through traditional dispositions of non-core assets and innovative partnerships totaling approximately 1,973,000 square feet of recycled area. In line with our strategy of recycling capital through dispositions at or above IFRS values, we used the proceeds raised to fund active and completed major development projects, increasing Crombie’s concentration in VECTOM and Major Markets, as well as other higher-value opportunities, including support of Empire’s growth into urban markets, e-commerce, and major mixed-use development. This disposition strategy resulted in a reduction of our in-place mortgage debt, which enabled growth in our unencumbered asset pool. Crombie continues as property manager for the properties in which it retains a partial ownership interest. Date 2020 First Quarter Property Number of properties Interest Sq. ft. Ownership Net Property Income1 Total dispositions at 100% interest Excess Land — 100% 2020 Fourth Quarter Total dispositions at 100% interest SDM Properties 5 100% $ — — $ — — 94,000 94,000 2,156 2,156 Price 1,000 1,000 37,010 37,010 Total dispositions for the year ended December 31, 2020 Total dispositions for the year ended December 31, 2019 5 5 94,000 $ 2,156 $ 38,010 1,879,000 $ 22,514 $ 536,471 (1) Reflects actual net property income earned for the year as reflected in our consolidated results, prior to disposition. 42 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020OPERATIONAL PERFORMANCE REVIEW OCCUPANCY AND LEASING ACTIVITY The portfolio occupancy and committed activity by market class and asset type for the year ended December 31, 2020 was as follows: January 1, 2020 Acquisitions (Dispositions) New Leases1 Lease Expiries Other Changes2 December 31, 2020 Economic Occupancy Committed Space (sq. ft.)3 Total Committed Space (sq. ft.) Committed Occupancy Occupied space (sq. ft.) VECTOM 5,239,000 2,000 26,000 (11,000) (31,000) Major Markets 4,426,000 (17,000) 50,000 (27,000) (51,000) Rest of Canada 7,090,000 44,000 172,000 (29,000) 33,000 Total 16,755,000 29,000 248,000 (67,000) (49,000) 5,225,000 4,381,000 7,310,000 16,916,000 93.5% 94.8% 93.8% 94.0% 305,000 5,530,000 57,000 4,438,000 70,000 7,380,000 432,000 17,348,000 99.0% 96.1% 94.7% 96.4% Occupied space (sq. ft.) January 1, 2020 Acquisitions (Dispositions) New Leases1 Lease Expiries Other Changes2 December 31, 2020 Economic Occupancy Retail Office Retail-related industrial 14,187,000 29,000 228,000 (36,000) (24,000) 14,384,000 885,000 1,683,000 — — 20,000 (31,000) (25,000) 849,000 — — — 1,683,000 Total 16,755,000 29,000 248,000 (67,000) (49,000) 16,916,000 95.5% 89.1% 84.9% 94.0% Committed Space (sq. ft.)3 Total Committed Space (sq. ft.) Committed Occupancy 83,000 14,467,000 49,000 898,000 96.0% 94.2% 300,000 1,983,000 100.0% 432,000 17,348,000 96.4% (1) New leases include new lease and expansions to existing properties. (2) Other changes include amendments to existing leases; lease terminations and surrenders; bankruptcies; and space certifications. (3) Committed space represents lease contacts for future occupancy of currently vacant space. Management believes such reporting, along with reported lease maturities, provides more balanced reporting of overall vacant space. Overall leased space (occupied plus committed) has increased from 96.1% at December 31, 2019 to 96.4% at December 31, 2020. During 2020, Crombie had a net increase from acquisitions of 29,000 square feet and had new leases outpace lease expiries by 181,000 square feet. Leasing activity at major developments continued throughout the year, with approximately 42,000 square feet of new leases in economic occupancy at Avalon Mall, Belmont Market, and Davie Street retail. Economic occupancy at December 31, 2020 was 85.6%, 90.0%, and 96.0% respectively for these retail developments. Leased space in our retail properties portfolio was 96.0% at December 31, 2020, an increase from 95.8% at December 31, 2019. This was driven by approximately 228,000 square feet of new leases in the year. The Brick opened a 45,000 square foot location at Woodgate Plaza and H&M opened a 22,000 square foot store at Avalon Mall. These are the first locations in Newfoundland and Labrador for both of these tenants. Leased space in office properties of 94.2% at December 31, 2020, increased from 93.1% at December 31, 2019. This was primarily due to approximately 20,000 square feet of new leases in economic occupancy, and an additional 49,000 square feet committed. Leased space in retail-related industrial properties of 100.0% at December 31, 2020, remained constant from 100.0% at December 31, 2019. Retail-related industrial provides stability with solid NOI growth and long lease terms, and also provides growth opportunities through an increased presence in the e-commerce hub-and-spoke network. The portfolio weighted average annual minimum rent per occupied square foot for our income producing properties was $16.74 as at December 31, 2020 compared to $16.61 as at December 31, 2019. The 0.8% increase in average annual minimum rent per occupied square foot was due to Crombie’s strong leasing, which consisted of new leases, contractual rent increases within existing leases, and modernization income. The increase also reflects strategic commitment to portfolio quality improvement through both dispositions of non-core, low growth assets, and a positive return from the participation in modernizations with Empire. 43 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthNew Leasing Activity NEW LEASING BY MARKET CLASS (SQ. FT.) year ended December 31, 2020 NEW LEASING BY ASSET TYPE (SQ. FT.) year ended December 31, 2020 50,000 20.2% 26,000 10.5% 172,000 69.4% 20,000 8.1% 228,000 91.9% VECTOM Major Market Rest of Canada Retail Office New leases and expansions increased occupancy by 248,000 square feet at December 31, 2020, at an average first year rate of $18.04 per square foot. New leases totaled 238,000 square feet, at an average first year rate of $17.65 per square foot. Expansions totaled 10,000 square feet, at an average first year rate of $27.03 per square foot. Crombie is focused on increasing its presence in VECTOM and Major Markets. In 2020, 30.6% of new leases, equivalent to 76,000 square feet, were completed in these markets. Strong rental rates were achieved with an average first year rate of $19.82 per square foot on 50,000 square feet in Major Markets. In VECTOM, 26,000 square feet of new leases, at an average first year rate of $39.73 per square foot, were completed. Growth in Major Markets was driven by Belmont Market, in Langford, British Columbia (one of our completed major developments) and a land-use intensification at Beauport Plaza, in Beauport, Quebec. 172,000 square feet of new leases occurred in Rest of Canada markets, with an average first year rate of $14.29 per square foot. The vast majority of the portfolio’s vacancy is within this market and Crombie is pleased with the new leasing activity throughout 2020. Included in the activity were Giant Tiger in North Bay, Ontario, Cloud 5 at Loch Lomond in Saint John, New Brunswick, The Brick at Woodgate Plaza, and H&M in the development space at Avalon Mall in St. John’s, Newfoundland and Labrador. 432,000 square feet of space at an average first year rate of $19.66 was committed at December 31, 2020 with tenants expected to take possession throughout 2021. A 49,000 square foot office lease is committed at our Scotia Square complex in Halifax, Nova Scotia. Leasing on our major developments continues to progress as approximately 350,000 square feet of committed space is at Pointe- Claire, Avalon Mall, and Belmont Market. 300,000 square feet of this committed space is the future home of Voilà par IGA in Montreal, Empire’s Customer Fulfilment Centre for its online grocery home delivery service. Also included is a 26,000 square foot Sport Chek and a 16,000 square foot Old Navy at Avalon Mall. Additionally, there is approximately 34,000 square feet of development space with executed leases that has not yet been added to GLA at Avalon Mall. It is expected to be added to GLA in early 2021. 44 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020Renewal Activity RENEWAL BY MARKET CLASS (SQ. FT.) year ended December 31, 2020 RENEWAL BY ASSET TYPE (SQ. FT.) year ended December 31, 2020 ) s 0 0 0 ’ ( . t f . q S 800 600 400 200 0 ) s 0 0 0 ’ ( . t f . q S 800 400 0 VECTOM Major Markets Rest of Canada 2020 Renewals Early renewals completed Retail Office 2020 Renewals Early renewals completed For 2020, renewal activity for our portfolio was as follows: 2020 Renewals Early Renewals Completed Total Three months ended December 31, 2020 Year ended December 31, 2020 Sq. ft. 33,000 167,000 200,000 $ $ $ Rate PSF Growth % 26.59 15.70 17.48 0.3% 5.9% 4.5% Sq. ft. 341,000 417,000 758,000 $ $ $ Rate PSF Growth % 17.03 17.27 17.16 4.0% 4.3% 4.1% Crombie’s renewal activity for the year ended December 31, 2020 included retail renewals of 747,000 square feet with an increase of 4.2% over expiring rental rates. Driving this growth was 404,000 square feet of renewals at retail plazas, with an increase of 5.0% over expiring rental rates. Office renewals of 11,000 square feet were completed with a decrease of 4.1% over expiring rental rates. The decrease is a result of one lease executed in the fourth quarter with negative growth. Additionally, three other executions completed throughout 2020 remained flat. Renewal spreads are based on the first year rate and do not factor in any additional rental step-ups that may take place throughout the lease term. During the year ended December 31, 2020, Crombie demonstrated portfolio stability with approximately 46.0% of renewals occurring in VECTOM and Major Markets. Total renewal growth was positively impacted by the 71,000 square feet of renewals in VECTOM at an average first year rate of $35.25 per square foot, an increase of 5.1% over expiring rental rates. Major Markets saw renewals of 278,000 square feet, with an increase of 3.7% over expiring rental rates or an average first year rate of $16.80 per square foot. The remaining 409,000 square feet of renewals was in the Rest of Canada at an average first year rate of $14.27, which is an increase of 4.1% over expiring rental rates. 45 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth LEASE MATURITIES The following table sets out, as at December 31, 2020, the number of leases maturing during the periods indicated, the renewal area, the percentage of the total GLA of the properties represented by such maturities and the estimated average rent per square foot at the time of expiry. Year 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Thereafter Total Number of Leases1 Renewal Area (sq. ft.) % of Total GLA Average Rent per sq. ft. at Expiry 290 194 143 160 131 79 77 60 94 47 272 1,547 1,225,000 857,000 652,000 887,000 1,098,000 771,000 816,000 770,000 1,097,000 600,000 8,575,000 17,348,000 $ 6.9% 4.8% 3.7% 5.0% 6.2% 4.4% 4.6% 4.3% 6.2% 3.4% 47.6% 97.1% $ 16.42 17.87 19.52 17.78 15.63 16.18 18.89 16.90 19.41 18.14 20.02 18.79 (1) Assuming tenants do not holdover on a month-to-month basis or exercise renewal options or termination rights. The following table sets out, as at December 31, 2020, the number of Empire leases maturing during the periods indicated, the renewal area, the percentage of the total GLA of the properties represented by such maturities, and the estimated average rent per square foot at the time of expiry. Year 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Thereafter Total Number of Leases1 Renewal Area (sq. ft.) % of Total GLA Average Rent per sq. ft. at Expiry 13 6 3 2 8 12 10 10 17 8 196 285 210,000 95,000 8,000 68,000 301,000 339,000 335,000 353,000 596,000 294,000 7,663,000 10,262,000 $ 1.2% 0.5% 0.1% 0.4% 1.7% 1.9% 1.9% 2.0% 3.3% 1.6% 42.6% 57.2% $ 9.50 10.59 32.12 12.59 13.44 13.27 14.09 15.94 16.40 13.62 19.84 18.40 (1) Assuming tenants do not holdover on a month-to-month basis or exercise renewal options or termination rights. Crombie proactively manages its lease maturities, taking advantage of opportunities to renew tenants prior to expiration. In 2020, approximately 417,000 square feet of renewals related to future year expiries. Crombie’s partnership with Empire provides strategic alignment, maximizing value through accretive transactions. 46 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020FINANCIAL PERFORMANCE REVIEW Three months ended December 31, Year ended December 31, 2020 2019 Variance 2020 2019 Variance 2018 Property revenue $ 97,060 $ 96,823 $ 237 $ 388,733 $ 398,741 $ (10,008) $ 414,649 Property operating expenses Net property income Net property income margin percentage Other items: Gain on disposal of investment properties Impairment of investment properties 29,245 67,815 69.9% 4,164 (4,500) 29,852 66,971 69.2% 607 844 0.7% 129,872 258,861 66.6% 117,645 (12,227) 121,306 281,096 (22,235) 293,343 70.5% (3.9)% 70.7% 30,198 (26,034) (6,000) 1,500 3,335 (6,600) 81,803 (78,468) 50,023 (6,000) (600) (15,000) Depreciation and amortization (19,506) (18,347) (1,159) (75,567) (74,313) (1,254) (96,353) General and administrative expenses (5,493) (5,855) 362 (20,534) (23,721) 3,187 (19,226) Finance costs – operations (24,912) (22,810) (2,102) (91,808) (97,316) 5,508 (105,631) Income from equity accounted investments Operating income before taxes Taxes – current (411) 17,157 — (8) (403) (72) 334 (406) 254 44,149 (26,992) 67,615 161,883 (94,268) 107,410 — — (7) (8) 1 (3) Operating income attributable to Unitholders 17,157 44,149 (26,992) 67,608 161,875 (94,267) 107,407 Finance costs – distributions to Unitholders (35,211) (48,936) 13,725 (140,302) (150,169) 9,867 (134,729) (725) (70) (655) 805 (1,337) 2,142 402 Finance (costs) income – change in fair value of financial instruments Increase (decrease) in net assets attributable to Unitholders Operating income attributable to Unitholders per Unit, Basic $ (18,779) $ 0.11 Basic weighted average Units outstanding (in 000’s) 158,239 Distributions per Unit to Unitholders (excluding special distribution in 2019) $ 0.22 (4,857) $ (13,922) $ (71,889) $ $ $ 10,369 $ (82,258) 1.07 151,666 0.89 $ $ 0.43 157,448 0.89 $ $ $ $ $ $ $ $ 0.29 151,723 0.22 60,680 42,132 0.28 80.1% 36,006 0.24 $ $ $ $ $ $ $ $ (26,920) 0.71 151,214 0.89 231,642 184,034 1.22 73.2% 15,594 1.03 $ 61,805 $ 42,305 $ 0.27 83.2% $ 35,679 $ 0.23 $ $ $ $ $ 1,125 $ 237,522 $ 240,250 173 $ 165,850 $ 175,539 (0.01) $ 1.05 $ 1.16 3.1% 84.6% 76.9% (327) $ 138,963 $ 148,632 (0.01) $ 0.88 $ 0.98 $ $ $ $ $ (2,728) (9,689) (0.11) 7.7% (9,669) (0.10) 98.7% 93.8% 4.9% 101.0% 90.8% 10.2% 86.5% 47 Other Non-GAAP Performance Metrics Same-asset property cash NOI* FFO* FFO* per unit – basic FFO* payout ratio, excluding 2019 special distribution (%) AFFO* AFFO* per unit – basic AFFO* payout ratio, excluding 2019 special distribution (%) MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthOperating income attributable to Unitholders For the three months ended: For the year ended: Operating income attributable to Unitholders decreased by $26,992, or 61.1%, compared to the fourth quarter of 2019 primarily due to the disposition of investment properties in 2019 with a gain on sale of $30,198. Additionally, tenant incentive amortization increased $1,261 due to modernizations, parking revenue decreased by $854 as a result of reduced demand due to COVID-19, and rent abatements increased by $365 in the quarter due to COVID-19. Finance costs from operations increased $2,102 primarily due to the premium paid related to partial early redemption of Series B unsecured notes. In the fourth quarter of 2020, an impairment of $4,500 was recognized on four retail properties, which was $1,500 lower than the impairment related to three retail properties in the fourth quarter of 2019. The impairment was the result of the fair value impact of tenant lease expiries, slower-than-expected leasing activity, and the ongoing impacts of COVID-19. Operating income attributable to Unitholders decreased by $94,267, or 58.2%, on an annual basis. Gain on disposal of investment properties decreased by $78,468 and net property income decreased $22,235 due to property dispositions and the factors noted for the quarter, including increased bad debt expense of $10,717 as a result of COVID-19-related collection risk, increased tenant incentive amortization of $3,710, decreased parking revenue of $2,715 due to COVID-19, and increased rent abatements of $1,012. The reduced net property income for the year was offset in part by a decrease of $3,187 in general and administrative expenses resulting primarily from reduced salaries, and a decrease of $5,508 in finance costs from operations due to a reduction in mortgage interest resulting from disposition activity and maturing mortgages, partially offset by the premium paid related to partial early redemption of unsecured notes. Net Property Income Management uses net property income on a cash basis (property cash NOI*) as a measure of performance as it reflects the cash generated by the properties period-over-period. Refer to the “Non-GAAP Financial Measures” section of this MD&A, starting on page 84, for a more detailed discussion on property cash NOI*. Net property income on a cash basis*, which excludes non-cash straight-line rent recognition and amortization of tenant incentive amounts, is as follows: Net Property Income Non-cash straight-line rent Non-cash tenant incentive amortization Property cash NOI* Acquisitions and dispositions property cash NOI* Development property cash NOI* Acquisitions, dispositions and development property cash NOI* Same-asset property cash NOI* Adjusted for management’s estimate of the material impacts of COVID-19: Decrease in parking revenue Rent abatements Bad debt expense Same-asset property cash NOI*, adjusted for COVID-19 Three months ended December 31, Year ended December 31, 2020 2019 Variance 2020 2019 Variance $ 67,815 $ 66,971 $ 844 $ 258,861 $ 281,096 $ (22,235) (2,036) 4,859 70,638 1,930 6,903 8,833 61,805 854 178 30 (2,080) 3,598 68,489 738 7,071 7,809 60,680 — — — 44 1,261 2,149 1,192 (168) 1,024 1,125 854 178 30 (9,112) 17,849 267,598 7,537 22,539 (10,287) 14,139 284,948 16,360 28,338 30,076 44,698 237,522 240,250 2,715 1,490 5,228 — — — 1,175 3,710 (17,350) (8,823) (5,799) (14,622) (2,728) 2,715 1,490 5,228 $ 62,867 $ 60,680 $ 2,187 $ 246,955 $ 240,250 $ 6,705 48 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020Development properties include properties earning cash NOI that are: currently being developed, have recently completed development, and are scheduled for development. Change in cash NOI from development properties period-over-period is impacted by the timing of commencement and completion of each development project. The nature and extent of development projects results in operations being impacted minimally in some instances, and more significantly in others. Consequently, comparison of period-over-period development operating results may not be meaningful. Avalon Mall is currently under development and its NOI inclusive of COVID-19 impact is reflected in the above table. Same-asset property cash NOI* by asset type and market class is as follows: Retail1 Office Retail-related industrial2 Three months ended December 31, Year ended December 31, 2020 2019 Variance % 2020 2019 Variance % $ 57,064 $ 55,360 $ 1,704 3.1% $ 218,321 $ 219,854 $ (1,533) (0.7)% 2,798 1,943 3,221 2,099 (423) (13.1)% 11,462 12,563 (156) (7.4)% 7,739 7,833 (1,101) (94) (8.8)% (1.2)% (1.1)% Same-asset property cash NOI* $ 61,805 $ 60,680 $ 1,125 1.9% $ 237,522 $ 240,250 $ (2,728) (1) Retail includes our substantial retail portfolio with commercial reflecting certain few additional properties which comprise both retail and office space. These properties have been consistently included in our retail category. (2) Retail-related industrial includes retail distribution centres owned in Toronto (50%), Montreal (50%), and Calgary (50%). Three months ended December 31, Year ended December 31, 2020 2019 Variance % 2020 2019 Variance % VECTOM Major Markets Rest of Canada $ 20,776 $ 20,478 $ 17,606 23,423 17,734 22,468 298 (128) 955 Same-asset property cash NOI* $ 61,805 $ 60,680 $ 1,125 1.5% $ 81,942 $ 80,882 $ 1,060 1.3% (0.7)% 4.3% 1.9% 66,379 89,201 70,943 88,425 (4,564) (6.4)% 776 0.9% $ 237,522 $ 240,250 $ (2,728) (1.1)% For the three months ended: For the year ended: Same-asset property cash NOI increased by $1,125, or 1.9%, compared to the fourth quarter of 2019 primarily due to higher supplemental rents from modernizations and capital improvements. This was partially offset by a decrease in parking revenue of $854 as a result of reduced demand due to COVID-19 and an increase in rent abatements of $178. Same-asset property cash NOI restated for bad debt expense, rent abatements and the decrease in parking revenue is $62,867, an increase of 3.6% compared to the fourth quarter of 2019. On an annual basis, same-asset property cash NOI decreased 1.1% compared to the same period in 2019 primarily due to the impacts of COVID-19, which resulted in an increase in bad debt expense for the year of $5,228 on same-asset properties over the same period in 2019, a decrease in parking revenue of $2,715 and an increase in rent abatements of $1,490. Same-asset property cash NOI restated for the removal of these items is $246,955, an increase of 2.8% compared to the year ended December 31, 2019. Compared to the fourth quarter of 2019, net property income increased by $844 and property cash NOI increased by $2,149, primarily due to the same factors affecting same-asset property cash NOI. On an annual basis, net property income decreased by $22,235. and property cash NOI decreased by $17,350 compared to the same period in 2019, primarily for the same reasons affecting same-asset property cash NOI. 49 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth Funds from Operations (FFO)* Crombie follows the recommendations of the Real Property Association of Canada (“REALPAC”)’s February 2019 white paper in calculating FFO*. Refer to the “Non-GAAP Financial Measures” section of this MD&A, starting on page 84, for a more detailed discussion on FFO. The reconciliation of FFO for the three months and year ended December 31, 2020 and 2019 is as follows: Increase (decrease) in net assets attributable to Unitholders Add (deduct): Amortization of tenant incentives Gain on disposal of investment properties Impairment of investment properties Depreciation and amortization of investment properties Depreciation of investment properties included in Income from equity accounted investments Principal payments on right of use assets Internal leasing costs Three months ended December 31, Year ended December 31, 2020 2019 Variance 2020 2019 Variance $ (18,779) $ (4,857) $ (13,922) $ (71,889) $ 10,369 $ (82,258) 4,859 (4,164) 4,500 3,598 (30,198) 6,000 1,261 26,034 (1,500) 17,849 (3,335) 6,600 14,139 (81,803) 6,000 3,710 78,468 600 19,183 18,041 1,142 74,316 73,138 1,178 109 57 604 41 (24) 525 68 81 79 176 220 2,416 102 (96) 2,184 74 316 232 Finance costs – distributions to Unitholders 35,211 48,936 (13,725) 140,302 150,169 (9,867) Finance costs (income) – change in fair value of financial instruments FFO* as calculated based on REALPAC recommendations Basic weighted average Units (in 000’s) FFO* per unit – basic FFO* payout ratio, excluding special distribution (%) 725 70 655 (805) 1,337 (2,142) $ $ 42,305 158,239 0.27 83.2% $ $ 42,132 151,723 0.28 80.1% $ $ 173 $ 165,850 157,448 (0.01) $ 1.05 3.1% 84.6% $ $ 175,539 151,666 1.16 76.9% $ $ (9,689) (0.11) 7.7% For the three months ended: For the year ended: The slight increase in FFO is primarily due to increased net property income (an increase of $844 for the quarter), which resulted from acquisitions and modernizations, and lower general and administrative costs of $362 for the quarter. Acquisitions include retail properties in the fourth quarter of 2020 and 2019 and the acquisition of the remaining 50% interest in a pre-existing retail-related industrial property in the fourth quarter of 2019. This is offset in part by increased finance costs from operations of $2,102, resulting from the premium paid relating to partial early redemption of unsecured notes. FFO per unit was reduced by the increased number of Units outstanding as a result of the issuance of REIT Units and Class B LP Units in the first quarter of 2020. On an annual basis, FFO decreased primarily due to reduced net property income (a decrease of $22,235 year-over-year) resulting from the disposition of properties in 2019, lower parking revenue (a decrease of $2,715 year-over-year due to COVID-19), and significant increases in bad debt expense of $10,717 and rent abatements of $1,012 over the same period in 2019. The increased bad debt expense was a result of higher allowance for the potential impacts of COVID-19 on collection of receivable balances outstanding, write-off of specific bad debts, and the impact of the federal government’s CECRA program. This is partially offset by a decrease in finance costs from operations of $5,508, and a decrease in general and administrative expenses of $3,187 compared to the same period in 2019. The decrease in finance costs is due to a reduction in mortgage interest resulting from disposition activity and maturing mortgages, partially offset by the premium paid related to partial early redemption of unsecured notes. The decline in general and administrative expenses is primarily related to the impact of decreased unit price on unit-based compensation plans, and lower salaries and benefits related to the organizational realignment in the second quarter of 2020, offset in part by the $1,509 of severance costs in the second quarter of 2020. FFO per unit for the year ended December 31, 2020 would have been $1.10 per unit without the issuance of additional Units in the first quarter. 50 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020Adjusted Funds from Operations (AFFO)* Crombie follows the recommendations of REALPAC’s February 2019 white paper in calculating AFFO* and has applied these recommendations to the AFFO amounts included in this MD&A. Refer to the “Non-GAAP Financial Measures” section of this MD&A, starting on page 84, for a more detailed discussion. The reconciliation of AFFO for the three months and year ended December 31, 2020 and 2019 is as follows: FFO* as calculated based on REALPAC recommendations Add (deduct): Amortization of effective swap agreements Straight-line rent adjustment Internal leasing costs Maintenance expenditures on a square footage basis AFFO* as calculated based on REALPAC recommendations Basic weighted average Units (in 000’s) AFFO* per unit – basic AFFO* payout ratio, excluding special distribution (%) Three months ended December 31, Year ended December 31, 2020 2019 Variance 2020 2019 Variance $ 42,305 $ 42,132 $ 173 $ 165,850 $ 175,539 $ (9,689) — (2,036) (604) 356 (2,080) (525) (356) 44 (79) 510 (9,112) (2,416) 1,677 (10,287) (2,184) (1,167) 1,175 (232) (3,986) (3,877) (109) (15,869) (16,113) 244 $ $ 35,679 158,239 0.23 $ $ 36,006 151,723 0.24 $ $ (327) $ 138,963 157,448 (0.01) $ 0.88 $ $ 148,632 151,666 0.98 $ $ (9,669) (0.10) 98.7% 93.8% 4.9% 101.0% 90.8% 10.2% For further details on Crombie’s maintenance expenditures, refer to the Non-GAAP Financial Measures section of this MD&A. For the three months ended: For the year ended: The decrease in AFFO in the quarter is primarily due to the conclusion of the amortization of effective swap agreements resulting from mortgage maturities, a decrease of $356 from the same period in 2019. This is offset in part by the items affecting FFO in the quarter. AFFO per unit was reduced by the increased number of Units outstanding as a result of the issuance of Units in the first quarter of 2020. The decline in AFFO is primarily due to the disposition of properties in the current and prior quarters impacting FFO as described above, partially offset by the resulting decrease in maintenance expenditures on a square footage basis (a decrease of $244 for the year ended December 31, 2020 compared to the respective period in 2019). 51 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthDistributions to Unitholders A trust that satisfies the criteria of a REIT throughout its taxation year will not be subject to income tax in respect of distributions to its Unitholders that would otherwise apply to trusts classified as specified investment flow-through entities (“SIFTs”). Crombie has organized its assets and operations to satisfy the criteria contained in the Income Tax Act (Canada) in regard to the definition of a REIT. Crombie’s management and its advisors have completed an extensive review of Crombie’s organizational structure and operations to support Crombie’s assertion that it met the REIT criteria throughout 2020 and continues to do so. The relevant tests apply throughout the taxation year and as such the actual status of Crombie for any particular taxation year can only be ascertained at the end of the year. Pursuant to Crombie’s Declaration of Trust, cash distributions are to be determined by the Trustees at their discretion. Crombie intends, subject to approval of the Board of Trustees, to make distributions to Unitholders of not less than the amount equal to the net income and net realized capital gains of Crombie, to ensure that Crombie will not be liable for income taxes. Details of distributions to Unitholders are as follows: Distributions to Unitholders Distributions to Class B Voting Unitholder1 Total distributions FFO* payout ratio, excluding 2019 special distribution AFFO* payout ratio, excluding 2019 special distribution FFO* payout ratio AFFO* payout ratio Three months ended December 31, Year ended December 31, $ $ $ $ 2020 20,810 14,401 35,211 83.2% 98.7% 83.2% 98.7% $ $ 2019 28,927 20,009 48,936 80.1% 93.8% 116.1% 135.9% $ $ 2020 82,917 57,385 140,302 84.6% 101.0% 84.6% 101.0% 2019 88,766 61,403 150,169 76.9% 90.8% 85.5% 101.0% (1) Crombie Limited Partnership, a subsidiary of Crombie, has also issued Class B LP Units. These Class B LP Units accompany the Special Voting Units, are the economic equivalent of a Unit, and are exchangeable for Units on a one-for-one basis. The higher annual FFO* and AFFO* payout ratios (excluding the 2019 special distribution) are a direct result of the lower FFO in 2020. The decrease in FFO is primarily impacted by property dispositions in 2019 which resulted in reduced net property income as well as the impacts of COVID-19 on parking revenue, bad debt expense and rent abatements as discussed in the FFO* and AFFO* sections above. Pursuant to the requirement of National Policy 41-201, Income Trusts and Other Indirect Offerings, the table below outlines the differences between cash flow from operating activities and cash distributions as well as the differences between operating income attributable to Unitholders and cash distributions, in accordance with the policy guidelines. Three months ended December 31, Year ended December 31, 2020 2019 2020 2019 Operating income attributable to Unitholders $ 17,157 $ 44,149 $ 67,608 $ 161,875 Monthly distributions paid and payable Special distribution payable in cash (35,211) — (33,762) (15,174) (140,302) (134,995) — (15,174) Operating income attributable to Unitholders shortfall of distributions paid and payable $ (18,054) $ (4,787) $ (72,694) $ 11,706 Monthly distributions paid for the three months and year ended December 31, 2020 and 2019 were funded with cash flows from operating activities and borrowing on the revolving credit facility. The special distribution paid in cash on January 15, 2020 was funded from the revolving credit facility. On January 18, 2021, Crombie declared distributions of 7.417 cents per Unit for the period from January 1, 2021 to and including January 31, 2021. The distributions were paid on February 15, 2021, to Unitholders of record as of January 31, 2021. On February 16, 2021, Crombie declared distributions of 7.417 cents per Unit for the period from February 1, 2021 to and including February 28, 2021. The distributions will be paid on March 15, 2021, to Unitholders of record as of February 28, 2021. 52 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020General and Administrative Expenses The following table outlines the major categories of general and administrative expenses: Salaries and benefits Professional fees Public company costs Rent and occupancy Travel Other Three months ended December 31, Year ended December 31, 2020 2019 Variance 2020 2019 Variance $ 4,292 $ 4,604 $ 312 $ 14,774 $ 16,874 $ 2,100 442 237 133 (43) 432 351 408 159 160 173 (91) 171 26 203 (259) 1,676 1,616 569 29 1,870 1,336 2,196 612 573 2,130 (340) 580 43 544 260 General and administrative expenses $ 5,493 $ 5,855 $ 362 $ 20,534 $ 23,721 $ 3,187 As a percentage of property revenue 5.7% 6.0% 0.3% 5.3% 5.9% 0.7% For the three months ended: For the year ended: The decrease in expenses in the quarter is primarily due to reduced salaries and benefits of $312 related to organizational realignment in the second quarter of 2020. On an annual basis, the reduction in expenses is due to reduced salaries and benefits of $2,100 related to the decrease in Crombie’s unit price and its impact on unit-based compensation plans, and to the organizational realignment in the second quarter of 2020. These decreases are offset in part by $1,509 of severance in the second quarter related to the realignment. Additionally, travel costs in 2020 decreased by $544 compared to 2019. Finance Costs – Operations Finance costs Amortization of deferred financing charges Finance costs – operations Three months ended December 31, Year ended December 31, 2020 24,077 835 24,912 $ $ 2019 Variance $ $ 21,983 827 22,810 $ $ (2,094) (8) (2,102) $ $ 2020 88,802 3,006 91,808 2019 Variance $ $ 93,742 3,574 97,316 $ $ 4,940 568 5,508 For the three‑months ended: For the year ended: Finance costs increased by $2,094 primarily due to the premium paid relating to partial early redemption of Series B unsecured notes in the quarter of $2,025. Finance costs decreased by $4,940 primarily due to a reduction in mortgage interest resulting from disposition activity and maturing mortgages, partially offset by the premium paid related to partial early redemption of unsecured notes. 53 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthDepreciation, Amortization and Impairment Crombie’s total fair value of investment properties exceeds carrying value by $921,974 at December 31, 2020 (December 31, 2019 – $808,674). Crombie uses the cost method for accounting for investment properties, and increases in fair value over carrying value are not recognized until realized through disposition or derecognition of properties, while impairment, if any, is recognized on a property by property basis when circumstances indicate that the carrying value may not be recoverable. Three months ended December 31, Year ended December 31, 2020 2019 Variance 2020 2019 Variance Same-asset* depreciation and amortization $ 15,871 $ 16,198 $ 327 $ 63,888 $ 64,656 $ 768 Acquisitions, dispositions and development depreciation/amortization Depreciation and amortization Impairment 3,635 2,149 $ $ 19,506 $ 18,347 4,500 $ 6,000 $ $ (1,486) (1,159) 1,500 $ $ 11,679 75,567 6,600 $ $ 9,657 74,313 6,000 $ $ (2,022) (1,254) (600) For the three‑months ended: For the year ended: The increase in depreciation and amortization is due to additions, most notably the 50% acquisition of Vaughan Distribution Centre, an existing retail-related industrial property in December 2019, and the completed developments of Avalon Mall and Davie Street retail. This is offset in part by disposition of properties in 2019 and classification of certain investment properties as assets held for sale in the third quarter of 2020, for which depreciation is not recorded. The increase in depreciation and amortization on an annual basis is due to the additions and developments noted for the quarter and accelerated depreciation due to the partial demolition of a building at the Avalon Mall site in the first quarter of 2020. It is partially offset by the dispositions of properties in 2019. During the year ended December 31, 2020, Crombie recorded impairments totalling $6,600 on six properties. The impairments were the result of the fair value impact of tenant lease expiries, slower-than-expected leasing activity, and the ongoing impacts of COVID-19. Impairment was measured on a per property basis and was determined as the amount by which carrying value, using the cost method, exceeded the recoverable amount for that property. The recoverable amount was determined to be each property’s fair value defined as the higher of the economic benefit of the continued use of the asset or the selling price less costs to sell. To calculate the benefit of the continued use of the asset, Crombie utilized the present value of the estimated future cash flows, discounted using a discount rate based on the risk associated with the property. Selected Balance Sheet Information Total Assets Investment properties, carrying value Investment properties, fair value Total Debt Total non-current financial liabilities Number of Units outstanding (in 000’s) $ $ $ $ $ 2020 5,040,231 3,893,026 4,815,000 2,637,712 2,192,047 158,258 As at December 31, 2019 Variance $ $ $ $ $ 4,739,334 3,796,326 4,605,000 2,473,773 2,073,212 151,743 $ $ $ $ $ 300,897 96,700 210,000 163,939 118,835 6,515 $ $ $ $ $ 2018 4,875,912 3,978,912 4,776,000 2,634,916 2,318,933 151,419 Total assets include investment properties measured at fair value with all other components, including investment in joint ventures, measured at the carrying value included in Crombie’s financial statements. Total debt consists of all payables in Crombie’s financial statements excluding the financial liabilities to REIT Unitholders and to holders of Class B LP Units, as shown on the balance sheet as Net assets attributable to Unitholders. 