Crombie REIT Announces First Quarter 2010 Results

STELLARTON, NS, May 6 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) is pleased to report its results for the first quarter ended March 31, 2010.

2010 First Quarter Highlights

    
    - Crombie completed the refinancing for the office and retail portfolio
      known as Halifax Developments resulting in additional proceeds of
      $35.0 million on February 1, 2010.
    - Crombie completed an offering of convertible unsecured subordinated
      debentures for gross proceeds of $45.0 million on February 8, 2010.
    - Crombie completed the acquisition of eight retail properties, in two
      tranches, for a total purchase price of $59.3 million, excluding closing
and
      transaction costs.
    - Property revenue for the quarter ended March 31, 2010 of $53.2 million
      represented an increase of 0.4% compared to $53.0 million for the
      quarter ended March 31, 2009, and an increase of 1.6% compared to the
      quarter ended December 31, 2009.
    - Same-asset NOI for the quarter ended March 31, 2010 of $31.5 million
      remained virtually unchanged compared to $31.6 million for the quarter
      ended March 31, 2009.
    - Crombie completed leasing activity on approximately 268,000 square feet
      of gross leaseable area during the first quarter of 2010, which
      represents approximately 34.6% of its 2010 expiring leases.
    - Average net rent per square foot from the leasing activity decreased
      slightly to $13.34 from the expiring rent per square foot of $13.44, a
      decrease of 0.7%. Excluding two new leases with anchor tenants in
      redevelopment properties, average net rent per square foot from leasing
      activity would have been $14.97, an increase of 11.4%.
    - Occupancy for the properties increased to 95.0% at March 31, 2010
      compared with 94.7% at December 31, 2009 and 94.2% at March 31, 2009.
    

Commenting on the quarterly results, Donald E. Clow, FCA, President and Chief Executive Officer stated: "The addition of the eight new property acquisitions in the quarter positions Crombie for continued growth in our operating results and high quality cash flow. The refinancing of the Halifax Developments portfolio, additional mortgage financing and debenture financing significantly improves the REIT's liquidity which will provide Crombie with financial flexibility and enable strategic growth.

Our grocery-anchored retail property portfolio remained resilient during the very difficult economic environment of 2009, and we are seeing improved occupancy results as the economy improves. We are pleased to see same-asset NOI, calculated on a cash basis, improve over the quarter."

The table below presents a summary of the financial performance for the quarter ended March 31, 2010 compared to the same period in fiscal 2009.

    
    -------------------------------------------------------------------------
                                                        Three         Three
                                                       months        months
                                                        ended         ended
    (In millions of dollars, except where             Mar. 31,      Mar. 31,
     otherwise noted)                                    2010          2009
    -------------------------------------------------------------------------
    Property revenue                                  $53.221       $52.992
    Property expenses                                  20.008        19.971
    -------------------------------------------------------------------------
    Property NOI                                       33.213        33.021
    -------------------------------------------------------------------------
    NOI margin percentage                                62.4%         62.3%
    -------------------------------------------------------------------------
    Expenses:
      General and administrative                        2.523         1.644
      Interest                                         13.634        10.730
      Depreciation and amortization                    11.279        12.491
    -------------------------------------------------------------------------
                                                       27.436        24.865
    -------------------------------------------------------------------------
    Income before other items, income taxes and
     non-controlling interest                           5.777         8.156
    Other income                                            -         0.092
    -------------------------------------------------------------------------
    Income before income taxes and non-controlling
     interest                                           5.777         8.248
    Income taxes expense (recovery) - Future           (1.100)        0.200
    -------------------------------------------------------------------------
    Income before non-controlling interest              6.877         8.048
    Non-controlling interest                            3.262         3.856
    -------------------------------------------------------------------------
    Net income                                         $3.615        $4.192
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Basic and diluted net income per unit               $0.11         $0.15
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Acquisition properties

On February 22, 2010, Crombie completed the acquisition of five of the eight retail properties previously announced on November 5, 2009, from subsidiaries of Empire Company Limited. The cost of the portfolio was $31.5 million, excluding closing and transaction costs, and was partially financed by the assumption of $8.4 million of mortgages with a weighted average term of 8.6 years, a 25 year amortization period and a weighted average interest rate of 6.26%. The balance was financed with Crombie's existing credit facility. On March 24, 2010, Crombie completed the acquisition of the remaining three properties. The purchase price of the three properties was $27.7 million and was financed with Crombie's existing credit facility. Commitments for mortgage financing for the properties of approximately $19.0 million have been assigned to Crombie and are anticipated to close during the second quarter of 2010.

    
    Same-Asset Property NOI
    -------------------------------------------------------------------------
                                                        Three         Three
                                                       months        months
                                                        ended         ended
                                                      Mar. 31,      Mar. 31,
    (In millions of dollars)                             2010          2009
    -------------------------------------------------------------------------
    Same-asset property revenue                       $50.273       $50.365
    -------------------------------------------------------------------------
    Same-asset property expenses                       18.763        18.774
    -------------------------------------------------------------------------
    Same-asset property NOI                           $31.510       $31.591
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Same-asset NOI margin %                              62.7%         62.7%
    -------------------------------------------------------------------------
    

Same-asset property revenue for the quarter ended March 31, 2010 of $50.3 million was 0.2% lower than the same period in 2009 due primarily to the reduction in below-market lease amortization as original lease terms expire partially offset by increases in base rent and recoveries and improvements in occupancy rates. Same-asset property expenses of $18.8 million for the quarter ended March 31, 2010 were $0.01 million lower than the same period in 2009 due to reduced snow clearing costs and non-shareable expenses which were offset by increases in recoverable property taxes and other recoverable costs. As a result of the above, same-asset NOI for the quarter ended March 31, 2010 remained relatively stable as it decreased by 0.3% from the same quarter in 2009.

    
    Acquisition and Redevelopment Property NOI
    -------------------------------------------------------------------------
                                                        Three         Three
                                                       months        months
                                                        ended         ended
                                                      Mar. 31,      Mar. 31,
    (In millions of dollars)                             2010          2009
    -------------------------------------------------------------------------
    Acquisition and redevelopment property revenue     $2.948        $2.627
    Acquisition and redevelopment property expenses     1.245         1.197
    -------------------------------------------------------------------------
    Acquisition and redevelopment property NOI         $1.703        $1.430
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Acquisition and redevelopment NOI margin %           57.8%         54.4%
    -------------------------------------------------------------------------
    

For the three months ended March 31, 2010, the acquisition properties include the eight retail properties acquired in February and March 2010. In addition, Crombie has included the operating results of the five properties that were in redevelopment during the first quarter of 2010.

    
    Property NOI - Cash Basis
    -------------------------------------------------------------------------
                                                        Three         Three
                                                       months        months
                                                        ended         ended
                                                      Mar. 31,      Mar. 31,
    (In millions of dollars)                             2010          2009
    -------------------------------------------------------------------------
    Same-asset property cash NOI                      $29.909       $29.573
    Acquisition and redevelopment property cash NOI     1.508         1.191
    Straight-line and above- and below-market rent
     amortization                                       1.796         2.257
    -------------------------------------------------------------------------
    Property NOI                                      $33.213       $33.021
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Property NOI, on a cash basis, excludes straight-line rent recognition and amortization of below-market and above-market lease amounts. The increase in same-asset cash NOI for the quarter ended March 31, 2010 is primarily the result of increased occupancy rates combined with the increased average net rent per square foot results from the 2009 leasing activity.

General and Administrative Expenses

General and administrative expenses increased during the first quarter of 2010 to $2.5 million from $1.6 million in the first quarter of 2009 primarily due to higher incentive payments and travel costs in the first quarter of 2010 combined with reduced incentive payments in the first quarter of 2009. General and administrative expenses as a percentage of revenue have increased to 4.7% in the first quarter of 2010 compared to 3.1% in the first quarter of 2009. Crombie anticipates that general and administrative expenses will approximate 4.0% to 4.5% of property revenue for the full year of 2010.

    
    Interest
    -------------------------------------------------------------------------
                                                        Three         Three
                                                       months        months
                                                        ended         ended
                                                      Mar. 31,      Mar. 31,
    (In millions of dollars)                             2010          2009
    -------------------------------------------------------------------------
    Same-asset interest expense                       $11.780        $9.528
    Acquisition and redevelopment interest expense      0.470         0.515
    Amortization of effective swaps and deferred
     financing charges                                  1.384         0.687
    -------------------------------------------------------------------------
    Interest expense                                  $13.634       $10.730
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The increase in same-asset interest expense for the quarter ended March 31, 2010 reflects Crombie's replacement of short-term floating rate debt with long-term fixed rate mortgages and convertible debentures. The weighted average contractual interest rate on fixed rate mortgages increased to 5.86% at March 31, 2010, from 5.51% at March 31, 2009, primarily due to the refinancing, on February 1, 2010, of the maturing Halifax Developments mortgages. Floating rate debt decreased from $251.7 million at March 31, 2009 to $54.5 million at the end of the first quarter of 2010.

FFO and AFFO

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

    
    -------------------------------------------------------------------------
                                           Quarter ended March 31,
                                ---------------------------------------------
                                                               Variance
    (In millions of dollars,                            ---------------------
     except per unit amounts)      2010        2009           $           %
    -------------------------------------------------------------------------
    FFO                         $17.056     $20.739     $(3.683)      (17.8)%
    FFO Per Unit - basic          $0.28       $0.40      $(0.12)      (30.0)%
    FFO Per Unit - diluted        $0.27       $0.39      $(0.12)      (30.8)%
    FFO Payout ratio               79.5%       56.2%                  (23.3)%
    -------------------------------------------------------------------------

    AFFO                        $12.744     $11.698      $1.046         8.9%
    AFFO Per Unit - basic         $0.21       $0.22      $(0.01)       (4.5)%
    AFFO Per Unit - diluted       $0.20       $0.22      $(0.02)       (9.1)%
    AFFO Payout ratio             106.5%       99.6%                   (6.9)%
    -------------------------------------------------------------------------
    

The decrease in FFO for the quarter ended March 31, 2010 to $17.1 million ($0.27 per unit - diluted) from $20.7 million ($0.39 per unit - diluted) in the first quarter of 2009 was primarily due to the impact of the increased interest expense and increased general and administrative expenses.

AFFO for the first quarter of 2010 was $12.7 million ($0.20 per unit - diluted) compared to $11.7 million ($0.22 per unit - diluted) for the first quarter of 2009. The improved AFFO result for the quarter ended March 31, 2010, compared to the same quarter of 2009, is the primarily the result of the lack of settlement costs on effective interest rate swap agreements incurred in the first quarter of 2009, partially offset by the reduced FFO results and higher maintenance capital expenditures in 2010.

Liquidity and Financings

Crombie's objective when managing capital on a long-term basis is to utilize staggered debt maturities, minimize long-term exposure to floating rate debt and maintain conservative payout ratios. Crombie has in place an authorized floating rate revolving credit facility of up to $150 million, of which $54.5 million was drawn as at March 31, 2010. Debt to gross book value was 54.8% at March 31, 2010 compared to 52.4% at December 31, 2009, and 54.8% at March 31, 2009. This leverage ratio is below the maximum 60%, or 65% including convertible debentures, as outlined by Crombie's Declaration of Trust. On a long-term basis, Crombie intends to maintain overall indebtedness, including convertible debentures, in the range of 50% to 60% of gross book value, depending upon Crombie's future acquisitions and financing opportunities. Crombie's interest and debt service coverage for the quarter ended March 31, 2010 were 2.44 times EBITDA and 1.73 times EBITDA. This compares to 2.99 times EBITDA and 2.11 times EBITDA respectively for the quarter ended March 31, 2009. The reduction on the interest service coverage is attributable to the increased interest expense as Crombie has replaced short-term floating rate debt with long-term fixed rate debt. The reduction in the debt service coverage is further impacted by the increased debt repayments on the amortizing mortgages.

Convertible Debenture Offering - In February 2010, Crombie completed an issuance of unsecured convertible subordinated debentures ("Series C Debentures") for gross proceeds of $45 million to reduce the revolving credit facility. The Series C Debentures pay interest at a rate of 5.75% per annum and are convertible into Units at a conversion price of $15.30.

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

Mortgage Financing - On February 1, 2010, Crombie completed the refinancing for the office and retail portfolio known as Halifax Developments. The principal amount of the maturing Halifax Developments mortgages was approximately $106.1 million with a weighted average interest rate of 5.43%. The new Halifax Developments mortgages are for a total of $141 million. The initial mortgage financing has a $25 million principal, a ten year term and a 25 year amortization with a fixed interest of 6.52%. The additional refinancing has a $116 million principal, a ten year term and an amortization period of 25 years with a fixed interest rate of 6.47%.