54 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020DEVELOPMENT Property Development is a strategic priority for Crombie to improve NAV, cash flow growth and Unitholder value. With urban intensification an important reality across the country, Crombie is focused on evaluating and undertaking major developments at certain properties, where incremental costs to develop are greater than $50,000 and where development may include retail-related industrial, commercial, and/ or residential uses (“Major Developments”). This discussion of Crombie’s development activities contains forward-looking information. Refer to the “Forward-Looking Information” section of this MD&A starting on page 87 for additional information regarding such statements and the related risks and uncertainties. Crombie has the potential to unlock significant value within its current pipeline of 30 Major Development properties (three Active (December 31, 2019 – six) and 27 Potential Major Developments (December 31, 2019 – 27)) over the next decade or longer. Crombie benefits from having solid income (FFO and AFFO) generated by these properties while working through the various approvals, entitlements, and advance preparations required before each Major Development can commence. In aggregate, Crombie currently achieves an in-place NOI yield of approximately 5.0% on existing asset cost for our potential development pipeline of properties. Crombie has a strategic relationship with Empire. The majority of our development properties have Empire as an anchor tenant; our strategic relationship should enable us to unlock value and transition from existing property/store operations to construction/development of these sites on mutually agreeable terms. Our Major Developments will be planned and executed either alone or with partners to complete development of mixed-use properties with a focus on grocery-anchored retail and, wherever practical, primarily purpose-built residential rental accommodations that provide revenue, diversification and growth to Crombie. We view this approach as the optimal way to drive both NAV and AFFO growth. In certain cases, residential condominium uses may also be considered, as will certain other uses, to satisfy municipal requirements and/or market opportunities. Crombie may also have the option, if desired, to monetize our density value by selling certain air rights, or purpose-built rental properties to third parties in lieu of, or after, development. Completed Developments The table below summarizes projects that have reached substantial completion during the fiscal year. Crombie recognizes substantial completion when key project milestones are met and/or project spending has reached over 90% of total project costs. As at December 31, 2020, Crombie has reached substantial completion on the following major development projects: CMA Use Ownership Substantial Completion Date Completed Commercial GLA Completed Residential GLA Major Tenant(s)1 Estimated Total Project Cost ($ in Millions) Estimated Annual NOI ($ in Millions) Estimated Yield on Cost Victoria Retail, Office 100% Q1 2020 160,000 — Thrifty Foods $ 93.0 $ 5.4-5.7 5.8%-6.1% Vancouver Retail 100% Q2 2020 54,000 St. John’s Retail 100% Q3 2020 — St. John’s Retail 100% Q4 2020 165,000 Pointe-Claire Montreal Total Completed Retail- related industrial 100% Q4 2020 300,000 679,000 — — — — — Safeway N/A 29.2 54.5 1.8-1.9 6.2%-6.5% — — Various 56.8 5.3-5.8 9.3%-10.2% Empire 100.0 6.1-6.4 6.1%-6.4% $ 333.5 $ 18.6-19.8 (1) A tenant leasing over 15,000 square feet is considered to be a Major Tenant (2) There are 17,000 square feet left to be developed and the project is expected to be complete by Q4 2021 – timing dependent on pre-leasing effort (3) Avalon Mall total GLA is expected to be 593,000 square feet when Phase II is completed. 165,000 square feet relates to the expected square footage of the redeveloped portion of the mall (4) Tenants leasing over 15,000 square feet at Avalon Mall include Winners, H&M, Old Navy, GAP and Sport Chek Estimated GLA on completion is based on applicable standards of area measurement determined through internal site plans and drawings, and using external massing studies, where applicable. Estimated annual NOI is calculated using first year stabilized annual rent for each tenant, assuming 100% occupancy. These estimates are established by using contracted rents, Crombie’s market knowledge, and/or using externally generated market studies for any current vacant space. These projects have reached substantial completion, thereby reducing the amount of risk remaining in the development. The remaining risk is primarily related to achieving successful lease-up of vacant space at estimated rent per square foot. Estimated total project cost includes the current carrying costs of development lands, where applicable, net of any reductions from land and air rights dispositions. Total estimated project costs include land costs measured at fair value on existing Income Producing Properties upon transfer to the development, soft and hard construction 55 Property Belmont Market2 Davie Street – retail Avalon Mall – Phase I Avalon Mall – Phase II3, 4 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growthcosts, tenant inducements, external leasing costs, finance costs, and capitalized interest and other carrying costs, such as capitalized construction and development staff and property taxes. These costs are determined by using internal knowledge and external professional resources, where applicable. There is no additional allocation of land cost included in the estimated total cost of Avalon Mall. Development Pipeline In the sections that follow (Active Major Developments and Potential Major Developments), Crombie has identified 30 Major Development projects as at December 31, 2020 (December 31, 2019 – 33), with a total projected cost to develop these properties of $4,300,000 to $6,100,000 (December 31, 2019 – $4,000,000 to $5,800,000). Crombie may enter joint venture or other partnership arrangements for these properties to share cost, revenue, risk, and development expertise, depending upon the nature of each project. Each future project remains subject to normal development approvals, achieving required economic hurdles, and Board of Trustees’ approval. Number of Projects Total Projected Cost Range CAD $ millions1 Commercial GLA on Completion2 Commercial Incremental GLA2 Residential GLA on Completion2 Residential # of Units2 Active projects Future potential projects Total Development Pipeline 3 27 30 $ 300 80,000 4,000 – 5,800 1,300,000 $ 4,300 – 6,100 1,380,000 50,000 740,000 790,000 961,000 9,400,000 10,361,000 1,197 11,000 12,197 (1) The total projected cost range shown in development pipeline is rounded to the nearest hundredth (2) GLA and Units reflective of upper projected cost range In conjunction with our strategic partner Empire, Crombie management continuously reviews and prioritizes development opportunities that drive NAV and AFFO, including high-density urban re-development, new grocery-anchored retail, retail-related e-commerce facilities, and land-use intensification. Active Major Developments ACTIVE PROJECT GLA BY CITY as at December 31, 2020 ACTIVE PROJECT GLA BY ASSET TYPE (SQ. FT.) as at December 31, 2020 80,000 7.7% 961,000 92.3% Vancouver Toronto Montreal Commercial GLA Residential GLA Retail Residential ) s 0 0 0 ’ ( . t f . q S 600 400 200 0 56 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 The below table provides additional detail into Crombie’s Active Major Developments by property type. Commercial GLA on Completion Residential GLA on Completion Residential Units Estimated Final Completion Date Estimated Annual NOI Estimated Total Cost Estimated Yield on Cost Estimated Cost to Complete At Crombie’s Share ($ in millions) Property CMA Residential Properties1 Davie St – residential Vancouver Total – Residential Retail and Residential Properties1 — — 254,000 254,000 Le Duke Montreal 26,000 241,000 Bronte Village Toronto 54,000 466,000 Total – Retail and Residential 80,000 707,000 Total Joint Ventures 80,000 961,000 1,197 Total – Active Major Developments 80,000 961,000 1,197 (1) These properties are held in joint venture agreements in which Crombie owns a 50% interest Q1 2021 Q3 2021 Q4 2021 330 330 387 480 867 $ $ $ $ $ $ 4.0-4.4 4.0-4.4 3.2-3.4 7.5-8.3 10.7-11.7 14.7-16.1 14.7-16.1 $ $ $ $ $ $ 80 80 5.0%-5.5% 5.0%-5.5% 59 5.4%-5.8% 139 198 278 5.4%-6.0% 5.4%-5.9% 5.3%-5.8% 278 5.3%-5.8% $ $ $ $ $ $ 2 2 18 39 57 59 59 Estimated GLA on completion is based on applicable standards of area measurement determined through internal site plans and drawings and using external massing studies, where applicable. Estimated annual NOI is calculated using first year stabilized annual rent for each tenant, assuming 100% occupancy. These estimates are established by using contracted rents, Crombie’s market knowledge, and/or determined using externally generated market studies. Revenue assumptions are subject to uncertainty and proformas contain provision for revenue risk and/or timing of revenue achieving stabilization. Revenue risk in the 5% range is reasonable for typical projects and typical valuation appraisals contain provision for vacancy. For joint venture projects, our partners may provide estimates which Crombie reviews and analyzes to determine final estimates. Estimated total cost includes the current carrying costs of development lands, net of any proceeds from land and air rights dispositions. Total estimated costs include land cost measured at fair value on existing Income Producing Properties upon transfer to the development, soft and hard construction costs, tenant inducements, external leasing costs, finance costs, and capitalized interest and other carrying costs, such as capitalized construction and development staff, and property taxes. These costs are determined by using internal knowledge and external professional resources, where applicable. Project capital cost uncertainty exists and project proformas contain contingency for capital cost exceedances in the ordinary course. Capital cost exceedances in the 5% – 10% range are reflective of such contingencies. These major development projects have received Board of Trustees’ approval. Ongoing reporting to the Board of Trustees continues throughout the duration of each project. These estimates and assumptions are reviewed and updated regularly and are subject to changes, which could be material. Estimated GLA, estimated completion dates, estimated total costs, and estimated annual NOI are based on assumptions that are updated regularly, based on revised site plans, cost tendering processes, market studies and continuing tenant negotiations. These assumptions are based on access to job sites, supplies and labour availability, ability to attract tenants, estimated GLA, and tenant mix among rental, air rights sale, tenant rents, building sizes, and availability and cost of construction financing. Within specific projects, scheduling and/or completion timing uncertainty exists and project economics can handle reasonable delays in the range of 10%. Estimations included in the chart are believed to be reasonable, but there can be no assurance that actual results will be consistent with these projections. As previously disclosed, COVID-19 has affected project timelines, cost, and future lease-up schedules. Due to the shutdown of non-essential construction in Quebec during COVID-19, Le Duke and the Pointe-Claire developments were shutdown from March 24th to May 11th, 2020. Le 57 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthDuke’s completion date moved from Q2 2021 to Q3 2021. Davie Street’s residential completion date moved from Q3 2020 to Q1 2021 and project cost was increased in Q2 by $1,800 due to increased construction costs and financing costs from delays. As a result, estimated NOI yields on cost decreased to 5.0%- 5.5% from 5.1% – 5.6%. 1641 DAVIE STREET, VANCOUVER, BRITISH COLUMBIA Type: Mixed-Use Retail / Residential Rental Ownership: 50% residential, 100% Crombie ownership of commercial Construction Status: The construction of the commercial portion of the development is now complete as Safeway opened in Q2 2020, while Scotiabank and a government liquor store opened in Q4 2020. Rental residential space will total 254,000 square feet (330 rental units) in two residential towers at completion. The West Tower was completed in Q4 2020 with initial tenant move-ins beginning in November 2020. The East Tower will be completed in Q1 2021 with move-ins beginning in February. Potential Major Developments LE DUKE, 297 RUE DUKE, MONTREAL, QUEBEC Type: Retail / Residential Ownership: 50% Construction Status: Development of Le Duke began late in 2017 and the residential structure is completed. This development is expected to be fully complete in Q3 2021 inclusive of COVID-19-related impacts with initial residential leasing commencing in Q3 2021. BRONTE VILLAGE, 2441 LAKESHORE ROAD WEST, OAKVILLE (TORONTO), ONTARIO Type: Retail / Residential Ownership: 50% Construction Status: The structure, pre-cast, and glazing are complete on both Building A (west) and Building B (east). Pre-leasing marketing is currently underway and interior finishing work is progressing well with substantial completion scheduled for Q4 2021. Future Projects by City As at December 31, 2020 6,000 4,000 2,000 ) s 0 0 0 ' ( . t f . q S Vancouver Victoria Calgary Edmonton Toronto Halifax Hamilton Transit-oriented Non-transit Crombie’s current Potential Major Developments have the ability to add up to 740,000 square feet (December 31, 2019 – 540,000 square feet) of commercial GLA and up to 9,400,000 square feet (up to 11,000 units) (December 31, 2019 – 7,500,000 square feet and 9,000 units) of residential GLA (which may include a combination of rental or condominium units). Based on Crombie’s current estimates, total costs to develop these properties could reach $4,000,000 to $5,800,000 over 10 to 15 years. Crombie may develop some or all of these properties independently or may enter joint venture or other partnership arrangements for these properties to share cost, revenue, risk, and development expertise, depending upon the nature of each project. Each project remains subject to normal development approvals, achieving required economic hurdles (including financial NAV and AFFO accretion analysis), and Board of Trustees’ approval. As at December 31, 2020, Crombie has identified 27 Potential Major Development locations as having potential to become Active Major Developments. Development of each property is subject to management completing full due diligence on the opportunity, including commercial and residential components, and seeking all necessary Board, municipal/provincial entitlements, and tenant approvals prior to proceeding. The precise timing of each project is not determinable at present. The time horizon of these projects may change, project scope may change, and/or Crombie may choose to not proceed with development on some properties after further review, entitlement assessment, and completion of financial projections. 58 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 Projects described as having a “pre-planning” status include projects where Crombie has undertaken potential development planning, which could include seeking municipal approvals for zoning, density, developing image renderings, seeking potential commercial and/or residential development partners, evaluation of financing options, and other activities required to determine viability of the opportunity. An important part of creating a sustainable development program is a systematic approach to proactively moving potential development lands through the entitlement process to obtain zoning approvals. Crombie currently has 5 of these 27 potential major projects identified for near- term re-zoning and is currently in various stages of entitlement pursuit as noted in the following chart: Number of Projects Estimated Commercial Sq. ft.1 Estimated Residential Sq. ft.1 Estimated Total Sq. ft.1 % of Entitlement of Sq. ft. Residential Units1 Crombie’s Entitled Projects Zoned Application Submitted Total 3 2 5 20 130 150 940 560 1,500 960 690 58.2% 41.8% 1,650 100.0% 1,040 690 1,730 (1) Square footage and unit information presented in the table are estimates only and are subject to change. Design, municipal approvals and market conditions may influence estimates provided Zoning is in place for the following development sites: Westhill on Duke (Halifax), Belmont Market – Phase II (Victoria), and Triangle Lands (Halifax). Rezoning applications have been submitted and are in process for Broadway and Commercial (Vancouver) and Penhorn Lands (Halifax). 59 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthThe following table lists the 27 identified Potential Major Development locations and certain key features of each property. Potential developments in the table following are organized in order of potential construction commencement: Potential Major Development Pipeline Site Size (acres) Transit Oriented Existing Tenants Potential Commercial Expansion Potential Residential Expansion 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 21 Existing Property Penhorn Lands Westhill on Duke1 Belmont Market – Phase II 1780 East Broadway (Broadway and Commercial) 10355 King George Boulevard Park West CMA Halifax Halifax Victoria Vancouver Vancouver Halifax 1170 East 27 Street (Lynn Valley) Vancouver Triangle Lands McCowan & Ellesmere 10 1818 Centre Street 3130 Danforth 2733 West Broadway Centennial Parkway Halifax Toronto Calgary Toronto Vancouver Hamilton 990 West 25 Avenue (King Edward) Vancouver 524 Elbow Drive SW (Mission) Fleetwood Brunswick Place Robson Street Port Coquitlum 410 10 Street NW (Kensington) 813 11 Avenue SW (Beltline) Calgary Vancouver Halifax Vancouver Vancouver Calgary Calgary 22 3410 Kingsway (Kingsway +Tyne) Vancouver 23 East Hastings 24 25 26 27 10930 82 Avenue (Whyte Ave) 5235 Kingsway (Royal Oak) New Westminster Brampton Mall Vancouver Edmonton Vancouver Vancouver Toronto 26.12 0.462 1.70 2.43 5.07 6.44 2.82 0.68 4.48 2.18 0.79 1.95 2.75 1.80 1.60 4.45 0.753 1.15 5.31 1.73 2.59 3.74 3.30 2.44 2.76 2.82 8.74 No Yes No Yes Yes No No No Yes Yes Yes Yes No No No Yes Yes No No Yes Yes Yes No No Yes No No Land n/a Land Safeway Safeway Retail Safeway Land FreshCo/ Other tenants Safeway The Beer Store Safeway Retail Safeway Safeway Safeway n/a Safeway Safeway Safeway Safeway Safeway/ Other tenants Safeway/ Other tenants Safeway/ Other tenants Safeway Safeway Office/Retail Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Entitlement Status Application Submitted Zoned Zoned Application Submitted Yes Yes Yes Yes Yes Pre-Planning Yes Pre-Planning Yes Pre-Planning Yes Zoned Yes Pre-Planning Yes Future Yes Pre-Planning Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Future Future Future Future Future Future Future Future Future Future Future Future Future Future Future Future (1) Westhill on Duke was formerly referred to as Westhill and Scotia Square residential (2) Westhill on Duke can be developed through densification on 0.46 acres of the existing 9.05 acre Scotia Square site (3) Brunswick Place can be developed through densification on the existing 0.75 acre Brunswick Place Parkade 60 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020CAPITAL MANAGEMENT We continue to reduce risk and build financial strength by strategically managing our capital structure and optimizing capital allocation to generate long-term value for our stakeholders. Our continued success is underpinned by a strong balance sheet and more than adequate liquidity, and an investment-grade credit profile providing the company with a solid financial foundation and great financial flexibility. CAPITAL MANAGEMENT FRAMEWORK The real estate industry is highly capital intensive. Crombie’s strategic capital management objective consists of three main priorities: 1. to maintain multiple sources of both debt and equity financing; 2. to reduce risk by pre-funding its capital commitments; and 3. to source capital with the lowest cost on a long-term basis and to maintain overall indebtedness at reasonable levels, utilize staggered debt maturities, minimize long-term exposure to excessive levels of floating rate debt, and maintain conservative payout ratios. At a minimum, Crombie’s capital structure is managed to ensure that it complies with the limitations pursuant to its Declaration of Trust, the criteria contained in the Income Tax Act (Canada) in regard to the definition of a REIT and existing debt covenants. Crombie’s Declaration of Trust sets out the investment guidelines for Crombie’s capital deployment. The Declaration of Trust outlines the minimum amount of due diligence that must be completed prior to a project being approved by the Board. Crombie’s Board ensures Our guiding principles for managing capital are as follows: continued compliance with the Declaration of Trust through the review and approval of the annual operating and capital budgets, annual confirmation of Crombie’s strategic plan, and through the approval of individual projects. The annual budget will detail the level of projected capital spend for a given year and how the required capital will be funded, as well as various key performance indicators and impacts on debt covenants. The Board monitors performance quarterly or on a more frequent basis, if needed. In addition, the Board and Management regularly review unspent committed capital (i.e., unfunded capital requirements of partially completed projects) with a lens towards Crombie’s available liquidity, leverage metrics and sources of financing. Crombie expects to be able to satisfy all of its financing requirements through the use of some or all of the following: • Cash on hand; • Cash flow generated from operating the property portfolio; • Bank credit facilities; • Proceeds from partial or full disposition of select non-core investment properties; • Traditional construction financing; • CMHC insured mortgages on residential properties; • Secured mortgages and term debt on unencumbered properties; • Issuance of senior unsecured notes; • The issuance of new units; and • The issuance of units under its distribution reinvestment plan (“DRIP”). Guiding Principles Current Status Target D/GFV below 50% and reduce total leverage over the medium/ long-term D/GFV* (net of cash) is 48.8% at December 31, 2020. Maintain minimum of $250 million liquidity Increased liquidity to $472M, up $23M from 2019. Increase weighted average term to maturity Lower cost of capital through equity raises and/or innovative funding solutions, such as capital recycling Take advantage of current low interest rates Increase unencumbered asset pool Increased weighted average term to maturity by 1.2 years from 4.1 years to 5.3 years since December 31, 2019. During 2020, Crombie raised equity at a record net price of $16.00 per unit. Continue to harvest interest rate savings by refinancing high coupon debt in current low rate environment. Expanded unencumbered asset pool by approximately 12% to $1.4B since December 31, 2019. We have become a more dynamic, analytically focused organization, which allows us to constantly review the cause and effect to our base business as we evaluate key capital allocation and funding decisions that shape our business for the future. Investment‑Grade Credit Rating Crombie’s ability to raise debt financing and the cost associated with that debt financing depends on its ability to access the public debt capital markets as well as the bank credit market, both of which depend on assigned credit ratings. A credit rating generally indicates the rating agency’s assessment of the relative risk that the borrower will not fulfill its obligations in a timely manner with respect to both interest and principal commitments. In 2013, Crombie successfully applied to DBRS for a credit rating in order to access the unsecured note markets. At this time, Crombie is assigned a credit rating of BBB(low) with stable trend.11 (1) The credit ratings are not recommendations to buy, sell or hold any of the securities referred to, and they may be revised or withdrawn at any time by the assigning rating agency. Ratings are determined by the rating agencies based on criteria established from time to time by them, and they do not comment on market price or suitability for a particular investor. Each credit rating should be evaluated independently of any other credit rating. 61 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthSTRONG CAPITAL STRUCTURE CAPITAL STRUCTURE as at December 31, 2020 Equity Units $1,478,306 Mortgages $1,267,044 Unsecured Notes $1,121,398 Bank Credit Facilities and Lease Liabilities $92,170 Mortgages Bank Credit Facilities and Lease Liabilities Unsecured Notes Equity Units Crombie’s capital structure consists of the following carrying values, net of deferred financing costs where applicable: Fixed rate mortgages Drawn credit facilities Senior unsecured notes Lease liabilities Crombie REIT Unitholders (Equity Units) Special Voting Units and Class B Limited Partnership Unitholders (Equity Units) December 31, 2020 December 31, 2019 $ 1,267,044 32.0% $ 1,302,510 62,256 1,121,398 29,914 881,511 1.6% 28.3% 0.7% 22.3% 54,308 922,479 29,419 870,792 596,795 15.1% 584,251 $ 3,958,918 100.0% $ 3,763,759 34.6% 1.5% 24.5% 0.8% 23.1% 15.5% 100.0% In 2019, asset recycling through full or partial dispositions provided the equity capital required to fund our capital investments at a time when our unit price was trading materially below our NAV. In aggregate, all dispositions were completed at or above our IFRS fair value, which resulted in material value preservation compared to raising equity at prices well below NAV. At the same time, Crombie continued to harvest interest rate savings by refinancing higher coupon debt at lower current interest rates. 62 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 DEBT METRICS We monitor our debt by utilizing a number of key metrics, including the following: Unencumbered investment properties1 Unencumbered investment properties1 as a % of unsecured debt Debt to gross fair value* Weighted average interest rate2 Debt to trailing 12 months EBITDA* Interest coverage ratio* (1) Represents fair value of unencumbered properties. (2) Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt. December 31, 2020 December 31, 2019 $ 1,366,258 $ 1,223,452 117.8% 49.4% 3.9% 9.73x 2.77x 128.1% 48.9% 4.2% 8.52x 2.99x Crombie has continued to grow its unencumbered asset pool, increasing it from fair value of $1,223,452 as at December 31, 2019 to $1,366,258 as at December 31, 2020. This increase is primarily due to mortgage maturities, mortgage repayments as a result of capital recycling activity in 2019, and increased unsecured note balances. Debt to Gross Fair Value* The debt to gross fair value* was 49.4% at December 31, 2020 (48.8% after applying cash and cash equivalents to reduce debt) compared to 48.9% at December 31, 2019. This leverage ratio is below the maximum 60%, or 65% including convertible debentures, as permitted by Crombie’s Declaration of Trust. The increase in leverage ratio during the year was due to: • increased senior unsecured notes due to issuance of Series H and Series I; offset in part by: • partial redemption of Series B unsecured notes; • • increased value in investment properties due to higher net assets from development progress; increased cash and cash equivalents related to construction financing at our Pointe-Claire development; and • increased investment in joint ventures. When calculating debt to gross fair value, debt is defined under the terms of the Declaration of Trust as obligations for borrowed money including obligations incurred in connection with acquisitions, excluding specific deferred taxes payable, trade payables, and accruals in the ordinary course of business and distributions payable. Debt to gross fair value includes investment properties measured at fair value with all other components of gross fair value measured at the carrying value included in Crombie’s financial statements. Crombie’s methodology for determining fair value includes capitalization of net property income using biannual capitalization rates from external property valuators. The majority of investment properties are also subject to external, independent appraisals on a rotational basis over a period of not more than four years. The valuation techniques are more fully described in Crombie’s year end audited financial statements. During the year, Crombie made assumptions when determining the fair value of its investment properties as to the short and potential long-term impacts of COVID-19. Crombie adjusted net property income for expected impacts related to COVID-19, by looking at potential bad debts or other lost income at each property and applying probability to several potential scenarios. Crombie also completed discounted cash flow models to support its fair value of investment properties. These assumptions are subject to change as the full impact of COVID-19 is yet to be determined. The fair value included in this calculation reflects the fair value of the properties as at December 31, 2020 and 2019, respectively, based on each property’s current use as a revenue generating investment property. During the year ended December 31, 2020, Crombie’s weighted average capitalization rate used in the determination of the fair value of its investment properties decreased 0.13% to 5.86%. 63 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthFixed rate mortgages Senior unsecured notes Revolving credit facility Joint operation credit facility Bilateral credit facility Lease liabilities Total debt outstanding Less: Applicable fair value debt adjustment Debt Investment properties, at fair value Other assets, cost1 Cash and cash equivalents Deferred financing charges Investment in joint ventures Interest rate subsidy Gross fair value Debt to gross fair value* December 31, 2020 December 31, 2019 $ 1,274,304 $ 1,309,077 1,125,000 925,000 17,712 9,544 35,000 29,914 15,339 8,969 30,000 29,419 2,491,474 2,317,804 $ $ $ $ (283) 2,491,191 4,815,000 100,206 63,293 10,972 51,043 (283) (539) 2,317,265 4,605,000 80,035 — 9,715 45,123 (539) $ 5,040,231 $ 4,739,334 49.4% 48.9% (1) Other assets exclude tenant incentives and accrued straight-line rent receivable. The debt to gross fair value*, applying cash and cash equivalents to reduce debt, is 48.8% at December 31, 2020. Debt to EBITDA* and Interest Coverage* Ratios: Crombie’s debt to EBITDA* increased to 9.73x for the trailing 12 months ended December 31, 2020 from 8.52x for the trailing 12 months ended December 31, 2019. The increase was primarily due to increased debt from the issuance of Series H and Series I senior unsecured notes and mortgages, and reduced EBITDA. (Debt to EBITDA* is 9.48x after applying cash and cash equivalents to reduce debt.) The decreased EBITDA resulted from property dispositions in 2019 and the impacts of COVID-19, including decreased parking revenue due to reduced demand, increased rent abatements and a significant increase in bad debt expense in 2020. After adjusting EBITDA for the impacts of COVID-19 on bad debt expense, rent abatements, parking revenue, and organizational realignment severance costs, the debt to EBITDA* ratio for the trailing 12 months ended December 31, 2020 was 9.19x. EBITDA* decreased by $15,744 over the trailing 12 months ended December 31, 2020 when compared to the trailing 12 months ended December 31, 2019, as a result of property dispositions in 2019 and the impacts of COVID-19 in 2020 as discussed above. The interest coverage* ratio for the quarter ended December 31, 2020 declined to 2.77x compared to 2.99x for the quarter ended December 31, 2019 due to reduced EBITDA resulting from lower property revenue and the impacts of COVID-19 described above. Finance costs decreased by $4,940 primarily due to a reduction in mortgage interest resulting from disposition activity and maturing mortgages, partially offset by the premium paid related to partial early redemption of unsecured notes. After adjusting EBITDA for the impacts of COVID-19 on bad debt expense, rent abatements, parking revenue, and organizational realignment severance costs, the interest coverage* ratio for the quarter ended December 31, 2020 was 2.83x. Crombie’s debt service coverage* increased slightly to 1.92x for the quarter ended December 31, 2020 from 1.91x for the quarter ended December 31, 2019 due to the decrease in EBITDA. 64 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020The following table presents a reconciliation of property revenue to EBITDA. EBITDA is a non-GAAP measure and should not be considered an alternative to operating income attributable to Unitholders and may not be comparable to that used by other entities. Refer to the “Non-GAAP Financial Measures” section of this MD&A, starting on page 84, for more information. Dec. 31, 2020 Sep. 30, 2020 Jun. 30, 2020 Mar. 31, 2020 Dec. 31, 2019 Sep. 30, 2019 Jun. 30, 2019 Mar. 31, 2019 Three months ended Property revenue $ 97,060 $ 92,920 $ 96,501 $ 102,252 $ 96,823 $ 97,346 $ 99,332 $ 105,240 Amortization of tenant incentives 4,859 4,752 4,419 3,819 3,598 3,515 3,411 3,615 Adjusted property revenue 101,919 97,672 100,920 106,071 100,421 100,861 102,743 108,855 Property operating expenses (29,245) (27,503) (37,887) (35,237) (29,852) (27,205) (28,222) (32,366) General and administrative expenses (5,493) (5,062) (6,960) (3,019) (5,855) (6,112) (5,970) (5,784) Income (loss) from equity accounted investments EBITDA*1 Trailing 12 months EBITDA*4 Finance costs – operations Amortization of deferred financing charges Amortization of effective swap agreements Adjusted interest expense2 Debt principal repayments3 Debt outstanding (see Debt to Gross Fair Value*)5 Interest service coverage* ratio {(1)/(2)} Debt service coverage* ratio {(1)/((2)+(3))} Debt to trailing 12 months EBITDA* {(5)/(4)} (411) 101 123 66,770 256,104 $ $ 65,208 254,040 $ $ 56,196 256,501 $ $ 115 67,930 268,979 24,912 $ 22,250 $ 22,006 $ 22,640 (835) (737) (683) (751) — — — (510) 24,077 $ 21,513 $ 21,323 $ 21,379 10,715 $ 10,786 $ 10,395 $ 10,790 (8) 64,706 271,848 22,810 (827) (356) 21,627 12,167 $ $ $ $ $ 125 67,669 278,999 24,504 (922) (226) 23,356 12,773 $ $ $ $ $ 123 68,674 282,653 24,335 (913) (544) 22,878 12,917 $ $ $ $ $ 94 70,799 286,078 25,667 (912) (551) 24,204 13,647 $ $ $ $ $ $ $ $ $ $ $ 2,491,191 $ 2,373,623 $ 2,338,288 $ 2,383,451 $ 2,317,265 $ 2,329,039 $ 2,319,410 $ 2,449,331 2.77x 3.03x 2.64x 3.18x 2.99x 2.90x 3.00x 2.93x 1.92x 2.02x 1.77x 2.11x 1.91x 1.87x 1.92x 1.87x 9.73x 9.34x 9.12x 8.86x 8.52x 8.35x 8.21x 8.56x 65 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthDebt Profile A continuity of Crombie’s fixed-rate mortgages, senior unsecured notes, and credit facilities for the year ended December 31, 2020 is as follows: Opening balance at January 1, 2020 $ 1,308,147 $ 925,000 $ 54,308 Mortgages Senior Unsecured Notes Credit Facilities Additions to existing mortgages New borrowings or issuances Principal repayments Repayments on maturity Early redemption Net advances 5,125 218,000 (42,686) (214,912) — — — 300,000 — — (100,000) — Closing balance at December 31, 2020 $ 1,273,674 $ 1,125,000 $ — — — — — 7,948 62,256 Mortgages Crombie had outstanding fixed rate mortgages consisting of: Fixed rate mortgages Unamortized fair value debt adjustment and interest rate subsidy Deferred financing charges on fixed rate mortgages Total mortgage debt Long-term portion Current portion Weighted average interest rate Weighted average term to maturity $ $ $ $ December 31, 2020 December 31, 2019 1,273,674 $ 1,308,147 630 1,274,304 (7,260) 1,267,044 1,139,798 127,246 3.98% 5.7 years $ $ $ 930 1,309,077 (6,567) 1,302,510 1,045,015 257,495 4.25% 3.9 years • Crombie has a mortgage payable of $25,526 in settlement of an amount payable to 1600 Davie Limited Partnership. This mortgage, bearing interest at 3.22%, relates to the commercial component of the Davie Street development, 100% of which is included in Crombie’s financial statements. • During the year ended December 31, 2020, Crombie successfully closed on two mortgages totalling $218,000 at retail-related industrial properties. The proceeds of one of the mortgages were placed in escrow and will be drawn down once certain conditions have been met. As of December 31, Crombie has received $36,753 of the total commitment. Given that Crombie controls the total proceeds, the full remaining proceeds have been reflected as long-term debt and cash at December 31, 2020. From time to time, Crombie has entered into interest rate swap agreements to manage the interest rate profile of its current or future debts without an exchange of the underlying principal amount (see “Interest Rate Risk”). Crombie currently has interest rate swap agreements in place on $112,510 of floating rate debt. 66 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 Senior Unsecured Notes The following series of senior unsecured debentures were outstanding as at December 31, 2020 and 2019: Maturity Date Interest Rate December 31, 2020 December 31, 2019 Series B Series D Series E Series F Series G Series H Series I Unamortized Series B issue premium Deferred financing charges Total senior unsecured notes Long-term portion Current portion Weighted average interest rate Weighted average term to maturity June 1, 2021 3.962% $ 150,000 $ November 21, 2022 January 31, 2025 August 26, 2026 June 21, 2027 March 31, 2028 October 9, 2030 4.066% 4.802% 3.677% 3.917% 2.686% 3.211% 150,000 175,000 200,000 150,000 150,000 150,000 110 (3,712) 1,121,398 971,398 150,000 3.78% 5.1 years $ $ $ $ $ $ 250,000 150,000 175,000 200,000 150,000 — — 627 (3,148) 922,479 922,479 — 4.07% 4.5 years • On October 9, 2020, Crombie issued on a private placement basis, $150,000 Series H notes (senior unsecured) maturing March 31, 2028. The net proceeds were used to repay existing indebtedness, including repayment of outstanding credit facilities and partial repayment of the Series B unsecured notes. Crombie called for early redemption of $100,000 of the Series B unsecured notes on October 21, 2020 in conjunction with the offering of the Series H notes. The Series H notes were priced with an effective yield to maturity of 2.686% and sold at a price of $1,000.00 per $1,000.00 principal amount. Interest is payable in equal semi-annual instalments on March 31 and September 30. • On the same date, Crombie issued on a private placement basis, $150,000 Series I notes (senior unsecured) maturing October 9, 2030. The proceeds were used for the same purposes as the Series H notes. The notes were priced with an effective yield to maturity of 3.211% and sold at a price of $1,000.00 per $1,000.00 principal amount. Interest is payable in equal semi-annual instalments on April 9 and October 9. There are no required periodic principal payments, with the full face value of the notes due on their respective maturity dates. Credit Facilities The following floating-rate credit facilities had balances drawn as at December 31, 2020 and 2019: Revolving credit facility Unsecured bilateral credit facility Joint operation credit facility I Joint operation credit facility II Total credit facilities REVOLVING CREDIT FACILITY Available Facility 400,000 130,000 68,050 32,000 $ $ $ $ Weighted average term to maturity December 31, 2020 December 31, 2019 0.3 years $ 17,712 $ 0.7 years 3.3 years 3.8 years 35,000 7,188 2,356 $ 62,256 $ 15,339 30,000 6,978 1,991 54,308 Crombie has in place an authorized floating rate revolving credit facility of up to $400,000 (the “revolving credit facility”), with a maturity date of June 30, 2023, of which $17,712 ($23,292 including outstanding letters of credit) was drawn as at December 31, 2020. The revolving credit facility is secured by a pool of first mortgages on certain properties. Borrowings under the revolving credit facility can be by way of Bankers’ Acceptance or prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin. The respective spread or margin may change depending on Crombie’s unsecured bond rating with DBRS and whether the facility remains secured or migrates to an unsecured status. 67 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthUNSECURED BILATERAL CREDIT FACILITY The unsecured bilateral credit facility has a maximum principal amount of $130,000, increased from $100,000 in the third quarter of 2020 with the maturity date extended to September 1, 2021, of which $35,000 was drawn as at December 31, 2020. The facility is used by Crombie for working capital purposes and to provide temporary financing for acquisitions and development activity. Borrowings under the bilateral credit facility can be by way of Bankers’ Acceptance or prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin. The respective spread or margin may change depending on Crombie’s unsecured bond rating with DBRS. JOINT OPERATION CREDIT FACILITIES In conjunction with the 89% sale of a portfolio of assets in the second quarter of 2019, Crombie and its co-owner entered into a credit agreement with a Canadian chartered bank for a $62,250 term loan facility and a $5,800 revolving credit facility. Both facilities are secured by first mortgages on select properties and have a term of five years maturing on April 25, 2024. Borrowings under both facilities can be by way of Bankers’ Acceptance or prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin. Concurrent with entering into these facilities, Crombie and its co-owner entered into a fixed for floating interest rate swap, effectively fixing the interest rate on both facilities at 3.58%. At December 31, 2020, Crombie‘s portion of the term and revolving credit facilities was $6,847 and $341, respectively. In conjunction with the 89% sale of a portfolio of assets in the fourth quarter of 2019, Crombie and its co-owner entered into a credit agreement with a Canadian chartered bank for a $16,500 term loan facility and a $15,500 revolving credit facility. Both facilities are secured by first and second mortgages on select properties and have a term of five years maturing on October 7, 2024. Borrowings under both facilities can be by way of Bankers’ Acceptance or prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin. Concurrent with entering into these facilities, Crombie and its co-owner entered into a fixed for floating interest rate swap, effectively fixing the interest rate on both facilities at 3.27%. At December 31, 2020, Crombie’s portion of the term and revolving credit facilities was $1,815 and $541, respectively. Debt Maturities Principal repayments of the fixed rate mortgages and credit facilities are scheduled as follows: Maturing Debt Balances 12 Months Ending Mortgages Senior Unsecured Notes Credit Facilities Total % of Total Payments of Principal Total Required Payments % of Total December 31, 2021 $ 84,985 $ 150,000 $ 35,000 $ 269,985 12.3% $ 42,261 $ 312,246 December 31, 2022 159,451 150,000 — 309,451 December 31, 2023 December 31, 2024 238,384 226,268 — — December 31, 2025 30,596 175,000 279,991 650,000 17,712 9,544 — — 256,096 235,812 205,596 929,991 14.0% 11.6% 10.7% 9.3% 42.1% 39,418 32,838 21,033 17,131 348,869 288,934 256,845 222,727 101,318 1,031,309 12.7% 14.2% 11.7% 10.4% 9.1% 41.9% $ 1,019,675 $ 1,125,000 $ 62,256 $ 2,206,931 100.0% $ 253,999 $ 2,460,930 100.0% Thereafter Total1 (1) Excludes fair value debt adjustment and deferred financing charges. Outstanding Unit Data REIT UNITS AND CLASS B LP UNITS AND THE ATTACHED SPECIAL VOTING UNITS On February 11, 2020, Crombie closed a public offering, on a bought deal basis, of 3,657,000 Units, at a price of $16.00 per Unit for proceeds of $55,848 net of issue costs. On the same date, concurrently with the issue of the REIT Units, in satisfaction of its pre-emptive right, ECL Developments (ECLD), a wholly owned subsidiary of Empire, purchased 2,593,750 Class B LP Units and the attached Special Voting Units at a price of $16.00 per Class B LP Unit for proceeds of $41,425 net of issue costs, on a private placement basis. After the closing of the public offering and the private placement, Empire continues to hold a 41.5% economic and voting interest in Crombie. For the year ended December 31, 2020, Crombie issued 120,533 REIT Units and 85,433 Class B LP Units under its DRIP. Units issued under the DRIP are issued at a price equal to 100% of the volume-weighted average trading price of the REIT Units on the TSX for the five trading days immediately preceding the relevant distribution payment date. Throughout the year, Crombie issued 58,090 REIT Units under its unit based compensation plan. Total units outstanding at January 31, 2021, were as follows: Units Special Voting Units1 93,541,132 64,730,503 (1) Crombie Limited Partnership, a subsidiary of Crombie, has also issued 64,730,503 Class B LP Units. These Class B LP Units accompany the Special Voting Units, are the economic equivalent of a Unit, and are exchangeable for Units on a one-for-one basis 68 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020CASH FLOWS The following shows the major sources and uses of cash for the year ended December 31, 2020: Major Sources and Uses of Cash $300,000 $97,273 $218,000 $66,406 $0 $(100,000) $(42,687) $37,832 $63,293 $(109,668) $(13,911) $(140,302) $7,948 $(257,598) Opening cash Operating cash ﬂow before distributions Distributions Issue of mortgages Mortgage payments Credit facility net repayments Issue of notes Notes redemption Unit issue Acquisitions Additions to investment properties Proceeds on disposition Other, net Closing cash Cash provided by (used in): Operating activities Financing activities Investing activities Source of cash Use of cash Three months ended December 31, Year ended December 31, 2020 2019 Variance 2020 2019 Variance $ (2,289) $ (9,236) $ 6,947 $ (73,896) $ (35,869) $ (38,027) 114,356 47,452 66,904 261,469 (63,487) 324,956 (48,774) (38,216) (10,558) (124,280) 99,356 (223,636) Net change during the period $ 63,293 $ — $ 63,293 $ 63,293 $ — $ 63,293 69 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthOperating Activities For the three months ended: For the year ended: The decrease in cash used in operating activities in the quarter compared to the same quarter in 2019 is primarily due to additions to tenant incentives in 2019, including modernizations of $15,297. The increase in cash used in operating activities on an annual basis is largely due to reduced net property income of $22,235 as a result of property dispositions and the impacts of COVID-19. These impacts include decreased parking revenue of $2,715, increased rent abatements of $1,012 and increased bad debt expense of $10,717 as a result of COVID-19-related collection risk. The reduced net property income for the year was offset in part by a decrease of $3,187 in general and administrative expenses resulting primarily from reduced salaries, and a decrease of $5,508 in finance costs from operations due to a reduction in mortgage interest resulting from disposition activity and maturing mortgages. Additionally, modernizations for energy upgrades of $14,489, payment of the special cash distribution of $14,857 on January 15, 2020, and higher distributions during the year compared to 2019 as a result of the Unit issuance in Q1 2020 contributed to the use of cash. Financing Activities For the three months ended: For the year ended: The increase in cash provided by financing activities is primarily generated from the $100,000 mortgage at our Pointe-Claire development and issuance of senior unsecured notes of $300,000, offset in part by early redemption of Series B unsecured notes of $100,000 and repayment of credit facilities of $140,070. The increase in cash provided by financing activities on an annual basis is due to $300,000 issuance of unsecured notes, mortgage issues of $218,000, and the Unit issuance of $97,273 net of costs. This is partially offset by repayment of mortgages of $257,598. Investing Activities For the three months ended: For the year ended: The increase in cash used in investing activities results primarily from the additions to investment properties of $49,797 compared to $37,799 in the fourth quarter of 2019. Annually, the decrease in cash provided by investing activities is due to the proceeds from disposition of properties of $37,832 compared to $339,391 in 2019, offset in part by the acquisition of properties of $42,687 ($152,507 in 2019). 70 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020AVAILABLE CREDIT LINE LIQUIDITY Available liquidity is the net amount available on Crombie’s credit facilities, excluding joint facilities with joint operation partners, calculated as follows: Revolving credit facility $ 400,000 $ 364,558 $ 369,785 $ 400,000 $ 400,000 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 Amount drawn Outstanding letters of credit Available liquidity Unsecured revolving bilateral credit facility Amount drawn Available liquidity Unsecured short-term non-revolving credit facility Amount drawn Available liquidity Cash (17,712) (5,580) 376,708 130,000 (35,000) 95,000 — — — — (18,927) (5,746) 339,885 130,000 (99,000) 31,000 75,000 (75,000) — — (20,736) (5,746) 343,303 100,000 (37,000) 63,000 75,000 (75,000) — — (117,000) (5,759) 277,241 100,000 (40,000) 60,000 120,000 (120,000) — 112,657 (15,339) (5,645) 379,016 100,000 (30,000) 70,000 — — — — Total available liquidity $ 471,708 $ 370,885 $ 406,303 $ 449,898 $ 449,016 Cash and cash equivalents on the balance sheet of $63,293 consists of restricted cash related to a mortgage on a retail-related industrial property and is therefore not included in available liquidity. Under the amended terms governing the revolving credit facility, Crombie is entitled to borrow a maximum of 70% of the fair market value of assets subject to a first security position and 60% of the excess of fair market value over first mortgage financing of assets subject to a second security position or a negative pledge (the “Borrowing Base”). The revolving credit facility provides Crombie with flexibility to add or remove properties from the Borrowing Base, subject to compliance with certain conditions. The terms of the revolving credit facility also require that Crombie must maintain certain covenants: • annualized NOI for the prescribed properties must be a minimum of 1.4 times the coverage of the related annualized debt service requirements; • annualized NOI on all properties must be a minimum of 1.4 times the coverage of all annualized debt service requirements; and • cash distributions to Unitholders are limited to 100% of funds from operations. The revolving credit facility also contains a covenant limiting the amount which may be utilized under the revolving credit facility at any time. This covenant provides that the aggregate of amounts drawn under the revolving credit facility plus any outstanding letters of credit, may not exceed the “Aggregate Borrowing Base”, which is based on a modified calculation of the Borrowing Base, as defined in the revolving credit facility. At December 31, 2020, the remaining amount available under the revolving credit facility was approximately $382,000 (prior to reduction for standby letters of credit outstanding of $5,580) and was not limited by the Aggregate Borrowing Base. At December 31, 2020, Crombie remained in compliance with all debt covenants. The terms of the unsecured bilateral revolving credit facility and the unsecured non-revolving short-term credit facility also require annualized NOI on all properties to be a minimum of 1.4 times the coverage of all annualized debt service requirements and cash distributions to Unitholders to be limited to 100% of funds from operations as defined in the credit facilities. 71 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthOur liquidity is impacted by contractual debt commitments. Our contractual debt commitments for the next five years are as follows: Fixed rate mortgages – principal and interest2 $ 487,879 $ 91,305 $ 80,391 $ 70,992 $ 35,820 $ 32,327 $ 177,044 Twelve months ending December 31, Contractual Cash Flows1 2021 2022 2023 2024 2025 Thereafter Fixed rate mortgages – maturities 1,019,674 84,985 159,451 238,384 226,268 30,596 Senior unsecured notes Trade and other payables Lease liabilities Credit facilities Total 1,326,040 189,051 185,899 30,476 30,476 197,776 124,853 108,878 148,115 2,537 2,953 2,476 1,714 2,390 964 2,254 964 2,267 3,106,561 476,756 431,170 343,956 295,782 263,930 1,294,967 64,811 36,176 672 18,215 9,748 — — $ 3,171,372 $ 512,932 $ 431,842 $ 362,171 $ 305,530 $ 263,930 $ 1,294,967 279,990 692,362 9,380 136,191 (1) Contractual cash flows include principal and interest and exclude extension options. (2) Reduced by the interest rate subsidy payments to be received from Empire. Crombie’s contractual debt obligations and projected development expenditures can be funded from the following financing sources: • secured and unsecured short-term financing subject to available borrowing base; • recycling capital through the disposition of select investment properties; • secured mortgage and term debt on unencumbered properties; • • the issuance of additional senior unsecured notes; the issuance of new units; and • entering into new joint arrangements. Off‑Balance Sheet Commitments and Guarantees There are claims and litigation in which Crombie is involved, arising out of the ordinary course of business operations. In the opinion of management, any liability that would arise from such contingencies would not have a significant adverse effect on these operating results. Crombie has agreed to indemnify its trustees and officers, and particular employees, in accordance with Crombie’s policies. Crombie maintains insurance policies that may provide coverage against certain claims. Crombie obtains standby letters of credit to support its obligations with respect to construction work on its investment properties and satisfying mortgage financing requirements. As at December 31, 2020, Crombie has a total of $5,580 in outstanding letters of credit related to: Construction work being performed on investment properties Mortgage lenders primarily to satisfy mortgage financings on redevelopment properties Total outstanding letters of credit December 31, 2020 December 31, 2019 $ $ 3,740 1,840 5,580 $ $ 3,805 1,840 5,645 Crombie does not believe that any of these standby letters of credit are likely to be drawn upon. As at December 31, 2020, Crombie had signed construction contracts totaling $358,813 of which $288,183 has been paid. This includes contracts signed within joint ventures at Crombie’s ownership percentage. Crombie has 100% guarantees on mortgages related to properties in which it has less than a 100% interest. The mortgages payable related to these guarantees are secured by specific charges against the properties. As at December 31, 2020, Crombie has provided guarantees of approximately $140,577 (December 31, 2019 – $145,713) on mortgages in excess of their ownership interest in the properties. Responsibility for ongoing payments of principal and interest on these mortgages remains with the joint owners of the properties. The mortgages have a weighted average term to maturity of 3.8 years. Crombie signed an indemnity for a bond on a several basis at 1600 Davie Limited Partnership for $1,337. This indemnity was related to removal of a lien issued from a third-party supplier. Subsequent to year end, the lien and bond were removed. 72 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020Under the terms of head leases with certain of Crombie’s joint operation partners, Crombie guarantees its joint operation partners their portion of any uncollected rent receivable from the sub-tenant. FINANCIAL INSTRUMENTS The fair value of a financial instrument is the estimated amount that Crombie would receive to sell a financial asset or pay to transfer a financial liability in an orderly transaction between market participants at the measurement date. Fair value determination is classified within a three-level hierarchy, based on observability of significant inputs, as follows: Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 – unobservable inputs for the asset or liability. There were no transfers between levels of the fair value during the year ended December 31, 2020. Due to their short-term nature, the carrying value of the following financial instruments approximates their fair value at the balance sheet date: • Cash and cash equivalents • Trade receivables • Trade and other payables. The fair value of other financial instruments is based on discounted cash flows using discount rates that reflect current market conditions for instruments with similar terms and risks. The following table summarizes the estimated fair value of other financial instruments which have a fair value different from their carrying value: Financial assets Long-term receivables1 Financial liabilities Investment property debt Senior unsecured notes Total other financial liabilities December 31, 2020 December 31, 2019 Fair Value $ $ $ 25,042 1,427,367 1,206,285 2,633,652 $ $ $ Carrying Value 25,051 1,336,560 1,125,000 2,461,560 Fair Value 23,911 1,400,821 946,700 2,347,521 $ $ $ $ $ $ Carrying Value 24,120 1,363,385 925,000 2,288,385 (1) Long-term receivables include amounts in other assets for the capital expenditure program, interest rate subsidy and receivable from related parties. Financial assets are derecognized when the contractual rights to benefits from the financial asset expire. The difference between the asset’s carrying value and the consideration received or receivable is recognized as a charge to the statement of comprehensive income. The fair value of the long-term receivables, investment property debt and senior unsecured notes are Level 2 measurements. 73 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth RISK MANAGEMENT Risk Management Framework Management of the REIT is vested in the Board of Trustees, subject to the provisions of applicable statutes and the Declaration of Trust. The Board of Trustees of the REIT shall have explicit responsibility for the stewardship of the REIT including the strategic planning process, approval of the strategic plan, the identification of principal risks and implementation of systems to manage these risks, succession planning, operations, communications and reporting, and the integrity of the REIT’s internal control and management information systems. The Board discharges certain of its responsibilities through delegation to its committees as more particularly set out in the committee mandates. Risk Factors Related to the Business of Crombie In the normal course of business, Crombie is exposed to a number of financial risks that can affect its operating performance. The more significant risks, and the action taken to manage them, are as follows: ENTERPRISE RISK MANAGEMENT Markets have been negatively impacted by COVID-19, which was declared a pandemic by the World Health Organization (“WHO”) on March 11, 2020. The continued spread of COVID-19 and the actions being taken by governments, businesses and individuals to limit this pandemic, including business closures and physical distancing, and the effects of resulting layoffs and other job losses on the available income of retail customers, may adversely impact our operations and development activities including, among others, increasing the credit risk associated with our receivables, limiting our ability to quickly respond to changes in credit risk, extending the time to completion and occupancy of our major developments, and limiting our ability to serve our tenants. There is also increased risk as to the extent of the impact of COVID-19 on leasing, occupancy, tenant inducements, land use intensifications, market rents, and capital expenditures if the current economic slowdown continues long-term, potentially impacting future operational expectations and valuation of assets. This has resulted in significant economic uncertainty, of which the potential impact on Crombie’s future financial results is difficult to reliably measure. REAL PROPERTY OWNERSHIP AND TENANT RISKS All real property investments are subject to elements of risk. The value of real property and any improvements thereto depend on the credit and financial stability of tenants and upon the vacancy rates of the properties. In addition, certain significant expenditures, including property taxes, ground rent, mortgage payments, insurance costs, and related charges must be made throughout the period of ownership of real property regardless of whether a property is producing any income. Cash available for distribution will be adversely affected if a significant number of tenants are unable to meet their obligations under their leases or if a significant amount of available space in the properties becomes vacant and cannot be leased on economically favourable lease terms. Upon the expiry of any lease, there can be no assurance that the lease will be renewed or the tenant replaced. The terms of any subsequent lease may be less favourable to Crombie than those of an existing lease. The ability to rent unleased space in the properties in which Crombie has an interest will be affected by many factors, including general economic conditions, local real estate markets, changing demographics, supply and demand for leased premises, competition from other available premises, and various other factors. Management utilizes staggered lease maturities so that Crombie is not required to lease unusually large amounts of space in any given year. In addition, the diversification of our property portfolio by geographic location, tenant mix, and asset type also help to mitigate this risk. COMPETITION The real estate business is competitive. Numerous other developers, managers, and owners of properties compete with Crombie in seeking tenants. Some of the properties located in the same markets as Crombie’s properties may be newer, better located, less levered, or have stronger anchor tenants than Crombie’s properties. Some property owners with properties located in the same markets as Crombie’s properties may be better capitalized and may be stronger financially and hence better able to withstand an economic downturn. Competitive pressures in such markets could have a negative effect on Crombie’s ability to lease space in its properties and on the rents charged or concessions granted. DEVELOPMENT RISK Crombie owns a number of investment properties at varying stages of development as well as a significant pipeline of potential future development properties. Development risk associated with development projects underway include: construction delays and their impact on financing and related costs as well as commitments from tenants for occupancy; cost overruns which could impact the profitability and/or financial viability of a project; and the inability to meet revenue projections upon completion, which could be impacted by unmet leasing assumptions on timing of tenant occupancy or rent per square foot. Management strives to mitigate these risks by undertaking certain projects with partners (see Joint Arrangement Risk); entering into fixed cost construction contracts with reputable contractors; entering into long-term financing at the most appropriate stage possible; and entering into long- term leases with reputable commercial tenants prior to construction wherever possible. Development risks associated with potential future development properties include all of the above as well as the risks associated with the ability to develop the property at all. This may include waiting for all current leases to expire or negotiating favourable terms with current tenants which could include costs associated with lease interruptions to permit development, and inability to receive various required municipal/provincial approvals for site plan, development, zoning, construction, etc. 74 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020JOINT ARRANGEMENT RISK Crombie has entered into joint arrangements or partnerships with other third party entities. Risks associated with these arrangements include risk of default by a partner on financing obligations or non-performance of a partner’s obligations on a project, which may include development, construction, management or leasing. Crombie attempts to mitigate these risks by entering into arrangements with financially stable, reputable partners with a proven track record and by negotiating contractual rights in the event of a default. SIGNIFICANT RELATIONSHIP As at December 31, 2020, Empire, through its wholly-owned subsidiary ECLD, holds a 41.5% indirect interest in Crombie. Crombie’s anchor tenants are concentrated in a relatively small number of retail operators. Specifically, 54.9% of the annual minimum rent and 54.0% of total property revenue generated from Crombie’s properties is derived from anchor tenants that are owned and/or operated by Empire (including Sobeys and all other subsidiaries of Empire). Therefore, Crombie is reliant on the sustainable operation by Empire in these locations. POTENTIAL CONFLICTS OF INTEREST The trustees will, from time to time, in their individual capacities, deal with parties with whom Crombie may be dealing, or may be seeking investments similar to those desired by Crombie. The interests of these persons could conflict with those of Crombie. The Declaration of Trust and Code of Conduct contain conflict of interest provisions requiring the trustees to disclose their interests in certain contracts and transactions and to refrain from voting on those matters. In addition, certain decisions regarding matters that may give rise to a conflict of interest must be made by a majority of independent elected trustees only. Conflicts may exist due to the fact that certain trustees, senior officers, and employees of Crombie are directors and/or senior officers of Empire and/or its affiliates or will provide management or other services to Empire and its affiliates. Empire and its affiliates are engaged in a wide variety of real estate and other business activities. Crombie may become involved in transactions that conflict with the interests of the foregoing. The interests of these persons could conflict with those of Crombie. To mitigate these potential conflicts, Crombie and Empire have entered into a number of agreements to outline how potential conflicts of interest will be dealt with, including a Non-Competition Agreement, Management Agreement, and Development Agreement. As well, the Declaration of Trust contains a number of provisions to manage potential conflicts of interest including setting limits to the number of Empire appointees to the Board, “conflict of interest” guidelines, as well as outlining which matters require the approval of a majority of the independent elected trustees such as any property acquisitions or dispositions between Crombie and Empire or another related party. RELIANCE ON KEY PERSONNEL The management of Crombie depends on the services of certain key personnel. The loss of the services of any key personnel could have an adverse effect on Crombie and adversely impact Crombie’s financial condition. Crombie does not have key person insurance on any of its key employees. RETAIL AND GEOGRAPHIC CONCENTRATION Crombie’s portfolio of properties is heavily weighted in retail properties. Consequently, changes in the retail environment and general consumer spending, including the growing trend in e-commerce, could adversely impact Crombie’s financial condition. Crombie’s portfolio of properties was historically heavily concentrated in Atlantic Canada. Through property acquisitions and dispositions over the last eight years, Crombie has reduced its geographic concentration in Atlantic Canada, and thereby reduced the adverse impact an economic downturn in any one specific geographic region in Canada could have on Crombie’s financial condition. CYBER SECURITY RISK A cyber security incident includes any material adverse event that threatens the confidentiality, integrity and/or availability of Crombie’s information resources. Such events, intentional or unintentional, could include malicious software attacks, unauthorized access to confidential data or information systems, or security breaches and could lead to a disruption of operations or unauthorized access to, and release of, confidential information. The results could include reputational damage with tenants and suppliers, financial costs, or a disruption to Crombie’s business. Crombie has implemented processes, procedures and controls to help mitigate these risks, but these measures, as well as its increased awareness of a risk of a cyber incident, do not guarantee that its financial results will not be negatively impacted by the occurrence of any such event. ENVIRONMENTAL MATTERS Environmental legislation and regulations have become increasingly important in recent years. As an owner of interests in real property in Canada, Crombie is subject to various Canadian federal, provincial, and municipal laws relating to environmental matters. Such laws provide that Crombie could become liable for environmental harm, damage, or costs, including with respect to the release of hazardous, toxic, or other regulated substances into the environment, and the removal or other remediation of hazardous, toxic, or other regulated substances that may be present at or under its properties. The failure to remove or otherwise address such substances, if any, may adversely affect Crombie’s ability to sell such property, realize the full value of such property or borrow using such property as collateral security, and could potentially result in claims against Crombie by public or private parties by way of civil action. Crombie’s operating policy is to obtain a Phase I environmental site assessment, conducted by an independent and experienced environmental consultant, prior to acquiring a property and to have Phase II environmental site assessment work completed where recommended in a Phase I environmental site assessment. Crombie is not aware of any material non-compliance with environmental laws at any of its properties, and is not aware of any pending or threatened investigations or actions by environmental regulatory authorities in connection with any of its properties. Crombie has implemented policies and procedures to assess, manage and monitor environmental conditions at its properties to manage exposure to liability. CLIMATE CHANGE RISK Crombie has properties located in areas that are subject to natural disasters and severe weather conditions such as hurricanes, ice storms, floods, and fires, and the frequency of these natural disasters and severe weather conditions may increase due to climate change. The occurrence of natural disasters, severe weather conditions, and the effects of climate change can delay new development or redevelopment projects, increase investment costs to repair or replace 75 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growthdamaged properties, increase operation costs, including the cost of energy at our properties, increase costs for future property insurance, negatively impact the tenant demand for lease space, and cause substantial damages or losses to our properties which could exceed any applicable insurance coverage. The incurrence of any of these losses, costs or business interruptions may adversely affect our financial condition, results of operations and cash flows. In addition, changes in government legislation and regulation on climate change could result in increased capital expenditures to improve the energy efficiency of our existing properties and could also require us to spend more on our development or redevelopment projects without a corresponding increase in revenues, which may adversely affect our financial condition, results of operations and cash flows. RELIANCE ON EMPIRE, SOBEYS, AND OTHER EMPIRE AFFILIATES A significant portion of Crombie’s rental income will be received from tenants that are affiliates of Empire. In addition, Empire has obligations to indemnify Crombie in respect to the cost of environmental remediation of certain properties acquired by Crombie from Empire to a maximum permitted amount under an omnibus environmental indemnity agreement entered into as part of the closing of the acquisition of certain properties. There is no certainty that Empire will be able to perform its obligations to Crombie in connection with these agreements. Empire and specific subsidiaries have not provided any security to guarantee these obligations. If Empire, Sobeys or such affiliates are unable or otherwise fail to fulfill their obligations to Crombie, such failure could adversely impact Crombie’s financial condition. Financial Risk Management The following table outlines our financial risks, how we manage these risks, and whether there was a change in risk exposure compared to the prior year. CREDIT RISK Risk Description Credit risk arises from the possibility that tenants may experience financial difficulty and be unable to fulfill their lease commitments. A provision for doubtful accounts and other adjustments to net property income are taken for all anticipated collectability risks. Risk Management Crombie mitigates credit risk by geographical diversification, diversifying both its tenant mix and asset mix and conducting credit assessments for new and renewing tenants. In measuring tenant concentration, Crombie considers both the annual minimum rent and total property revenue of major tenants. • Crombie’s largest tenant, Empire (including Sobeys and all other subsidiaries of Empire), represents 54.9% of annual minimum rent. No other tenant accounts for more than 3.3% of Crombie’s total minimum rent; and • Total property revenue includes operating and realty tax cost recovery income and percentage rent. These amounts can vary by property type, specific tenant leases, and where tenants may directly incur and pay operating and realty tax costs. Crombie earned total property revenue of $56,889 and $209,780 respectively for the three months and year ended December 31, 2020 (three months and year ended December 31, 2019 – $51,032 and $207,948 respectively) from Sobeys Inc. and other subsidiaries of Empire. Receivables are substantially comprised of current balances due from tenants and past due receivables since the start of the pandemic, primarily July to September. The balance of accounts receivable past due is usually not significant; however, historically low receivable balances have increased significantly during the year as a result of the impacts of the COVID-19 pandemic. Generally, rents are due the first of each month and other tenant billings are due 30 days after invoicing, and in general, balances over 30 days are considered past due. Crombie determines the expected credit loss in accordance with IFRS 9’s simplified approach for amounts receivable where its loss allowance is measured at initial recognition and throughout the life of the receivable. Trade receivables are written off when there is no reasonable expectation of recovery. Crombie assesses, on a forward-looking basis, the expected credit losses associated with its rent receivables. In determining the expected credit losses, Crombie takes into account, on a tenant-by-tenant basis, the payment history, future expectations, and knowledge gathered through discussions for rental concessions, applications for rental relief through government programs, and ongoing discussions with tenants. Crombie’s assessment of expected credit losses is subjective and, due to the impacts of COVID-19, the degree of uncertainty in our assessments has increased. During the year ended December 31, 2020, Crombie has recorded bad debt expense of $10,894, with the corresponding amount recorded as an expected credit loss against our accounts receivable balance. Our trade receivables and allowance for doubtful accounts balances at December 31, 2020 were $42,211 and $(7,955), respectively (December 31, 2019 – $21,017 and $(340), respectively). Crombie manages its residual risk in its investment properties through an active capital expenditure program and actively leasing any vacant spaces. The residual risk throughout Crombie’s portfolio is not considered significant although a prolonged state of economic shutdown can impact Crombie’s ability to execute on its capital expenditure program and leasing activity. 76 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020Liquidity Risk Risk Description Risk Management Liquidity risk is the risk that Crombie may not have access to sufficient debt and equity capital to fund its growth program, refinance debt obligations as they mature, or meet its ongoing obligations as they arise. Cash flow generated from operating the property portfolio represents the primary source of liquidity used to service the interest on debt, fund general and administrative expenses, reinvest in the portfolio through capital expenditures, as well as fund tenant incentive costs and make distributions to Unitholders. Debt repayment requirements are primarily funded from refinancing Crombie’s maturing debt obligations. Property acquisition funding requirements are funded through a combination of accessing the debt and equity capital markets and recycling capital from property dispositions. There is a risk that the debt capital markets may not refinance maturing fixed rate and floating rate debt on terms and conditions acceptable to Crombie or at any terms at all. Crombie seeks to mitigate this risk by staggering its debt maturity dates. There is also a risk that the equity capital markets may not be receptive to a REIT unit offering issue from Crombie with financial terms acceptable to Crombie. Access to debt and equity capital markets may also be affected by national and international events, and economic conditions beyond Crombie’s control. Crombie mitigates its exposure to liquidity risk utilizing a disciplined approach to capital management. Access to the $400,000 floating rate revolving credit facility is limited by the amount utilized under the facility and the amount of any outstanding letters of credit, and cannot exceed the borrowing base security provided by Crombie. The maximum principal amount of the unsecured bilateral revolving credit facility was increased from $100,000 to $130,000 in the third quarter of 2020 and the maturity date was extended to September 1, 2021. Refer to section “Available Credit Line Liquidity” of this MD&A for a maturity analysis of our recognized financial liabilities and purchase obligations. Interest Rate Risk Risk Description Interest rate risk is the potential for financial loss arising from increases in interest rates. Risk Management Crombie mitigates this risk by utilizing staggered debt maturities and limiting the use of permanent floating rate debt and, on occasion, utilizing interest rate swap agreements. Crombie does not enter into interest rate swaps on a speculative basis. As at December 31, 2020: • Crombie’s weighted average term to maturity of its fixed rate mortgages is 5.7 years; • Crombie’s weighted average term to maturity of its unsecured notes was 5.1 years; • Crombie has a floating rate revolving credit facility available to a maximum of $400,000, subject to available Borrowing Base, with a balance of $17,712 at December 31, 2020; • Crombie has a floating rate bilateral credit facility available to a maximum of $130,000 with a balance of $35,000 at December 31, 2020; and • Crombie has interest rate swap agreements in place on $112,510 of floating rate debt. A fluctuation in interest rates would have had an impact on Crombie’s operating income related to the use of floating rate debt. The following table looks at the impacts of selected interest rate moves on operating income: Three months ended December 31, 2020 Year ended December 31, 2020 Impact on operating income attributable to Unitholders of interest rate changes on the floating rate revolving credit facility Decrease in rate Increase in rate Decrease in rate Increase in rate Impact of a 0.5% interest rate change Impact of a 1.0% interest rate change $ $ 103 207 $ $ (103) (207) $ $ 648 1,296 $ $ (648) (1,296) Risk Factors Related to the Units CASH DISTRIBUTIONS ARE NOT GUARANTEED There can be no assurance regarding the amount of income to be generated by Crombie’s properties. The ability of Crombie to make cash distributions and the actual amount distributed are entirely dependent on the operations and assets of Crombie and its subsidiaries, and are subject to various factors including financial performance, obligations under applicable credit facilities, the sustainability of income derived from anchor tenants, and capital expenditure requirements. Cash available to Crombie to fund distributions may be limited from time to time because of items such as principal repayments, tenant allowances, leasing commissions, capital expenditures, and redemptions of Units, if any. Crombie may be required to use part of its debt capacity or to reduce distributions in order to accommodate such items. The market value of the Units will deteriorate if Crombie is unable to maintain its distribution in the future, and that deterioration may be significant. In addition, the composition of cash distributions for tax purposes may change over time and may affect the after-tax return for investors. 