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

Definition of Non-GAAP Measures

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

    
    - Property NOI is property revenue less property expenses.
    - Debt is defined as bank loans plus commercial property debt and
      convertible debentures.
    - Gross book value means, at any time, the book value of the assets of
      Crombie and its consolidated subsidiaries plus accumulated depreciation
      and amortization in respect of Crombie's properties (and related
      intangible assets) less (i) the amount of any receivable reflecting
      interest rate subsidies on any debt assumed by Crombie and (ii) the
      amount of future income tax liability arising out of the fair value
      adjustment in respect of the indirect acquisitions of certain
      properties.
    - EBITDA is calculated as property revenue, adjusted to remove the impact
      of amortization of above market and below market leases, less property
      expenses and general and administrative expenses.
    - FFO is calculated as net income (computed in accordance with GAAP),
      excluding gains (or losses) from sales of depreciable real estate and
      extraordinary items, plus depreciation and amortization, future income
      taxes and after adjustments for equity accounted entities and non-
      controlling interests.
    - AFFO is defined as FFO adjusted for non-cash amounts affecting revenue
      and discontinued operations, less maintenance capital expenditures,
      maintenance tenant improvements and leasing costs, and the settlement
      of interest rate swap agreements.
    

About Crombie

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

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

In particular, certain statements in this document discuss Crombie's anticipated outlook of future events. These statements include, but are not limited to anticipated or target distributions and payout ratios, which could be impacted by seasonality of capital expenditures, results of operations and capital resource allocation decisions as well as the closing of a mortgage financing which is dependent on the completion of pre-funding conditions.

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

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

Conference Call Invitation

Crombie will provide additional details concerning its first quarter ended March 31, 2010 results on a conference call to be held Friday, May 7, 2010, at 9:30 a.m. Eastern time. To join this conference call you may dial (902) 455-3592 or (888) 231-8191. You may also listen to a live audio web cast of the conference call by visiting Crombie's website located at www.crombiereit.com. Replay will be available until midnight May 21, 2010, by dialling (416) 849-0833 or (800) 642-1687 and entering pass code 71200637, or on the Crombie website for 90 days after the meeting.

    
                     CROMBIE REAL ESTATE INVESTMENT TRUST
                      Consolidated Financial Statements
                               March 31, 2010


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

                                                     March 31,  December 31,
                                                         2010          2009
                                              -------------------------------

    Assets
      Commercial properties (Note 4)               $1,362,734    $1,314,611
      Intangible assets (Note 5)                      109,001       103,357
      Notes receivable (Note 6)                         7,661         8,169
      Other assets (Note 7)                            23,507        24,100
      Cash and cash equivalents                         2,861             -
      Assets related to discontinued
       operations (Note 21)                             6,912         6,929
                                              -------------------------------
                                                   $1,512,676    $1,457,166
                                              -------------------------------
                                              -------------------------------

    Liabilities and Unitholders' Equity
      Commercial property debt (Note 8)              $722,017      $706,369
      Convertible debentures (Note 9)                 153,839       110,858
      Payables and accruals (Note 10)                  43,051        39,223
      Intangible liabilities (Note 11)                 31,053        31,558
      Employee future benefits obligation
       (Note 23)                                        6,349         6,260
      Distributions payable                             4,523         4,522
      Future income tax liability (Note 16)            78,600        79,700
      Liabilities related to discontinued
       operations (Note 21)                             6,294         6,334
                                             -------------------------------
                                                    1,045,726       984,824

      Non-controlling interest (Note 12)              222,734       225,367

      Unitholders' equity                             244,216       246,975
                                             -------------------------------
                                                   $1,512,676    $1,457,166
                                             -------------------------------
                                             -------------------------------

    Commitments and contingencies (Note 18)

    Subsequent events (Note 24)

    See accompanying notes to the interim consolidated financial statements.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
                      Consolidated Statements of Income
             (In thousands of dollars, except per unit amounts)
                                 (Unaudited)
    -------------------------------------------------------------------------

                                                        Three         Three
                                                       months        months
                                                        Ended         Ended
                                                     March 31,     March 31,
                                                         2010          2009
                                              -------------------------------
    Revenues

      Property revenue (Note 14)                      $53,221       $52,992
      Lease terminations                                    -            92
                                              -------------------------------
                                                       53,221        53,084
                                              -------------------------------

    Expenses
      Property expenses                                20,008        19,971
      General and administrative expenses               2,523         1,644
      Interest expense (Note 15)                       13,634        10,730
      Depreciation of commercial properties             4,830         4,544
      Depreciation of recoverable capital
       expenditures                                       289           256
      Amortization of tenant improvements/
       lease costs                                      1,234         1,131
      Amortization of intangible assets                 4,926         6,560
                                              -------------------------------
                                                       47,444        44,836
                                              -------------------------------
    Income before income taxes and
     non-controlling interest                           5,777         8,248
    Income tax expense  (recovery) - Future
     (Note 16)                                         (1,100)          200
                                              -------------------------------
    Income before non-controlling interest              6,877         8,048
    Non-controlling interest                            3,262         3,856
                                              -------------------------------
    Net income                                         $3,615        $4,192
                                              -------------------------------
                                              -------------------------------
    Basic and diluted net income per unit
     (Note 13)                                          $0.11         $0.15
                                              -------------------------------
                                              -------------------------------
    Weighted average number of units
     outstanding
      Basic                                        31,881,071    27,147,380
                                              -------------------------------
                                              -------------------------------
      Diluted                                      32,048,302    27,271,888
                                              -------------------------------
                                              -------------------------------

    See accompanying notes to the interim consolidated financial statements.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
               Consolidated Statements of Comprehensive Income
                          (In thousands of dollars)
                                 (Unaudited)
    -------------------------------------------------------------------------

                                                        Three         Three
                                                       months        months
                                                        Ended         Ended
                                                     March 31,     March 31,
                                                         2010          2009
                                              -------------------------------

    Net income                                         $3,615        $4,192
                                              -------------------------------
      Losses on derivatives designated as
       cash flow hedges transferred to net
       income in the current period                       435           108
      Net change in derivatives designated
       as cash flow hedges                                165          (459)
                                              -------------------------------
    Other comprehensive income (loss)                     600          (351)
                                              -------------------------------
    Comprehensive income                               $4,215        $3,841
                                              -------------------------------
                                              -------------------------------

    See accompanying notes to the interim consolidated financial statements.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
               Consolidated Statements of Unitholders' Equity
                          (In thousands of dollars)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                                 Accu-
                                              mulated
                                                Other
                                               Compre-
                                    Contri-   hensive
                REIT        Net      buted     Income     Distri-
               Units     Income    Surplus      (Loss)   butions      Total
            -----------------------------------------------------------------
            (Note 13)

    Unit-
     holders'
     equity,
     January
     1,
     2010   $300,348    $45,378        $73   $(17,433)  $(81,391)  $246,975
    Units
     released
     under
     EUPP          8          -         (8)         -          -          -
    Units
     issued
     under
     EUPP        190          -          -          -          -        190
    Loans
     recei-
    vable
     under
     EUPP       (190)         -          -          -          -       (190)
    EUPP
     compen-
     sation        -          -         12          -          -         12
    Repayment
     of EUPP
     loans
     recei-
     vable       145          -          -          -          -        145
    Net
     income        -      3,615          -          -          -      3,615
    Distri-
     butions       -          -          -          -     (7,131)    (7,131)
    Other
     compre-
     hensive
     income        -          -          -        600          -        600
            -----------------------------------------------------------------
    Unit-
     holders'
     equity,
     March
     31,
     2010   $300,501    $48,993        $77   $(16,833)  $(88,522)  $244,216
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    Unit-
     holders'
     equity,
     January
     1,
     2009   $265,096    $34,630        $34   $(29,567)  $(54,635)  $215,558
    EUPP
     compen-
     sation        -          -         11          -          -         11
    Repayment
     of EUPP
     loans
     recei-
     vable         9          -          -          -          -          9
    Net
     income        -      4,192          -          -          -      4,192
    Distri-
     butions       -          -          -          -     (6,068)    (6,068)
    Other
     compre-
     hensive
     loss          -          -          -       (351)         -       (351)
            -----------------------------------------------------------------
    Unit-
     holders'
     equity,
     March
     31,
     2009   $265,105    $38,822        $45   $(29,918)  $(60,703)  $213,351
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    See accompanying notes to the interim consolidated financial statements.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
                    Consolidated Statements of Cash Flows
                           (In thousand of dollars)
                                 (Unaudited)
    -------------------------------------------------------------------------

                                                        Three         Three
                                                       months        months
                                                        Ended         Ended
                                                     March 31,     March 31,
                                                         2010          2009
                                              -------------------------------

    Cash flows provided by (used in)

    Operating Activities
    Net income                                         $3,615        $4,192
    Items not affecting operating cash
     (Note 17)                                         13,041        14,988
                                              -------------------------------
                                                       16,656        19,180

    Additions to tenant improvements and
     lease costs                                         (713)       (1,240)
    Change in other non-cash operating
     items (Note 17)                                    7,332        (7,276)
                                              -------------------------------
    Cash provided by operating activities              23,275        10,664
                                              -------------------------------

    Financing Activities
    Issue of commercial property debt                 174,850        57,000
    Increase in deferred financing charges             (1,470)         (557)
    Issue of convertible debentures                    45,000             -
    Issue costs of convertible debentures              (2,287)            -
    Settlement of interest rate swap
     agreements                                             -        (4,535)
    Repayment of commercial property debt            (166,379)      (53,491)
    Decrease in liabilities related to
     discontinued operations                              (40)          (67)
    Collection of notes receivable                        508           786
    Repayment of EUPP loan receivable                     145             9
    Payment of distributions                          (13,568)      (11,649)
                                              -------------------------------
    Cash provided by (used in) financing
     activities                                        36,759       (12,504)
                                              -------------------------------

    Investing Activities
    Additions to commercial properties                 (5,127)       (1,730)
    Additions to recoverable capital
     expenditures                                        (453)         (312)
    Decrease in assets related to
     discontinued operations                               17            22
    Acquisition of commercial properties
     (Note 4)                                         (51,610)            -
                                             -------------------------------
    Cash used in investing activities                 (57,173)       (2,020)
                                             -------------------------------
    Increase (decrease) in cash and cash
     equivalents during the period                      2,861        (3,860)
    Cash and cash equivalents, beginning of
     period                                                 -         4,028
                                              -------------------------------
    Cash and cash equivalents, end of period           $2,861          $168
                                              -------------------------------
                                              -------------------------------

    See accompanying notes to the interim consolidated financial statements.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
             Notes to Interim Consolidated Financial Statements
             (In thousands of dollars, except per unit amounts)
                                 (Unaudited)
                               March 31, 2010
    -------------------------------------------------------------------------
    

1) CROMBIE REAL ESTATE INVESTMENT TRUST

Crombie Real Estate Investment Trust ("Crombie") is an unincorporated "open-ended" real estate investment trust created pursuant to the Declaration of Trust dated January 1, 2006, as amended. The units of Crombie are traded on the Toronto Stock Exchange ("TSX") under the symbol "CRR.UN".

2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

These interim consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles ("GAAP") as prescribed by the Canadian Institute of Chartered Accountants ("CICA"). These interim consolidated financial statements do not include all of the disclosures included in Crombie's annual consolidated financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2009 as set out in the 2009 Annual Report.

The accounting policies used in preparation of these interim consolidated financial statements conform with those used in the 2009 annual consolidated financial statements.

(b) Property acquisitions

Upon acquisition of commercial properties, Crombie performs an assessment of the fair value of the properties' related tangible and intangible assets and liabilities (including land, buildings, origination costs, in-place leases, above- and below-market leases, and any other assumed assets and liabilities), and allocates the purchase price to the acquired assets and liabilities. Crombie assesses and considers fair value based on cash flow projections that take into account relevant discount and capitalization rates and any other relevant sources of market information available. Estimates of future cash flow are based on factors that include historical operating results, if available, and anticipated trends, local markets and underlying economic conditions.

Crombie allocates the purchase price based on the following:

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

Buildings - Buildings are recorded at the fair value of the building on an "as-if-vacant" basis, which is based on the present value of the anticipated net cash flow of the building from vacant start up to full occupancy.

Origination costs for existing leases - Origination costs are determined based on estimates of the costs that would be incurred to put the existing leases in place under the same terms and conditions. These costs include estimated tenant inducements, leasing commissions and tenant and lease coordination costs.

In-place leases - In-place lease values are determined based on estimated costs required for each lease that represents the net operating income lost during an estimated lease-up period that would be required to replace the existing leases at the time of purchase.

Tenant relationships - Tenant relationship values are determined based on costs avoided if the respective tenants were to renew their leases at the end of the existing term, adjusted for the estimated probability that the tenants will renew.

Above- and below-market existing leases - Values ascribed to above- and below-market existing leases are determined based on the present value of the difference between the rents payable under the terms of the respective leases and estimated future market rents.

Fair value of debt - Values ascribed to fair value of debt are determined based on the differential between contractual and market interest rates on long term liabilities assumed at acquisition.

(c) Revenue recognition

Property revenue includes rents earned from tenants under lease agreements, percentage rent, realty tax and operating cost recoveries, and other incidental income. Certain leases have rental payments that change over their term due to changes in rates. Crombie records the rental revenue from these leases on a straight-line basis over the term of the lease. Accordingly, an accrued rent receivable/payable is recorded for the difference between the straight-line rent recorded as property revenue and the rent that is contractually due from the tenants. Percentage rents are recognized when tenants are obligated to pay such rent under the terms of the related lease agreements. The value of the differential between original and market rents for existing leases is amortized using the straight-line method over the terms of the tenant lease agreements. Realty tax and other operating cost recoveries, and other incidental income, are recognized on an accrual basis.