77 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthCrombie and its advisors underwent an extensive review of Crombie’s organizational structure and operations to support Crombie’s assertion that it meets the REIT technical tests contained in the Act through the 2020 fiscal year. The relevant tests apply throughout the taxation year of Crombie and, as such, the actual status of Crombie for any particular taxation year can only be ascertained at the end of the year. Notwithstanding that Crombie may meet the criteria for a REIT and thus be exempt from the distribution tax, there can be no assurance that the Department of Finance (Canada) or other governmental authority will not undertake initiatives which have an adverse impact on Crombie or its Unitholders. INDIRECT OWNERSHIP OF UNITS BY EMPIRE Empire holds a 41.5% economic interest in Crombie through the ownership of REIT and Class B LP Units. Pursuant to the Exchange Agreement, each Class B LP Unit will be exchangeable at the option of the holder for one Unit of Crombie and will be attached to a Special Voting Unit of Crombie, providing for voting rights in Crombie. Furthermore, pursuant to the Declaration of Trust, Empire is entitled to appoint a certain number of Trustees based on the percentage of Units held by it. Thus, Empire is in a position to exercise a certain influence with respect to the affairs of Crombie. If Empire sells substantial amounts of its Class B LP Units or exchanges such units for Units and sells these Units in the public market, the market price of the Units could fall. The perception among the public that these sales will occur could also produce such effect. OWNERSHIP OF SENIOR UNSECURED NOTES (“NOTES”) There is no public market through which the notes may be sold. Crombie does not intend to list the notes on any securities exchange or include the notes in any automated quotation system. Therefore, an active market for the notes may not develop or be maintained, which would adversely affect the market price and liquidity of the notes. In such case, the holders of the notes may not be able to sell their notes at a particular time or at a favourable price. If a public trading market were to develop, future trading prices of the notes may be volatile and will depend on many factors, including: • the number of holders of notes; • prevailing interest rates; • Crombie’s operating performance and financial condition; • Crombie’s credit rating; • • the interest of securities dealers in making a market for them; and the market for similar securities. Even if an active trading market for the notes does develop, there is no guarantee that it will continue. The notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar notes, Crombie’s performance, and other factors. RESTRICTIONS ON REDEMPTIONS It is anticipated that the redemption of Units will not be the primary mechanism for holders of Units to liquidate their investments. The entitlement of Unitholders to receive cash upon the redemption of their Units is subject to the following limitations: (i) the total amount payable by Crombie in respect of such Units and all other Units tendered for redemption in the same calendar month must not exceed $50 (provided that such limitation may be waived at the discretion of the Trustees); (ii) at the time such Units are tendered for redemption, the outstanding Units must be listed for trading on a stock exchange or traded or quoted on another market which the Trustees consider, in their sole discretion, provides fair market value prices for the Units; and (iii) the trading of Units is not suspended or halted on any stock exchange on which the Units are listed (or, if not listed on a stock exchange, on any market on which the Units are quoted for trading) on the redemption date for more than five trading days during the 10-day trading period commencing immediately after the redemption date. POTENTIAL VOLATILITY OF UNIT PRICES One of the factors that may influence the market price of the Units is the annual yield on the Units. An increase in market interest rates may lead purchasers of Units to demand a higher annual yield, which accordingly could adversely affect the market price of the Units. In addition, the market price of the Units may be affected by changes in general market conditions, fluctuations in the markets for equity securities, and numerous other factors beyond the control of Crombie. TAX-RELATED RISK FACTORS Crombie intends to make distributions not less than the amount necessary to eliminate Crombie’s liability for tax under Part I of the Income Tax Act (Canada). Where the amount of net income and net realized capital gains of Crombie in a taxation year exceeds the cash distributions in the year, such excess net income and net realized capital gains will be distributed to Unitholders and such additional distributions may be in the form of cash and/or additional Units. Unitholders will generally be required to include an amount equal to the fair market value of any additional Units in their taxable income, notwithstanding that they do not directly receive a cash distribution. Certain properties have been acquired by Crombie on a tax deferred basis, whereby the tax cost of these properties is less than their fair market value. Accordingly if one or more of such properties are disposed of, the gain for tax purposes recognized by Crombie will be in excess of that which it would have been if it had acquired the properties at a tax cost equal to their fair market values. Publicly traded income trusts, or specified investment flow-through entities (“SIFTs”), are subject to income taxation at corporate tax rates, subject to an exemption for real estate investment trusts (“REITs”). The exemption for REITs was provided to “recognize the unique history and role of collective real estate investment vehicles,” which are well- established structures throughout the world. A trust that satisfies the criteria of a REIT throughout its taxation year will not be subject to income tax in respect of distributions to its unitholders or be subject to the restrictions on its growth that would apply to SIFTs. While REITs were exempted from the SIFT taxation, a number of technical tests apply to determine which entities would qualify as a REIT. These technical tests did not fully accommodate the business structures used by many Canadian REITs. 78 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020OTHER DISCLOSURES RELATED PARTY TRANSACTIONS As at December 31, 2020, Empire, through its wholly-owned subsidiary ECLD, holds a 41.5% indirect interest in Crombie. Related party transactions primarily include transactions with entities associated with Crombie through Empire’s indirect interest. Related party transactions also include transactions with joint venture entities in which Crombie has a 50% interest, as well as transactions with key management personnel and post-employment benefit plans. Related party transactions are measured at the amount of consideration established and agreed by the related parties. Crombie’s transactions with related parties are as follows: Property revenue Property revenue Head lease income Lease termination income Property operating expenses General and administrative expenses Property management services recovered Other general and administrative expenses Finance costs – operations Interest rate subsidy Finance costs – distributions to Unitholders Three months ended December 31, Year ended December 31, 2020 2019 2020 2019 (a) (b) (c) $ $ $ $ $ $ $ $ 56,889 456 34 (18) 243 (64) 62 (14,603) $ $ $ $ $ $ $ $ 51,032 178 33 (19) 177 (59) 68 (20,302) $ $ $ $ $ $ $ $ 209,780 1,162 136 (58) 594 (258) 256 (58,194) $ $ $ $ $ $ $ $ 207,948 856 521 (60) 602 (240) 279 (62,303) (a) Crombie earned property revenue from Empire (including Sobeys and all other subsidiaries of Empire). (b) Certain executive management individuals and other employees of Crombie provide general management, financial, leasing, administrative, and other administration support services to certain subsidiaries of Empire on a cost sharing basis pursuant to a Management Agreement effective January 1, 2016. (c) Crombie provides property management, leasing services and environmental management to specific properties owned by certain subsidiaries of Empire on a fee for service basis pursuant to a Management Agreement. Revenue generated from the Management Agreement is being recognized as a reduction of general and administrative expenses. Included in the above, during the year ended December 31, 2020, Crombie issued 85,433 (December 31, 2019 – 65,721) Class B LP Units to ECLD under the DRIP. On February 11, 2020, ECLD purchased 2,593,750 Class B LP Units and the attached Special Voting Units at a price of $16.00 per Class B LP Unit for proceeds of $41,425, net of issue costs, on a private placement basis. On May 28, 2020, Crombie purchased a property from a subsidiary of Empire for a total purchase price of $4,535 before transaction costs. On December 15, 2020, Crombie purchased a property from a subsidiary of Empire for a total purchase price of $17,100 before closing and transaction costs. During the year ended December 31, 2020, Crombie invested $40,554 in properties anchored by subsidiaries of Empire, which resulted in amended lease terms. These amounts have been included in tenant incentive additions or income property additions depending on the nature of the work completed. The costs are being amortized over the amended lease terms or the useful life of the projects, as applicable. Crombie has a mortgage payable of $25,526 (December 31, 2019 – $20,401) due to 1600 Davie Limited Partnership. This mortgage relates to the commercial component of the Davie Street development, 100% of which is included in Crombie’s financial statements. Amounts due from related parties include $15,533 (December 31, 2019 – $15,533) in 6% subordinated notes receivable due from Bronte Village Limited Partnership and The Duke Limited Partnership. USE OF ESTIMATES AND JUDGMENTS The preparation of consolidated financial information requires management to make judgments, estimates, and assumptions that affect the application of policies and reported amounts of assets and liabilities, income, and expenses. Significant judgment, estimate, and assumption items include impairment, employee future benefits, investment properties, purchase price allocations, and fair value of financial instruments. These estimates are based on historical experience and management’s best knowledge of current events and actions that Crombie may undertake in the future. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revisions affect only that period, or in the period of the revision and future periods if the revision affects both current and future periods. 79 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthCritical Accounting Estimates and Assumptions INVESTMENT PROPERTY VALUATION FAIR VALUE MEASUREMENT A number of assets and liabilities included in Crombie’s consolidated financial statements require measurement at, and/or disclosure of, fair value. In estimating the fair value of an asset or a liability, Crombie uses market-observable data to the extent it is available. Where market- observable data is not available, Crombie estimates the fair value based on discounted future cash flows using discount rates that reflect current market conditions for instruments with similar terms and risks. INVESTMENT PROPERTY ACQUISITIONS Upon acquisition, Crombie performs an assessment of the investment properties being acquired to determine whether the acquisition is to be accounted for as an asset acquisition or a business combination. A transaction is considered to be a business combination if the acquired property meets the definition of a business under IFRS 3 – “Business Combinations”: being an integrated set of activities and assets that are capable of being managed for the purpose of providing a return to the Unitholders. Crombie performs an assessment of the fair value of the properties’ related tangible and intangible assets and liabilities and allocates the purchase price to the acquired assets and liabilities. Crombie assesses and considers fair value based on cash flow projections that take into account relevant discount and capitalization rates and any other relevant sources of market information available. Estimates of future cash flow are based on factors that include historical operating results, if available, and anticipated trends, local markets and underlying economic conditions. Crombie allocates the purchase price based on the following: • Land – The amount allocated to land is based on an appraisal estimate of its fair value. • Buildings – Buildings are recorded at the estimated fair value of the building and its components and significant parts. • Intangible Assets – Intangible assets are recorded for tenant relationships, based on estimated costs avoided should the respective tenants renew their leases at the end of the initial lease term, adjusted for the estimated probability of renewal. • Fair value of debt – Values ascribed to fair value of debt are determined based on the differential between contractual and market interest rates on long-term liabilities assumed at acquisition. INVESTMENT PROPERTIES Investment properties are properties which are held to earn rental income. Investment properties include land, buildings and intangible assets. Investment properties are carried at cost less accumulated depreciation and are reviewed periodically for impairment. Depreciation of buildings is calculated using the straight-line method with reference to each property’s cost, the estimated useful life of the building (not exceeding 40 years) and its components, significant parts and residual value. Repairs and maintenance improvements are expensed as incurred or, in the case of major items that constitute a capital asset, are capitalized to the building and amortized on a straight-line basis over the expected useful life of the improvement. 80 External, independent valuation companies, having appropriate recognized professional qualifications and recent experience in the location and category of properties being valued, value substantially all of Crombie’s investment property portfolio on a rotating basis over a maximum period of four years. On a periodic basis, Crombie obtains independent appraisals such that approximately 85% of our properties, by value, will be externally appraised over a four year period. The fair values, based on the measurement date, represent the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Internal quarterly valuations are performed using internally generated valuation models prepared by considering the aggregate trailing annual net property income recognized from leasing the property, that is stabilized for any major tenant movement. Crombie has adjusted net property income for expected impacts related to COVID-19 by looking at potential bad debts or other income implications at each property, and applying probability to several potential scenarios and, where appropriate, normalized the COVID-19 impact on net operating income. Biannual yields are obtained from an independent valuation company, which reflects the specific risks inherent in the net property income, to arrive at property valuations. As at December 31, 2020, management’s determination of fair value was updated for current market assumptions, informed by property income, market capitalization rates and recent appraisals provided by independent appraisal professionals. CHANGE IN USEFUL LIFE OF INVESTMENT PROPERTIES The estimated useful lives of significant investment properties are reviewed whenever events or circumstances indicate a change in useful life. Estimated useful lives of significant investment properties are based on management’s best estimate and the actual useful lives may be different. Revisions to the estimated useful lives of investment properties constitute a change in accounting estimate and are accounted for prospectively by amortizing the cumulative changes over the remaining estimated useful life of the related assets. REVENUE RECOGNITION Property revenue includes rents earned from tenants under lease agreements, percentage rent, realty tax and operating cost recoveries, and other incidental income. Certain leases have rental payments that change over their term due to changes in rates. Crombie records the rental revenue from leases on a straight-line basis over the term of the lease. Accordingly, an accrued rent receivable is recorded for the difference between the straight-line rent recorded as property revenue and the rent that is contractually due from the tenants. In addition, tenant incentives are amortized on a straight-line basis over the term of existing leases and the amortization is shown as a reduction in property revenue. Percentage rents are recognized when tenants are obligated to pay such rent under the terms of the related lease agreements. Realty tax and operating cost recoveries, and other incidental income, are recognized on an accrual basis. LEASE MODIFICATIONS From time to time, Crombie may agree with tenants to modify the terms of lease agreements, including changes to the consideration under the lease. When the changes result in a reduction in amounts receivable relating to past lease periods, Crombie applies IFRS 9 in determining whether to partially or fully derecognize those receivables. Other changes to the terms and conditions of the lease are treated as lease modifications in accordance with IFRS 16, and the modified MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020lease is accounted for as a new lease from the effective date of the modification, with any prepaid or accrued lease payments relating to the original lease included as part of the lease payments for the new lease. EXPECTED CREDIT LOSS Crombie assesses, on a tenant-by-tenant basis, losses expected with its rent receivables. In determining the provision for doubtful accounts, Crombie takes into account the payment history and future expectations of likely default events (tenants asking for rental concessions/ abatements, applications for rental relief through government programs such as CECRA and CERS, or stating they will not be making rental payments on the due date) based on actual or expected insolvency filings or company voluntary arrangements and likely deferrals of payments due, and potential abatements to be granted by the landlord through tenant negotiations or under CECRA. Crombie’s assessment is subjective due to the forward-looking nature of the situation. As a result, the provision for doubtful accounts is subject to a degree of uncertainty and is made based on assumptions which may not prove to be accurate with the unprecedented uncertainty caused by COVID-19. Critical Judgments Judgments made by management in the preparation of the consolidated financial statements that have significant effect and estimates with a significant risk of material adjustment to the carrying amount of assets and liabilities are as follows: IMPAIRMENT OF LONG-LIVED TANGIBLE AND DEFINITE LIFE INTANGIBLE ASSETS Long-lived tangible and definite life intangible assets are reviewed for impairment at each reporting period for events or changes in circumstances that indicate that the carrying value of the assets may not be recoverable. If such an indication exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment loss (if any). The recoverable amount is the higher of fair value less costs to sell and value in use. Where the asset does not generate cash flows that are independent from other assets, Crombie estimates the recoverable amount of the cash generating unit(s) to which the asset belongs. When the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash generating unit) is reduced to the recoverable amount. An impairment loss is recognized as an expense immediately in operating income. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate, but is limited to the carrying amount that would have been determined if no impairment loss had been recognized in prior periods. A reversal of impairment loss is recognized immediately in operating income. DEFINED BENEFIT LIABILITY Management estimates the defined benefit liability annually with the assistance of independent actuaries; however, the actual outcome may vary due to estimation uncertainties. The estimate of Crombie’s defined benefit liability is based on standard rates of inflation, medical cost trends and mortality. It also takes into account Crombie’s specific anticipation of future salary increases. Discount factors are determined each reporting period by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability. Estimation uncertainties exist particularly with regard to medical cost trends, which may vary significantly in future appraisals of Crombie’s defined benefit obligations. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of marketable financial instruments is the estimated amount for which an instrument could be exchanged, or a liability settled, by Crombie and a knowledgeable, willing party in an arm’s length transaction. The fair value of other financial instruments is based upon discounted future cash flows using discount rates that reflect current market conditions for instruments with similar terms and risks. CONTROLS AND PROCEDURES Crombie maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by Crombie in its annual filings, interim filings, or other reports filed or submitted by it under securities legislation is recorded, processed, summarized, and reported within the time periods specified in the securities legislation. Controls and procedures are designed to ensure that information required to be disclosed by Crombie is accumulated and communicated to Crombie’s management, including its President and Chief Executive Officer (“CEO”) and Executive Vice President, Chief Financial Officer and Secretary (“CFO”), as appropriate, to allow timely decisions regarding disclosure. Our CEO and CFO have evaluated the design and effectiveness of our disclosure controls and procedures as of December 31, 2020. They have concluded that our current disclosure controls and procedures are effective. In addition, our CEO and CFO have designed, or caused to be designed under their supervision, internal controls over financial reporting (“ICFR”) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes as defined in National Instrument 52-109. The control framework management used to design and assess the effectiveness of ICFR is Internal Control-Integrated Framework (2013) issued by The Committee of Sponsoring Organizations of the Treadway Commission (COSO). Further, our CEO and CFO have evaluated, or caused to be evaluated under their supervision, the effectiveness of the design and operation of ICFR as at December 31, 2020, and have concluded that our current ICFR was effective based on that evaluation. There have been no material changes to Crombie’s internal controls during the year. 81 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthQuarterly Information Dec. 31, 2020 Sep.30, 2020 Jun. 30, 2020 Mar. 31, 2020 Dec. 31, 2019 Sep. 30, 2019 Jun. 30, 2019 Mar. 31, 2019 Three months ended Property revenue $ 97,060 $ 92,920 $ 96,501 $ 102,252 $ 96,823 $ 97,346 $ 99,332 $ 105,240 Property operating expenses Net property income Operating income Finance costs – distributions to Unitholders Finance income (costs) – change in fair value of financial instruments Increase (decrease) in net assets attributable to Unitholders Operating income per unit – Basic Distributions Distributions Per unit AFFO* Basic Per unit – Basic Payout ratio1 FFO* Basic Per unit – Basic Payout ratio2 Operating information 29,245 67,815 17,157 27,503 65,417 19,734 37,887 58,614 9,393 35,237 67,015 21,324 29,852 66,971 44,149 27,205 70,141 30,049 28,222 71,110 39,449 32,366 72,874 48,228 (35,211) (35,202) (35,187) (34,702) (48,936) (33,753) (33,744) (33,736) (725) (187) (212) 1,929 (70) (264) (332) (671) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (18,779) 0.11 35,211 0.22 35,679 0.23 98.7% 42,305 0.27 83.2% $ $ $ $ $ $ $ $ (15,655) 0.12 35,202 0.22 35,494 0.22 99.2% 43,327 0.27 81.2% $ $ $ $ $ $ $ $ (26,006) 0.06 35,187 0.22 28,107 0.18 125.2% 34,557 0.22 101.8% $ $ $ $ $ $ $ $ (11,449) 0.14 34,702 0.22 39,683 0.26 87.4% 45,661 0.29 76.0% $ $ $ $ $ $ $ $ (4,857) 0.29 48,936 0.22 36,006 0.24 93.8% 42,132 0.28 80.1% $ $ $ $ $ $ $ $ (3,968) 0.20 33,753 0.22 36,417 0.24 92.7% 43,380 0.29 77.8% $ $ $ $ $ $ $ $ 5,373 0.26 33,744 0.22 37,549 0.25 89.9% 44,567 0.29 75.7% 13,821 0.32 33,736 0.22 38,660 0.26 87.3% 45,460 0.30 74.2% Number of investment properties 284 286 286 285 285 284 284 285 18,000,000 17,684,000 17,614,000 17,583,000 17,558,000 17,732,000 17,746,000 18,604,000 94.0% 96.4% 94.7% 95.3% 95.1% 95.6% 95.5% 96.2% 95.4% 96.1% 95.6% 96.1% 95.2% 95.9% 95.0% 95.7% Gross leasable area Economic occupancy Committed occupancy Debt metrics Unencumbered investment properties3 Available liquidity $ 471,708 $ 370,885 $ 406,303 $ 449,898 $ 449,016 $ 1,366,258 $ 1,460,152 $ 1,461,970 $ 1,479,211 $ 1,223,452 $ $ 960,275 450,967 $ $ 953,738 $ 1,012,707 413,087 $ 346,347 Debt to gross fair value* Weighted average interest rate4 Debt to trailing 12 months EBITDA* Interest coverage ratio* 49.4% 3.9% 9.73x 2.77x 49.8% 4.1% 9.34x 3.03x 49.2% 4.1% 9.12x 2.64x 50.0% 4.1% 8.86x 3.18x 48.9% 4.2% 8.52x 2.99x 48.9% 4.2% 8.35x 2.90x 49.1% 4.2% 8.21x 3.00x 50.3% 4.2% 8.56x 2.93x (1) Excludes special distribution December 31, 2019. Payout ratio including total distributions is 135.9%. (2) Excludes special distribution December 31, 2019. Payout ratio including total distributions is 116.1%. (3) Represents fair value of unencumbered properties. (4) Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt. 82 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020Variations in quarterly results over the past eight quarters have been influenced by the following specific transactions and ongoing events: • Property acquisitions and dispositions (gross proceeds excluding closing and transaction costs) for each of the above three month periods were: December 31, 2020 – acquisition of two retail properties and one development property for a total purchase price of $31,400 and disposition of five retail properties for proceeds of $37,010; September 30, 2020 – acquisition of one development property for a total purchase price of $4,575; June 30, 2020 – acquisition of one retail property for a total purchase price of $4,535; March 31, 2020 – acquisition of a parcel of land adjacent to an existing retail property for a total purchase price of $280 and disposition of a parcel of land adjacent to an existing retail property for proceeds of $1,000; December 31, 2019 – acquisition of one retail property, additions to one existing retail property and one existing retail-related industrial property for a total purchase price of $114,933, and disposition of an 89% interest in 15 retail properties for proceeds of $193,333; • September 30, 2019 – acquisition of a 50% interest in one retail property for a total purchase price of $9,500, disposition of an 89% interest in one retail property for proceeds of $9,750, disposition of 100% of one retail property for proceeds of $12,255, disposition of air rights to a joint venture for proceeds of $27,379, and disposition of a freestanding building adjacent to a retail property for proceeds of $175; June 30, 2019 – disposition of one retail property for proceeds of $21,500, disposition of residential lands adjacent to a development property for proceeds of $3,275 and disposition of an 89% interest in 26 retail properties for proceeds of $161,589; and March 31, 2019 – acquisition of one development property for a total purchase price of $32,000, disposition of three retail properties for proceeds of $64,780, disposition of a parcel of land adjacent to a retail property for proceeds of $821, and disposition of a 50% interest in seven retail properties for proceeds of $41,614. • Property revenue and property operating expenses – Crombie’s business is subject to seasonal fluctuations. Property operating expenses during winter months include particular expenses such as snow removal, which is a recoverable expense, thus increasing property revenue during these same periods. Property operating expenses during the summer and fall periods include particular expenses such as paving and roof repairs. • Per unit amounts for FFO and AFFO are influenced by operating results as detailed above and by the timing of the issuance of REIT Units and Class B LP Units. 83 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth NON-GAAP FINANCIAL MEASURES There are financial measures included in this MD&A that do not have a standardized meaning under IFRS as prescribed by the IASB. Management includes these measures as they represent key performance indicators to management, and it believes certain investors use these measures as a means of assessing relative financial performance. These measures, as computed by Crombie, Non-GAAP Measure Description and Purpose may differ from similar computations as reported by other entities and, accordingly, may not be comparable to other such entities. These measures are defined below and are cross referenced, as applicable, to a reconciliation elsewhere in this MD&A to the most comparable IFRS measure. Reconciliation “Net Property Income” starting on page 48 “Net Property Income” starting on page 48 “Funds from Operations (FFO)*” starting on page 50 Property NOI on a cash basis • Property NOI on a cash basis, which excludes non-cash straight-line rent recognition and non-cash tenant incentive amortization. Same-asset property cash NOI Funds from Operations (“FFO”) • Management believes that Property NOI on a cash basis is an important measure of operating performance as it reflects the cash generated by the properties period-over-period. • Same-asset properties are properties owned and operated by Crombie throughout the current and comparative reporting periods, excluding any property that was designated for redevelopment during either the current or comparative period. Same-asset property cash NOI includes Crombie’s proportionate ownership of jointly operated properties. • Management believes this is a useful measure in understanding period-over- period changes in property cash NOI before considering the changes in NOI that can be attributed to the certain transactions such as acquisitions and dispositions. • The number of same-asset properties was 270 for the year ended December 31, 2020. • Crombie follows the recommendations of the Real Property Association of Canada (“REALPAC”)’s February 2019 white paper in calculating FFO, and defines FFO as increase (decrease) in net assets attributable to Unitholders (computed in accordance with IFRS), adjusted for the following applicable amounts: - Gain or loss on disposal of investment properties and related income tax; - Impairment charges and recoveries; - Depreciation and amortization expense of investment properties, including amortization of tenant incentives charged against property revenue; - Adjustments for equity accounted entities; - Operational expenses from right of use assets; - Incremental internal leasing expenses; - Finance costs – distributions on Crombie’s REIT and Class B LP Units classified as financial liabilities; and - Change in fair value of financial instruments. • REALPAC provides for other adjustments in determining FFO which are currently not applicable to Crombie, therefore not included in the above list. Crombie’s expenditures on tenant incentives are capital in nature and Crombie considers these costs comparable to other capital costs incurred to earn property revenue. As a result, where depreciation and amortization of other capital costs is added back in the calculation of FFO as recommended by REALPAC, Crombie also adds back the amortization of tenant incentives. 84 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020Non-GAAP Measure Description and Purpose Reconciliation Adjusted Funds from Operations (“AFFO”) • Crombie considers AFFO to be a useful measure in evaluating the recurring economic performance of its operating results which will be used to support future distribution payments. “Adjusted Funds from Operations (AFFO)*” starting on page 51 • Crombie follows the recommendations of REALPAC’s February 2019 white paper in calculating AFFO. • AFFO reflects earnings after the adjustments in arriving at FFO (excluding internal leasing costs) and the provision for non-cash straight-line rent included in revenue, amortization of effective swap agreements, maintenance capital expenditures, maintenance tenant incentives and leasing costs, and any settlement of effective interest rate swap agreements. Debt to gross fair value • Used to evaluate Crombie’s flexibility to incur additional financial leverage. “Debt Metrics” starting on page 63 Earnings before interest, taxes, depreciation and amortization (“EBITDA”) • Represents earnings before interest, taxes, depreciation, and amortization “Debt Metrics” starting on page 63 adjusted for certain items such as amortization of tenant incentives, impairment of investment properties, and gain (loss) on disposal of investment properties. • EBITDA is used as an input in several of our debt metrics, providing information with respect to certain financial ratios that we use in measuring our debt profile and assessing our ability to satisfy obligations, including servicing our debt. • Crombie believes EBITDA is an indicative measure of its ability to service debt requirements, fund capital projects and acquire properties. Debt to EBITDA • Used to assess Crombie’s financial leverage, to measure its ability to meet “Debt Metrics” starting on page 63 financial obligations and measure its balance sheet strength. Interest service coverage • These ratios are useful in determining Crombie’s ability to service the interest “Debt Metrics” starting on page 63 Debt service coverage requirements of its outstanding debt. Maintenance Capital Expenditures, Maintenance Tenant Incentives and Leasing Costs (“Maintenance Expenditures”) Maintenance expenditures represent costs incurred in sustaining and maintaining existing space and exclude expenditures that are revenue enhancing. Crombie considers revenue enhancing expenditures to be costs that expand the GLA of a property, increase the net property income by a minimum threshold, or otherwise enhance the property’s overall value. Crombie’s policy is to charge AFFO* with maintenance expenditures based on a normalized rate per square foot applied to the weighted average GLA, as these expenditures are not generally incurred on a consistent basis during the year, or from year to year. Crombie also discloses actual maintenance expenditures for comparative purposes. The rate per square foot is a proxy for actual historic costs, anticipated future costs, and any significant changes in the nature and age of the properties in the portfolio as it evolves over time. For 2020, Crombie has maintained the normalized rate of $0.90 per square foot of weighted average GLA, based on the actual spend for the previous three years and estimated spend for 2020. Additionally, Crombie combines maintenance capital expenditures with maintenance tenant incentive (“TI”) and deferred leasing costs in arriving at the normalized per square foot charge to AFFO, based on the fact that in years where TI and leasing expenditures are reduced, spending on maintenance capital expenditures may be accelerated and vice versa. 85 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthMaintenance Expenditures – Actual Year ended Three months ended Year ended Three months ended Dec. 31, 2020 Dec. 31, 2020 Sep. 30, 2020 Jun. 30, 2020 Mar. 31, 2020 Dec. 31, 2019 Dec. 31, 2019 Sep. 30, 2019 Jun. 30, 2019 Mar. 31, 2019 $ 109,668 $ 49,797 $ 30,913 $ 14,819 $ 14,139 $ 94,769 $ 37,799 $ 19,149 $ 20,602 $ 17,219 (103,982) (47,692) (29,887) (13,890) (12,513) (86,807) (34,322) (17,195) (19,951) (15,339) 5,686 2,105 1,026 929 1,626 7,962 3,477 1,954 651 1,880 64,971 12,716 3,682 23,944 24,629 61,035 21,238 24,853 11,336 3,608 (51,464) (9,557) (1,585) (18,947) (21,375) (53,564) (17,879) (23,992) (9,612) (2,081) 13,507 3,159 2,097 4,997 3,254 7,471 3,359 861 1,724 1,527 $ $ 19,193 15,869 $ $ 5,264 3,986 $ $ 3,123 3,963 $ $ 5,926 3,967 $ $ 4,880 3,953 $ $ 15,433 16,113 $ $ 6,836 3,877 $ $ 2,815 3,982 $ $ 2,375 4,045 $ $ 3,407 4,209 Total additions to investment properties Less: revenue enhancing expenditures Maintenance capital expenditures Total additions to TI and deferred leasing costs Less: revenue enhancing expenditures Maintenance TI and deferred leasing costs Total maintenance expenditures – actual Reserve amount charged against AFFO* Obligations for expenditures for TI’s occur when renewing existing tenant leases or for new tenants occupying a space. Typically, leasing costs for existing tenants are lower on a per square foot basis than for new tenants. However, new tenants may provide more overall cash flow to Crombie through higher rents or improved traffic to a property. The timing of such expenditures fluctuates depending on the satisfaction of contractual terms contained in the leases. Maintenance TI and deferred leasing costs are the result of both lease renewals and new leases and are reflective of the leasing activity during 2020 and 2019. Revenue enhancing expenditures are capitalized and depreciated or charged against revenue over their useful lives, but not deducted when calculating AFFO*. Revenue enhancing expenditures during the year ended December 31, 2020 consisted primarily of development work, modernization investments, energy upgrades, and land use intensification. Crombie uses a normalized rate of $0.90 per square foot of weighted average GLA for the reserve amount charged against AFFO*. 