(d) Income taxes

Crombie is taxed as a "mutual fund trust" for income tax purposes. Crombie intends 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.

Future income tax liabilities of Crombie relate to tax and accounting basis differences of all incorporated subsidiaries of Crombie. Income taxes are accounted for using the liability method. Under this method, future income taxes are recognized for the expected future tax consequences of differences between the carrying amount of balance sheet items and their corresponding tax values. Future income taxes are computed using substantively enacted corporate income tax rates for the years in which tax and accounting basis differences are expected to reverse.

(e) Employee future benefits obligation

The cost of pension benefits for the defined contribution plans is expensed as contributions are paid. The cost of the defined benefit pension plan and post-retirement benefit plan is accrued based on actuarial valuations, which are determined using the projected benefit method pro-rated on service and management's best estimate of the expected long-term rate of return on plan assets, salary escalation, retirement ages and expected growth rate of health care costs. The defined benefit plan and post-retirement benefit plan are unfunded.

The impact of changes in plan amendments is amortized on a straight-line basis over the expected average remaining service life ("EARSL") of active members. For the supplementary executive retirement plan, the impacts of changes in the plan provisions are amortized over five years.

(f) Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The significant areas of estimation and assumption include:

    
    - Impairment of assets;
    - Depreciation and amortization;
    - Employee future benefits obligation;
    - Future income taxes;
    - Allocation of purchase price on property acquisitions; and
    - Fair value of commercial property debt, convertible debentures and
      assets and liabilities related to discontinued operations.
    

(g) Payment of distributions

The determination to declare and make payable distributions from Crombie is at the discretion of the Board of Trustees of Crombie and, until declared payable by the Board of Trustees of Crombie, Crombie has no contractual requirement to pay cash distributions to Unitholders' of Crombie. During the period ended March 31, 2010 $13,568 (period ended March 31, 2009 - $11,649) in cash distributions were declared payable by the Board of Trustees to Crombie Unitholders and Crombie Limited Partnership Unitholders (the "Class B LP Units").

(h) Convertible debentures

Debentures with conversion features are assessed at inception as to the value of both their equity component and their debt component. Based on the assessment, Crombie has determined to date that no amount should be attributed to equity and thus its convertible debentures have been classified as liabilities. Distributions to debenture holders are presented as interest expense. Issue costs are netted against the convertible debentures and amortized over the original life of the convertible debentures using the effective interest method.

(i) Hedges

Crombie has cash flow hedges which are used 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 change in fair value of the hedging relationship recognized in other comprehensive income (loss). Any ineffective portion of the cash flow hedge is recognized in net income. Amounts recognized in accumulated other comprehensive income (loss) are reclassified to net income in the same periods in which the hedged item is recognized in net income. Fair value hedges and the related hedge items are recognized on the balance sheet at fair value with any changes in fair value recognized in net income. To the extent the fair value hedge is effective, the changes in the fair value of the hedge and the hedged item will offset each other.

Crombie has a fixed interest rate swap and a delayed interest rate swap designated as cash flow hedges. Crombie has identified these hedges against increases in benchmark interest rates and has formally documented all relationships between these derivative financial instruments and hedged items, as well as the risk management strategy and objectives. Crombie assesses on an ongoing basis whether the derivative financial instrument continues to be effective in offsetting changes in interest rates on the hedged items.

(j) Comprehensive income

Comprehensive income is the change in Unitholders' equity during a period from transactions and other events and circumstances from non-owner sources. Crombie reports a consolidated statement of comprehensive income, comprising net income and other comprehensive income (loss) for the period. Accumulated other comprehensive income (loss), has been added to the consolidated statements of Unitholders' equity.

(k) Discontinued operations

Crombie classifies properties that meet certain criteria as held for sale and separately discloses any net income and gain (loss) on disposal for current and prior periods as discontinued operations. 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 held for sale are no longer depreciated and amortized. A property that is subsequently reclassified as held 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.

(l) Impairment of long-lived assets

Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable.

If it is determined that the net recoverable value of a long-lived asset is less than its carrying value, the long-lived asset is written down to its fair value. Net recoverable amount represents the undiscounted estimated future cash flow expected to be received from the long-lived asset. Assets reviewed under this policy include commercial properties and intangible assets.

3) CHANGES IN ACCOUNTING POLICIES

Effect of new accounting standards not yet implemented

International Financial Reporting Standards

On February 13, 2008, the Accounting Standards Board of Canada announced that GAAP for publicly accountable enterprises will be replaced by International Financial Reporting Standards ("IFRS"). IFRS must be adopted for interim and annual financial statements related to fiscal years beginning on or after January 1, 2011, with retrospective adoption and restatement of the comparative fiscal year ended December 31, 2010. Accordingly, the conversion from GAAP to IFRS will be applicable to Crombie's reporting for the first quarter of fiscal 2011 for which the current and comparative information will be prepared under IFRS.

Crombie, with the assistance of its external advisors, has launched an internal initiative to govern the conversion process and is currently evaluating the potential impact of the conversion to IFRS on its financial statements. At this time, the impact on Crombie's future financial position and results of operations is not reasonably determinable or estimatable. Crombie expects the transition to IFRS to impact accounting, financial reporting, internal control over financial reporting, information systems and business processes.

Crombie has developed a formal project governance structure, and is providing regular progress reports to senior management and the audit committee. Crombie has also completed a diagnostic impact assessment, which involved a high level review of the major differences between current GAAP and IFRS, as well as establishing an implementation guideline. In accordance with this guideline Crombie has established a staff training program and is in the process of completing analysis of the key decision areas, including analyzing the appropriate accounting policy selections from available IFRS options, and making recommendations on the same.

Crombie will continue to assess the impact of the transition to IFRS and to review all of the proposed and ongoing projects of the International Accounting Standards Board to determine their impact on Crombie. Additionally, Crombie will continue to invest in training and resources throughout the transition period to facilitate a timely conversion.

4) COMMERCIAL PROPERTIES

    
                                                  March 31, 2010
                                     ----------------------------------------
                                                  Accumulated           Net
                                           Cost  Depreciation    Book Value
                                     ----------------------------------------
    Land                               $296,432          $Nil      $296,432
    Buildings                         1,089,885        60,871     1,029,014
    Recoverable capital expenditures      7,766         3,295         4,471
    Tenant improvements and leasing
     costs                               43,345        10,528        32,817
                                     ----------------------------------------
                                     $1,437,428       $74,694    $1,362,734
                                     ----------------------------------------
                                     ----------------------------------------


                                                December 31, 2009
                                     ----------------------------------------
                                                  Accumulated           Net
                                           Cost  Depreciation    Book Value
                                     ----------------------------------------
    Land                               $286,491          $Nil     $ 286,491
    Buildings                         1,048,112        56,041       992,071
    Recoverable capital expenditures      6,853         3,006         3,847
    Tenant improvements and leasing
     costs                               43,107        10,905        32,202
                                     ----------------------------------------
                                     $1,384,563       $69,952    $1,314,611
                                     ----------------------------------------
                                     ----------------------------------------
    

Property Acquisitions and Disposals

The operating results of the acquired properties are included from the respective date of acquisition.

    
    2010
    ----
    

On February 22, 2010, Crombie completed the acquisition of five retail properties, representing approximately 186,000 square feet of gross leaseable area, from subsidiaries of Empire Company Limited. The purchase price of the properties was $31,530, excluding closing and transaction costs. The purchase price was financed through $8,358 of assumed mortgages and the balance from Crombie's floating rate revolving credit facility.

On March 24, 2010, Crombie completed the acquisition of three retail properties, representing approximately 147,000 square feet of gross leaseable area, from subsidiaries of Empire Company Limited. The purchase price of the properties was $27,746, excluding closing and transaction costs. The purchase price was financed through Crombie's floating rate revolving credit facility. Commitments for mortgage financing for the properties of approximately $19,000 have been assigned to Crombie and are anticipated to close during the second quarter of 2010 (Note 24).

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

    
                                                        Three         Three
                                                       months        months
                                                        ended         ended
                                                      Mar. 31,      Mar. 31,
    Commercial property acquired, net:                   2010          2009
                                              -------------------------------
    Land                                               $9,920             $
    Buildings                                          39,811             -
    Intangible assets:
      Lease origination costs                           4,855             -
      Tenant relationships                              1,789             -
      In-place leases                                   4,707             -
    Intangible liabilities:
      Below-market leases                              (1,114)            -
                                              -------------------------------
    Net purchase price                                 59,968             -
    Assumed mortgages                                  (8,358)            -
                                              -------------------------------
                                                      $51,610            $-
                                              -------------------------------
                                              -------------------------------
    Consideration funded by:
    Cash from revolving credit facility               $51,610            $-
                                              -------------------------------
                                              -------------------------------
    

5) INTANGIBLE ASSETS

    
                                                  March 31, 2010
                                     ----------------------------------------
                                                  Accumulated           Net
                                           Cost  Amortization    Book Value
                                     ----------------------------------------
    Origination costs for existing
     leases                             $49,765       $10,418       $39,347
    In-place leases                      46,900        13,666        33,234
    Tenant relationships                 58,323        26,028        32,295
    Above-market existing leases         16,015        11,890         4,125
                                     ----------------------------------------
                                       $171,003       $62,002      $109,001
                                     ----------------------------------------
                                     ----------------------------------------


                                                December 31, 2009
                                     ----------------------------------------
                                                  Accumulated           Net
                                           Cost  Amortization    Book Value
                                     ----------------------------------------
    Origination costs for existing
     leases                             $52,866       $17,228       $35,638
    In-place leases                      56,493        26,516        29,977
    Tenant relationships                 56,534        23,698        32,836
    Above-market existing leases         16,015        11,109         4,906
                                     ----------------------------------------
                                       $181,908       $78,551      $103,357
                                     ----------------------------------------
                                     ----------------------------------------
    

6) NOTES RECEIVABLE

    
                                                     March 31,  December 31,
                                                         2010          2009
                                              -------------------------------
    Capital expenditure program                          $436          $436
    Interest rate subsidy                               7,225         7,733
                                              -------------------------------
                                                       $7,661        $8,169
                                              -------------------------------
                                              -------------------------------
    

7) OTHER ASSETS

    
                                                     March 31,  December 31,
                                                         2010          2009
                                              -------------------------------
    Gross accounts receivable                          $6,882        $7,732
    Provision for doubtful accounts                      (413)         (326)
                                              -------------------------------
    Net accounts receivable                             6,469         7,406
    Accrued straight-line rent receivable              11,906        10,948
    Prepaid expenses                                    4,889         5,531
    Restricted cash                                       243           215
                                              -------------------------------
                                                      $23,507       $24,100
                                              -------------------------------
                                              -------------------------------
    

8) COMMERCIAL PROPERTY DEBT

    
                                           Weighted
                                            average    Weighted
                                        contractual     average
                                           interest     term to    March 31,
                                  Range        rate    maturity        2010
                             ------------------------------------------------
    Fixed rate mortgages      4.82-7.30%       5.86%  7.5 years    $673,481
    Floating rate revolving
     credit facility                           1.57%  1.3 years      54,500
    Deferred financing
     charges                                                         (5,964)
                                                                 ------------
                                                                   $722,017
                                                                 ------------
                                                                 ------------


                                           Weighted
                                            average    Weighted
                                        contractual     average
                                           interest     term to    March 31,
                                  Range        rate    maturity        2009
                             ------------------------------------------------
    Fixed rate mortgages      4.82-8.00%       5.66%  5.8 years    $604,992
    Floating rate revolving
     credit facility                           1.53%  1.5 years     106,160
    Deferred financing
     charges                                                         (4,783)
                                                                 ------------
                                                                   $706,369
                                                                 ------------
                                                                 ------------


    As March 31, 2010, debt retirements for the next five years are:

                             Fixed Rate                Floating
                              Principal  Fixed Rate        Rate
                               Payments  Maturities  Maturities       Total
                             ------------------------------------------------
    Remaining 2010              $14,725          $-          $-     $14,725
    2011                         20,164      26,786      54,500     101,450
    2012                         21,050           -           -      21,050
    2013                         22,185      30,042           -      52,227
    2014                         19,826      69,797           -      89,623
    Thereafter                   87,857     353,726           -     441,583
                             ------------------------------------------------
                               $185,807    $480,351     $54,500     720,658
                             ------------------------------------
                             ------------------------------------
    Deferred financing charges                                       (5,964)
    Fair value debt adjustment                                        7,323
                                                                 ------------
                                                                   $722,017
                                                                 ------------
                                                                 ------------
    

On February 1, 2010, Crombie completed 2 first mortgage refinancings to replace the maturing mortgages of approximately $106,079 for the office and retail portfolio known as Halifax Developments. The initial mortgage financing has a $25,000 principal, a 25 year amortization, a fixed interest rate of 6.52% with a maturity date of February 2020. The additional mortgage has a $116,000 principal, a 25 year amortization, a fixed interest rate of 6.47% with a maturity date of February 2020.

On February 22, 2010, Crombie assumed two mortgages totalling $8,358 as part of the financing for a five retail property acquisition. The mortgages have a weighted average term of 8.6 years, a 25 year amortization period and a weighted average interest rate of 6.26%. In addition, Crombie repaid $3,471 to ECL General Partner Limited, to retire a loan used to finance an acquisition at Avalon Mall in 2009, as required under the terms of the agreement.