86 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020FORWARD-LOOKING INFORMATION This MD&A contains forward-looking statements about expected future events and the financial and operating performance of Crombie. These statements, and the related estimates and assumptions used by management, can be found in several sections of the MD&A, including, but not limited to, “COVID-19 Impact – Operations”, “COVID-19 Impact – Financial”, “Development”, “Capital Management”, and “Other Disclosures.” Forward-looking statements include, but are not limited to, statements concerning management’s beliefs, plans, estimates, intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical fact. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “estimate”, “anticipate”, “believe”, “expect”, “intend”, or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. All forward-looking information in this MD&A is qualified by the cautionary statements under “Risk Factors Related to the Business of Crombie” above, as well as the additional statements in the “Risks” section of Crombie’s Annual Information Form available at www.sedar.com. Forward-looking statements in this MD&A and principle related risks include statements regarding: (i) anticipated annual spend with Empire for acquisitions and modernizations, which are based on historical experience, and may be impacted by the timing of Empire’s development activities and the availability of Empire properties meeting Crombie’s acquisition criteria, Empire’s capital needs, and Empire business developments impacting the need for store modernizations; (ii) AFFO accretion and NAV growth from strategic acquisitions, which may be affected by future occupancy and rental performance, and/or redevelopment activity of acquired properties; (x) (iii) disposition of properties and the anticipated reinvestment of net proceeds, which could be impacted by the availability of purchasers, the availability of accretive property acquisitions, the timing of property development activities or other accretive uses for net proceeds and real estate market conditions; (iv) (v) fair value of investment properties, which is based on assumptions regarding the short and potential long-term impacts of COVID-19, cash flow projections, and estimates of future cash flows and anticipated trends and economic conditions; overall indebtedness levels and terms and expectations relating to refinancing, which could be impacted by the level of acquisition and disposition activity that Crombie is able to achieve, levels of indebtedness, Crombie’s ability to maintain and strengthen its investment grade credit rating, future financing opportunities, future interest rates, creditworthiness of major tenants and joint arrangement partners, and market conditions; (vi) statements under the heading “Development” including the locations identified, timing, cost, development size and nature, and anticipated impact on portfolio quality and diversification, net asset value, cash flow growth, unitholder value, or other financial measures, all of which may be impacted by real estate market cycles, future capitalization rates, the availability of financing opportunities and labour, actual development costs, and general economic conditions and factors described under the “Development” section and which assumes obtaining required municipal zoning and development approvals and successful agreements with existing tenants, and where applicable, successful execution of development activities undertaken by related parties not under the direct control of Crombie; (vii) estimated GLA, estimated completion dates, estimated total costs, and estimated annual NOI cost for Active Major Developments, which are subject to changes in site plans, cost tendering processes, and continuing tenant negotiations, as well as access to job sites, supplies and labour availability, ability to attract tenants, tenant mix, building sizes, and availability and cost of construction financing; (viii) asset growth and reinvesting to develop or otherwise make improvements to existing properties, which could be impacted by the availability of labour, capital resource availability and allocation decisions, as well as actual development costs; (ix) generating improved rental income and occupancy levels, including anticipated replacement of expiring tenancies, which could be impacted by changes in demand for Crombie’s properties, tenant bankruptcies, the effects of general economic conditions, e-commerce, and supply of competitive locations in proximity to Crombie locations; estimated payments on derivative and non-derivative financial liabilities, which could be impacted by interest rate subsidy payments, interest rates on floating rate debt, and fluctuations in the settlement value and settlement timing of any derivative financial liabilities; (xi) pending acquisitions or dispositions, which remain subject to satisfaction of customary closing conditions; (xii) investment in joint ventures and the income contributed by those investments, which could be impacted by the risk and uncertainty from dependence on partners that are not under Crombie’s control, including risk of default by a partner on financing obligations or non-performance of a partner’s obligations on a project, which may include development, construction, management or leasing; (xiii) tax exempt status, which can be impacted by regulatory changes enacted by governmental authorities; (xiv) anticipated distributions and payout ratios, which could be impacted by results of operations and capital resource allocation decisions; and (xv) effect that any contingencies or guarantees would have on Crombie’s financial statements which could be impacted by their eventual outcome. 87 MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable GrowthThese forward-looking statements are presented for the purpose of assisting Crombie’s Unitholders and financial analysts in understanding Crombie’s operating environment and may or may not be appropriate for other purposes. These forward-looking statements are not guarantees of future events or performance and, by their nature, are based on Crombie’s current estimates and assumptions. Crombie can give no assurance that actual results will be consistent with these forward-looking statements. A number of factors, including those discussed under “Risk Management” could cause actual results, performance, achievements, prospects, or opportunities to differ materially from the results discussed or implied in the forward-looking statements. These factors should be considered carefully, and a reader should not place undue reliance on the forward-looking statements. These forward-looking statements are made as at the date of the MD&A and Crombie assumes no obligation to update or revise them to reflect new or current events or circumstances unless otherwise required by applicable securities legislation. 88 MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020MANAGEMENT’S STATEMENT OF RESPONSIBILITY MANAGEMENT’S STATEMENT OF RESPONSIBILITY FOR FINANCIAL REPORTING The management of Crombie Real Estate Investment Trust (“Crombie”) is responsible for the preparation and fair presentation of the accompanying annual consolidated financial statements and Management’s Discussion and Analysis (“MD&A”). The annual consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The annual consolidated financial statements and information in the MD&A include amounts based on best estimates and judgments by management of the expected effects of current events and transactions. In preparing this financial information, we make determinations about the relevancy of information to be included, and estimates and assumptions that affect the reported information. The MD&A also includes information regarding the impact of current transactions and events, sources of liquidity and capital resources, operating trends, risks and uncertainties. Actual results in the future may vary materially from our present assessment of this information as future events and circumstances may not occur as expected. In meeting our responsibility for the fair presentation of the annual consolidated financial statements and MD&A and for the accounting systems from which they are derived, management has established internal controls designed to ensure that our financial records are reliable for preparing consolidated financial statements and other financial information, transactions are properly authorized and recorded, and assets are safeguarded against unauthorized use or disposition. As at December 31, 2020, our Chief Executive Officer and Chief Financial Officer evaluated, or caused an evaluation under their direct supervision, the design and operation of our internal controls over financial reporting and, based on that assessment, determined that our internal controls over financial reporting were appropriately designed and operating effectively. The Board of Trustees oversees management’s responsibility for financial reporting through an Audit Committee. This committee reviews Crombie’s annual consolidated financial statements and MD&A with both management and the independent auditor before such statements are approved by the Board of Trustees. The Audit Committee also recommends the appointment of independent external auditors to the Unitholders. The Audit Committee meets regularly with senior management and the independent auditor to discuss internal controls, audit activities and financial reporting results. The independent auditor has full and free access to, and meets regularly with, the Audit Committee to discuss their audits and related matters. DONALD E. CLOW, FCPA, FCA President and Chief Executive Officer February 24, 2021 CLINTON D. KEAY, CPA, CA Chief Financial Officer and Secretary February 24, 2021 Proven Stability and Sustainable Growth 89 INDEPENDENT AUDITOR’S REPORT INDEPENDENT AUDITOR’S REPORT TO THE UNITHOLDERS OF CROMBIE REAL ESTATE INVESTMENT TRUST OUR OPINION BASIS FOR OPINION In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Crombie Real Estate Investment Trust and its subsidiaries (together, the Trust) as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS). We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Trust in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements. What we have audited The Trust’s consolidated financial statements comprise: • • • • • the consolidated balance sheets as at December 31, 2020 and 2019; the consolidated statements of comprehensive income (loss) for the years then ended; the consolidated statements of changes in net assets attributable to unitholders for the years then ended; the consolidated statements of cash flows for the years then ended; and the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information. 90 CROMBIE REIT | Annual Report 2020 INDEPENDENT AUDITOR’S REPORT KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter Valuation of investment properties Refer to note 2 – Summary of significant accounting policies and note 3 – Investment properties to the consolidated financial statements The REIT’s total investment properties as at December 31, 2020 were $3.65 billion. The investment properties are carried at cost less accumulated depreciation, with their fair value disclosed at each reporting period. The REIT disclosed a total fair value of $4.7 billion on December 31, 2020. In determining the fair value of investment properties to be disclosed, management used an internally generated capitalized net operating income method (the method) by applying capitalization rates to trailing stabilized net operating income (NOI) of each investment property. To determine the capitalization rate, management receives bi-annual capitalization rate reports from external, knowledgeable property valuators that provide a range of rates for various geographic regions and for various types and qualities of properties within each region. Management selected the appropriate capitalization rate for each property from the range provided. Management has adjusted NOI for expected impacts related to COVID-19, by looking at potential bad debts or other lost income at each property and applying probability to several potential scenarios. The method requires certain key assumptions and estimates, which include the capitalization rates for each specific property and stabilized NOI. Significant judgments were made by management in respect of these key assumptions and estimates. We considered this a key audit matter due to the significant judgments made by management when determining the fair values of the investment properties for disclosure purposes and the high degree of complexity in assessing audit evidence related to the key assumptions and estimates made by management. In addition, the audit effort involved the use of professionals with specialized skill and knowledge in the field of real estate valuations. How our audit addressed the key audit matter Our approach to addressing the matter included the following procedures, among others: For a sample of investment properties, tested how management determined the fair value, which included the following: • Evaluated the appropriateness of the method. • Tested the underlying data used in the method. • Evaluated the reasonableness of capitalization rates by comparing them to external market and industry data. • Professionals with specialized skill and knowledge in the field of real estate valuations further assisted us in assessing the capitalization rates by (i) comparing them to externally available market data and (ii) evaluating whether the allocation of capitalization rates to investment properties is reasonable based on location, current leases in place and the type of investment property. • Agreed NOI used in the method to accounting records and evaluated as applicable whether stabilization is reasonable considering (i) the current and past leasing activity of the investment properties, (ii) the comparability with external market and industry data, (iii) potential bad debts or lost income resulting from COVID-19 and (iv) whether these assumptions were aligned with evidence obtained in other areas of the audit. 91 Proven Stability and Sustainable GrowthINDEPENDENT AUDITOR’S REPORT Key audit matter How our audit addressed the key audit matter Impairment of certain investment properties Refer to note 2 – Summary of significant accounting policies and note 3 – Investment properties to the consolidated financial statements Investment properties have a total carrying value of $3.65 billion at December 31, 2020. Investment properties are reviewed for impairment when events or changes in circumstances indicate that the carrying value of the investment properties may not be recoverable. When such an indication exists, the recoverable amount of the investment property is estimated in order to determine the extent of impairment loss (if any). During the year, management identified circumstances indicating that the carrying value for certain investment properties may not be recoverable. As a result, management performed an impairment test and determined the recoverable amounts of the six properties using one of the following methods: the capitalized net operating income method, the discounted cash flow method or obtaining external independent appraisals for the properties. In applying the capitalized net operating income method, capitalization rates are applied to trailing stabilized NOI. In applying the discounted cash flow method, discount rates are applied to the forecasted cash flows reflecting the initial terms of the lease or leases for that specific property and assumptions as to renewal and new leasing activity. The Trust adjusted NOI for expected impacts related to COVID-19, by looking at potential bad debts or other lost income at each property and applying probability to several potential scenarios. For the year ended December 31, 2020, management recognized an impairment loss related to the six investment properties of $6.6 million. The key assumptions and estimates used in the methods were capitalization rates, discount rates, lease renewals, leasing activity and stabilized NOI. Significant judgments were made by management in respect of these key assumptions and estimates. We considered this a key audit matter due to the subjectivity and complexity in applying audit procedures to test the valuation methods used by management and the key assumptions and estimates used in those methods, which involved significant judgment from management. In addition, professionals with specialized skill and knowledge in the field of real estate valuations assisted us in performing our procedures. Our approach to addressing the matter included the following procedures, among others: For the six properties where management identified circumstances indicating that the carrying value may not be recoverable, tested how management determined the recoverable amount of the investment properties, which included the following: • Evaluated the appropriateness of the methods used by management. • Tested the underlying data used in the methods. Where the capitalized net operating income method was used: • Agreed NOI figures used in the methods to the accounting records and evaluated whether stabilization was reasonable considering (i) the current and past leasing activity of the investment properties, (ii) the comparability with external market and industry data,(iii) potential bad debts or lost income resulting from COVID-19 and (iv) whether these assumptions were aligned with evidence obtained in other areas of the audit. • Evaluated the reasonableness of capitalization rates by comparing them to external market and industry data. • Professionals with specialized skill and knowledge in the field of real estate valuations further assisted us in assessing the capitalization rates by (i) comparing them to externally available market data and (ii) evaluating whether the allocation of capitalization rates to investment properties is reasonable based on location, current leases in place and the type of investment property. Where the discounted cash flow method was used: • Evaluated the reasonableness of assumptions such as lease renewals and leasing activities by comparing them to current and past leasing activity of the investment properties. • Evaluated the reasonableness of discount rates by comparing them to external market and industry data. • Professionals with specialized skill and knowledge in the field of real estate valuations further assisted us in assessing the reasonability of the discount and capitalization rate used. 92 CROMBIE REIT | Annual Report 2020INDEPENDENT AUDITOR’S REPORT OTHER INFORMATION Management is responsible for the other information. The other information comprises the Management’s Discussion and Analysis. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Trust’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Trust or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Trust’s financial reporting process. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Trust’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Trust to cease to continue as a going concern. Proven Stability and Sustainable Growth 93 INDEPENDENT AUDITOR’S REPORT • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Trust to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor’s report is Donald M. Flinn. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. CHARTERED PROFESSIONAL ACCOUNTANTS Halifax, Nova Scotia February 24, 2021 94 CROMBIE REIT | Annual Report 2020 CONSOLIDATED BALANCE SHEETS CONSOLIDATED BALANCE SHEETS (in thousands of CAD dollars) Assets Non-current assets Investment properties Investment in joint ventures Other assets Current assets Cash and cash equivalents Other assets Investment properties held for sale Total Assets Liabilities Non-current liabilities Fixed rate mortgages Credit facilities Senior unsecured notes Employee future benefits obligation Trade and other payables Lease liabilities Current liabilities Fixed rate mortgages Credit facilities Senior unsecured notes Employee future benefits obligation Trade and other payables Lease liabilities Total liabilities excluding net assets attributable to Unitholders Net assets attributable to Unitholders Net assets attributable to Unitholders represented by: Crombie REIT Unitholders Special Voting Units and Class B Limited Partnership Unitholders Commitments, contingencies and guarantees Subsequent events See accompanying notes to the consolidated financial statements. Approved on behalf of the Board of Trustees signed (Michael Knowlton) MICHAEL KNOWLTON Chair Note December 31, 2020 December 31, 2019 $ 3,583,939 $ 51,043 307,724 3,942,706 63,293 69,540 29,899 162,732 4,105,438 1,139,798 27,256 971,398 8,378 15,975 29,242 2,192,047 127,246 35,000 150,000 279 121,888 672 435,085 2,627,132 1,478,306 881,511 596,795 1,478,306 $ $ $ $ $ $ 3 4 5 7 5 6 7 7 8 9 10 20 7 7 8 9 10 20 21 22 signed (Paul Beesley) PAUL BEESLEY Audit Committee Chair 3,557,572 45,123 286,947 3,889,642 — 30,625 — 30,625 3,920,267 1,045,015 54,308 922,479 8,122 14,613 28,675 2,073,212 257,495 — — 289 133,484 744 392,012 2,465,224 1,455,043 870,792 584,251 1,455,043 95 Proven Stability and Sustainable GrowthCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands of CAD dollars) Note December 31, 2020 December 31, 2019 Year ended Property revenue Property operating expenses Net property income Gain on disposal of investment properties Impairment of investment properties Depreciation and amortization General and administrative expenses Finance costs – operations Income (loss) from equity accounted investments Operating income before taxes Taxes – current Operating income attributable to Unitholders Finance costs – other Distributions to Unitholders Change in fair value of financial instruments (Decrease) increase in net assets attributable to Unitholders Other comprehensive income (loss) Items that will be subsequently reclassified to (decrease) increase in net assets attributable to Unitholders: Costs incurred on derivatives designated as cash flow hedges transferred to finance costs – operations Net change in derivatives designated as cash flow hedges Items that will not be subsequently reclassified to Increase (decrease) in net assets attributable to Unitholders: Unamortized actuarial gains in employee future benefits obligation Other comprehensive (loss) income Comprehensive (loss) income See accompanying notes to the consolidated financial statements. 11 $ 388,733 $ 3 3 3,5 13 14 4 13 129,872 258,861 3,335 (6,600) (75,567) (20,534) (91,808) (72) 67,615 (7) 67,608 (140,302) 805 (139,497) (71,889) 510 (6,210) (61) (5,761) $ (77,650) $ 398,741 117,645 281,096 81,803 (6,000) (74,313) (23,721) (97,316) 334 161,883 (8) 161,875 (150,169) (1,337) (151,506) 10,369 2,136 (1,893) 1,219 1,462 11,831 96 CROMBIE REIT | Annual Report 2020CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS REIT Units, Special Voting Units and Class B LP Units Net Liabilities Attributable to Unitholders Accumulated Other Comprehensive Income (Loss) Attributable to Total REIT Units Class B LP Units (in thousands of CAD dollars) (Note 15) Balance, January 1, 2020 $ 1,759,324 $ (304,412) $ 131 $ 1,455,043 $ 870,792 $ 584,251 Adjustments related to EUPP Comprehensive income (loss) Units issued under Distribution Reinvestment Plan (“DRIP”) Units issued under unit based compensation plan Unit issue proceeds, net of costs 39 — 2,856 745 97,273 — (71,889) — (5,761) 39 39 — (77,650) (47,584) (30,066) — — — — — — 2,856 745 97,273 1,671 1,185 745 55,848 — 41,425 Balance, December 31, 2020 $ 1,860,237 $ (376,301) $ (5,630) $ 1,478,306 $ 881,511 $ 596,795 REIT Units, Special Voting Units and Class B LP Units Net Assets (Liabilities) Attributable to Unitholders Accumulated Other Comprehensive Income (Loss) Attributable to Total REIT Units Class B LP Units (Note 15) Balance, January 1, 2019 $ 1,756,458 $ (312,287) $ (1,331) $ 1,442,840 $ 864,779 $ 578,061 Adjustments related to adoption of IFRS 16 Adjustments related to EUPP Comprehensive income (loss) Units issued under DRIP Units issued under unit based compensation plan — 422 — 2,330 114 (2,505) 11 10,369 — — — — 1,462 — — (2,505) 433 11,831 2,330 114 (1,501) (1,004) 433 5,611 1,356 114 — 6,220 974 — Balance, December 31, 2019 $ 1,759,324 $ (304,412) $ 131 $ 1,455,043 $ 870,792 $ 584,251 See accompanying notes to the consolidated financial statements. 97 Proven Stability and Sustainable GrowthCONSOLIDATED STATEMENTS OF CASH FLOWS CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of CAD dollars) Cash flows provided by (used in) Operating Activities Note December 31, 2020 December 31, 2019 Year ended (Decrease) increase in net assets attributable to Unitholders $ (71,889) $ Special cash distribution Additions to tenant incentives Items not affecting operating cash Change in other non-cash operating items Income taxes paid Cash used in operating activities Financing Activities Issue of mortgages Financing – other Repayment of mortgages – principal Repayment of mortgages – maturity Advance (repayment) of floating rate credit facilities Advance of joint operation credit facilities Issue of senior unsecured notes Redemption of senior unsecured notes REIT Units and Class B LP Units issued REIT Units and Class B LP Units issue costs Payments of lease liabilities Cash provided by (used in) financing activities Investing Activities Acquisition of investment properties and intangible assets Additions to investment properties Proceeds on disposal of investment properties Contributions to joint ventures Distributions from joint ventures Additions to fixtures and computer equipment Additions to deferred leasing costs Advances on long-term receivables Cash (used in) provided by investing activities Net change in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period See accompanying notes to the consolidated financial statements. 98 16 16 7 7 7 8 8 15 15 3 (14,857) (63,536) 92,293 (15,900) (7) (73,896) 218,000 (3,419) (42,686) (214,912) 7,373 575 300,000 (100,000) 100,012 (2,739) (735) 261,469 (42,687) (109,668) 37,832 (6,061) 69 (1,399) (1,435) (931) (124,280) 63,293 — $ 63,293 $ 10,369 — (58,919) 24,789 (12,100) (8) (35,869) 25,288 (3,308) (51,504) (133,759) (133,504) 8,969 350,000 (125,000) — — (669) (63,487) (152,507) (94,769) 339,391 (2,251) 15,366 (1,520) (2,116) (2,238) 99,356 — — — CROMBIE REIT | Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of CAD dollars) 1) GENERAL INFORMATION AND NATURE OF OPERATIONS Crombie Real Estate Investment Trust (“Crombie”) is an unincorporated “open-ended” real estate investment trust created pursuant to the Declaration of Trust dated January 1, 2006, as amended. The principal business of Crombie is investing in income-producing retail, retail-related industrial, mixed-use, and office properties in Canada. Crombie is registered in Canada and the address of its registered office is 610 East River Road, Suite 200, New Glasgow, Nova Scotia, Canada, B2H 3S2. The consolidated financial statements for the year ended December 31, 2020 and December 31, 2019 include the accounts of Crombie and all of its subsidiary entities. The units of Crombie are traded on the Toronto Stock Exchange (“TSX”) under the symbol “CRR.UN”. The consolidated financial statements were authorized for issue by the Board of Trustees on February 24, 2021. 2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Statement of compliance These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). (b) Basis of presentation These consolidated financial statements are presented in Canadian dollars (“CAD”); Crombie’s functional and reporting currency, rounded to the nearest thousand. The consolidated financial statements are prepared on a historical cost basis except for any financial assets and liabilities classified as fair value with changes in fair value either recognized as an increase (decrease) in net assets attributable to Unitholders (“FVTPL” classification) or fair value through other comprehensive income (“FVOCI” classification). (c) Presentation of financial statements When Crombie: (i) applies an accounting policy retrospectively; (ii) makes a retrospective restatement of items in its financial statements; or (iii) reclassifies items on the balance sheet, it will present an additional balance sheet as at the beginning of the earliest comparative period. (d) Basis of consolidation (i) Subsidiaries Crombie’s financial statements consolidate those of Crombie and all of its subsidiary entities at December 31, 2020. Subsidiaries are all entities over which Crombie has control. All subsidiaries have a reporting date of December 31, 2020. All intercompany transactions, balances, income, and expenses are eliminated in preparing the consolidated financial statements. Where unrealized losses on intercompany asset sales are reversed on consolidation, the underlying asset is also tested for impairment from an entity perspective. Operating income (loss) and other comprehensive income (loss) of subsidiaries acquired or disposed of during the period are recognized from the effective date of acquisition, or up to the effective date of disposal, as applicable. (ii) Joint arrangements Joint arrangements are business arrangements whereby two or more parties have joint control. Joint control is based on the contractual sharing of control over the decisions related to the relevant activities. Joint arrangements are classified as either joint operations or joint ventures depending on the contractual arrangements related to the rights and obligations of the parties to the arrangement. Joint operations A joint operation is an arrangement wherein the parties to the arrangement have rights to the assets and obligations for the liabilities related to the arrangement. For joint operations, Crombie recognizes its share of the assets, liabilities, revenues, and expenses of the joint operation in the relevant categories of Crombie’s financial statements. Joint ventures A joint venture is an entity over which Crombie shares joint control with other parties and where the joint venture parties have rights to the net assets of the joint venture. Joint control exists where there is a contractual agreement for shared control and wherein decisions about the significant relevant activities of the arrangement require unanimous consent of the parties sharing control. 99 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable GrowthInvestment in joint ventures is accounted for using the equity method. Under the equity method, the investment is initially recorded at cost with subsequent adjustments for Crombie’s share of the results of operations and any change in net assets. Crombie’s joint venture entities have the same reporting period as Crombie and adjustments,if any, are made to bring the accounting policies of joint venture entities in line with the policies of Crombie. (e) Investment properties Investment properties are properties which are held to earn rental income. Investment properties include land, buildings, and intangible assets. Investment properties are carried at cost less accumulated depreciation and are reviewed for impairment as described in Note 2(u). Depreciation of buildings is calculated using the straight-line method with reference to each property’s cost, the estimated useful life of the building (not exceeding 40 years) and its components, significant parts, and residual value. Amortization of intangible assets is calculated using the straight-line method over the term of the tenant lease. Repairs and maintenance items are expensed as incurred or, in the case of major items that constitute a capital asset, are capitalized to the building and amortized on a straight-line basis over the estimated useful life of the improvement. Upon acquisition, Crombie performs an assessment of investment properties being acquired to determine whether the acquisition is to be accounted for as an asset acquisition or a business combination. A transaction is considered to be a business combination if the acquired property meets the definition of a business under IFRS 3 – “Business Combinations”; being an integrated set of activities and assets that are capable of being managed for the purpose of providing a return to the Unitholders. For asset acquisitions, the total cost is allocated to the identifiable assets and liabilities on the basis of their relative fair values on the acquisition date. Asset acquisitions do not give rise to goodwill. Fair value of such assets and liabilities is determined based on the following: Land – the amount allocated to land is based on an appraisal estimate of its fair value. Buildings – are recorded at the estimated fair value of the building and its components and significant parts. Intangible assets – are recorded for tenant relationships, based on estimated costs avoided should the respective tenants renew their leases at the end of the initial lease term, adjusted for the estimated probability of renewal. Fair value of debt – values ascribed are determined based on the differential between contractual and market interest rates on long-term liabilities assumed at acquisition. For business combinations, the acquisition method is used wherein the components of the business combination (assets acquired, liabilities assumed, consideration transferred and any goodwill or bargain purchase) are recognized and measured. The assets acquired and liabilities assumed from the acquiree are measured at their fair value on the acquisition date. Change in useful life of investment properties The estimated useful lives of significant investment properties are reviewed whenever events or circumstances indicate a change in useful life. Estimated useful lives of significant investment properties are based on management’s best estimate and the actual useful lives may be different. Revisions to the estimated useful lives of investment properties constitute a change in accounting estimate and are accounted for prospectively by amortizing the cumulative changes over the remaining estimated useful life of the related assets. (f) Cash and cash equivalents Cash and cash equivalents are defined as cash on hand, restricted cash, cash in bank, and guaranteed investments with a maturity less than 90 days at date of acquisition. (g) Assets held for sale and discontinued operations A non-current asset is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than continuing use. A property is classified as held for sale at the point in time when it is available for immediate sale, management has committed to a plan to sell the property and is actively locating a purchaser for the property at a sales price that is reasonable in relation to the current estimated fair value of the property, and the sale is expected to be completed within a one-year period. Properties held for sale are carried at the lower of their carrying values and estimated fair value less costs to sell. In addition, assets classified as held for sale are not depreciated and amortized. A property that is subsequently reclassified as held and in use is measured at the lower of its carrying value amount before it was classified as held for sale, adjusted for any depreciation and amortization expense that would have been recognized had it been continuously classified as held and in use, and its estimated fair value at the date of the subsequent decision not to sell. Assets that are classified as held for sale and that constitute a component of Crombie are presented as discontinued operations and their operating results are presented separately in the Consolidated Statements of Comprehensive Income (Loss). A component of Crombie includes a property type or geographic area of operations. (h) Employee future benefits obligation The cost of Crombie’s pension benefits for defined contribution plans is expensed for employees in respect of the period in which they render services. The cost of defined benefit pension plans and other benefit plans is accrued based on estimates, using actuarial techniques, of the amount of 100 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS benefits employees have earned in return for their services in the current and prior periods. The present value of the defined benefit obligation and current service cost is determined by discounting the estimated benefits using the projected unit credit method to determine the fair value of the plan assets and total actuarial gains and losses and the proportion thereof which will be recognized. Other factors considered for other benefit plans include assumptions regarding salary escalation, retirement ages and expected growth rate of health care costs. The fair value of any plan assets is based on current market values. The present value of the defined benefit obligation is based on the discount rate determined by reference to the yield of high-quality corporate bonds of similar currency, having terms of maturity which align closely with the period of maturity of the obligation. The defined benefit plan and post-employment benefit plan are unfunded. The impact of changes in plan provisions will be recognized in benefit costs on a straight-line basis over a period not exceeding the average period until the benefit becomes vested. To the extent that the benefits are already vested the past service cost will be recognized immediately. In measuring its defined benefit liability, Crombie recognizes actuarial gains and losses directly to other comprehensive income (loss). (i) Unit based compensation plans (i) Deferred Unit Plan (“DU Plan”) Crombie provides a voluntary DU Plan whereby eligible trustees, officers, and employees (the “Participants”) may elect to receive all or a portion of their eligible compensation in deferred units (“DUs”). The Board (or its designated Committee) may determine that special compensation will be provided in the form of DUs. Unless otherwise determined by the Board (or its designated Committee), DUs are fully vested at the time they are allocated, with the value of the award recorded as a liability and expensed as general and administrative expenses. DUs are not Crombie REIT Units and do not entitle a Participant to any Unitholder rights, including voting rights, distribution entitlements (other than those noted below) or rights on liquidation. During the time that a Participant has outstanding DUs, whenever cash distributions are paid on REIT Units, additional DUs will be credited to the Participant’s DU account, determined by multiplying the number of DUs in the Participant’s DU