On February 26, 2010, Crombie completed first mortgage financing on five properties. The mortgages are for a total of $33,850 in principal, with an eight year term, a fixed interest rate of 5.70% and a weighted average amortization period of 21.6 years.

The floating rate revolving credit facility has a maximum principal amount of $150,000 and is used by Crombie for working capital purposes. It is secured by a pool of first and second mortgages and negative pledges on certain properties. The floating interest rate is based on specific margins over prime rate or bankers acceptance rates. The specified margin increases as Crombie's overall debt leverage increases.

The revolving credit facility also contains a covenant that ECL Developments Limited must maintain a minimum 40% voting interest in Crombie. If ECL Developments Limited reduces its voting interest below this level, Crombie will be required to renegotiate the revolving credit facility or obtain alternative financing. Pursuant to an exchange agreement, and while such covenant remains in place, ECL Developments Limited will be required to give Crombie at least six months' prior written notice of its intention to reduce its voting interest below 40%.

9) CONVERTIBLE DEBENTURES

    
              Conversion                 Interest    March 31,  December 31,
                   Price   Maturity date     rate        2010          2009
              ---------------------------------------------------------------
    Series A
     (CRR.DB)     $13.00  March 20, 2013     7.00%    $30,000       $30,000
    Series B
     (CRR.DB.B)   $11.00   June 30, 2015     6.25%     85,000        85,000
    Series C
     (CRR.DB.C)   $15.30   June 30, 2017     5.75%     45,000             -
    Deferred
     financing
     charges                                           (6,161)       (4,142)
                                                     ------------------------
                                                     $153,839      $110,858
                                                     ------------------------
                                                     ------------------------
    

On February 8, 2010, Crombie issued $45,000 in convertible unsecured subordinate debentures (the "Series C Convertible Debentures"). The proceeds were used to reduce the revolving credit facility.

The Series A, Series B, and Series C Convertible Debentures, (collectively the "Debentures") pay interest semi-annually on June 30 and December 31 of each year and Crombie has the option to pay interest on any interest payment date by selling units and applying the proceeds to satisfy its interest obligation.

The Debentures are convertible into Units at the option of the debenture holder at any time up to the maturity date, at the conversion price indicated in the table above, being a conversion rate of approximately 76.9231 Units per one thousand principal amount of Series A Convertible Debentures, 90.9091 Units per one thousand principal amount of Series B Convertible Debentures and 65.3595 Units per one thousand principal amount of Series C Convertible Debentures. If all conversion rights attaching to the Series A Convertible Debentures, the Series B Convertible Debentures and the Series C Convertible Debentures are exercised, Crombie would be required to issue approximately 2,307,693 Units, 7,727,272 Units, and 2,941,176 Units, respectively, subject to anti-dilution adjustments.

For the first three years from the date of issue, there is no ability to redeem the Debentures, after which, each series of Debentures has a period, lasting one year, during which the Debentures may be redeemed, in whole or in part, on not more than 60 days' and not less than 30 days' prior notice, at a redemption price equal to the principal amount thereof plus accrued and unpaid interest, provided that the volume-weighted average trading price of the Units on the TSX for the 20 consecutive trading days ending on the fifth trading day preceding the date on which notice on redemption is given exceeds 125% of the conversion price. After the end of the fourth period, and to the maturity date, the Debentures may be redeemed, in whole or in part, at anytime at the redemption price equal to the principal amount thereof plus accrued and unpaid interest. Provided that there is not a current event of default, Crombie will have the option to satisfy its obligation to pay the principal amount of the Debentures at maturity or upon redemption, in whole or in part, by issuing the number of units equal to the principal amount of the Debentures then outstanding divided by 95% of the volume-weighted average trading price of the units for a stipulated period prior to the date of redemption or maturity, as applicable. Upon change of control of Crombie, Debenture holders have the right to put the Debentures to Crombie at a price equal to 101% of the principal amount plus accrued and unpaid interest.

Transaction costs related to the Debentures have been deferred and are being amortized into interest expense over the term of the Debentures using the effective interest method.

10) PAYABLES AND ACCRUALS

    
                                                     March 31,  December 31,
                                                         2010          2009
                                              -------------------------------
    Tenant improvements and capital
     expenditures                                     $18,661       $20,209
    Property operating costs                           13,460        10,575
    Advance rents                                       2,363         2,069
    Interest on commercial property debt
     and debentures                                     5,348        2,836
    Fair value of interest rate swap
     agreements                                         3,219         3,534
                                              -------------------------------
                                                      $43,051       $39,223
                                              -------------------------------
                                              -------------------------------
    

11) INTANGIBLE LIABILITIES

    
                                                  March 31, 2010
                                     ----------------------------------------
                                                  Accumulated           Net
                                           Cost  Amortization    Book Value
                                     ----------------------------------------
    Below-market leases                 $55,511       $24,458       $31,053
                                     ----------------------------------------
                                     ----------------------------------------


                                                December 31, 2009
                                     ----------------------------------------
                                                  Accumulated           Net
                                           Cost  Amortization    Book Value
                                     ----------------------------------------
    Below-market leases                 $54,397       $22,839       $31,558
                                     ----------------------------------------
                                     ----------------------------------------
    

12) NON-CONTROLLING INTEREST

    
                                                 Accu-
                                              mulated
                                                Other
                                               Compre-
                                    Contri-   hensive
             Class B        Net      buted     Income     Distri-
            LP Units     Income    Surplus      (Loss)   butions      Total
            -----------------------------------------------------------------
    Balance,
     January
     1,
     2010   $274,260    $41,929       $Nil   $(16,302)  $(74,520)  $225,367
    Net
     income        -      3,262          -          -          -      3,262
    Distri-
     butions       -          -          -          -     (6,437)    (6,437)
    Other
     compre-
     hensive
     income        -          -          -        542           -       542
            -----------------------------------------------------------------
    Balance,
     March
     31,
     2010   $274,260    $45,191       $Nil   $(15,760)  $(80,957)  $222,734
            -----------------------------------------------------------------
            -----------------------------------------------------------------


                                                 Accu-
                                              mulated
                                                Other
                                               Compre-
                                    Contri-   hensive
             Class B        Net      buted     Income     Distri-
            LP Units     Income    Surplus      (Loss)   butions      Total
            -----------------------------------------------------------------
    Balance,
     January
     1,
     2009   $244,520    $32,098       $Nil   $(27,254)  $(50,201)  $199,163
    Net
     income        -      3,856          -          -          -      3,856
    Distri-
     butions       -          -          -          -     (5,581)    (5,581)
    Other
     compre-
     hensive
     loss          -          -          -       (323)         -       (323)
            -----------------------------------------------------------------
    Balance,
     March
     31,
     2009   $244,520    $35,954       $Nil   $(27,577)  $(55,782)  $197,115
            -----------------------------------------------------------------
            -----------------------------------------------------------------
    

13) UNITS OUTSTANDING

    
    Crombie REIT Special
                                    Voting Units and
             Crombie REIT Units     Class B LP Units            Total
           --------------------- --------------------- ----------------------
               Number                Number                Number
             of Units    Amount    of Units    Amount    of Units     Amount
           ------------------------------------------------------------------
    Balance,
     January
     1,
     2010  32,044,299  $300,348  28,925,730  $274,260  60,970,029  $574,608
    Units
     issued
     under
     EUPP      17,157       190           -         -      17,157       190
    Units
     re-
     leased
     under
     EUPP           -         8           -         -           -         8
    Net
     change
     in EUPP
     loans
     recei-
     vable          -       (45)          -         -           -       (45)
           ------------------------------------------------------------------
    Balance,
     March
     31,
     2010  32,061,456  $300,501  28,925,730  $274,260  60,987,186  $574,761
           ------------------------------------------------------------------
           ------------------------------------------------------------------



                                  Crombie REIT Special
                                    Voting Units and
             Crombie REIT Units     Class B LP Units            Total
           --------------------- --------------------- ----------------------
               Number                Number                Number
             of Units    Amount    of Units    Amount    of Units     Amount
           ------------------------------------------------------------------
    Balance,
     January
     1,
     2009  27,271,888  $265,096  25,079,576  $244,520  52,351,464  $509,616
    Net
     change
     in EUPP
     loans
     recei-
     vable          -         9           -         -           -         9
           ------------------------------------------------------------------
    Balance,
     March
     31,
     2009  27,271,888  $265,105  25,079,576  $244,520  52,351,464  $509,625
           ------------------------------------------------------------------
           ------------------------------------------------------------------
    

Crombie REIT Units

Crombie is authorized to issue an unlimited number of units ("Units") and an unlimited number of voting non-participating Units (the "Special Voting Units"). Issued and outstanding Units may be subdivided or consolidated from time to time by the Trustees without the approval of the Unitholders. Units are redeemable at any time on demand by the holders at a price per Unit equal to the lesser of: (i) 90% of the weighted average price per Crombie Unit during the period of the last ten days during which Crombie's Units traded; and (ii) an amount equal to the price of Crombie's Units on the date of redemption, as defined in the Declaration of Trust.

On March 23, 2010, Crombie announced a normal course issuer bid ("NCIB") where Crombie may purchase for cancellation up to 100,000 of its units, which represents approximately 0.31% of the outstanding units, during the period March 26, 2010 to March 25, 2011. The purchases will be made through the facilities of the TSX. The price that Crombie will pay for any such units will be the market price at the time of acquisition. Under the TSX policies, Crombie is entitled to purchase a maximum of 14,143 units per trading day. As at March 31, 2010, Crombie has not purchased any units under the NCIB.

Crombie REIT Special Voting Units and Class B LP Units

The Declaration of Trust and the Exchange Agreement provide for the issuance of Special Voting Units to the holders of Class B LP Units used solely for providing voting rights proportionate to the votes of Crombie's Units. The Special Voting Units are not transferable separately from the Class B LP Units to which they are attached and will be automatically transferred upon the transfer of such Class B LP Unit. If the Class B LP Units are exchanged in accordance with the Exchange Agreement, a like number of Special Voting Units will be redeemed and cancelled for no consideration by Crombie.

The Class B LP Units issued by a subsidiary of Crombie to ECL Developments Limited have economic and voting rights equivalent, in all material aspects, to Crombie's Units. They are indirectly exchangeable on a one-for-one basis for Crombie's Units at the option of the holder, under the terms of the Exchange Agreement.

Each Class B LP Unit entitles the holder to receive distributions from Crombie, pro rata with distributions made by Crombie on Units.

The Class B LP Units are accounted for as non-controlling interest.

Employee Unit Purchase Plan ("EUPP")

Crombie provides for unit purchase entitlements under the EUPP for certain senior executives. Awards made under the EUPP will allow executives to purchase units from treasury at the average daily high and low board lot trading prices per unit on the TSX for the five trading days preceding the issuance. Executives are provided non-recourse loans at 3% annual interest by Crombie for the purpose of acquiring Units from treasury and the Units purchased are held as collateral for the loan. The loan is repaid through the application of the after-tax amounts of all distributions received on the Units, as well as the after-tax portion of any Long-Term Incentive Plan cash awards received, as payments on interest and principal. As at March 31, 2010, there are loans receivable from executives of $1,491 under Crombie's EUPP, representing 168,776 Units, which are classified as a reduction of Unitholders' Equity. Loan repayments will result in a corresponding increase in Unitholders' Equity. Market value of the Units at March 31, 2010 was $2,025.

The compensation expense related to the EUPP during the period ended March 31, 2010 was $12 (period ended March 31, 2009 - $11).

Income per Unit Computations

Basic net income per Unit is computed by dividing net income by the weighted average number of Units outstanding during the year. Diluted net income per Unit is calculated on the assumption that all EUPP loans were repaid at the beginning of the year. For all years, the assumed exchange of all Class B LP Units would not be dilutive. The convertible debentures are anti-dilutive and have not been included in diluted net income per unit or diluted weighted average number of units outstanding. As at March 31, 2010, there are no other dilutive items.

14) PROPERTY REVENUE

    
                                                        Three         Three
                                                       months        months
                                                        Ended         Ended
                                                     March 31,     March 31,
                                                         2010          2009
                                              -------------------------------
    Rental revenue contractually due
     from tenants                                     $51,425       $50,735
    Straight-line rent recognition                        958           883
    Below-market lease amortization                     1,619         2,145
    Above-market lease amortization                      (781)         (771)
                                              -------------------------------
                                                      $53,221       $52,992
                                              -------------------------------
                                              -------------------------------
    

15) INTEREST

    

                                                        Three         Three
                                                       months        months
                                                        Ended         Ended
                                                     March 31,     March 31,
                                                         2010          2009
                                              -------------------------------
    Fixed rate mortgages                              $10,616        $8,152
    Floating rate term, revolving and
     demand facilities                                    822         2,060
    Convertible debentures                              2,196           518
                                              -------------------------------
    Interest expense                                   13,634        10,730
    Change in fair value debt adjustment                  508           786
    Change in accrued interest                         (2,512)         (643)
    Amortization of effective swap agreements            (827)         (207)
    Amortization of deferred financing
     charges                                             (557)         (480)
                                              -------------------------------
    Interest paid                                     $10,246       $10,186
                                              -------------------------------
                                              -------------------------------
    

16) FUTURE INCOME TAXES

On September 22, 2007, tax legislation Bill C-52, the Budget Implementation Act, 2007 (the "Act") was passed into law. The Act related to the federal income taxation of publicly traded income trusts and partnerships. The Act subjects all existing income trusts, or specified investment flow-through entities ("SIFTs"), to corporate tax rates beginning in 2011, subject to an exemption for real estate investment trusts ("REITs"). A trust that satisfies the criteria of a REIT throughout its taxation year will not be subject to income tax in respect of distributions to its unitholders or be subject to the restrictions on its growth that would apply to SIFTs.

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 meets the REIT technical tests contained in the Act. The relevant tests apply throughout the taxation year of Crombie and, as such, the actual status of Crombie for any particular taxation year can only be ascertained at the end of the year.

The future income tax liability of the wholly-owned corporate subsidiary which is subject to income taxes consists of the following:

    
                                                     March 31,  December 31,
                                                         2010          2009
                                            -------------------------------
    Tax liabilities relating to difference
     in tax and book value                            $86,571       $87,389
    Tax asset relating to non-capital
     loss carry-forward                                (7,971)       (7,689)
                                            -------------------------------
    Future income tax liability                       $78,600       $79,700
                                            -------------------------------
                                            -------------------------------


    The future income tax recovery consists of the following:

                                                        Three         Three
                                                       months        months
                                                        Ended         Ended
                                                     March 31,     March 31,
                                                         2010          2009
                                            -------------------------------
    Provision for income taxes at the
     expected rate                                     $1,726        $2,812
    Tax effect of income attribution to
     Crombie's unitholders                             (1,126)       (2,612)
    Decreased income tax resulting from
     a change in expected rate                         (1,700)            -
                                            -------------------------------
    Income tax expense (recovery)                     $(1,100)         $200
                                            -------------------------------
                                            -------------------------------
    

17) SUPPLEMENTARY CASH FLOW INFORMATION

    
    a) Items not affecting operating cash
                                                        Three         Three
                                                       months        months
                                                        Ended         Ended
                                                     March 31,     March 31,
                                                         2010          2009
                                              -------------------------------
      Items not affecting operating cash:
        Non-controlling interest                       $3,262        $3,856
        Depreciation of commercial properties           4,830         4,544
        Depreciation of recoverable capital
         expenditures                                     289           256
        Amortization of tenant improvements/
         lease costs                                    1,234         1,131
        Amortization of deferred financing
         charges                                          557           480
        Amortization of effective swap
         agreements                                       827           207
        Amortization of intangible assets               4,926         6,560
        Amortization of above-market leases
         (Note 14)                                        781           771
        Amortization of below-market leases
         (Note 14)                                     (1,619)       (2,145)
        Accrued rental revenue                           (958)         (883)
        Unit based compensation                            12            11
        Future income tax expense (recovery)           (1,100)          200
                                              -------------------------------
                                                      $13,041       $14,988
                                              -------------------------------
                                              -------------------------------


    b) Change in other non-cash operating items
                                                        Three         Three
                                                       months        months
                                                        Ended         Ended
                                                     March 31,     March 31,
                                                         2010          2009
                                              -------------------------------
    Cash provided by (used in):
      Receivables                                        $937          $777
      Prepaid expenses and other assets                   614         2,633
      Payables and other liabilities                    5,781       (10,686)
                                              -------------------------------
                                                       $7,332       $(7,276)
                                              -------------------------------
                                              -------------------------------
    

18) COMMITMENTS AND CONTINGENCIES

There are various claims and litigation, which Crombie is involved with, arising out of the ordinary course of business operations. In the opinion of management, any liability that would arise from such contingencies would not have a significant adverse effect on these financial statements.

Crombie has agreed to indemnify 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 has entered into a management cost sharing agreement with a subsidiary of Empire Company Limited. Details of this agreement are described in "Related Party Transactions" (Note 19).

Crombie has land leases on certain properties. These leases have payments of $969 per year over the next five years. The land leases have terms of between 15.1 and 74.8 years remaining, including renewal options.

Crombie obtains letters of credit to support its obligations with respect to construction work on its commercial properties, defeasing commercial property debt and satisfying mortgage financing requirements. Crombie has $223 in standby letters of credit for construction work that is being performed on its commercial properties. In connection with the defeasance of the discontinued operations commercial property debt, Crombie has issued a standby letter of credit in the amount of $1,715 in favour of the mortgage lender. In addition, to satisfy the requirements of mortgage financings, Crombie has issued standby letters of credit in the amount of $8,100 in favour of the mortgage lender. Crombie does not believe that any of these standby letters of credit are likely to be drawn upon.

19) RELATED PARTY TRANSACTIONS

As at March 31, 2010, Empire Company Limited, through its wholly-owned subsidiary ECL Developments Limited, holds a 47.4% (fully diluted 40.3%) indirect interest in Crombie. Crombie uses the exchange amount as the measurement basis for the related party transactions.

For a period of five years commencing March 23, 2006, certain executive management individuals and other employees of Crombie will provide general management, financial, leasing, administrative, and other administration support services to certain real estate subsidiaries of Empire Company Limited on a cost sharing basis, pursuant to a Management Cost Sharing Agreement dated March 23, 2006 between Crombie Developments Limited, a subsidiary of Crombie, and ECL Developments Limited, a subsidiary of Empire Company Limited ("Management Cost Sharing Agreement"). The costs assumed by Empire Company Limited pursuant to the agreement during the three months ended March 31, 2010 were $277 (three months ended March 31, 2009 - $297) and were netted against general and administrative expenses owing by Crombie to Empire Company Limited.

For a period of five years, commencing March 23, 2006, certain on-site maintenance and management employees of Crombie will provide property management services to certain real estate subsidiaries of Empire Company Limited on a cost sharing basis pursuant to the Management Cost Sharing Agreement. In addition, for various periods, ECL Developments Limited has an obligation to provide rental income and interest rate subsidies pursuant to an Omnibus Subsidy Agreement dated March 23, 2006 between Crombie Developments Limited, Crombie Limited Partnership and ECL Developments Limited. The costs assumed by Empire Company Limited pursuant to the Management Cost Sharing Agreement during the three months ended March 31, 2010 were $283 (three months ended March 31, 2009 - $376) and were netted against property expenses owing by Crombie to Empire Company Limited. The head lease subsidy during the three months ended March 31, 2010 was $186 (three months ended March 31, 2009 - $250).

Crombie also earned rental revenue of $15,009 for the three months ended March 31, 2010 (three months ended March 31, 2009 - $14,560) from Sobeys Inc. and Empire Theatres, subsidiaries of Empire Company Limited.

On February 22, 2010, Crombie acquired five properties (Note 4) and assumed two mortgages $8,358 from subsidiaries of Empire Company Limited. In addition, Crombie repaid $3,471 to ECL General Partner Limited to retire a loan as required under the terms of the agreement.

On March 24, 2010, Crombie acquired three properties from subsidiaries of Empire Company Limited (Note 4).

20) FINANCIAL INSTRUMENTS

a) Fair value of financial instruments

The fair value of a financial instrument is the estimated amount that Crombie would receive or pay to settle the financial assets and financial liabilities as at the reporting date.

Crombie has classified its financial instruments in the following categories:

    
    i.   Held for trading - Restricted cash, cash and cash equivalents
    ii.  Held to maturity investments - Assets related to discontinued
         operations
    iii. Loans and receivables - Notes receivable and accounts receivable
    iv.  Other financial liabilities - Commercial property debt, liabilities
         related to discontinued operations, convertible debentures, tenant
         improvements and capital expenditures payable, property operating
         costs payable and interest payable
    

The book value of cash and cash equivalents, restricted cash, receivables, payables and accruals approximate fair values at the balance sheet date. 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. Such fair value estimates are not necessarily indicative of the amounts Crombie might pay or receive in actual market transactions.

The following table summarizes the carrying value (excluding deferred financing charges) and fair value of those financial instruments which have a fair value different from their book value at the balance sheet date.

    
                                   March 31, 2010        December 31, 2009
                             ------------------------------------------------
                               Carrying        Fair    Carrying        Fair
                                  Value       Value       Value       Value
                             ------------------------------------------------
    Assets related to
     discontinued operations     $6,912      $7,015      $6,929      $7,066
                             ------------------------------------------------
                             ------------------------------------------------
    Commercial property debt   $727,981    $725,476    $711,152    $708,401
                             ------------------------------------------------
                             ------------------------------------------------
    Convertible debentures     $160,000    $170,115    $115,000    $120,200
                             ------------------------------------------------
                             ------------------------------------------------
    Liabilities related to
     discontinued operations     $6,294      $6,222      $6,334      $6,270
                             ------------------------------------------------
                             ------------------------------------------------
    

The following summarizes the significant methods and assumptions used in estimating the fair values of the financial instruments reflected in the above table:

Assets related to discontinued operations: The fair value of the bonds and treasury bills are based on market trading prices at the reporting date.

Commercial property debt and liabilities related to discontinued operations: The fair value of Crombie's commercial property debt and liabilities related to discontinued operations is estimated based on the present value of future payments, discounted at the yield on a Government of Canada bond with the nearest maturity date to the underlying debt, plus an estimated credit spread at the reporting date.

Convertible debentures: The fair value of the convertible debentures is estimated based on the market trading prices, at the reporting date, of the convertible debentures.

b) Risk management

In the normal course of business, Crombie is exposed to a number of financial risks that can affect its operating performance. These risks, and the action taken to manage them, are as follows:

Credit risk

Credit risk arises from the possibility that tenants may experience financial difficulty and be unable to fulfill their lease commitments. Crombie's credit risk is limited to the recorded amount of tenant receivables. A provision for doubtful accounts is taken for all anticipated problem accounts (Note 7).

Crombie mitiges credit risk by geographical diversification, utilizing staggered lease maturities, diversifying both its tenant mix and asset mix and conducting credit assessments for new and renewing tenants. As at March 31, 2010:

    
    - Excluding Sobeys (which accounts for 32.6% of Crombie's minimum rent),
      no other tenant accounts for more than 2.2% of Crombie's minimum rent;
      and
    - Over the next five years, no more than 9.0% of the gross leaseable area
      of Crombie will expire in any one year.
    

As outlined in Note 19, Crombie earned rental revenue of $15,009 for the three months ended March 31, 2010 (three months ended March 31, 2009 - $14,560) from subsidiaries of Empire Company Limited.

Interest rate risk

Interest rate risk is the potential for financial loss arising from increases in interest rates. Crombie mitigates interest rate risk by utilizing staggered debt maturities, limiting the use of permanent floating rate debt and utilizing interest rate swap agreements. As at March 31, 2010:

    
    - Crombie's weighted average term to maturity of the fixed rate mortgages
      was 7.5 years; and
    - Crombie's exposure to floating rate debt, including the impact of the
      fixed rate swap agreements discussed below, was 0.6% of the total
      commercial property debt.
    

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. The breakdown of the swaps in place at March 31, 2010 as part of the interest rate management program, and their associated mark-to-market amounts are as follows:

    
    - Crombie has entered into a fixed interest rate swap to fix the amount
      of interest to be paid on $50,000 of the revolving credit facility. The
      fair value of the fixed interest rate swap at March 31, 2010, had an
      unfavourable mark-to-market exposure of $2,398 (March 31, 2009 -
      unfavourable $4,231) compared to its face value. The change in this
      amount has been recognized in other comprehensive income (loss). The
      mark-to-market amount of fixed interest rate swaps reduce to $Nil upon
      maturity of the swaps.
    - Crombie has entered into a delayed interest rate swap agreement of a
      notional amount of $8,204 (March 31, 2009 - $100,334) with a settlement
      date of July 2, 2011 and maturing July 2, 2021 to mitigate exposure to
      interest rate increases for a mortgage maturing in 2011. The fair value
      of this delayed interest rate swap agreement at March 31, 2010, had an
      unfavourable mark-to-market exposure of $821 (March 31, 2009 -
      unfavourable $21,330) compared to its face value. The change in this
      amount has been recognized in other comprehensive income (loss).
    

Crombie estimates that $3,206 of other comprehensive income (loss) will be reclassified to interest expense during the remaining three quarters of 2010 based on interest rate swap agreements settled to March 31, 2010.

A fluctuation in interest rates would have had an impact on Crombie's net income and other comprehensive income (loss) items. Based on the previous year's rate changes, a 0.5% interest rate change would reasonably be considered possible. The changes would have had the following impact:

    
                                   March 31, 2010          March 31, 2009
                             ------------------------------------------------
                                   0.5%        0.5%        0.5%        0.5%
                               increase    decrease    increase    decrease
    -------------------------------------------------------------------------
    Impact on net income
     of interest rate
     changes on the
     floating rate
     revolving credit
     facility                      $(33)        $33       $(270)       $270
    -------------------------------------------------------------------------


                                   March 31, 2010          March 31, 2009
                             ------------------------------------------------
                                   0.5%        0.5%        0.5%        0.5%
                               increase    decrease    increase    decrease
    -------------------------------------------------------------------------
    Impact on other
     comprehensive income
     and non-controlling
     interest items due to
     changes in fair value
     of derivatives
     designated as a cash
     flow hedge                    $631       $(653)    $10,024     $(9,577)
    -------------------------------------------------------------------------
    

Crombie does not enter into these interest rate swap transactions on a speculative basis. Crombie is prohibited by its Declaration of Trust in purchasing, selling or trading in interest rate future contracts other than for hedging purposes.