account on the REIT distribution record date by the distribution paid per REIT Unit, and dividing the result by the market value of a Unit as determined in accordance with the DU Plan. Additional DUs issued as a result of distributions vest on the same basis as noted above and the value of the additional DUs credited is expensed to general and administrative expenses on allocation. A Participant may redeem their vested DUs in whole or in part by filing a written notice of redemption; redemption will also occur as the result of specific events such as the retirement of a Participant. Upon redemption, a Participant will receive the net value of the vested DUs being redeemed, with the net value determined by multiplying the number of DUs redeemed by the REIT Unit’s market price on redemption date, less applicable withholding taxes. The Participant may elect to receive this net amount as a cash payment or instead receive Crombie REIT Units for redeemed DU’s after deducting applicable withholding taxes. For fair value measurement purposes, each DU is measured based on the market value of a REIT Unit. (ii) Restricted Unit Plan (“RU Plan”) Crombie has a RU Plan for certain eligible executives and employees (“RU Participants”), whereby the RU Participants will receive all or a portion of their annual long-term incentive plan awards in restricted units (“RUs”). The RUs are accounted for under IAS 19 “Employee benefits” and the liability and expense are recognized over the service period which ends on the vesting date. The RUs are subject to vesting conditions including being actively employed. The number of RUs which fully vest is determined by: (a) the dollar amount of the award divided by the market value of a REIT Unit on the award grant date, plus (b) deemed distributions on RUs during the vesting period at a rate equivalent to the number of REIT Units that would have been issued had the vested RUs been treated as a REIT Unit. The value of these additional RUs from deemed distributions are expensed to general and administrative expenses at the time of allocation. On the vesting date, each participant shall be entitled to receive a cash amount (net of any applicable withholding taxes) equal to the number of vested RUs held by the RU Participant multiplied by the market value on the vesting date, as determined by the market value of a REIT Unit. Alternatively, a RU Participant who is an eligible employee on the vesting date may elect to convert their vested RUs to DUs under Crombie’s DU Plan. No REIT Units or other securities of Crombie will be issued from treasury as settlement of any obligation under the RU Plan. (iii) Performance Unit Plan (“PU Plan”) Crombie has a PU Plan for certain eligible executives and employees (“PU Participants”), whereby the PU Participants may elect each year to participate in the PU Plan and receive all or a portion of their eligible remuneration in the form of an allocation of performance units (“PUs”). The PUs are accounted for under IAS 19 “Employee benefits” and the liability and expense are recognized over the service period which ends on the vesting date. The PUs are subject to vesting conditions including being actively employed. The number of PUs which vest for each participant shall be determined by: (a) multiplying the number of PUs granted under the award by an adjustment factor applicable to the performance level achieved, and (b) adding the number of PUs or fractions thereof that would be credited to such participant upon the payment of distributions by Crombie on the REIT Units, based on the number of additional REIT Units a participant would have received had the vested PUs been treated as REIT Units under a distribution reinvestment plan during the PU term. Alternatively, a PU Participant who is an eligible employee on the vesting date may elect to convert their vested PUs to DUs under Crombie’s DU Plan. A PU is not considered to be a REIT Unit or entitle any participant to exercise voting rights or any other rights or entitlements associated with a REIT Unit. No REIT Units or other securities of Crombie will be issued from treasury as settlement of any obligation under the PU Plan. 101 Proven Stability and Sustainable Growth(j) Distribution reinvestment plan (“DRIP”) Crombie has a DRIP which is described in Note 15. (k) Revenue recognition (i) Lease revenue Revenue earned from tenants under lease agreements includes base rent, realty tax recoveries, percentage rent, and other incidental income. Certain leases have rental payments that change over their term due to changes in rates. Crombie records the rental revenue from leases on a straight-line basis over the term of the lease. Accordingly, an accrued rent receivable is recorded for the difference between the straight-line rent recorded as property revenue and the rent that is contractually due from the tenants. In addition, tenant incentives are amortized on a straight-line basis over the term of existing leases and the amortization is shown as a reduction in property revenue. Percentage rents are recognized when tenants are obligated to pay such rent under the terms of the related lease agreements. Realty tax recoveries, and other incidental income, are recognized on an accrual basis as they become due. (ii) Revenue from contracts with customers Crombie recognizes revenue in accordance with IFRS 15 “Revenue from Contracts with Customers”. Crombie recognizes revenue from customers that reflects the consideration to which it expects to be exchanged for. This involves identifying the contract with its customers, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when the entity satisfies its performance obligations. Where a contract contains elements of variable consideration, Crombie estimates the amount of variable consideration to which it will be entitled under the contract. Variable consideration can arise from discounts, refunds, credits, and price concessions. This consideration is allocated to all performance obligations in a contract based on their relative standalone selling prices. (l) Leases Crombie as lessor Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Crombie has determined that all of its leases with its tenants are operating leases. Revenue is recorded in accordance with Crombie’s revenue recognition policy. Crombie as lessee Crombie leases include land, office, equipment, and vehicles. Crombie assesses whether a contract is or contains a lease at the inception of the contract. Leases are recognized as a right of use asset with a corresponding liability at the date at which the leased asset is available for use by Crombie, except for short-term leases of 12 months or less or low value leases which are expensed in the consolidated income statement on a straight-line basis over the lease term. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease; or if not determinable, the lessee’s incremental borrowing rate, specific to the term of the lease. Lease payments can include fixed payments; variable payments based on an index or a rate known at the commencement date; and extension option payments or purchase options, if Crombie is reasonably certain to exercise. The lease liability is subsequently measured at amortized cost using the effective interest rate method and remeasured (with a corresponding adjustment to the related right of use asset) when there is a change in future lease payments in case of renegotiation, changes of an index or rate or in case of reassessment of options. At inception of the lease, the right of use asset is measured at cost, comprising initial lease liability, initial direct costs, and any future restoration or refurbishment costs, less any incentives granted by the lessors. The right of use asset is depreciated over the shorter of the asset’s useful life and the lease term of the underlying asset on a straight-line basis. The right of use asset is subject to testing for impairment if there is an indicator for impairment. Right of use assets are included in Investment Property and Other Assets and the lease liability are presented separately. (m) Finance costs – operations Finance costs – operations primarily comprise interest on Crombie’s borrowings. Finance costs directly attributable to the acquisition, redevelopment, construction, or production of a qualifying asset are capitalized as a component of the cost of the asset to which it is related. All other finance costs – operations are expensed in the period in which they are incurred using the effective interest rate method. 102 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020(n) Finance costs – distributions to Unitholders The determination to declare and make payable distributions from Crombie is at the discretion of the Board of Trustees and, until declared payable by the trustees, Crombie has no contractual obligation to pay cash distributions to Unitholders. (o) Income taxes Crombie is taxed as a “mutual fund trust” for income tax purposes. It is the intention of Crombie, subject to approval of the trustees, to make distributions not less than the amount necessary to ensure that Crombie will not be liable to pay income tax, except for the amounts incurred in its incorporated subsidiaries. (p) Hedges Crombie may use cash flow hedges to manage exposures to increases in variable interest rates. Cash flow hedges are recognized on the balance sheet at fair value with the effective portion of the hedging relationship recognized in other comprehensive income (loss). Any ineffective portion of the cash flow hedge is recognized in operating income. Amounts recognized in accumulated other comprehensive income (loss) are reclassified to operating income in the same periods in which the hedged item is recognized in operating income. Fair value hedges and the related hedged items are recognized on the balance sheet at fair value with any changes in fair value recognized in operating income. To the extent the fair value hedge is effective, the changes in the fair value of the hedge and the hedged item will offset each other. Crombie assesses on an ongoing basis whether any existing derivative financial instrument continues to be effective in offsetting changes in interest rates on the hedged items. (q) Comprehensive income (loss) Comprehensive income (loss) is the change in net assets attributable to Unitholders during a period from transactions and other events and circumstances from non-Unitholder sources. Crombie reports a consolidated statement of comprehensive income (loss), comprising changes in net assets attributable to Unitholders and other comprehensive income (loss) for the year. Accumulated other comprehensive income (loss), has been included in the Consolidated Statements of Changes in Net Assets Attributable to Unitholders. (r) Provisions Provisions are recognized when: Crombie has a present obligation (legal or constructive) as a result of a past event; it is probable that Crombie will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows, where the time value of money is material. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Provisions reflect Crombie’s best estimate at the reporting date. Environmental liabilities are recognized when Crombie has an obligation relating to site closure or rehabilitation. The extent of the work required and the associated costs are dependent on the requirements of the relevant authorities and Crombie’s environmental policies. Provisions for the cost of each closure and rehabilitation program are recognized at the time of occurrence and when Crombie has a reliable estimate of the obligation. Changes in the provision are recognized in the period of the change. (s) Financial instruments Crombie classifies financial assets and liabilities according to their characteristics and management’s choices and intentions related thereto for the purpose of ongoing measurement. Classification choices for financial assets include: a) Amortized cost – recorded at amortized cost with gains and losses recognized in increase (decrease) in net assets attributable to Unitholders in the period that the asset is derecognized or impaired; b) Fair value, with two options; (i) FVTOCI – measured at fair value with changes in fair value recognized in other comprehensive income (loss) for the current period until realized through disposal or impairment; and (ii) FVTPL – measured at fair value with changes in fair value recognized in increase (decrease) in net assets attributable to Unitholders for the period. Classification choices for financial liabilities include: a) Amortized cost - recorded at amortized cost with gains and losses recognized in increase (decrease) in net assets attributable to Unitholders in the period that the asset is derecognized or impaired; and b) FVTPL - measured at fair value with changes in fair value recognized in increase (decrease) in net assets attributable to Unitholders for the period. Subsequent measurement for these assets and liabilities is based on either fair value or amortized cost using the effective interest method, depending upon their classification. 103 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable GrowthCrombie’s financial assets and liabilities are generally classified and measured as follows: Financial Asset/Liability Cash and cash equivalents Trade receivables Restricted cash Long-term receivables Marketable securities Derivative financial assets and liabilities Category Assets at amortized cost Assets at amortized cost Assets at amortized cost Assets at amortized cost FVTPL FVTPL Measurement Amortized cost Amortized cost Amortized cost Amortized cost Fair value Fair value Accounts payable and other liabilities (excluding interest rate swaps) Financial liabilities at amortized cost Amortized cost Investment property debt Senior unsecured notes Financial liabilities at amortized cost Amortized cost Financial liabilities at amortized cost Amortized cost Other balance sheet accounts, including, but not limited to, prepaid expenses, accrued straight-line rent receivable, tenant incentives, investment properties, and employee future benefits obligation are not financial instruments. Transaction costs, other than those related to financial instruments classified as FVTPL that are expensed as incurred, are added to the fair value of the financial asset or financial liability on initial recognition and amortized using the effective interest method. Financing costs incurred to establish revolving credit facilities are deferred and amortized on a straight-line basis over the term of the facilities. In the event any debt is extinguished, the associated unamortized financing costs are expensed immediately. Financial assets are derecognized when the contractual rights to benefits from the financial asset expires. The difference between the asset’s carrying value and the consideration received or receivable is recognized as a charge to the statement of comprehensive income. At each reporting date, Crombie assesses whether there is objective evidence that a financial asset carried at amortized cost is impaired. If such evidence exists, Crombie recognizes an impairment loss, as the difference between the carrying value of the instrument and the present value of the estimated future cash flows, discounted using the instrument’s original effective interest rate or a discount rate based on the risk associated with the financial asset being tested. The carrying amount of the asset is reduced by this amount through a charge to the statement of comprehensive income. Crombie determines the expected credit loss in accordance with IFRS 9’s simplified approach for amounts receivable where its loss allowance is measured at initial recognition and throughout the life of the receivable. Trade receivables are written off when there is no reasonable expectation of recovery. (t) Fair value measurement The fair value of financial instruments is the estimated amount that Crombie would receive to sell a financial asset or pay to transfer a financial liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by Crombie. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. Crombie uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. The fair value of any interest rate swap is estimated by discounting net cash flows of the swaps using forward interest rates for swaps of the same remaining maturities. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. When determining the highest and best use of non-financial assets Crombie takes into account the following: • use of the asset that is physically possible – Crombie assesses the physical characteristics of the asset that market participants would take into account when pricing the asset; • use that is legally permissible – Crombie assesses any legal restrictions on the use of the asset that market participants would take into account when pricing the asset; and • use that is financially feasible – Crombie assesses whether a use of the asset that is physically possible and legally permissible generates adequate income or cash flows to produce an investment return that market participants would require from an investment in that asset put to that use. (u) Impairment of long-lived tangible and definite life intangible assets Long-lived tangible and definite life intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. When such an indication exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment loss (if any). The recoverable amount is the higher of fair value less costs to sell and value in use. Where the asset does not generate cash flows that are independent from other assets, Crombie estimates the recoverable amount of the cash generating unit(s) to which the asset belongs. When the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash generating unit) is reduced to the recoverable amount. An impairment loss is recognized as an expense immediately in operating income. 104 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate, but is limited to the carrying amount that would have been determined if no impairment loss had been recognized in prior periods. A reversal of impairment loss is recognized immediately in operating income. (v) Net assets attributable to Unitholders (i) Balance Sheet presentation In accordance with International Accounting Standard (“IAS”) 32 Financial Instruments: Presentation, puttable instruments are generally classified as financial liabilities. Crombie’s REIT Units and Class B LP Units with attached Special Voting Units (“SVU”) are both puttable instruments, meeting the definition of financial liabilities in IAS 32. There are exception tests within IAS 32 which could result in classification as equity; however, Crombie’s units do not meet the exception requirements. Therefore, Crombie has no instrument qualifying for equity classification on its Balance Sheet pursuant to IFRS. The classification of all units as financial liabilities with presentation as net assets attributable to Unitholders does not alter the underlying economic interest of the Unitholders in the net assets and net operating results attributable to Unitholders. (ii) Balance Sheet measurement REIT Units and Class B LP Units with attached SVUs are carried on the Balance Sheet at net asset value. Although puttable instruments classified as financial liabilities are generally required to be remeasured to fair value at each reporting period, the alternative presentation as net assets attributable to Unitholders reflects that, in total, the interests of the Unitholders are limited to the net assets of Crombie. (iii) Statement of Comprehensive Income (Loss) presentation As a result of the classification of all units as financial liabilities, the Statement of Comprehensive Income (Loss) recognizes distributions to Unitholders as a finance cost. In addition, terminology such as net income has been replaced by Increase (decrease) in net assets attributable to Unitholders to reflect the absence of an equity component on the Balance Sheet. (iv) Presentation of per unit measures As a result of the classification of all units as financial liabilities, Crombie has no equity instrument; therefore, in accordance with IAS 33 Earnings per Share, there is no denominator for purposes of calculation of per unit measures. (v) Allocation of comprehensive income (loss) The components of comprehensive income (loss) are allocated between REIT Units and Class B LP Units as follows: • Operating income – based on the weighted average number of units outstanding during the reporting period. • Distributions to Unitholders – based on the actual distributions paid to each separate unit class. • Accumulated other comprehensive income (loss) – increases are allocated based on the weighted average number of units outstanding during the reporting period, decreases in previously accumulated amounts are drawn down based on the average accumulation allocation rate. (w) Critical judgments in applying accounting policies The following are the critical judgments that have been made in applying Crombie’s accounting policies and that have the most significant effect on the consolidated financial statements: (i) Investment properties Crombie’s accounting policies relating to investment properties are described in Note 2(e). In applying these policies, judgment is applied in determining whether certain costs are additions to the carrying amount of an investment property and whether properties acquired are considered to be asset acquisitions or business combinations. Crombie has determined that all properties acquired to date are asset acquisitions. (ii) Investment in joint ventures Crombie makes judgments in determining the appropriate accounting for investments in other entities. Such judgments include: determining the significant relevant activities and assessing the level of influence Crombie has over such activities through agreements and contractual arrangements. (iii) Classifications of Units as liabilities Crombie’s accounting policies relating to the classification of Units as liabilities are described in Note 2. The critical judgments inherent in this policy relate to applying the criteria set out in IAS 32, “Financial Instruments: Presentation”, relating to the puttable instrument exception. (iv) Investment in joint arrangements Crombie makes judgments in determining the appropriate accounting for investments in other entities. Such judgments include: determining the significant relevant activities and assessing the level of control or influence Crombie has over such activities through agreements and contractual arrangements; and determining whether Crombie’s rights and obligations are directly related to the assets and liabilities of the arrangement or to the net assets of the joint arrangement. 105 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth(x) Critical accounting estimates and assumptions The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. As of December 31, 2020, there continues to be increased measurement uncertainty due to the outbreak of the novel strain of coronavirus (“COVID-19”). The estimates and assumptions that are critical to the determination of the amounts reported in the consolidated financial statements relate to the following: (i) Fair value measurement A number of assets and liabilities included in Crombie’s consolidated financial statements require measurement at, and/or disclosure of, fair value. In estimating the fair value of an asset or a liability, Crombie uses market-observable data to the extent it is available. Where market-observable data is not available, Crombie estimates the fair value based on discounted future cash flows using discount rates that reflect current market conditions for instruments with similar terms and risks. The significant methods and assumptions used in estimating fair value are set out in Notes 2(i), 2(t), 3 and 18. (ii) Investment properties Investment properties are carried at cost less accumulated depreciation. Crombie estimates the residual value and useful lives of investment properties and the significant components thereof to calculate depreciation and amortization. (iii) Impairment of long‑lived tangible and definite life intangible assets Long-lived tangible and definite life intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. When such an indication exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment loss (if any). The recoverable amount is the higher of fair value less costs to sell and value in use. Where the asset does not generate cash flows that are independent from other assets, Crombie estimates the recoverable amount of the cash generating unit(s) to which the asset belongs. When the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash generating unit) is reduced to the recoverable amount. An impairment loss is recognized as an expense immediately in operating income. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate, but is limited to the carrying amount that would have been determined if no impairment loss had been recognized in prior periods. A reversal of impairment loss is recognized immediately in operating income. (iv) Investment property valuation External, independent valuation companies, having appropriate recognized professional qualifications and recent experience in the location and category of properties being valued, value substantially all of Crombie’s investment property portfolio on a rotating basis over a maximum period of four years. The fair values, based on the measurement date, represent the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Internal quarterly valuations are performed using internally generated valuation models prepared by considering the aggregate trailing annual net property income recognized from leasing the property, that is stabilized for any major tenant movement. Crombie has adjusted net property income for expected impacts related to COVID-19 by looking at potential bad debts or other income implications at each property, and applying probability to several potential scenarios and where appropriate, normalized the COVID-19 impact on net operating income. Biannual yields are obtained from an independent valuation company, which reflects the specific risks inherent in the net property income, to arrive at property valuations. As at December 31, 2020, management’s determination of fair value was updated for current market assumptions, informed by property income, market capitalization rates, and recent appraisals provided by independent appraisal professionals. (v) Defined benefit liability Management estimates the defined benefit liability annually with the assistance of independent actuaries; however, the actual outcome may vary due to estimation uncertainties. The estimate of Crombie’s defined benefit liability is based on standard rates of inflation, medical cost trends, and mortality. It also takes into account Crombie’s specific anticipation of future salary increases. Discount factors are determined each reporting period by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability. Estimation uncertainties exist particularly with regard to medical cost trends, which may vary significantly in future appraisals of Crombie’s defined benefit obligations. (vi) Purchase price allocation Investment properties are properties which are held to earn rental income. Investment properties include land, buildings, and intangible assets. Upon acquisition, management allocates the purchase price of the acquisition as described in Note 2(e). This allocation contains a number of estimates and underlying assumptions including, but not limited to, highest and best use and fair value of the properties, estimated cash flows, discount rates, lease- up rates, inflation rates, renewal rates, tenant incentive allowances, cost recoveries, and leasing costs and termination costs. 106 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020(vii) Lease modifications From time to time, Crombie may agree with tenants to modify the terms of lease agreements, including changes to the consideration under the lease. When the changes result in a reduction in amounts receivable relating to past lease periods, Crombie applies IFRS 9 in determining whether to partially or fully derecognize those receivables. Other changes to the terms and conditions of the lease are treated as lease modifications in accordance with IFRS 16, and the modified lease is accounted for as a new lease from the effective date of the modification, with any prepaid or accrued lease payments relating to the original lease included as part of the lease payments for the new lease. (viii) Risk management Markets have been negatively impacted by COVID-19, which was declared a pandemic by the World Health Organization (“WHO”) on March 11, 2020. The continued spread of COVID-19 and the actions being taken by governments, businesses and individuals to limit this pandemic, including business closures and physical distancing, and the effects of resulting layoffs and other job losses on the available income of retail customers may adversely impact our operations and development activities including, among others, increasing the credit risk associated with our receivables, limiting our ability to quickly respond to changes in credit risk, extending the time to completion and occupancy of major developments, and limiting our ability to serve our tenants. This has resulted in significant economic uncertainty, of which the potential impact on our future financial results is difficult to reliably measure. (ix) Expected credit loss Crombie assesses, on a tenant-by-tenant basis, losses expected with its rent receivables. In determining the provision for doubtful accounts, Crombie takes into account the payment history and future expectations of likely default events (tenants asking for rental concessions/abatements, applications for rental relief through government programs such as Canada Emergency Commercial Rent Assistance program (“CECRA”) and Canada Emergency Rent Subsidy (“CERS”) or stating they will not be making rental payments on the due date) based on actual or expected insolvency filings or company voluntary arrangements and likely deferrals of payments due, and potential abatements to be granted by the landlord through tenant negotiations or under CECRA. Crombie’s assessment is subjective due to the forward-looking nature of the situation. As a result, the provision for doubtful accounts is subject to a degree of uncertainty and is made based on assumptions which may not prove to be accurate with the unprecedented uncertainty caused by COVID-19. (y) Application of new IFRS (i) IFRS 3 Business combinations Effective January 1, 2020, Crombie has applied the amendments to the requirements of IFRS 3, “Business Combinations” (“IFRS 3”), in relation to whether a transaction meets the definition of a business combination. The amendments help provide guidance on whether the acquired assets and activities constitute a business. The change is applied prospectively on or after the effective date and as such there was no impact on the adoption of this amendment. 107 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth3) INVESTMENT PROPERTIES Income properties Properties underdevelopment Income properties Cost December 31, 2020 December 31, 2019 $ $ 3,520,562 63,377 3,583,939 $ $ 3,461,359 96,213 3,557,572 Land Buildings Intangibles Deferred Leasing Costs Total Opening balance, January 1, 2020 $ 1,117,701 $ 2,825,447 $ 112,313 $ 8,853 $ 4,064,314 Acquisitions Additions Dispositions Write-off of fully depreciated assets Transfer to investment properties held for sale (Note 6) Reclassification from properties under development 12,115 1,054 (7,618) — (16,219) 40,575 20,520 49,888 (23,111) (2,890) (24,135) 75,586 2,360 — (440) (39,982) (933) — — 1,462 — (237) — — 34,995 52,404 (31,169) (43,109) (41,287) 116,161 Balance, December 31, 2020 1,147,608 2,921,305 73,318 10,078 4,152,309 Accumulated depreciation, amortization, and impairment Opening balance, January 1, 2020 Depreciation and amortization Dispositions Impairment Write-off of fully depreciated assets Transfer to investment properties held for sale (Note 6) 2,673 317 — 3,300 — — 530,576 67,565 (4,078) 3,300 (2,890) (4,107) Balance, December 31, 2020 6,290 590,366 66,657 5,366 (203) — (39,982) (627) 31,211 3,049 1,068 — — (237) — 3,880 602,955 74,316 (4,281) 6,600 (43,109) (4,734) 631,747 Net carrying value, December 31, 2020 $ 1,141,318 $ 2,330,939 $ 42,107 $ 6,198 $ 3,520,562 Included in land are right of use assets of $16,089 net of accumulated depreciation of $633 for land held under lease. During the year ended December 31, 2020, Crombie recorded impairments totalling $6,600 on six properties. The impairments were the result of the fair value impact of tenant lease expiries, slower-than-expected leasing activity, and the ongoing impacts of COVID-19. Impairment was measured on a per property basis and was determined as the amount by which carrying value, using the cost method, exceeded the recoverable amount for that property. The recoverable amount was determined to be the higher of the economic benefit of the continued use of the asset or the selling price less costs to sell. To calculate the benefit of the continued use of the asset, Crombie utilized the present value of the estimated future cash flows, discounted using a discount rate based on the risk associated with the property. 108 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020Land Buildings Intangibles Deferred Leasing Costs Total Cost Opening balance, January 1, 2019 $ 1,176,745 $ 2,968,216 $ 121,181 $ 7,010 $ 4,273,152 Impact of adoption of IFRS 16 Acquisitions Additions Dispositions Transfer to investment properties held for sale (Note 6) Reclassification from properties under development 16,812 39,408 3,158 (69,672) (54,693) 5,943 — 84,685 70,118 (185,430) (124,993) 12,851 — 3,138 — (7,847) (4,159) — — — 1,740 (34) — 137 16,812 127,231 75,016 (262,983) (183,845) 18,931 Balance, December 31, 2019 1,117,701 2,825,447 112,313 8,853 4,064,314 Accumulated depreciation, amortization, and impairment Opening balance, January 1, 2019 Depreciation and amortization Dispositions Impairment Transfer to investment properties held for sale (Note 6) 2,357 320 (4) — — 509,304 66,198 (30,514) 6,000 (20,412) Balance, December 31, 2019 2,673 530,576 65,777 5,812 (3,311) — (1,621) 66,657 2,250 808 (9) — — 579,688 73,138 (33,838) 6,000 (22,033) 3,049 602,955 Net carrying value, December 31, 2019 $ 1,115,028 $ 2,294,871 $ 45,656 $ 5,804 $ 3,461,359 Included in land are right of use assets of $16,405 net of accumulated depreciation of $320 for land held under lease. Properties under development Opening balance, January 1, 2020 Acquisitions Additions Reclassification to income-producing properties Balance, December 31, 2020 Land Buildings 76,104 $ 20,109 $ 7,692 3,004 (40,575) — 72,629 (75,586) 46,225 $ 17,152 $ $ $ Deferred Leasing Costs — — — — — $ $ As of December 31, 2020, Crombie completed its initial construction phase of a retail-related industrial development. Land Buildings Deferred Leasing Costs Opening balance, January 1, 2019 $ 49,967 $ 16,095 $ 117 $ Acquisitions Additions Dispositions Reclassification to income-producing properties 32,439 3,314 (3,673) (5,943) — 16,865 — (12,851) — 20 — (137) Balance, December 31, 2019 $ 76,104 $ 20,109 $ — $ Total 96,213 7,692 75,633 (116,161) 63,377 Total 66,179 32,439 20,199 (3,673) (18,931) 96,213 Fair value Crombie’s total fair value of investment properties exceeds carrying value by $921,974 at December 31, 2020 (December 31, 2019 – $808,674). Crombie uses the cost method for accounting for investment properties and increases in fair value over carrying value are not recognized until realized through disposition or derecognition of properties, while impairment is recognized at the time of impairment. As of December 31, 2020, there continues to be increased measurement uncertainty around valuation regarding COVID-19. Crombie has disclosed increased sensitivity around capitalization rates and continues to monitor the ongoing potential impacts on valuation. 109 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable GrowthThe estimated fair values of Crombie’s investment properties are as follows: December 31, 2020 December 31, 2019 Carrying value consists of the net carrying value of: Income properties Properties under development Accrued straight-line rent receivable Tenant incentives Investment properties held for sale Total carrying value $ $ $ $ Note 3 3 5 5 6 Fair Value Carrying Value 4,815,000 4,605,000 $ $ 3,893,026 3,796,326 December 31, 2020 December 31, 2019 3,520,562 $ 3,461,359 63,377 88,299 190,889 29,899 96,213 80,268 158,486 — 3,893,026 $ 3,796,326 The fair value of investment properties is a Level 3 fair value measurement. The fair value represents the estimated price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value included in this summary reflects the fair value of the properties as at December 31, 2020 and 2019, respectively, based on each property’s current use as a revenue generating investment property. The fair value of properties under development is assumed to equal cost until the property is substantially completed, and at that point in time, the property is moved to income producing and valued according to Crombie’s policies described below. The valuation techniques and significant unobservable inputs used in determining the fair value of investment properties are set out below: (i) (ii) The capitalized net operating income method – Under this method, capitalization rates are applied to trailing stabilized net operating income (property revenue less property operating expenses). The key assumption is the capitalization rates for each specific property. Crombie receives biannual capitalization rate reports from external, knowledgeable property valuators. The capitalization rate reports provide a range of rates for various geographic regions and for various types and qualities of properties within each region. Management selects the appropriate rate for each property from the range provided. Crombie employs this method to determine fair value. The discounted cash flow method – Under this method, discount rates are applied to the forecasted cash flows reflecting the initial terms of the lease or leases for that specific property and assumptions as to renewal and new leasing activity. The key assumptions are the discount rate applied over the initial term of the lease, as well as lease renewals and new leasing activity. Crombie employs this method when the capitalized net operating income method indicates a risk of impairment or when a property is, or will be, undergoing redevelopment. (iii) External appraisals – Crombie has external, independent appraisals performed on substantially all properties on a rotational basis over a maximum period of four years. On a periodic basis, Crombie obtains independent appraisals such that approximately 85% of its properties, by value, will be externally appraised over a four-year period. Crombie has utilized the following weighted average capitalization rates on its income properties. Related to the growth in properties under development, Crombie reports the weighted average capitalization rate excluding the value of properties under development with the comparative rates adjusted to reflect this change. Weighted average capitalization rate December 31, 2020 December 31, 2019 5.86% 5.99% Crombie has determined that an increase (decrease) in this applied capitalization rate at December 31, 2020 would result in an increase (decrease) in the fair value of the investment properties as follows: Capitalization Rate Sensitivity December 31, 2020 110 Increase in Rate Decrease in Rate 0.25% $ (202,000) $ 0.50% $ 0.75% $ (383,000) $ (550,000) $ 214,000 454,000 720,000 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020Property Acquisitions and Dispositions The operating results of acquired properties are included from the respective date of acquisition and for disposed properties up to the date of disposition. 