Liquidity risk

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 the growth program and/or refinance the debt obligations as they mature.

Cash flow generated from operating the property portfolio represents the primary source of liquidity used to service the interest on debt, fund general and administrative expenses, reinvest into the portfolio through capital expenditures, as well as fund tenant improvement 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.

There is a risk that the debt capital markets may not refinance maturing debt on terms and conditions acceptable to Crombie or at any terms at all. Crombie seeks to mitigate this risk by staggering the debt maturity dates (Note 8). There is also a risk that the equity capital markets may not be receptive to an equity issue from Crombie with financial terms acceptable to Crombie. As discussed in Note 22, Crombie mitigates its exposure to liquidity risk utilizing a conservative approach to capital management.

The estimated maturities of non-derivative financial liabilities are as follows:

    
                            Contractual
                                   Cash   Remaining
                                Flows(1)       2010        2011        2012
                             ------------------------------------------------
    Fixed rate mortgages(2)    $920,274     $43,315     $83,291     $55,563
    Convertible debentures      212,950       7,500      10,000      10,000
                             ------------------------------------------------
                              1,133,224      50,815      93,291      65,563
    Floating rate revolving
     credit facility             55,570         642      54,928           -
                             ------------------------------------------------
    Total                    $1,188,794     $51,457    $148,219     $65,563
                             ------------------------------------------------
                              ------------------------------------------------

                                               2013        2014  Thereafter
                             ------------------------------------------------
    Fixed rate mortgages(2)                 $85,314    $115,289    $537,502
    Convertible debentures                   38,425       7,900     139,125
                             ------------------------------------------------
                                            123,739     123,189     676,627
    Floating rate revolving
     credit facility                             -           -           -
    Total                                  $123,739    $123,189    $676,627
                             ------------------------------------------------
                             ------------------------------------------------
    (1) Contractual cash flows include principal and interest and ignore
        extension options
    (2) Reduced by the interest rate subsidy payment received from ECL
    

The estimated maturities of derivative financial liabilities are as follows:

    
                              Remai-
                               ning                                   There-
                      Total    2010    2011    2012    2013    2014   after
                     --------------------------------------------------------
    Swap agreement   $3,219  $1,418  $1,801      $-      $-      $-      $-
    

21) ASSET HELD FOR SALE AND DISCONTINUED OPERATIONS

During the fourth quarter of 2008, Crombie defeased the mortgage associated with the discontinued operations. The transaction did not qualify for defeasance accounting, therefore the defeased loan and related asset have not been removed from the balance sheet. The defeased loan is payable in monthly payments of $42 and bears interest at 5.46%, was originally amortized over 25 years and is due April 1, 2014. Crombie purchased Government of Canada bonds and treasury bills and Canada mortgage bonds and pledged them as security to the mortgage company. The bonds have maturity dates to September 15, 2013, have a weighted average interest rate of 3.63% and have been placed in escrow. The assets and liabilities related to discontinued operations are measured at amortized cost using the effective interest method, until April 1, 2014 at which time the debt will be extinguished.

22) CAPITAL MANAGEMENT

Crombie's objective when managing capital on a long-term basis is to maintain overall indebtedness, including convertible debentures, in the range of 50% to 60% of gross book value (as defined in the credit facility agreement), utilize staggered debt maturities, minimize long-term exposure to floating rate debt and maintain conservative payout ratios. Crombie's capital structure consists of the following:

    
                                                     March 31,  December 31,
                                                         2010          2009
                                              -------------------------------
    Commercial property debt                         $722,017      $706,369
    Convertible debentures                            153,839       110,858
    Non-controlling interest                          222,734       225,367
    Unitholders' equity                               244,216       246,975
                                              -------------------------------
                                                   $1,342,806    $1,289,569
                                              -------------------------------
                                              -------------------------------
    

At a minimum, Crombie's capital structure is managed to ensure that it complies with the restrictions 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 the individual property; and
    - A restriction that Crombie shall not incur indebtedness of more than
      60% of gross book value (65% including convertible debentures)
    

Crombie's debt to gross book value as defined in Crombie's Declaration of Trust is as follows:

    
                                                     March 31,  December 31,
                                                         2010          2009
                                              -------------------------------
    Mortgages payable                                $673,481      $604,992
    Convertible debentures                            160,000       115,000
    Revolving credit facility                          54,500       106,160
                                              -------------------------------
    Total debt outstanding                            887,981       826,152
    Less: Applicable fair value debt
     adjustment                                        (7,225)       (7,733)
                                              -------------------------------
    Debt                                             $880,756      $818,419
                                              -------------------------------
                                              -------------------------------

    Total assets                                   $1,512,676    $1,457,166
    Add:
    Deferred financing charges                         12,125         8,925
    Accumulated depreciation of commercial
     properties                                        74,694        69,952
    Accumulated amortization of intangible
     assets                                            62,002        78,551
    Less:
    Assets held related to discontinued
     operations                                        (6,912)       (6,929)
    Interest rate subsidy                              (7,225)       (7,733)
    Fair value adjustment to future taxes             (39,245)      (39,245)
                                              -------------------------------
    Gross book value                               $1,608,115    $1,560,687
                                              -------------------------------
                                              -------------------------------
    Debt to gross book value                             54.8%         52.4%
                                              -------------------------------
                                              -------------------------------
    

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 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 any negative mark-to-market position
      on the interest rate swap agreements, not to exceed the security
      provided by Crombie; and
    - distributions to Unitholders are limited to 100% of Distributable
      Income as defined in the revolving credit facility.
    

The revolving credit facility also contains a covenant that ECL Developments Limited must maintain a minimum 40% voting interest in Crombie. If ECL Developments Limited reduces its voting interest below this level, Crombie will be required to renegotiate the revolving credit facility or obtain alternative financing. Pursuant to an exchange agreement, and while such covenant remains in place, ECL Developments Limited will be required to give Crombie at least six months' prior written notice of its intention to reduce its voting interest below 40%.

As at March 31, 2010, Crombie is in compliance with all externally imposed capital requirements and all covenants relating to its debt facilities.

23) 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) that can be achieved with the combined total of employee and employer contributions and investment income over the period of plan membership, and the annuity purchase rates at the time of the employee's retirement.

Defined benefit pension plans

The ultimate retirement benefit is defined by a formula that provides a unit of benefit for each year of service. Employee contributions, if required, pay for part of the cost of the benefit, and the employer contributions fund the balance. The employer contributions are not specified or defined within the plan text. They are based on the result of actuarial valuations which determine the level of funding required to meet the total obligation as estimated at the time of the valuation. The defined benefit plans are unfunded.

The total defined benefit cost related to pension plans and post retirement benefit plans for the three months ended March 31, 2010 was $141 (three months ended March 31, 2009 - $75).

24) SUBSEQUENT EVENTS

a) On April 22, 2010, Crombie declared distributions of 7.417 cents per unit for the period from April 1, 2010 to and including, April 30, 2010. The distribution will be payable on May 14, 2010 to Unitholders of record as at April 30, 2010.

b) On April 22, 2010, Crombie completed the first tranche of financing for the Mountain Locks Plaza in St. Catharines, Ontario. The mortgage of $10,500 has a ten year term, a 25 year amortization period and a fixed interest rate of 5.88%. The second tranche of financing of $2,500 is anticipated to close prior to the end of the second quarter of 2010, subject to meeting final closing conditions.

25) SEGMENT DISCLOSURE

Crombie owns and operates primarily retail 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 for disclosure purposes in accordance with GAAP.

26) COMPARATIVE FIGURES

Comparative figures have been reclassified, where necessary, to reflect the current year's presentation.

Management Discussion and Analysis

(In thousands of dollars, except per unit amounts)

The following is Management's Discussion and Analysis ("MD&A") of the consolidated financial condition and results of operations of Crombie Real Estate Investment Trust ("Crombie") for the quarter ended March 31, 2010, with a comparison to the financial condition and results of operations for the comparable period in 2009.

This MD&A should be read in conjunction with Crombie's interim consolidated financial statements and accompanying notes for the period ended March 31, 2010, and the audited consolidated financial statements and accompanying notes for the year ended December 31, 2009 and the related MD&A. Information about Crombie can be found on SEDAR at www.sedar.com.

Forward-looking Information

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

In particular, certain statements in this document discuss Crombie's anticipated outlook of future events. These statements include, but are not limited to:

(i) the development of new properties under a development agreement, which development activities are undertaken by a related party and thus are not under the direct control of Crombie and whose activities could be impacted by real estate market cycles, the availability of labour and general economic conditions;

(ii) the acquisition of accretive properties and the anticipated extent of the accretion of any acquisitions, which could be impacted by demand for properties and the effect that demand has on acquisition capitalization rates and changes in interest rates;

(iii) reinvesting to make improvements to existing properties, which could be impacted by the availability of labour and capital resource allocation decisions;

(iv) generating improved rental income and occupancy levels, which could be impacted by changes in demand for Crombie's properties, tenant bankruptcies, the effects of general economic conditions and supply of competitive locations in proximity to Crombie locations;

(v) the anticipated rate of general and administrative expenses as a percentage of property revenue, which could be impacted by changes in property revenue and/or changes in general and administrative expenses;

(vi) overall indebtedness levels, which could be impacted by the level of acquisition activity Crombie is able to achieve and future financing opportunities;

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

(viii) anticipated subsidy payments from ECL Developments Limited ("ECLD"), which are dependent on tenant leasing and construction activity;

(ix) anticipated distributions and payout ratios, which could be impacted by seasonality of capital expenditures, results of operations and capital resource allocation decisions;

* the effect that any contingencies would have on Crombie's financial statements;

(xi) the continued investment in training and resources throughout the International Financial Reporting Standards ("IFRS") transition and the effect the adoption of IFRS may have on Crombie's future financial statements;

(xii) the assumed estimated impact per unit upon future settlement of the interest rate swap agreements which may be impacted by changes in Canadian bond yields and swap spreads, as well as the timing and type of financing available and the related amortization period thereon; and

(xiii) anticipated replacement of expiring tenancies, which could be impacted by the effects of general economic conditions and the supply of competitive locations.

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

Non-GAAP Financial Measures

There are financial measures included in this MD&A that do not have a standardized meaning under Canadian generally accepted accounting principles ("GAAP") as prescribed by the Canadian Institute of Chartered Accountants. These measures are property net operating income ("NOI"), adjusted funds from operations ("AFFO"), debt to gross book value, funds from operations ("FFO") and earnings before interest, taxes, depreciation and amortization ("EBITDA"). Management includes these measures because it believes certain investors use these measures as a means of assessing relative financial performance.

Introduction

Date of MD&A

The information contained in the MD&A, including forward-looking statements, is based on information available to management as of May 6, 2010.

Financial and Operational Summary

Comparative AFFO information has been restated to reflect the retrospective application of the settlement of effective interest rate swap agreements.

    
    -------------------------------------------------------------------------
                                                      Quarter       Quarter
                                                        Ended         Ended
    (in thousands of dollars, except per unit        March 31,     March 31,
     amounts and as otherwise noted)                     2010          2009
    -------------------------------------------------------------------------
                                                               (as restated)
    Property revenue                                  $53,221       $52,992
    Net income                                         $3,615        $4,192
    Basic and diluted net income per unit               $0.11         $0.15
    -------------------------------------------------------------------------
    FFO                                               $17,056       $20,739
    FFO per unit - basic                                $0.28         $0.40
    FFO per unit - diluted(1)                           $0.27         $0.39
    FFO payout ratio (%)                                 79.5%         56.2%
    AFFO                                              $12,744       $11,698
    AFFO per unit- basic                                $0.21         $0.22
    AFFO per unit-diluted(1)                            $0.20         $0.22
    AFFO payout ratio (%)                               106.5%         99.6%
    -------------------------------------------------------------------------
    (1) The diluted weighted average number of total Units and Special Voting
        Units includes the conversion of all series of convertible debentures
        outstanding during the period, excluding any series that is anti-
        dilutive. For March 31, 2010, the Series A Debentures and the Series
        C Debentures are anti-dilutive for AFFO per unit calculations. For
        March 31, 2009, the Series A Debentures are anti-dilutive for AFFO
        per unit calculations.
    

Overview of the Business and Recent Developments

Crombie is an unincorporated, open-ended real estate investment trust established pursuant to a Declaration of Trust dated January 1, 2006, as amended and restated (the "Declaration of Trust") under, and governed by, the laws of the Province of Ontario. The units of Crombie trade on the Toronto Stock Exchange under the symbol CRR.UN.

Crombie invests in income-producing retail, office and mixed-use properties in Canada, with a future growth strategy focused primarily on the acquisition of retail properties. At March 31, 2010, Crombie owned a portfolio of 118 commercial properties in seven provinces, comprising approximately 11.5 million square feet of gross leaseable area ("GLA"). Empire Company Limited ("Empire"), through ECLD, holds a 47.4% economic and voting interest in Crombie at March 31, 2010.