2020 Transaction Date January 9, 20201 February 4, 20202 May 28, 2020 July 7, 2020 October 5, 2020 October 26, 2020 November 4, 2020 December 8, 2020 December 9, 2020 December 15, 2020 December 22, 2020 (1) Acquisition of a parcel of land adjacent to an existing retail property. (2) Disposal of a parcel of land adjacent to an existing retail property. 2019 Transaction Date January 7, 2019 January 29, 2019 February 5, 20191 February 8, 2019 February 14, 2019 March 25, 2019 April 25, 20192 April 29, 2019 June 3, 2019 July 3, 20193 July 4, 2019 August 1, 20194 August 2, 20195 September 25, 20196 October 7, 20197 October 29, 20198 November 28, 2019 December 16, 20199 Vendor/Purchaser Properties Acquired (Disposed) Approximate Square Footage Initial Acquisition (Disposition) Price Third Party Third Party Related Party Third Party Third Party Third Party Third Party Third Party Third Party Related Party Third Party — — 1 1 1 (1) 1 (1) (1) 1 (2) $ — — 30,000 — 41,000 (18,000) — (15,000) (20,000) 54,000 (41,000) 280 (1,000) 4,535 4,575 11,000 (7,510) 3,300 (7,414) (7,112) 17,100 (14,974) Vendor/Purchaser Properties Acquired (Disposed) Approximate Square Footage Initial Acquisition (Disposition) Price Third Party Third Party Third Party Third Party Third Party Third Party Third Party Third Party Third Party Third Party Third Party Empire Joint Venture Third Party Third Party Third Party Empire Empire — (1) (7) (1) (1) 1 (26) (1) — (1) (1) 1 (1) — (15) — 1 — — $ (114,000) (148,000) (50,000) (19,000) — (785,000) (39,000) — (44,000) (36,000) 15,000 — (3,000) (641,000) 29,000 40,000 397,000 (1) Disposal of 50% interest in seven retail properties to a third party. (2) Disposal of an 89% interest in 26 retail properties to a third party. (3) Disposal of an 89% interest in one retail property to a third party. (4) Acquisition of a 50% interest in one retail property from a related party. (5) Disposal of air rights to a joint venture. (6) Disposal of a freestanding building adjacent to a retail property. (7) Disposal of an 89% interest in 15 properties to a third party. (8) Additions to an existing property. (9) Acquisition of the remaining 50% interest in one retail-related industrial property from a related party. (821) (35,180) (41,614) (19,925) (9,675) 32,000 (161,589) (21,500) (3,275) (9,750) (12,255) 9,500 (27,379) (175) (193,333) 6,611 12,422 95,900 111 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable GrowthThe initial acquisition (disposition) prices stated above exclude closing and transaction costs. Investment property disposals Gross proceeds Selling costs Carrying values derecognized Land Buildings Intangibles Deferred leasing costs Tenant Incentives Accrued straight-line rent Provisions Gain (loss) on disposal Proceeds Mortgages assumed by buyer Non-cash consideration, addition to investment in joint venture Cash proceeds 4) INVESTMENT IN JOINT VENTURES The following represents Crombie’s interest in its equity accounted investments: 1600 Davie Limited Partnership Bronte Village Limited Partnership The Duke Limited Partnership 140 CPN Limited Year ended December 31 2020 38,010 $ (178) 37,832 (8,690) (24,521) (330) — — (1,081) 125 3,335 $ Year ended December 31 2020 37,832 $ — — 37,832 $ 2019 536,471 (8,229) 528,242 (128,034) (259,496) (7,073) (25) (31,565) (11,706) (8,540) 81,803 2019 528,242 (161,472) (27,379) 339,391 $ $ $ $ December 31, 2020 December 31, 2019 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% The following table represents 100% of the financial position and financial results of the equity accounted entities: Non-current assets Current assets Non-current liabilities Current liabilities Net assets Crombie’s investment in joint ventures Revenue Property operating expenses General and administrative expenses Depreciation and amortization Finance costs -operations Net (loss) income Crombie’s (loss) income from equity accounted investments 112 December 31, 2020 December 31, 2019 475,780 $ 7,987 (144,841) (237,490) 101,436 51,043 $ $ Year ended 297,598 31,287 (111,845) (127,444) 89,596 45,123 December 31, 2020 December 31, 2019 1,830 $ (495) (310) (351) (818) (144) (72) $ $ 1,708 (434) (2) (203) (401) 668 334 $ $ $ $ $ $ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020The following table shows the changes in the total carrying value of Crombie’s investment in joint ventures for the year ended: Opening balance Contributions Distributions Deferred gain Share of (loss) income Closing balance 5) OTHER ASSETS December 31, 2020 December 31, 2019 45,123 $ 6,061 (69) — (72) 51,043 $ 39,485 28,111 (15,366) (7,441) 334 45,123 $ $ December 31, 2020 December 31, 2019 Current Non-current Total Current Non-current Total Trade receivables $ 42,211 $ $ 42,211 $ 14,976 $ 6,041 $ 21,017 Provision for doubtful accounts Net trade receivables Prepaid expenses and deposits Other fixed assets1, 2 Finance lease receivable Accrued straight-line rent receivable Tenant incentives Other Amounts receivable from related parties (7,955) 34,256 19,271 — 391 — — 89 — — — — 11,373 7,734 88,299 190,889 127 (7,955) 34,256 19,271 11,373 8,125 88,299 190,889 216 15,533 9,302 24,835 (340) 14,636 15,533 — 363 — — 93 — — 6,041 — 10,000 8,125 80,268 158,486 215 (340) 20,677 15,533 10,000 8,488 80,268 158,486 308 23,812 23,812 (1) For the year ended December 31, 2020, depreciation of other fixed assets was $1,251 (December 31, 2019 – $1,175). (2) Other fixed assets include right of use assets of $2,136 (December 31, 2019 – $1,493) net of accumulated depreciation of $818 (December 31, 2019 – $574) relating to office and vehicle leases. $ 69,540 $ 307,724 $ 377,364 $ 30,625 $ 286,947 $ 317,572 Tenant Incentives Balance, January 1, 2020 Additions Amortization Write-off fully depreciated assets Balance, December 31, 2020 Tenant Incentives Balance, January 1, 2019 Additions Amortization Disposition Transfer to investment properties held for sale (Note 6) $ $ $ Cost Accumulated Amortization Net Carrying Value 236,071 $ 77,585 $ 158,486 50,252 — (11,129) — 17,849 (11,129) 50,252 (17,849) — 275,194 $ 84,305 $ 190,889 Cost Accumulated Amortization Net Carrying Value 204,250 $ 66,670 $ 60,379 — (19,914) (8,644) — 14,139 (1,977) (1,247) 137,580 60,379 (14,139) (17,937) (7,397) Balance, December 31, 2019 $ 236,071 $ 77,585 $ 158,486 Bad debt expense, recognized in property operating expenses, has been the following in each of the past four quarters: Three months ended December 31, 2020 Three months ended September 30, 2020 Three months ended June 30, 2020 Three months ended March 31, 2020 $ $ 67 1,018 8,722 1,087 10,894 113 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth6) INVESTMENT PROPERTIES HELD FOR SALE 2020 Assets transferred to held for sale Derecognition through disposition Net carrying value, December 31, 2020 2019 Assets transferred to held for sale Additions to assets held for sale Derecognition through disposition Net carrying value, December 31, 2019 Land 16,219 (1,072) 15,147 $ $ Buildings Intangibles 20,028 (5,489) 14,539 $ $ 306 (93) 213 $ $ Tenant Incentives — — — $ $ Total 36,553 (6,654) 29,899 Land Buildings Intangibles Tenant Incentives Total 54,693 $ 104,581 $ 2,538 $ 7,397 $ 169,209 — — (54,693) (104,581) — (2,538) 6,230 (13,627) 6,230 (175,439) — $ — $ — $ — $ — $ $ $ $ Crombie has determined that three of its investment properties meet the criteria for classification as held for sale as at December 31, 2020 based on the current status of the sale process. Prior to the classification as held for sale, the properties were assessed for impairment, which, at that time, is the amount by which the carrying amount exceeds its recoverable amount, if any. No depreciation or amortization will be recorded while the properties are classified as held for sale. Crombie expects to complete the sale of the properties during the next 12 months. 7) INVESTMENT PROPERTY DEBT Fixed rate mortgages 2.35 – 6.80% 3.98% 5.7 years $ 1,274,304 $ 1,309,077 Weighted Average Interest Rate Average Term to Maturity Range December 31, 2020 December 31, 2019 Floating rate revolving credit facility Joint operation credit facility I Joint operation credit facility II Unsecured bilateral credit facility Deferred financing charges on fixed rate mortgages Mortgages Non-current Current Credit facilities Non-current Current 2.5 years 3.3 years 3.8 years 0.7 years 17,712 7,188 2,356 35,000 (7,260) $ $ 1,329,300 1,139,798 127,246 $ $ 27,256 35,000 15,339 6,978 1,991 30,000 (6,567) 1,356,818 1,045,015 257,495 54,308 — $ 1,329,300 $ 1,356,818 Specific investment properties with a carrying value of $2,743,270 as at December 31, 2020 (December 31, 2019 – $2,705,625) are currently pledged as security for mortgages or provided as security for the floating rate revolving credit facility. Carrying value includes investment properties, as well as accrued straight-line rent receivable and tenant incentives which are included in other assets. 114 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020Mortgage Activity For the year ended: December 31, 2020 Weighted Average Number of Mortgages Rates Terms in Years Amortization Period in Years — 2 12 3.22% 3.42% 5.02% 15.9 30.0 Type Addition New Repaid Proceeds (Repayments) 5,125 218,000 (214,912) 8,213 $ $ During the year ended December 31, 2020, Crombie recognized an addition to a mortgage payable of $5,125 in settlement of an amount payable to 1600 Davie Limited Partnership. This mortgage relates to the commercial component of the Davie Street development, 100% of which is included in Crombie’s financial statements. During the year ended December 31, 2020, Crombie successfully closed on two mortgages totalling $218,000 at retail-related industrial properties. The proceeds of one of the mortgages were placed in escrow and will be drawn down once certain conditions have been met. As of December 31, Crombie has received $36,753 of the total $100,000 commitment. Given that Crombie controls the total proceeds, the remaining proceeds of $63,247 have been reflected as cash at December 31, 2020. For the year ended: December 31, 2019 Type New Repaid Disposition Weighted Average Number of Mortgages Rates Terms in Years Amortization Period in Years 7 17 27 3.43% 4.43% 4.33% 6.2 31.7 $ $ Proceeds (Repayments) 45,689 (133,759) (161,472) (249,542) During the year ended December 31, 2019, Crombie recognized a mortgage payable of $20,401 in settlement of an amount payable to 1600 Davie Limited Partnership. This mortgage, bearing interest at 3.22%, relates to the commercial component of the Davie Street development, 100% of which is included in Crombie’s financial statements. The repayments of $161,472 represent disposition of interests in mortgages related to partial dispositions of a portfolio of properties. Floating Rate Revolving Credit Facility The floating rate revolving credit facility has a maximum principal amount of $400,000 (December 31, 2019 – $400,000) and matures June 30, 2023. The facility is used by Crombie for working capital purposes and to provide temporary financing for acquisitions and development activity. It is secured by a pool of first mortgages on certain properties and the maximum principal amount is subject to an available borrowing base (December 31, 2020 – borrowing base of $400,000). Borrowings under the revolving credit facility can be by way of Bankers’ Acceptance or prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin. The respective spread or margin may change depending on Crombie’s unsecured bond rating with DBRS Morningstar and whether the facility remains secured or migrates to an unsecured status. Joint Operation Credit Facilities In conjunction with the 89% sale of a portfolio of assets in the second quarter of 2019, Crombie and its co-owner entered into a credit agreement with a Canadian chartered bank for a $62,250 term loan facility and a $5,800 revolving credit facility. Both facilities are secured by first mortgages on select properties and have a term of five years maturing on April 25, 2024. Borrowings under both facilities can be by way of Bankers’ Acceptance or prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin. Concurrent with entering into these facilities, Crombie and its co-owner entered into a fixed for floating interest rate swap, effectively fixing the interest rate on both facilities at 3.58%. At December 31, 2020, Crombie’s portion of the term and revolving credit facilities was $6,847 and $341, respectively. In conjunction with the 89% sale of a portfolio of assets in the fourth quarter of 2019, Crombie and its co-owner entered into a credit agreement with a Canadian chartered bank for a $16,500 term loan facility and a $15,500 revolving credit facility. Both facilities are secured by first and second mortgages on select properties and have a term of five years maturing on October 7, 2024. Borrowings under both facilities can be by way of Bankers’ Acceptance or prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin. Concurrent with entering into these facilities, Crombie and its co-owner entered into a fixed for floating interest rate swap, effectively fixing the interest rate on both facilities at 3.27%. At December 31, 2020, Crombie’s portion of the term and revolving credit facilities was $1,815 and $541, respectively. Unsecured Bilateral Credit Facility The unsecured bilateral credit facility agreement was extended and increased in the third quarter of 2020. The unsecured bilateral credit facility has a maximum principal amount of $130,000 and matures September 1, 2021. The facility is used by Crombie for working capital purposes and to provide temporary financing for acquisitions and development activity. Borrowings under the bilateral credit facility can be by way of Bankers’ Acceptance or prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin. The respective spread or margin may change depending on Crombie’s unsecured bond rating with DBRS Morningstar. 115 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth8) SENIOR UNSECURED NOTES Maturity Date1 Interest Rate December 31, 2020 December 31, 2019 June 1, 2021 3.962% $ 150,000 $ Series B Series D Series E Series F Series G Series H Series I Unamortized Series B issue premium Deferred financing charges November 21, 2022 January 31, 2025 August 26, 2026 June 21, 2027 March 31, 2028 October 9, 2030 4.066% 4.800% 3.677% 3.917% 2.686% 3.211% (1) For the year ended December 31, 2020, the weighted average term to maturity was 5.1years. Senior unsecured notes are presented in the consolidated balance sheet as follows: Non-current Current Total A continuity of Crombie’s senior unsecured notes is as follows: $ $ $ Opening balance at January 1, 2020 New borrowings or issuances Early redemption Closing balance at December 31, 2020 Opening balance at January 1, 2019 New borrowings or issuances Early redemption Closing balance at December 31, 2019 2020 150,000 175,000 200,000 150,000 150,000 150,000 110 (3,712) 1,121,398 $ 250,000 150,000 175,000 200,000 150,000 — — 627 (3,148) 922,479 December 31, 2020 December 31, 2019 971,398 150,000 1,121,398 $ $ $ $ $ $ 922,479 — 922,479 Senior Unsecured Notes 925,000 300,000 (100,000) 1,125,000 Senior Unsecured Notes 700,000 350,000 (125,000) 925,000 On October 9, 2020, Crombie issued on a private placement basis, $150,000 Series H notes (senior unsecured) maturing March 31, 2028. The net proceeds of the offering were used to repay existing debt; this included partial repayment of Series B unsecured notes, which Crombie called for early redemption in conjunction with this offering, and repayment of outstanding credit facilities. The notes were priced with an effective yield to maturity of 2.686% and sold at a price of $1,000.00 per $1,000.00 principal amount. Interest is payable in equal semi-annual instalments on March 31 and September 30. On October 9, 2020, Crombie issued on a private placement basis, $150,000 Series I notes (senior unsecured) maturing October 9, 2030. The net proceeds of the offering were used to repay existing debt; this included partial repayment of Series B unsecured notes, which Crombie called for early redemption in conjunction with this offering, and repayment of outstanding facilities. The notes were priced with an effective yield to maturity of 3.211% and sold at a price of $1,000.00 per $1,000.00 principal amount. Interest is payable in equal semi-annual instalments on April 9 and October 9. 2019 On December 20, 2019, Crombie issued on a private placement basis, $150,000 Series G notes (senior unsecured) maturing June 21, 2027. The proceeds were used to fund the repayment of upcoming secured mortgage maturities. The notes were priced with an effective yield to maturity of 3.917% and sold at a price of $1,000.00 per $1,000.00 principal amount. Interest is payable in equal semi-annual instalments on June 21 and December 21. 116 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020On August 26, 2019, Crombie issued, on a private placement basis, $200,000 Series F notes (senior unsecured) maturing August 26, 2026. The proceeds were used to fund the early repayment of the Series C notes and repay bank indebtedness. The notes were priced with an effective yield to maturity of 3.677% and sold at a price of $1,000.00 per $1,000.00 principal amount. Interest is payable in equal semi-annual instalments on February 26 and August 26. 9) EMPLOYEE FUTURE BENEFITS Crombie has a number of defined benefit and defined contribution plans providing pension and other retirement benefits to most of its employees. Defined contribution pension plans The contributions required by the employee and the employer are specified. The employee’s pension depends on what level of retirement income (for example, annuity purchase) can be achieved with the combined total of employee and employer contributions and investment returns over the period of plan membership, and the annuity purchase rates at the time of the employee’s retirement. Defined benefit plans The retirement benefit provides pension benefits to members designated in writing by the Board of Trustees based on a formula recognizing length of service and final average earnings. The annual pension payable at age 65 is equal to 2% of the final average base earnings multiplied by years of credited service (to a maximum of 30 years), offset by the deemed retirement income provided under the defined contribution pension plan and deferred profit sharing plan. For the purpose of calculating the deemed retirement income provided under the defined contribution pension plan and deferred profit sharing plan, the assumptions stipulated in the SERP plan text are used, including an assumed annuity conversion discount rate of 7.0%. The final average earnings are 12 times the average of the 60 highest months of eligible earnings. Employee contributions, if required, pay for part of the cost of the benefit, and the employer contributions fund the balance. The employer contributions are not specified or defined within the plan text; they are based on the result of actuarial valuations which determine the level of funding required to meet the total obligation as estimated at the time of the valuation. Crombie’s defined benefit plans are unfunded. Once participants attain age 55 and 5 years of continuous service, they can retire. The total pension payable is reduced by 5/12% for each month by which the early retirement precedes age 60 (62 for a member who was designated as a member on or after June 25, 2009). The normal form of pension payment is a 60% joint and survivor pension. The post-employment benefits program offered to Crombie employees and retirees in Canada is an open plan that provides life and medical benefits for grandfathered employees and employees retired prior to May 1, 2011 as well as critical illness coverage for other employees. Full-time employees must be over age 55 to be eligible for the post-employment benefits program. The total defined benefit cost related to pension plans and post-employment benefit plans for the year ended December 31, 2020 was $473 (year ended December 31, 2019 – $816). The plan typically exposes Crombie to actuarial risks such as: interest rate risk, mortality risk, and salary risk. (i) Interest rate risk – The present value of the defined benefit liability is calculated using discount rates that reflect the average yield, as at the measurement date, on high-quality corporate bonds of similar duration to the plans’ liabilities. A decrease in the market yield on high-quality corporate bonds will increase Crombie’s defined benefit liability. (ii) Mortality risk – The present value of the defined benefit plan is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability. (iii) Salary risk – The present value of the defined benefit plan liability is calculated by reference to the anticipated future salary of the plan participants. As such, an increase in the salary of plan participants over that anticipated will increase the plan’s liability. Senior Management Pension Plan Post-Employment Benefit Plans Most recent valuation date Next required valuation date December 31, 2020 December 31, 2021 January 1, 2019 January 1, 2022 The significant actuarial assumptions adopted in measuring the Company’s accrued benefit obligations and pension costs are as follows: December 31, 2020 December 31, 2019 Senior Management Pension Plan Post-Employment Benefit Plans Senior Management Pension Plan Post-Employment Benefit Plans Discount rate – accrued benefit obligation Rate of compensation increase 2.50% 3.00% 2.40% N/A 3.00% 3.00% 3.00% N/A For measurement purposes, a 4.75% (2019 – 5.00%) annual rate increase in the per capita cost of covered health care benefits was assumed. 117 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable GrowthThese assumptions were developed by management with the assistance of independent actuaries. Discount factors are determined close to year-end by reference to market yields of high-quality corporate bonds that have a maturity approximating the terms of the related pension obligation. Other assumptions are based on current actuarial benchmarks and management’s historical experience. The projected unit credit method is used to determine the present value of the defined benefit obligation and the related current service cost for all active members. Crombie uses December 31 as a measurement date for accounting purposes for its defined benefit pension plans. Information about Crombie’s defined benefit plans are as follows: December 31, 2020 December 31, 2019 Senior Management Pension Plan Post-Employment Benefit Plans Senior Management Pension Plan Total Post-Employment Benefit Plans Total Accrued benefit obligation Balance, beginning of year $ 5,646 $ 2,765 $ 8,411 $ 4,918 $ 4,202 $ 9,120 Current service cost Past service cost Interest cost Actuarial losses (gains) Benefits paid Balance, end of year Plan assets Fair value, beginning of year Employer contributions Benefits paid Fair value, end of year Funded status – deficit Current portion Non-current portion Accrued benefit obligation recorded as a liability Net expense Current service cost Interest cost Net expense 200 — 172 279 (200) 6,097 — 200 (200) — 6,097 200 5,897 6,097 200 172 372 $ $ $ $ $ $ 19 — 82 (218) (88) 2,560 — 88 (88) — 2,560 79 2,481 2,560 19 82 101 $ $ $ 219 — 254 61 (288) 8,657 — 288 (288) — 8,657 279 8,378 8,657 219 254 473 $ $ $ 211 235 178 304 (200) 5,646 — 200 (200) — 5,646 200 5,446 5,646 211 178 389 $ $ $ 37 — 155 (1,523) (106) 2,765 — 106 (106) — 2,765 89 2,676 2,765 37 155 192 $ $ $ 248 235 333 (1,219) (306) 8,411 — 306 (306) — 8,411 289 8,122 8,411 248 333 581 The table below outlines the sensitivity of the fiscal 2020 key economic assumptions used in measuring the accrued benefit plan obligations and related expenses of Crombie’s pension and other benefit plans. The sensitivity of each key assumption has been calculated independently. Changes to more than one assumption simultaneously may amplify or reduce the impact on the accrued benefit obligation or benefit plan expenses. There was no change to the method and assumptions used in preparing the sensitivity analysis from prior years. Senior Management Pension Plan Post-Employment Benefit Plans Benefit Obligations Benefit Cost1 Benefit Obligations Benefit Cost1 Discount rate Impact of: Growth rate of health costs Impact of: 1% increase 1% decrease 1% increase 1% decrease 2.50% (717) 876 2.50% — (3) 2.40% (305) 371 4.75% 188 (161) 2.40% 8 (12) 4.75% 5 (4) (1) Reflects the impact of the current service costs, the interest cost, and the expected return on assets. For the year ended December 31, 2020, the net defined contribution pension plans expense was $983 (year ended December 31, 2019 – $975). 118 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 202010) TRADE AND OTHER PAYABLES December 31, 2020 December 31, 2019 Current Non-current Total Current Non-current Total $ 51,960 $ 19,548 15,938 13,010 1,008 5,263 11,738 3,165 258 — — — — — — — 11,575 4,400 $ 51,960 $ 51,751 $ 19,548 15,938 13,010 1,008 5,263 11,738 14,740 4,658 29,932 9,665 11,913 — (947) 26,429 4,671 70 — — — — — — — 9,793 4,820 $ 51,751 29,932 9,665 11,913 — (947) 26,429 14,464 4,890 $ 121,888 $ 15,975 $ 137,863 $ 133,484 $ 14,613 $ 148,097 Tenant incentives and capital expenditures Property operating costs Prepaid rents Finance costs on investment property debt and notes Amounts payable to related party Fair value of interest rate swap agreements Distributions payable Unit-based compensation plans Deferred revenue Deferred Revenue During 2014, Crombie completed a sale-leaseback of the land component of an investment property. The proceeds received in excess of fair value of the land have been deferred and is being recognized as a reduction in property operating expenses over the term of the land lease. In addition, Crombie received a prepayment, from a related party, of their future obligation under a land sub-lease. This prepayment has also been deferred and is being recognized as a reduction in property operating expenses over the term of the land lease. 11) PROPERTY REVENUE Operating lease revenue Rental revenue contractually due from tenants1 Contingent rental revenue Straight-line rent recognition Tenant incentive amortization Lease termination income Revenue from contracts with customers Common area cost recoveries Parking revenue (1) Includes reimbursement of Crombie’s property tax expense. Year ended December 31, 2020 December 31, 2019 $ $ 343,113 $ 1,048 9,112 (17,849) 405 50,021 2,883 388,733 $ 344,803 1,843 10,287 (14,139) 1,670 48,722 5,555 398,741 The following table sets out tenants that contributed in excess of 10% of total property revenue: Sobeys Inc. (including all subsidiaries of Empire) $ 209,780 54.0% $ 207,948 52.2% Year ended December 31, 2020 December 31, 2019 119 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth 12) OPERATING LEASES Crombie as a Lessor Crombie’s operations include leasing commercial real estate. Future minimum rental income under non-cancellable tenant leases as at December 31, 2020, is as follows: Future minimum rental income $ 268,874 $ 257,782 $ 245,040 $ 234,208 $ 218,560 $ 1,497,941 $ 2,722,405 2021 2022 2023 2024 2025 Thereafter Total Year ending December 31, Crombie manages its residual risk in its investment properties through an active capital expenditure program and actively leasing any vacant spaces. The residual risk throughout Crombie’s portfolio is not considered significant. 13) GENERAL AND ADMINISTRATION EXPENSES AND CHANGE IN FAIR VALUE OF FINANCIAL INSTRUMENTS (a) General and administrative expenses Salaries and benefits Professional and public company costs Occupancy and other (b) Decrease (increase) in fair value of financial instruments Deferred Unit (“DU”) Plan 14) FINANCE COSTS — OPERATIONS Fixed rate mortgages Floating rate term, revolving, and demand facilities Capitalized interest Senior unsecured notes Interest income on finance lease receivable Interest on lease liability Finance costs – operations, expense Amortization of fair value debt adjustment and accretion income Change in accrued finance costs Amortization of effective swap agreements Capitalized interest1 Amortization of issue premium on senior unsecured notes Amortization of deferred financing charges Finance costs – operations, paid Year ended December 31, 2020 December 31, 2019 14,774 $ 3,292 2,468 20,534 $ 16,874 3,532 3,315 23,721 Year ended December 31, 2020 December 31, 2019 805 $ (1,337) Year ended December 31, 2020 December 31, 2019 $ $ $ $ 50,540 $ 3,791 (5,331) 41,333 (387) 1,862 91,808 312 (1,097) (510) 5,331 517 (3,006) 66,458 3,950 (4,759) 30,216 (401) 1,852 97,316 534 (2,352) (1,677) 4,759 442 (3,574) 95,448 $ 93,355 $ (1) As at December 31, 2020, interest was capitalized to qualifying development projects based on a weighted average interest rate of 3.47% (December 31, 2019 – 3.88%). 120 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 202015) UNITS OUTSTANDING Crombie REIT Units Class B LP Units and attached Special Voting Units Total Number of Units Amount Number of Units Amount Number of Units Amount Balance, January 1, 2020 89,697,623 $ 1,042,696 62,045,732 $ 716,628 151,743,355 $ 1,759,324 Net change in EUPP loans receivable Units issued under DRIP Units issued under unit based compensation plan Units issued (proceeds are net of issue costs) — 120,533 58,090 39 1,671 745 — 85,433 — — — 1,185 205,966 — 58,090 39 2,856 745 3,657,000 55,848 2,593,750 41,425 6,250,750 97,273 Balance, December 31, 2020 93,533,246 $ 1,100,999 64,724,915 $ 759,238 158,258,161 $ 1,860,237 Crombie REIT Units Class B LP Units and attached Special Voting Units Total Number of Units Amount Number of Units Amount Number of Units Amount Balance, January 1, 2019 89,597,604 $ 1,040,804 61,980,011 $ 715,654 151,577,615 $ 1,756,458 Net change in EUPP loans receivable Units issued under DRIP Units issued under unit based compensation plan — 92,685 7,334 422 1,356 114 — 65,721 — — 974 — — 158,406 7,334 422 2,330 114 Balance, December 31, 2019 89,697,623 $ 1,042,696 62,045,732 $ 716,628 151,743,355 $ 1,759,324 Crombie REIT Units Crombie is authorized to issue an unlimited number of REIT Units and an unlimited number of SVU and Class B LP Units. Issued and outstanding REIT Units may be subdivided or consolidated from time to time by the Trustees without the approval of the Unitholders. REIT Units are redeemable at any time on demand by the holders at a price per REIT Unit equal to the lesser of: (i) 90% of the weighted average price per Crombie REIT Unit during the period of the last ten days during which Crombie’s REIT Units traded; and (ii) an amount equal to the price of Crombie’s REIT Units on the date of redemption, as defined in the Declaration of Trust. The aggregate redemption price payable by Crombie in respect of any REIT Units surrendered for redemption during any calendar month will be satisfied by way of a cash payment in Canadian dollars within 30 days after the end of the calendar month in which the REIT Units were tendered for redemption, provided that the entitlement of Unitholders to receive cash upon the redemption of their REIT Units is subject to the limitation that: (i) (ii) (iii) the total amount payable by Crombie in respect of such REIT Units and all other REIT Units tendered for redemption, in the same calendar month must not exceed $50 (provided that such limitation may be waived at the discretion of the Trustees); at the time such REIT Units are tendered for redemption, the outstanding REIT Units must be listed for trading on the TSX or traded or quoted on any other stock exchange or market which the Trustees consider, in their sole discretion, provides representative fair market value prices for the REIT Units; and the normal trading of REIT Units is not suspended or halted on any stock exchange on which the REIT Units are listed (or if not listed on a stock exchange, in any market where the REIT Units are quoted for trading) on the redemption date or for more than five trading days during the 10-day trading period commencing immediately after the redemption date. On February 11, 2020, Crombie closed a public offering, on a bought deal basis, of 3,657,000 Units, at a price of $16.00 per Unit for proceeds of $55,848 net of issue costs. Crombie REIT Special Voting Units (“SVU”) and Class B LP Units The Declaration of Trust and the Exchange Agreement provide for the issuance of SVUs to the holders of Class B LP Units used solely for providing voting rights proportionate to the votes of Crombie’s REIT Units. The SVUs are not transferable separately from the Class B LP Units to which they are attached and will be automatically transferred upon the transfer of such Class B LP Unit. If the Class B LP Units are exchanged in accordance with the Exchange Agreement, a like number of SVUs will be redeemed and cancelled for no consideration by Crombie. The Class B LP Units issued by a subsidiary of Crombie to ECL Developments Limited (“ECLD”) are indirectly exchangeable on a one-for-one basis for Crombie’s REIT Units at the option of the holder, under the terms of the Exchange Agreement. Each Class B LP Unit entitles the holder to receive distributions from Crombie, pro rata with distributions made by Crombie on REIT Units. 121 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth On February 11, 2020, concurrently with the issue of the REIT Units, in satisfaction of its pre-emptive right, ECL Developments purchased 2,593,750 Class B LP Units and the attached SVUs at a price of $16.00 per Class B LP Unit for proceeds of $41,425 net of issue costs, on a private placement basis. Employee Unit Purchase Plan (“EUPP”) Crombie previously provided for REIT Unit purchase entitlements under the EUPP for certain senior executives. As at December 31, 2014, the EUPP was replaced with an RU Plan with a specific vesting period and no employee loans. As at December 31, 2020, there are loans receivable from executives of $1,207 under Crombie’s EUPP, representing 78,697 REIT Units, which are classified as a reduction to net assets attributable to Unitholders. The loans are being repaid through the application of the after-tax amounts of all distributions received on the REIT Units, as payments on interest and principal. The loans are required to be repaid by December 31, 2022. Loan repayments will result in a corresponding increase to net assets attributable to Unitholders. Market value of the REIT Units held as collateral at December 31, 2020 was $1,129. Distribution Reinvestment Plan (“DRIP”) Crombie has a DRIP whereby Canadian resident REIT Unitholders may elect to automatically have their distributions reinvested in additional REIT units. Units issued under the DRIP will be issued directly from the treasury of Crombie REIT at a price equal to the volume-weighted average trading price of the REIT units on the TSX for the five trading days immediately preceding the relevant distribution payment date, which is typically on or about the 15th day of the month following the declaration. Crombie recognizes the net proceeds in Net assets attributable to Unitholders. 16) SUPPLEMENTARY CASH FLOW INFORMATION (a) Items not affecting operating cash Year ended December 31, 2020 December 31, 2019 $ (9,112) $ (10,287) 14,139 (81,803) 6,000 74,313 11 4,809 (334) 2,330 15,174 8 (908) 1,337 24,789 17,849 (3,335) 6,600 75,567 — 2,999 72 2,856 — 7 (405) (805) 92,293 $ Year ended $ $ $ December 31, 2020 December 31, 2019 (13,579) $ (3,514) 1,193 (15,900) $ (12,340) (3,756) 3,996 (12,100) Items not affecting operating cash: Straight-line rent recognition Amortization of tenant incentives Gain on disposal of investment properties Impairment of investment properties Depreciation and amortization Unit-based compensation Amortization of effective swap agreements, financing charges, and other Loss (income) from equity accounted investments Non-cash distributions to Unitholders in the form of DRIP Units Non-cash accrued special distribution to Unitholders Income tax expense Non-cash lease termination income Change in fair value of financial instruments b) Change in other non-cash operating items Cash provided by (used in): Trade receivables Prepaid expenses and deposits and other assets Payables and other liabilities 122 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 202017) RELATED PARTY TRANSACTIONS As at December 31, 2020, Empire, through its wholly-owned subsidiary ECLD, holds a 41.5% indirect interest in Crombie. Related party transactions primarily include transactions with entities associated with Crombie through Empire’s indirect interest. Related party transactions also include transactions with joint venture entities in which Crombie has a 50% interest, as well as transactions with key management personnel and post- employment benefit plans. Related party transactions are measured at the amount of consideration established and agreed by the related parties. Crombie’s revenue (expense) transactions with related parties are as follows: Property revenue Property revenue Head lease income Lease termination income Property operating expenses General and administrative expenses Property management services recovered Other general and administrative expenses Finance costs – operations Interest rate subsidy Finance costs – distributions to Unitholders Year ended December 31, 2020 December 31, 2019 $ $ $ $ $ $ $ $ 209,780 1,162 136 (58) 594 (258) 256 (58,194) $ $ $ $ $ $ $ $ 207,948 856 521 (60) 602 (240) 279 (62,303) Crombie provides property management, leasing services and environmental management to specific properties owned by certain subsidiaries of Empire on a fee for service basis pursuant to a Management Agreement. Revenue generated from the Management Agreement is being recognized as a reduction of general and administrative expenses. During the year ended December 31, 2020, Crombie issued 85,433 (December 31, 2019 – 65,721) Class B LP Units to ECLD under the DRIP (Note 15). On May 28, 2020, Crombie purchased a property from a subsidiary of Empire for a total purchase price of $4,535 before transaction costs. On December 15, 2020, Crombie purchased a property from a subsidiary of Empire for a total purchase price of $17,100 before transaction costs. During the year ended December 31, 2020, Crombie invested $40,554 in properties anchored by subsidiaries of Empire, which resulted in amended lease terms. These amounts have been included in tenant incentive additions or income property additions depending on the nature of the work completed. The costs are being amortized over the amended lease terms or the useful life of the projects, as applicable. Amounts due from related parties include $15,533 (December 31, 2019 – $15,533) in 6% subordinated notes receivable due from Bronte Village Limited Partnership and The Duke Limited Partnership. Crombie has a mortgage payable due to 1600 Davie Limited Partnership of $25,526 (December 31, 2019 – $20,401). This mortgage relates to the commercial component of the Davie Street development, 100% of which is included in Crombie’s financial statements. Key management personnel compensation Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of Crombie. The following are considered to be Crombie’s key management personnel: the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and the two other highest compensated executives. The remuneration of members of key management during the year was approximately as follows: Year ended December 31, 2020 December 31, 2019 Salary, bonus, and other short-term employee benefits Total compensation paid to Trustees Other long-term benefits $ $ 6,193 $ 865 122 7,180 $ 5,899 894 109 6,902 123 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth18) FINANCIAL INSTRUMENTS (a) Fair Value of Financial Instruments The fair value of a financial instrument is the estimated amount that Crombie would receive to sell a financial asset or pay to transfer a financial liability in an orderly transaction between market participants at the measurement date. Fair value determination is classified within a three-level hierarchy, based on observability of significant inputs, as follows: Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 – unobservable inputs for the asset or liability. There were no transfers between levels of the fair value hierarchy during the period ended December 31, 2020. The fair value of other financial instruments is based on discounted cash flows using discount rates that reflect current market conditions for instruments with similar terms and risks. The following table summarizes the estimated fair value of other financial instruments which have a fair value different from their carrying value: Financial assets Long-term receivables1 Financial liabilities Investment property debt Senior unsecured notes Total other financial liabilities December 31, 2020 December 31, 2019 Fair Value Carrying Value Fair Value Carrying Value $ $ $ 25,042 1,427,367 1,206,285 $ $ 25,051 1,336,560 1,125,000 2,633,652 $ 2,461,560 $ $ $ 23,911 1,400,821 946,700 2,347,521 $ $ $ 24,120 1,363,385 925,000 2,288,385 (1) Long-term receivables include amounts in other assets for the capital expenditure program, interest rate subsidy, and receivable from related parties. The fair value of the long-term receivables, investment property debt, and senior unsecured notes are Level 2. Due to their short-term nature, the carrying value of the following financial instruments approximates their fair value at the balance sheet date: • Cash and cash equivalents • Trade receivables • Trade and other payables (excluding any embedded derivatives). (b) Risk Management In the normal course of business, Crombie is exposed to a number of financial risks that can affect its operating performance. The more significant risks, and the actions taken to manage them, are as follows: Credit Risk Credit risk arises from the possibility that tenants may experience financial difficulty and be unable to fulfil their lease commitments. A provision for doubtful accounts and other NOI adjustments are taken for all anticipated collectability risks. Crombie mitigates credit risk by geographical diversification, diversifying both its tenant mix and asset mix, and conducting credit assessments for new and renewing tenants. In measuring tenant concentration, Crombie considers both the annual minimum rent and total property revenue of major tenants: • Crombie’s largest tenant, Empire (including Sobeys and all other subsidiaries of Empire), represents 54.9% of annual minimum rent; no other tenant accounts for more than 3.3% of Crombie’s minimum rent. • Total property revenue includes operating and realty tax cost recovery income and percentage rent. These amounts can vary by property type, specific tenant leases and where tenants may directly incur and pay operating and realty tax costs. For the year ended December 31, 2020, Empire (including Sobeys and all other subsidiaries of Empire) represents 54.0% of total property revenue. Excluding these tenants, no other tenant accounts for more than 4.1% of Crombie’s total property revenue. • Over the next five years, leases on no more than 6.2% of the gross leasable area of Crombie will expire in any one year. Receivables are substantially comprised of current balances due from tenants and past due receivables. The balance of accounts receivable past due is usually not significant; however, historically low receivable balances have increased significantly during the year as a result of the impacts of the COVID-19 pandemic. Generally, rents are due the first of each month and other tenant billings are due 30 days after invoiced, and in general, balances over 30 days are considered past due. The total provision for doubtful accounts is reviewed at each balance sheet date and current and long-term accounts receivable are reviewed on a regular basis. 124 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020Provision for doubtful accounts, beginning of year Additional provision Recoveries Write-offs Provision for doubtful accounts, end of year Year ended December 31, 2020 December 31, 2019 $ $ 340 $ 8,751 (749) (387) 7,955 $ 345 284 (62) (227) 340 Crombie assesses, on a forward-looking basis, the expected credit losses associated with its rent receivables. In determining the expected credit losses, Crombie takes into account, on a tenant-by-tenant basis, the payment history, future expectations, and knowledge gathered through discussions for rental concessions, applications for rental relief through government programs, and ongoing discussions with tenants. Crombie’s assessment of expected credit losses is subjective and, due to the impacts of COVID-19, the degree of uncertainty in our assessments has increased. During the year ended December 31, 2020, Crombie has recorded a bad debt expense of $10,894, with the corresponding amount recorded as an expected credit loss against our accounts receivable balance. Interest Rate Risk Interest rate risk is the potential for financial loss arising from increases in interest rates. Crombie mitigates this risk by utilizing staggered debt maturities and limiting the use of permanent floating rate debt and, on occasion, utilizing interest rate swap agreements. Crombie does not enter into interest rate swaps on a speculative basis. As at December 31, 2020 • Crombie’s weighted average term to maturity of its fixed rate mortgages was 5.7 years. • Crombie’s weighted average term to maturity of its unsecured notes was 5.1 years. • Crombie has a floating rate revolving credit facility available to a maximum of $400,000 subject to available borrowing base, with a balance of $17,712 at December 31, 2020; and • Crombie has an unsecured bilateral credit facility available to a maximum of $130,000 with a balance of $35,000 at December 31, 2020. Crombie has interest rate swap agreements in place on $112,510 of floating rate mortgage debt. A fluctuation in interest rates would have had an impact on Crombie’s operating income related to the use of floating rate debt. The following table looks at the impacts of selected interest rate moves on operating income: Impact on operating income attributable to Unitholders of interest rate changes on the floating rate revolving credit facility Impact of a 0.5% interest rate change Impact of a 1.0% interest rate change Liquidity Risk Year ended December 31, 2020 Decrease in rate Increase in rate $ 648 $ 1,296 (648) (1,296) The real estate industry is highly capital intensive. Liquidity risk is the risk that Crombie may not have access to sufficient debt and equity capital to fund its growth program, refinance debt obligations as they mature, or meet its ongoing obligations as they arise. Cash flow generated from operating the property portfolio represents the primary source of liquidity used to service the interest on debt, fund general and administrative expenses, reinvest in the portfolio through capital expenditures, as well as fund tenant incentive costs and make distributions to Unitholders. Debt repayment requirements are primarily funded from refinancing Crombie’s maturing debt obligations. Property acquisition funding requirements are funded through a combination of accessing the debt and equity capital markets and recycling capital from property dispositions. There is a risk that the debt capital markets may not refinance maturing fixed rate and floating rate debt on terms and conditions acceptable to Crombie or at any terms at all. Crombie seeks to mitigate this risk by staggering its debt maturity dates. There is also a risk that the equity capital markets may not be receptive to a REIT unit offering issue from Crombie with financial terms acceptable to Crombie. Crombie mitigates its exposure to liquidity risk utilizing a conservative approach to capital management (see Note 19). Access to the $400,000 floating rate revolving credit facility is limited by the amount utilized under the facility and the amount of any outstanding letters of credit, and cannot exceed the borrowing base security provided by Crombie. 125 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable GrowthThe estimated payments, including principal and interest, on financial liabilities to maturity date are as follows: Contractual Cash Flows1 2021 2022 2023 2024 2025 Thereafter Twelve months ending December 31, Fixed rate mortgages2 $ 1,507,553 $ 176,290 $ 239,842 $ 309,376 $ 262,088 $ 62,923 $ 457,034 Senior unsecured notes 1,326,040 189,051 185,899 30,476 30,476 197,776 Trade and other payables 124,853 108,878 Lease liabilities 148,115 2,537 2,953 2,476 1,714 2,390 964 2,254 964 2,267 692,362 9,380 136,191 Credit facilities Total 3,106,561 476,756 431,170 343,956 295,782 263,930 1,294,967 64,811 36,176 672 18,215 9,748 — — $ 3,171,372 $ 512,932 $ 431,842 $ 362,171 $ 305,530 $ 263,930 $ 1,294,967 (1) Contractual cash flows include principal and interest and ignore extension options. (2) Reduced by the interest rate subsidy payments to be received from Empire. 19) CAPITAL MANAGEMENT Crombie’s objective when managing capital on a long-term basis is to maintain overall indebtedness, at reasonable levels, utilize staggered debt maturities, minimize long-term exposure to excessive levels of floating rate debt and maintain conservative payout ratios. Crombie’s capital structure consists of the following: Fixed rate mortgages Credit facilities Senior unsecured notes Crombie REIT Unitholders SVU and Class B LP Unitholders Lease liabilities December 31, 2020 December 31, 2019 1,267,044 $ 1,302,510 62,256 1,121,398 881,511 596,795 29,914 54,308 922,479 870,792 584,251 29,419 3,958,918 $ 3,763,759 $ $ At a minimum, Crombie’s capital structure is managed to ensure that it complies with the limitations pursuant to Crombie’s Declaration of Trust, the criteria contained in the Income Tax Act (Canada) in regard to the definition of a REIT and existing debt covenants. Some of the restrictions pursuant to Crombie’s Declaration of Trust would include, among other items: • A restriction that Crombie shall not incur indebtedness (other than by the assumption of existing indebtedness) where the indebtedness would exceed 75% of the market value of an individual property; and • A restriction that Crombie shall not incur indebtedness of more than 60% of gross book value. 126 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 For debt to gross book value calculation, Crombie does not include in total debt the financial liabilities to REIT Unitholders and to holders of Class B LP Units, as shown on the balance sheet as Net assets attributable to Unitholders. Crombie’s debt to gross book value as defined in Crombie’s Declaration of Trust is as follows: Year ended December 31, 2020 December 31, 2019 Fixed rate mortgages Senior unsecured notes Floating rate revolving credit facility Joint operation credit facilities Bilateral credit facility Lease liabilities Total debt outstanding Less: Applicable fair value debt adjustment Debt Income properties, cost1 Properties under development, cost Below-market lease component, cost2 Investment in joint ventures Other assets, cost Cash and cash equivalents Deferred financing charges Investment properties held for sale, cost Interest rate subsidy Gross book value Debt to gross book value – cost basis $ 1,274,304 $ $ $ 1,125,000 17,712 9,544 35,000 29,914 2,491,474 (283) 2,491,191 4,146,652 $ $ 63,377 64,873 51,043 463,699 63,293 10,972 33,263 (283) $ 4,896,889 $ 50.9% 1,309,077 925,000 15,339 8,969 30,000 29,419 2,317,804 (539) 2,317,265 4,061,957 96,213 64,754 45,123 396,374 — 9,715 — (539) 4,673,597 49.6% (1) Includes impairments on land of $5,657. (2) Below-market lease component is included in the carrying value of investment properties. Under the amended terms governing the floating rate revolving credit facility, Crombie is entitled to borrow a maximum of 70% of the fair market value of assets subject to a first security position and 60% of the excess fair market value over first mortgage financing of assets subject to a second security position or a negative pledge. The terms of the revolving credit facility also require that Crombie must maintain certain covenants: • annualized net operating income for the prescribed properties must be a minimum of 1.4 times the coverage of the related annualized debt service requirements; • annualized net operating income on all properties must be a minimum of 1.4 times the coverage of all annualized debt service requirements; • access to the revolving credit facility is limited by the amount utilized under the facility and the amount of any outstanding letters of credit not to exceed the borrowing base security provided by Crombie; and • cash distributions to Unitholders are limited to 100% of funds from operations. As at December 31, 2020, Crombie is in compliance with all externally imposed capital requirements and all covenants relating to its debt facilities. 20) LEASE LIABILITIES Crombie’s future minimum lease payments as a lessee are as follows: Twelve months ending December 31, Total Future minimum lease payments $ 148,115 Finance charges (118,201) Present value of lease payments $ 29,914 2021 2,537 (1,865) 672 $ $ 2022 2,476 (1,847) 629 2023 2,390 (1,832) 558 $ $ 2024 2,254 (1,823) 431 $ $ $ $ 2025 Thereafter $ $ 2,267 (1,815) 452 $ $ 136,191 (109,019) 27,172 127 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable GrowthLease liabilities are presented in the consolidated balance sheet as follows: Current Non-current Total December 31, 2020 December 31, 2019 $ $ 672 29,242 29,914 $ $ 744 28,675 29,419 Some of Crombie’s lease agreements contain contingent rent clauses. Contingent rental payments are recognized in the consolidated statements of comprehensive income as required when contingent criteria are met. The lease agreements contain renewal options and purchase options. For the year ended December 31, 2020, minimum lease payments of $2,598 were paid by Crombie. 21) COMMITMENTS, CONTINGENCIES, AND GUARANTEES There are various claims and litigation in which Crombie is involved, arising out of the ordinary course of business operations. In the opinion of management, any liability that would arise from such contingencies in excess of existing accruals would not have a significant adverse effect on these financial statements. Crombie obtains letters of credit to support its obligations with respect to construction work on its investment properties and satisfying mortgage financing requirements. As at December 31, 2020, Crombie has a total of $5,580 in outstanding letters of credit related to: Construction work being performed on investment properties Mortgage lenders primarily to satisfy mortgage financings on redevelopment properties Total outstanding letters of credit December 31, 2020 December 31, 2019 $ $ 3,740 1,840 5,580 $ $ 3,805 1,840 5,645 As at December 31, 2020, Crombie had signed construction contracts totalling $358,813 of which $288,183 has been paid. This includes contracts signed within joint ventures at Crombie’s ownership percentage. Crombie has 100% guarantees on mortgages related to properties in which it has less than a 100% interest. The mortgages payable related to these guarantees are secured by specific charges against the properties. As at December 31, 2020, Crombie has provided guarantees of approximately $140,577 (December 31, 2019 – $145,713) on mortgages in excess of their ownership interest in the properties. Responsibility for ongoing payments of principal and interest on these mortgages remains with the joint owners of the properties. The mortgages have a weighted average term to maturity of 3.8 years. Under the terms of head leases with certain of Crombie’s joint operation partners, Crombie guarantees its joint operation partners their portion of any uncollected rent receivable from the sub-tenant. 128 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 202022) SUBSEQUENT EVENTS (a) On January 18, 2021, Crombie declared distributions of 7.417 cents per Unit for the period from January 1, 2021 to and including January 31, 2021. The distributions were paid on February 15, 2021, to Unitholders of record as of January 31, 2021. (b) On January 29, 2021, Crombie disposed of a 100% interest in two retail properties totalling 29,000 square feet of gross leasable area. Total proceeds, before closing adjustments and transactions costs, were approximately $17,600. (c) On February 10, 2021, Crombie acquired a 100% interest in a retail property from a subsidiary of Empire totalling 26,000 square feet for $3,242, excluding closing and transaction costs. (d) On February 16, 2021, Crombie declared distributions of 7.417 cents per Unit for the period from February 1, 2021 to and including February 28, 2021. The distributions will be paid on March 15, 2021, to Unitholders of record as of February 28, 2021. 23) SEGMENT DISCLOSURE Crombie owns and operates primarily retail, retail-related industrial, office, and mixed-use real estate assets located in Canada. Management, in measuring Crombie’s performance or making operating decisions, does not distinguish or group its operations on a geographical or other basis. Accordingly, Crombie has a single reportable segment. 24) INDEMNITIES Crombie has agreed to indemnify its trustees and officers, and particular employees, in accordance with Crombie’s policies. Crombie maintains insurance policies that may provide coverage against certain claims. Crombie signed an indemnity for a bond on a several basis for $1,337 related to a lien registered by a third-party supplier at our 1600 Davie Limited Partnership. Subsequent to year-end, the lien and bond were removed. 129 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable GrowthPROPERTY PORTFOLIO Property Location Description Clarenville Conception Bay Deer Lake NEWFOUNDLAND & LABRADOR Random Square Conception Bay Plaza 2A Commerce Street 71 Grandview Boulevard Grand Bank Grand Falls 21 Cromer Avenue Placentia 69 Blockhouse Road St. John’s 10 Elizabeth Avenue St. John’s 45 Ropewalk Lane St. John’s Avalon Mall St. John’s Hamlyn Road Plaza St. John’s Kenmount Woodgate St. John’s Topsail Road Plaza St. John’s Torbay Road Plaza Retail – Enclosed Retail – Plaza Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Enclosed Retail – Plaza Mixed Use Retail – Plaza Retail – Plaza PRINCE EDWARD ISLAND 400 University Avenue Kinlock Plaza Charlottetown Stratford Retail – Freestanding Retail – Plaza NOVA SCOTIA Amherst Centre Amherst Plaza 151 Church Street Hemlock Square Mill Cove Plaza 2 Forest Hills Parkway Dartmouth Crossing — Amherst Amherst Antigonish Bedford Bedford Cole Harbour Cineplex Dartmouth Dartmouth Panavista Drive Dartmouth Penhorn Plaza Dartmouth Russell Lake Elmsdale Elmsdale Plaza Fall River Fall River Plaza Halifax North & Windsor Street Halifax Park West Plaza Halifax Queen Street Plaza Lower Sackville Downsview Mall Downsview Plaza Lower Sackville Aberdeen Business Centre New Glasgow New Glasgow Highland Square New Glasgow West Side Plaza New Minas County Fair Mall New Waterford 75 Emerald Street Pictou Blink Bonnie Plaza Port Hawkesbury 622 Reeves Street 22579 Highway 7 Sheet Harbour 279, 289 & 303 Herring Sydney Mines Tatamagouche Timberlea Truro Upper Tantallon Cove Road Spryfield Stellarton 293 Foord Street Prince Street Plaza Sydney Sydney Shopping Centre Sydney 39 Pitt Street North Shore Centre 70 Marketway Lane Fundy Trail Centre Tantallon Plaza Scotia Square Properties Barrington Place Barrington Tower Brunswick Place CIBC Building Cogswell Tower Duke Tower Scotia Square Scotia Square Parkade Halifax Halifax Halifax Halifax Halifax Halifax Halifax Halifax NEW BRUNSWICK 850 Saint Peters Avenue Bathurst 477 Paul Street 501 Regis Street Edmundston Brookside Mall Prospect Street Plaza Uptown Centre 1234 Main Street Elmwood Drive Mountain Road Northwest Centre, Mountain Road Dieppe Dieppe Edmundston Fredericton Fredericton Fredericton Moncton Moncton Moncton Moncton Vaughan Harvey Plaza Moncton 273 Pleasant Street Newcastle Riverview — Findlay Retail – Enclosed Retail – Plaza Retail – Freestanding Retail – Plaza Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Freestanding Mixed Use Retail – Plaza Retail – Plaza Retail – Plaza Retail – Freestanding Retail – Plaza Retail – Freestanding Retail – Plaza Retail – Plaza Mixed Use Retail – Enclosed Retail – Plaza Retail – Enclosed Retail – Freestanding Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Plaza Retail – Freestanding Retail – Plaza Retail - Freestanding Retail – Plaza Retail – Plaza Mixed Use Office Mixed Use Office Office Office Mixed Use Mixed Use Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Plaza Office Retail – Plaza Retail – Plaza 228,000 24,000 6,000 184,000 150,000 22,000 45,000 5,000 145,000 31,000 147,000 101,000 50,000 143,000 55,000 79,000 226,000 389,000 200,000 71,000 241,000 3,000 51,000 34,000 1,000 73,000 24,000 71,000 189,000 18,000 17,000 41,000 127,000 157,000 191,000 186,000 255,000 206,000 204,000 217,000 216,000 - 4,823,000 18,000 52,000 25,000 42,000 43,000 22,000 262,000 140,000 95,000 17,000 81.8 100.0 100.0 96.0 100.0 100.0 100.0 100.0 94.0 100.0 99.3 98.7 100.0 95.4 100.0 98.5 97.5 100.0 100.0 94.3 56.8 100.0 100.0 100.0 100.0 100.0 100.0 100.0 93.9 100.0 100.0 100.0 97.9 98.7 98.5 99.7 92.4 90.0 94.3 94.8 92.9 - 94.2 100.0 100.0 100.0 100.0 100.0 100.0 87.8 89.9 100.0 100.0 Retail – Freestanding Retail – Plaza Retail – Freestanding 52,000 103,000 20,000 100.0 100.0 100.0 Boulevard Riverview Place Fairvale Plaza Riverview Riverview Rothesay Retail – Plaza Mixed Use Retail – Freestanding 66,000 149,000 52,000 94.8 80.7 100.0 130 GLA (approx. sq. ft.) % Occu- pancy 108,000 65,000 29,000 19,000 3,000 2,000 80,000 6,000 552,000 38,000 86,000 158,000 139,000 1,285,000 96.1 89.9 100.0 100.0 100.0 100.0 100.0 100.0 94.1 83.4 100.0 98.5 82.7 94.1 5,000 84,000 89,000 100.0 100.0 100.0 Property Catherwood Street Loch Lomond Place Charlotte Mall Tracadie Location Saint John Saint John St. Stephen Tracadie Description Retail – Freestanding Mixed Use Retail – Plaza Retail – Plaza GLA (approx. sq. ft.) % Occu- pancy 5,000 193,000 116,000 40,000 1,512,000 100.0 75.9 97.8 83.8 91.3 QUÉBEC 1500 rue de Bretagne 1020 boul. Monseigneur- de-Laval Beauport Plaza 50 rue Bourgeoys 3260 boul. Lapiniere & 3305 Broadway 645 boul. Thibeau 80-90 boul. D’Anjou Marché St-Charles-de- Drummond 1205 rue de Neuville 1248 boul. de la Verendrye Baie Comeau Retail – Freestanding 50,000 100.0 Baie Saint Paul Beauport Bromptonville Retail – Plaza Retail – Plaza Retail – Plaza 65,000 78,000 7,000 100.0 97.0 37.7 Brossard Cap-de-la- Madeleine Chateauguay Retail – Plaza Retail – Freestanding 48,000 49,000 96.2 100.0 Retail – Plaza 91,000 100.0 Drummondville Gatineau Retail – Plaza Retail – Plaza 48,000 31,000 100.0 100.0 Est Retail – Plaza Gatineau Havre-Saint-Pierre Retail – Freestanding 1298 rue de la Digue Retail – Freestanding Huntingdon 2195 chemin Ridge Retail – Plaza Lavaltrie Centre Lavaltrie Retail – Plaza Lavaltrie Marché Lavaltrie Retail – Plaza Les Saules Les Saules Retail – Freestanding 714 boul. Saint-Laurent O Louiseville Retail – Plaza 1450 & 1454 rue Royale Malartic Retail – Freestanding 551 avenue du Phare E Matane McMasterville Retail – Plaza McMasterville Retail – Plaza Mercier Mercier Retail – Plaza Marché St-Augustin Mirabel Retail – Freestanding 1 avenue Westminster N Montreal Retail – Plaza 3964 Notre Dame St W Montreal Retail – Freestanding Montreal 5651 rue de Verdun Industrial Montreal Pointe-Claire Retail – Plaza Paspebiac Paspebiac Plaza Retail – Freestanding Quebec City Lebourgneuf Retail – Freestanding Rimouski 395 avenue Sirois Retail – Freestanding 375 boul. Jessop Rimouski Retail – Plaza 254 boul. de l’Hotel de Ville Riviere du Loup Retail – Freestanding Rouyn-Noranda 680 avenue Chausse Retail – Plaza Saint-Amable Carrefour Bourgeois Retail – Plaza Saint-Apollinaire Saint-Apollinaire Plaza Retail – Freestanding Saint-Donat 867-871 rue Principale Retail – Freestanding Saint-Georges- 8980 boul. Lacroix de-Beauce 71,000 26,000 19,000 43,000 52,000 69,000 3,000 28,000 3,000 55,000 58,000 38,000 10,000 41,000 6,000 300,000 73,000 6,000 11,000 41,000 72,000 5,000 64,000 62,000 34,000 5,000 92.1 100.0 100.0 100.0 97.8 100.0 100.0 100.0 100.0 98.6 100.0 100.0 100.0 100.0 100.0 100.0 91.7 100.0 100.0 100.0 100.0 100.0 93.1 100.0 100.0 100.0 131-A avenue Sainte- Cecile Saint Romuald Plaza 10505 boul. Sainte-Anne Sainte-Anne-de- Saint-Pie Saint Romuald Beaupré Shawinigan Shawinigan Sherbrooke 2959 rue King O Sherbrooke 3950 rue King O 411 boul. Poliquin Sorel-Tracy 1101 boul. de la Piniere O Terrebonne ONTARIO Ancaster 977 Golf Links Road Barrie 409 Bayfield Street Bowmanville 680 Longworth Avenue Bradford 20 Melbourne Drive Brampton Brampton Mall Brampton Brampton Plaza Burlington Burlington Plaza Milltowne Plaza Burlington 142 Dundas Street South Cambridge Cambridge 807 King Street Chatham 215 Park Avenue W Dorchester Village Centre Fenelon Falls Lindsay Street Centre Fort Frances 417 Scott Street Georgetown Sinclair Place Grimbsy 44 Livingston Avenue Grimsby Grimsby Centre Havelock Havelock Centre Kenora 400 First Avenue S London London Pine Valley Niagara Falls 5931 Kalar Road Niagara Falls Niagara Plaza Nepean Village Square Mall North Bay Algonquin Avenue Mall Orangeville 500 Riddell Road Orleans 5150 Innes Road Retail – Freestanding Retail – Plaza Retail – Freestanding 14,000 76,000 4,000 100.0 94.8 100.0 Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Freestanding Industrial 67,000 13,000 6,000 40,000 235,000 2,117,000 100.0 100.0 100.0 100.0 100.0 98.6 Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Freestanding Retail – Plaza Retail – Plaza Retail – Plaza Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Plaza Retail – Plaza Retail – Plaza Retail – Plaza Retail – Freestanding Retail – Plaza 32,000 24,000 42,000 4,000 103,000 38,000 70,000 11,000 4,000 9,000 5,000 32,000 4,000 43,000 28,000 36,000 29,000 2,000 4,000 39,000 6,000 64,000 91,000 163,000 5,000 63,000 100.0 100.0 100.0 100.0 95.8 100.0 76.8 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 94.0 100.0 100.0 CROMBIE REIT | Annual Report 2020Property Location Description GLA (approx. sq. ft.) % Occu- pancy Parry Sound Peterborough Scarborough Scarborough St. Catharines Stittsville Stoney Creek Thornbury Taunton and Wilson Plaza Oshawa Parry Sound Rockhaven Plaza 3130 Danforth Avenue McCowan Square Mountain Locks Plaza Stittsville Corner Stoney Creek Plaza 105 Arthur Street W 1099 Broadview Avenue Toronto 3362-3370 Yonge Street Toronto Toronto Queensway Plaza 8265 Huntington Road Vaughan 385 Springbank Avenue Woodstock MANITOBA East St. Paul 3156 Bird’s Hill Road E Neepawa 498 Mountain Avenue Selkirk 318 Manitoba Avenue 285 Marion Street Winnipeg 469-499 River Avenue Winnipeg 594 Mountain Avenue Winnipeg Winnipeg 654 Kildare Avenue Winnipeg 655 Osborne Street 920 Jefferson Avenue Winnipeg 1305-1321 Pembina Highway Winnipeg 2155 Pembina Highway Winnipeg 3381 & 3393 Portage Avenue Kildonan Green River East Plaza Winnipeg Winnipeg Winnipeg Moose Jaw North Battleford Prince Albert SASKATCHEWAN 200 1st Avenue NW 9801 Territorial Drive 2895 2nd Avenue W 2231 East Quance Street Regina Regina 2915 13th Avenue Regina 4250 Albert Street Saskatoon 1860 McOrmond Drive Saskatoon River City Centre Retail – Plaza Retail – Plaza Retail – Plaza Retail – Freestanding Retail – Plaza Retail – Plaza Retail – Plaza Retail – Plaza Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Plaza Industrial Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding 107,000 46,000 60,000 3,000 61,000 85,000 111,000 12,000 40,000 15,000 29,000 67,000 793,000 55,000 2,435,000 4,000 2,000 5,000 38,000 59,000 18,000 43,000 20,000 55,000 98.0 100.0 100.0 100.0 100.0 96.8 99.1 100.0 100.0 100.0 100.0 54.3 100.0 97.8 97.2 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Retail – Plaza Retail – Freestanding 39,000 46,000 100.0 100.0 Retail – Freestanding Retail – Plaza Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Plaza Retail – Freestanding Retail – Plaza 55,000 74,000 84,000 542,000 39,000 30,000 56,000 19,000 20,000 41,000 58,000 160,000 423,000 100.0 96.7 100.0 99.5 100.0 100.0 100.0 100.0 100.0 97.6 100.0 82.7 93.2 ALBERTA 318 Marten Street 5700 50th Street Beaumont Shopping Centre 550 Cassils Road & 4 Street W 55 Castleridge Boulevard Banff Beaumont Retail – Freestanding Retail – Plaza 19,000 21,000 100.0 100.0 Beaumont Retail – Plaza 58,000 100.0 Brooks Retail – Plaza 61,000 100.0 NE Calgary 99 Crowfoot Crescent NW Calgary 101 Crowfoot Way Calgary 110-620 McKenzie Towne Gate SE Calgary Calgary 410 10 Street NW 511 17 Avenue SE Calgary 504 & 524 Elbow Drive SW Calgary 813 11 Avenue SW Calgary 850 Saddletowne Circle Retail – Freestanding Retail – Plaza Retail – Freestanding 6,000 75,000 10,000 100.0 100.0 100.0 Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Freestanding 9,000 38,000 42,000 25,000 40,000 100.0 100.0 100.0 100.0 100.0 NE Calgary Retail – Freestanding 6,000 100.0 1818 Centre Street NE & 134 17 Avenue NE 2425 34 Avenue SW 3550 32 Avenue NE 5048 16 Avenue NW 5607 4 Street NW South Trail Plaza Strathcona Square 1200 Railway Avenue 135 Chestermere Station Way 304 5 Avenue W 400 & 500 Manning Calgary Calgary Calgary Calgary Calgary Calgary Calgary Canmore Retail – Freestanding Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Plaza Retail – Plaza Retail – Freestanding 36,000 48,000 69,000 21,000 51,000 79,000 81,000 53,000 100.0 100.0 100.0 100.0 94.1 100.0 98.6 100.0 Chestermere Cochrane Retail – Freestanding Retail – Freestanding 43,000 54,000 100.0 100.0 Crossing N Edmonton 2304 109 Street NW Edmonton 2534 Guardian Road NW Edmonton Edmonton 5119 167 Avenue NW Edmonton 5309 Ellerslie Road Edmonton 8118 118 Avenue NW Edmonton 8204 109 Street NW Edmonton 9611 167 Avenue NW Edmonton 10907 82 Avenue NW Edmonton 12950 137 Avenue NW Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Freestanding 49,000 48,000 49,000 30,000 50,000 22,000 34,000 37,000 21,000 55,000 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Property Location Description 13550 Victoria Trail Millwood Commons Namao Centre 304 54 Street 9601 Franklin Avenue Clearwater Landing 8100-8300 100 Street 9925 114 Avenue Leduc Centre 606 4 Avenue S 1760 23 Street 2750 Fairway Plaza Edmonton Edmonton Edmonton Edson Fort McMurray Fort McMurray Grand Prairie Grand Prairie Leduc Lethbridge Lethbridge Retail – Freestanding Retail – Plaza Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Plaza Retail – Plaza Retail – Plaza Retail – Freestanding Retail – Freestanding GLA (approx. sq. ft.) % Occu- pancy 37,000 29,000 34,000 33,000 4,000 143,000 67,000 62,000 138,000 20,000 45,000 100.0 100.0 100.0 100.0 100.0 96.5 100.0 100.0 100.0 100.0 100.0 Road S Lethbridge Retail – Plaza 7,000 100.0 West Highlands Towne Centre Lethbridge Retail – Plaza 29,000 100.0 West Lethbridge Towne Centre 615 Division Avenue S 410 & 610 Big Rock Lane Okotoks Gaetz South Plaza 260199 High Plains Red Deer Lethbridge Medicine Hat Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Plaza 104,000 43,000 5,000 74,000 99.1 100.0 100.0 97.8 Rocky View Sherwood Park Industrial Retail – Freestanding 655,000 23,000 100.0 100.0 Boulevard 688 Wye Road 1109 James Mowatt Trail SW 94 McLeod Avenue 395 St. Albert Trail 4607 50 Street 100 Ranch Market 4202 South Park Drive Southbrook Spruce Grove St. Albert Stettler Strathmore Stony Plain Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding 23,000 6,000 53,000 31,000 35,000 5,000 3,045,000 100 Mile House BRITISH COLUMBIA 575 Alder Avenue 4454 East Hastings Street Burnaby Burnaby Burnaby Heights Castlegar 1721 Columbia Avenue Chilliwack 45850 Yale Road 1551 Cliffe Avenue Courtenay Crown Isle Shopping Retail – Plaza Retail – Freestanding Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Plaza Centre Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Plaza Courtenay 934 Baker Street Cranbrook 1200 Baker Street Cranbrook 11200 8 Street Dawson Creek 9123 100 Street Fort St. John Kamloops 750 Fortune Drive 945 Columbia Street W Kamloops Kelowna 294 Bernard Avenue Kelowna 697 Bernard Avenue Langford Belmont Market Langley 20871 Fraser Highway 27566 Fraser Highway Langley 32520 Lougheed Highway Mission 800 McBride Boulevard New Westminster Retail – Freestanding Retail – Freestanding 1170 27 Street E North Vancouver Retail – Freestanding 1175 Mount Seymour Road North Vancouver Retail – Plaza 801-1301 Main Street Retail – Freestanding 2850 Shaughnessy Street Port Coquitlam Prince Rupert Retail – Plaza 200 2 Avenue W Quesnel Retail – Freestanding 445 Reid Street Retail – Freestanding 6140 Blundell Road Richmond Retail – Freestanding 3664 Yellowhead Highway Smithers Retail – Plaza 7450 120 Street 8860 152 Street Retail – Freestanding 10355 King George Surrey Surrey Penticton 8,000 4,000 61,000 3,000 6,000 54,000 97,000 9,000 48,000 5,000 66,000 56,000 5,000 19,000 30,000 137,000 48,000 45,000 55,000 43,000 37,000 36,000 59,000 49,000 50,000 3,000 28,000 5,000 60,000 56,000 Boulevard Surrey Terrace Trail 4655 Lakelse Avenue 1599 Second Avenue 990 King Edward Avenue W Vancouver 1641 & 1653 Davie Street Vancouver Vancouver 1766 Robson Street Vancouver 1780 East Broadway Vancouver 2733 West Broadway Vancouver 3410 Kingsway Vancouver 8475 Granville Street Vernon 3417 30 Avenue Vernon 4300 32 Street Williams Lake 451 Oliver Street Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Freestanding Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Plaza Retail – Plaza Retail – Freestanding Retail – Freestanding Retail – Freestanding Retail – Freestanding 62,000 43,000 32,000 28,000 54,000 42,000 42,000 55,000 51,000 24,000 29,000 56,000 29,000 1,729,000 100.0 100.0 100.0 100.0 100.0 100.0 99.6 26.6 100.0 96.7 100.0 100.0 96.9 98.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 92.2 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 96.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 98.6 TOTAL 18,000,000 96.4 Proven Stability and Sustainable Growth 131 UNITHOLDERS’ INFORMATION BOARD OF TRUSTEES J. Michael Knowlton Independent Trustee and Chair John Eby Independent Trustee Donald E. Clow Trustee, President and Chief Executive Officer Paul V. Beesley Independent Trustee James M. Dickson Independent Trustee Barbara Palk Independent Trustee Jason P. Shannon Independent Trustee Jana Sobey Independent Trustee Paul D. Sobey Independent Trustee Karen Weaver Independent Trustee OFFICERS J. Michael Knowlton Chair Donald E. Clow President and Chief Executive Officer Clinton D. Keay Chief Financial Officer and Secretary Glenn R. Hynes Executive Vice President and Chief Operating Officer Cheryl Fraser Chief Talent Officer and Vice President Communications John Barnoski Executive Vice President Corporate Development Trevor Lee Senior Vice President Construction and Development Arie Bitton Senior Vice President Leasing and Operations Fred Santini General Counsel 132 CROMBIE REIT | Annual Report 2020 CROMBIE REIT Head Office: 610 East River Road, Suite 200 New Glasgow, Nova Scotia B2H 3S2 Telephone: (902) 755-8100 Fax: (902) 755-6477 Internet: www.crombiereit.com INVESTOR RELATIONS AND INQUIRIES Unitholders, analysts, and investors should direct their financial inquiries or request to: Clinton D. Keay, CPA, CA Chief Financial Officer and Secretary Email: investing@crombie.ca Communication regarding investor records, including changes of address or ownership, lost certificates or tax forms, should be directed to the company’s transfer agent and registrar, AST Trust Company (Canada). UNIT SYMBOL REIT Trust Units — CRR.UN STOCK EXCHANGE LISTING Toronto Stock Exchange TRANSFER AGENT AST Trust Company (Canada) Investor Correspondence P.O. Box 700 Montreal, Quebec H3B 3K3 Telephone: (800) 387-0825 Email: inquiries@astfinancial.com Website: www.astfinancial.com/ca COUNSEL Stewart McKelvey Halifax, Nova Scotia AUDITORS PricewaterhouseCoopers, LLP Halifax, Nova Scotia MULTIPLE MAILINGS If you have more than one account, you may receive a separate mailing for each. If this occurs, please contact AST Trust Company (Canada) at (800) 387-0825 or (416) 682-3860 to eliminate multiple mailings. a d a n a C n i d e t n i r P i . m o c b a r c w w w . s n o i t a c i n u m m o C & n g i s e D b a r C i : n g i s e D Davie Street Vancouver, British Columbia Top 20 Tenants Crombie builds and owns a high-quality, resilient, and diversified portfolio backed by a diverse group of national and regional tenants, that deliver consistent long-term earnings and cash flow stability. % of Annual Minimum Rent Average Remaining Lease Term DBRS Credit Rating 54.9% 3.3% 1.5% 1.4% 1.2% 1.2% 1.1% 1.1% 1.1% 1.0% 1.0% 0.7% 0.7% 0.6% 0.6% 0.6% 0.6% 0.5% 0.5% 0.4% 74.0% 12.5 years BBB (low) 7.5 years BBB 7.1 years A (high) BBB AAA AA AA AA BBB 5.6 years 3.2 years 12.0 years 2.4 years 8.1 years 9.4 years 6.8 years 4.0 years 7.3 years 5.3 years 2.8 years AA (high) 4.2 years BBB (high) 6.6 years BBB 5.8 years AA (low) 4.3 years 7.6 years 3.0 years Tenant Empire Company Limited1 Shoppers Drug Mart Province of Nova Scotia Dollarama Government of Canada CIBC Bank of Nova Scotia GoodLife Fitness Cineplex Bank of Montreal Canadian Tire Corporation Leon’s Furniture Restaurant Brands International Royal Bank of Canada Bell Canada Metro SAQ/Province of Quebec Giant Tiger TJX Canada2 Staples TOTAL (1) Includes Sobeys and all other subsidiaries under Empire Company Limited. (2) TJX Canada’s parent company, The TJX Companies, Inc., is rated A2 by Moody’s. Crombie REIT crombie.ca

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