Significant developments during 2009 include:

    
    - The closing of a public offering of 4,725,000 Units, including the
      underwriter's over-allotment option, at a price of $7.80 per Unit for
      gross proceeds of $36,855 on June 25, 2009;

    - Concurrent with the above public offering, in satisfaction of its pre-
      emptive right, the purchase by ECLD of 3,846,154 of Class B LP Units
      and the attached Special Voting Units, on a private-placement basis, at
      the $7.80 offering price for gross proceeds of $30,000;

    - The closing of an $85,000 unsecured convertible debenture offering (the
      "Series B Debentures") on September 30, 2009. The Series B Debentures
      have an interest rate of 6.25%, a conversion price of $11.00 per unit
      and a maturity date of June 30, 2015; and

    - The entering of an agreement on November 5, 2009 to acquire eight
      retail properties representing approximately 333,000 square feet of GLA
      from subsidiaries of Empire for a purchase price of approximately
      $59,500, excluding closing and transaction costs and subject to normal
      closing adjustments.
    

Significant developments during the first quarter of 2010 include:

    
    - On February 1, 2010, Crombie completed the refinancing for the office
      and retail portfolio known as Halifax Developments. The principal
      amount of the maturing Halifax Developments mortgages was approximately
      $106,079 with a weighted average fixed interest rate of 5.43%. The new
      Halifax Developments mortgages are for a total of $141,000, with a ten
      year term, a 25 year amortization and a weighted average fixed interest
      rate of 6.48%.

    - On February 8, 2010, Crombie issued $45,000 of convertible unsecured
      subordinated debentures (the "Series C Debentures"). The Series C
      Debentures have an interest rate of 5.75%, a conversion price of $15.30
      per unit and a maturity date of June 30, 2017.

    - On February 26, 2010, Crombie completed $33,850 of mortgage financing
      on five properties. The mortgages have an eight year term, a fixed
      interest rate of 5.70% and a weighted average amortization period of
      21.6 years.

    - On February 22, 2010, Crombie completed the acquisition of five of the
      eight retail properties previously announced on November 5, 2009, from
      subsidiaries of Empire. The cost of the portfolio was $31,530,
      excluding closing and transaction costs, and was partially financed by
      the assumption of $8,358 of mortgages with a weighted average term of
      8.6 years, a 25 year amortization period and a weighted average
      interest rate of 6.26%. The balance was financed with Crombie's
      existing credit facility.

    - On March 24, 2010, Crombie completed the acquisition of the remaining
      three properties of the eight retail properties previously announced on
      November 5, 2009 from subsidiaries of Empire. The purchase price of the
      three properties was $27,746 and was financed with Crombie's existing
      credit facility. Commitments for mortgage financing for the properties
      of approximately $19,000 have been assigned to Crombie and are
      anticipated to close during the second quarter of 2010.
    

Business Strategy and Outlook

The objectives of Crombie are threefold:

    
    1. Generate reliable and growing cash distributions;

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

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

Generate reliable and growing cash distributions: Management focuses both on improving the same-asset results while expanding the asset base with accretive acquisitions to grow the cash distributions to unitholders. Crombie's focus on grocery-anchored retail properties, a stable and defensive-oriented asset class, assists in enhancing the reliability of cash distributions.

Enhance value of Crombie's assets: Crombie anticipates reinvesting approximately 3% to 5% of its property revenue each year into its properties to maintain their productive capacity and thus overall value.

Crombie's internal growth strategy focuses on generating greater rental income from its existing properties. Crombie plans to achieve this by strengthening its asset base through judicious expansion and improvement of existing properties, leasing vacant space at competitive market rates with the lowest possible transaction costs, and maintaining good relations with tenants. Management will continue to conduct regular reviews of properties and, based on its experience and market knowledge, will assess ongoing opportunities within the portfolio.

Expand asset base with accretive acquisitions: Crombie's external growth strategy focuses primarily on acquisitions of income-producing, grocery-anchored retail properties. Crombie pursues two sources of acquisitions which are third party acquisitions and the relationship with ECLD. The relationship with ECLD includes currently owned and future development properties, as well as opportunities through the rights of first refusal ("ROFR") that one of Empire's subsidiaries has negotiated in many of their leases. Crombie will seek to identify future property acquisitions using investment criteria that focus on the strength of anchor tenancies, market demographics, terms of tenancies, proportion of revenue from national tenants, opportunities for expansion, security of cash flow, potential for capital appreciation and potential for increasing value through more efficient management of the assets being acquired, including expansion and repositioning.

Crombie continues to work closely with ECLD to identify development opportunities that further Crombie's external growth strategy. The relationship is governed by a development agreement described in the Material Contracts section of Crombie's Annual Information Form. Through this relationship, Crombie expects to have the benefits associated with development while limiting its exposure to the inherent risks of development, such as real estate market cycles, cost overruns, labour disputes, construction delays and unpredictable general economic conditions. The development agreement also enables Crombie to avoid the uncertainties associated with property development, including paying the carrying costs of land, securing construction financing, obtaining development approvals, managing construction projects, marketing in advance of and during construction and earning no return during the construction period.

The development agreement provides Crombie with a preferential right to acquire retail properties developed by ECLD, subject to approval by the independent trustees. This relationship between Crombie and ECLD continues to provide promising opportunities for growth through future developments on both new and existing sites in Crombie's portfolio.

In the first quarter of 2010, Crombie acquired an eight property portfolio from subsidiaries of Empire. Five of these properties were new locations, while three of the acquisitions (Future Shop at Highland Square Mall in Nova Scotia, Mountain Equipment Co-op at Greenfield Park in Quebec and Societe des Alcools du Quebec and Dormez-Vous Centre du Sommeil in Saint Romuald Plaza, Quebec) were additions to existing properties.

The following table outlines the acquisitions completed since the initial public offering ("IPO") which highlight the growth opportunities provided through the Empire / ECLD relationship.

    
    -------------------------------------------------------------------------
                                                        Acquisi-
                       Date    Property         GLA        tion
    Property       Acquired        Type    (sq. ft.)     Cost(1)     Vendor
    -------------------------------------------------------------------------
    Brampton
     Plaza,                                                          Empire
     Brampton,       Oct. 2,     Retail                               Subsi-
     Ontario           2006     - Plaza      66,000     $13,160     diaries
    -------------------------------------------------------------------------
    Taunton &
     Wilson Plaza,                                                   Empire
     Oshawa,         Oct. 2,     Retail                               Subsi-
     Ontario           2006     - Plaza      83,000     $18,725     diaries
    -------------------------------------------------------------------------
    Burlington
     Plaza,
     Burlington,    Dec. 20,     Retail
     Ontario           2006     - Plaza      56,000     $14,200   3rd party
    -------------------------------------------------------------------------
    The Mews of
     Carleton
     Place,
     Carleton
     Place,         Jan. 17,     Retail
     Ontario           2007     - Plaza      80,000     $11,800   3rd party
    -------------------------------------------------------------------------
    Perth Mews
     Shopping
     Mall, Perth,    Mar. 7,     Retail
     Ontario           2007     - Plaza     103,000     $17,900   3rd party
    -------------------------------------------------------------------------
    International
     Gateway
     Centre,
     Fort Erie,     Jul. 26,     Retail
     Ontario           2007     - Plaza      93,000     $19,200        ROFR
    -------------------------------------------------------------------------
    Brossard-
     Longueuil,                  Retail
     Brossard,      Aug. 24,     - Free-
     Quebec            2007    standing      39,000      $7,300        ROFR
    -------------------------------------------------------------------------
    Town Centre,
     LaSalle,       Oct. 15,     Retail
     Ontario           2007     - Plaza      88,000     $12,700   3rd party
    -------------------------------------------------------------------------
    61 property
     portfolio
     (the                        Retail                              Empire
     "Portfolio     Apr. 22,     - Free-                              Subsi-
     Acquisition")     2008    standing   1,589,000    $428,500     diaries
                                 Retail
                                - Plaza   1,571,000
                                 Retail
                             - Enclosed     128,000
    -------------------------------------------------------------------------
    River City
     Centre,
     Saskatoon,     Jun. 12,     Retail
     Saskatchewan      2008     - Plaza     160,000     $27,200   3rd party
    -------------------------------------------------------------------------
                                                                     Empire
    5 property      Feb. 22,     Retail                               Subsi-
     portfolio         2010     - Plaza     186,000     $31,530     diaries
    -------------------------------------------------------------------------
                                                                     Empire
    3 property      Mar. 24,     Retail                               Subsi-
     portfolio         2010     - Plaza     101,000     $27,746     diaries
                                 Retail
                                 - Free-
                               standing      46,000
    -------------------------------------------------------------------------
    Total                                 4,389,000    $629,961
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excluding closing and transaction costs.
    

There is approximately 1.7 million square feet in 20 development properties that can be offered to Crombie on a preferential right through the Empire/ECLD relationship when the properties are sufficiently developed to meet Crombie's acquisition criteria. The properties are primarily retail plazas and approximately 70% of the GLA of the 20 properties is located outside of Atlantic Canada. These properties are anticipated to be made available to Crombie over the next five years.

Business Environment

During the latter half of 2009 and the first quarter of 2010, the Canadian economy continued to display strengthening results in a number of key economic areas, which indicate that the recession may be ending. However, concerns still exist as to the sustainability of the recovery as debt levels of both governments and consumers continue to rise and unemployment levels remain high. Also during this period, the credit and equity markets experienced a dramatic improvement in their liquidity which occurred almost as quickly as the contraction in late 2008. This liquidity expansion has helped reduce credit spreads to more historical normal levels and resulted in attractive overall financing costs which many Canadian real estate investment trusts ("REITs") and real estate companies, including Crombie, have taken advantage of to strengthen their financial position and improve their liquidity.

In light of the improving economic conditions and improved access to capital, capitalization rates began to contract slightly after their expansion during the recession. This capitalization rate contraction has resulted in a positive impact to the unit prices of many REITs and the recent improvement in both the credit and equity markets have improved Crombie's cost of capital to the level where accretive acquisitions could be considered. As a result, Crombie was able to complete the acquisition of eight retail properties from subsidiaries of Empire during the first quarter of 2010. Crombie will only pursue acquisitions that provide an acceptable return, including any acquisitions that may result from the relationship between Crombie and ECLD.

In terms of occupancy rates, both the retail and office markets in Atlantic Canada where Crombie has a prominent presence remain relatively stable. The overall business environment outlook is cautiously optimistic, influenced by the early recovery noted in the Canadian economy. However, there remains a lack of clarity as to the sustainability of the recovery. One offsetting factor is that many of Crombie's retail locations are anchored by food stores, which typically are less affected by swings in consumer spending.

2010 First Quarter Highlights

    
    - Crombie completed the acquisition of an eight property portfolio from
      subsidiaries of Empire.

    - Crombie completed the refinancing of the office and retail portfolio
      known as Halifax Developments, providing additional funds of $35,000.

    - Crombie issued $45,000 of Series C Debentures.

    - Crombie completed leasing activity on 268,000 square feet of GLA during
      the first quarter of 2010, which represents approximately 34.6% of its
      2010 expiring leases.

    - Average net rent per square foot from the leasing activity decreased to
      $13.34 from the expiring rent per square foot of $13.44, a decrease of
      0.7%.

    - Occupancy for the properties was 95.0% at March 31, 2010 compared with
      94.7% at December 31, 2009.

    - Property revenue for the quarter ended March 31, 2010 of $53,221
      increased by $229, or 0.4% over the $52,992 for the same quarter in the
      previous year.

    - Same-asset NOI for the quarter ended March 31, 2010 of $31,510
      decreased slightly by $81, or 0.3%, compared to $31,591 for the quarter
      ended March 31, 2009.

    - The FFO payout ratio for the quarter ended March 31, 2010 was 79.5%
      compared to the payout ratio of 56.2% for the same period in 2009.

    - The AFFO payout ratio for the quarter ended March 31, 2010 was 106.5%
      which was unfavourable to the target annual AFFO payout ratio of 95%
      and was unfavourable to the payout ratio of 99.6% for the same period
      in 2009.

    - Debt to gross book value was 54.8% at March 31, 2010 compared to 52.4%
      at December 31, 2009 and 54.8% at March 31, 2009.

    - Crombie's interest service coverage for the quarter ended March 31,
      2010 was 2.44 times EBITDA and debt service coverage was 1.73 times
      EBITDA, compared to 2.99 times EBITDA and 2.11 times EBITDA,
      respectively, for the same period in 2009.
    

Overview of the Property Portfolio

Property Profile

At March 31, 2010 the property portfolio consisted of 118 commercial properties that contain approximately 11.5 million square feet of GLA. The properties are located in seven provinces: (Nova Scotia, New Brunswick, Ontario, Newfoundland and Labrador, Quebec, Prince Edward Island and Saskatchewan).

As at March 31, 2010, the portfolio distribution of the GLA by province was as follows:

    
    -------------------------------------------------------------------------
                                                           % of
                     Number                              Annual
                  of Proper-        GLA                 Minimum        Occu-
    Province           ties    (sq. ft.)   % of GLA        Rent     pancy(1)
    -------------------------------------------------------------------------
    Nova Scotia          41   5,068,000        43.9%       40.0%       95.0%
    New Brunswick        23   1,784,000        15.5%       13.1%       91.0%
    Ontario              23   1,731,000        15.0%       16.8%       95.7%
    Newfoundland
     and Labrador        13   1,497,000        13.0%       17.1%       96.7%
    Quebec               14     908,000         7.9%        8.5%       98.6%
    Prince Edward
     Island               3     385,000         3.3%        3.0%       94.3%
    Saskatchewan          1     160,000         1.4%        1.5%       97.8%
    -------------------------------------------------------------------------
    Total               118  11,533,000       100.0%      100.0%       95.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For purposes of calculating occupancy percentage, Crombie considers
        GLA covered by the head lease agreement in favour of ECLD as occupied
        as there is head lease revenue being earned on the GLA.
    

During the first quarter of 2010 there was an increase in GLA due to the eight property portfolio acquisition with properties located in Ontario, New Brunswick, Nova Scotia and Quebec, along with the redevelopment of properties in New Brunswick, Nova Scotia and Newfoundland and Labrador.

Overall occupancy has increased to 95.0% at March 31, 2010 from 94.7% at December 31, 2009 primarily due to the commencement of occupancy of 90,000 square feet of committed renewals and 38,000 square feet of new leasing activity in the quarter, combined with the 100% occupancy at the eight properties acquired during the first quarter of 2010.

Crombie looks to diversify its geographic composition through growth opportunities, as indicated by eight acquisitions in Ontario, two acquisitions in Quebec, one acquisition in Saskatchewan and the Portfolio Acquisition since Crombie's IPO. As well, the properties are located in rural and urban locations, which Crombie believes adds stability to the portfolio while reducing vulnerability to economic fluctuations that may affect any particular region.

From time to time, Crombie will commence redevelopment work on a property to enhance the economic viability of a location when the environment in which it operates warrants. Crombie currently has two properties that are under redevelopment. Fairvale Plaza in New Brunswick is being converted to a retail freestanding property through the demolition of existing commercial retail unit space and expansion of an existing Sobeys store and additional customer parking. Aberdeen Business Centre in New Glasgow, Nova Scotia is being expanded to accommodate the needs of Pictou County Health Authority.

During the first quarter of 2010, Crombie completed the conversion of Fort Edward Mall in Windsor, Nova Scotia from a retail enclosed property to a retail plaza. The property was reconfigured to replace the previous SAAN location and several small tenants with new Hart and Dollarama locations. In addition, Valley Mall in Corner Brook, Newfoundland and Labrador completed the reconfiguration to replace an existing food court with a new Hart store. Finally, Charlotte Mall in St. Stephen, New Brunswick was converted from an enclosed mall to a retail plaza. As a result of these redevelopments, both Fort Edward and Charlotte have been reclassified from retail - enclosed properties to retail - plaza properties. Costs for properties under redevelopment are classified as productive capacity enhancements to the extent that Crombie determines they increase a property's NOI and appraised value by a minimum threshold (see "Tenant Improvements and Capital Expenditures").

The following table outlines properties under redevelopment:

    
    -------------------------------------------------------------------------
                                                                  Estimated
    Pro-                         Redevelop- Estimated   Incurred       Comp-
    vince   Property        GLA       ment       Cost    to Date     letion
    -------------------------------------------------------------------------
    Nova    Aberdeen    392,000  Expansion     $4,300     $1,293  July 2010
     Sco-     Centre            for Pictou
     tia                            County
                                    Health
    -------------------------------------------------------------------------
    New     Fairvale     52,000     Expand       $800       $340   May 2010
     Brun-     Plaza                Sobeys
     swick                         and add
                                additional
                                   parking
    -------------------------------------------------------------------------
    

Largest Tenants

The following table illustrates the ten largest tenants in Crombie's portfolio of income-producing properties as measured by their percentage contribution to total annual minimum base rent as at March 31, 2010.

    
    -------------------------------------------------------------------------
                                                                    Average
                                                  % of Annual     Remaining
    Tenant                                       Minimum Rent    Lease Term
    -------------------------------------------------------------------------
    Sobeys (1)                                           32.6%   15.9 years
    Shoppers Drug Mart                                    2.2%    7.8 years
    Empire Theatres Limited                               2.1%    8.2 years
    Zellers                                               2.1%    7.7 years
    Nova Scotia Power Inc                                 1.8%    1.0 years
    CIBC                                                  1.5%   17.0 years
    Province of Nova Scotia                               1.4%    5.7 years
    Bell (Aliant)                                         1.3%    8.5 years
    Bank of Nova Scotia                                   1.3%    2.2 years
    Good Life Fitness                                     1.3%    7.6 years
    -------------------------------------------------------------------------
    Total                                                47.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes Lawtons and Fast Fuel locations.
    

Crombie's portfolio is leased to a wide variety of tenants. Other than Sobeys, that accounts for 32.6% of the annual minimum rent, no other tenant accounts for more than 2.2% of Crombie's minimum rent. Nova Scotia Power Inc. ("NSPI") occupies 184,500 square feet in Barrington Tower, Halifax, Nova Scotia, under a lease that expires April 2011. NSPI has indicated that they will not be renewing their lease, which at the end of the term has rent per square foot of $13.00. Of this space, approximately 56,800 square feet are already under sub-lease by NSPI to other tenants. Crombie has begun negotiations and signing the existing sub-leased tenants to their own lease agreements in addition to negotiating with potential new tenants for the remaining space. While Crombie anticipates periods of vacancy once NSPI vacates, Crombie is confident of being able to replace NSPI with new tenancies. Bank of Nova Scotia occupies 110,598 square feet in 13 properties, one of which is a 44,476 square foot location at Scotia Square Mall in Halifax, Nova Scotia which expires in November 2012. Crombie anticipates being able to renew the Bank of Nova Scotia space upon maturity at market rates.

Lease Maturities

The following table sets out as of March 31, 2010 the number of leases relating to the properties subject to lease maturities during the periods indicated (assuming tenants do not holdover on a month-to-month basis or exercise renewal options or termination rights), the renewal area, the percentage of the total GLA of the properties represented by such maturities and the estimated average net rent per square foot at the time of expiry. The weighted average remaining term of all leases is approximately 10.1 years.

    
    -------------------------------------------------------------------------
                                                                    Average
                                                                        Net
                                            Renewal                Rent per
                              Number of        Area       % of   Sq. Ft. at
    Year                         Leases    (sq. ft.)  Total GLA   Expiry ($)
    -------------------------------------------------------------------------
    2010                            212     624,000         5.4%     $13.92
    2011                            223   1,036,000         9.0%     $14.39
    2012                            177     912,000         7.9%     $12.00
    2013                            159     864,000         7.5%     $11.79
    2014                            164     518,000         4.5%     $17.54
    Thereafter                      409   7,003,000        60.7%     $12.90
    -------------------------------------------------------------------------
    Total                         1,344  10,957,000        95.0%     $13.16
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

2010 Portfolio Lease Expiries and Leasing Activity

As at March 31, 2010, portfolio lease expiries and leasing activity for the year ending December 31, 2010 were as follows:

    
    -------------------------------------------------------------------------
              Retail
              - Free-  Retail -   Retail -
            standing     Plazas   Enclosed     Office  Mixed-use      Total
    -------------------------------------------------------------------------
    Expi-
     ries
     (sq.
     ft.)         --    295,000    196,000     89,000    194,000    774,000
    Average
     net
     rent
     per
     sq.
     ft.         $--     $13.73     $15.77     $12.18     $11.21     $13.44
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Commit-
     ted
     rene-
     wals
     (sq.
     ft.)         --     60,000     52,000     17,000     15,000    144,000
    Average
     net
     rent
     per
     sq.
     ft.         $--     $14.61     $12.55     $21.28     $17.52     $14.96
    New
     leasing
     (sq.
     ft.)         --     48,000     55,000      5,000     16,000    124,000
    Average
     net
     rent
     per
     sq.
     ft.         $--     $12.32     $10.27     $12.00     $12.68     $11.44
    -------------------------------------------------------------------------
    Total
     rene-
     wals/
     new
     leasing
     (sq.
     ft.)         --    108,000    107,000     22,000     31,000    268,000
    Total
     average
     net
     rent
     per
     sq.
     ft.         $--     $13.60     $11.38     $19.17     $15.02     $13.34
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

During the quarter ended March 31, 2010, Crombie had renewals or entered into new leases in respect of approximately 268,000 square feet at an average net rent of $13.34 per square foot, compared with expiries for 2010 of approximately 774,000 square feet at an average net rent of $13.44 per square foot. Of the 774,000 square feet of expiries, approximately 155,000 square feet involve tenants that are still paying property revenues on a holdover basis. Completed leasing activity to March 31, 2010 has been impacted by the following:

    
    - New leasing activity in the retail plazas is below the average expiring
      net rent per square foot due primarily to one anchor tenant lease on
      the Fort Edward redevelopment.

    - Retail enclosed committed renewal rates are below expiring rates due
      primarily to three smaller tenants renewing at two of Crombie's rural
      retail enclosed properties.

    - Retail enclosed new leasing average net rent is below expiring rates
      due to one anchor tenant lease in the Valley Mall redevelopment.

    - Office committed renewal average net rent is above the total 2010
      expiring net rent rate due to one gross rent renewal in Duke Tower in
      Halifax, Nova Scotia.

    - Mixed use committed renewal rates are above the expiry rate due to
      renewals on kiosk and food court locations in properties located in
      Halifax, Nova Scotia.
    

Excluding the two new anchor tenant leases in the Fort Edward and Valley Mall redevelopments, total average net rent per square foot would have been $14.97 for renewals and new leasing for the quarter ended March 31, 2010. This $14.97 would represent an increase of 11.4% over the 2010 expiring average net rent per square foot.

Sector Information

While Crombie does not distinguish or group its operations on a geographical or other basis, Crombie provides the following sector information as supplemental disclosure.

In the first quarter of 2010, Crombie reclassified Saint Romuald in Quebec from Retail-Freestanding to Retail-Plaza due to the additional tenant acquisition, in addition to reclassifying Fort Edward in Nova Scotia and Charlotte Mall in New Brunswick from a retail enclosed facility to a retail plaza due to redevelopment.

As at March 31, 2010, the portfolio distribution of the GLA by asset type was as follows:

    
    -------------------------------------------------------------------------
                                                           % of
                     Number                              Annual
                  of Proper-        GLA                 Minimum        Occu-
    Asset Type         ties    (sq. ft.)   % of GLA        Rent     pancy(1)
    -------------------------------------------------------------------------
    Retail -
     Freestanding        42   1,685,000        14.6%       14.6%      100.0%
    Retail -
     Plazas              51   4,558,000        39.5%       40.4%       96.2%
    Retail -
     Enclosed            12   2,555,000        22.2%       23.5%       92.8%
    Office                5   1,049,000         9.1%        8.7%       87.4%
    Mixed-Use             8   1,686,000        14.6%       12.8%       94.7%
    -------------------------------------------------------------------------
    Total               118  11,533,000       100.0%      100.0%       95.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For purposes of calculating occupancy percentage, Crombie considers
        GLA covered by the head lease agreement in favour of ECLD as occupied
    

As at March 31, 2009, the portfolio distribution of the GLA by asset type was as follows (restated per the 2010 reclassifications):

    
    -------------------------------------------------------------------------
                                                           % of
                     Number                              Annual
                  of Proper-        GLA                 Minimum        Occu-
    Asset Type         ties    (sq. ft.)   % of GLA        Rent     pancy(1)
    -------------------------------------------------------------------------
    Retail -
     Freestanding        41   1,635,000        14.6%       15.2%       100.0%
    Retail -
     Plazas              47   4,297,000        38.4%       39.1%        95.3%
    Retail -
     Enclosed            12   2,504,000        22.4%       23.3%        90.5%
    Office                5   1,049,000        9.4%         8.8%        87.6%
    Mixed-Use             8   1,706,000       15.2%        13.6%        95.4%
    -------------------------------------------------------------------------
    Total               113  11,191,000      100.0%       100.0%        94.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For purposes of calculating occupancy percentage, Crombie considers
        GLA covered by the head lease agreement in favour of ECLD as occupied
    

The following table sets out as of March 31, 2010, the square feet under lease subject to lease maturities during the periods indicated.

    
    -------------------------------------------------------------------------
                      Retail -
    Year           Freestanding      Retail - Plazas    Retail - Enclosed
    -------------------------------------------------------------------------
                (sq. ft.)      (%)   (sq. ft.)      (%)   (sq. ft.)      (%)
    -------------------------------------------------------------------------
    2010              --       --%    230,000      5.0%     138,000     5.4%
    2011           1,000      0.1%    293,000      6.4%     161,000     6.3%
    2012           5,000      0.3%    306,000      6.7%     142,000     5.6%
    2013              --       --%    401,000      8.8%     200,000     7.8%
    2014              --       --%    246,000      5.4%     149,000     5.8%
    There-
     after     1,679,000     99.6%  2,910,000     63.9%   1,582,000    61.9%
    -------------------------------------------------------------------------
    Total      1,685,000    100.0%  4,386,000     96.2%   2,372,000    92.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Year             Office              Mixed - Use              Total
    -------------------------------------------------------------------------
                (sq. ft.)      (%)   (sq. ft.)      (%)    (sq. ft.)     (%)
    -------------------------------------------------------------------------
    2010          83,000      7.9%    173,000     10.3%     624,000     5.4%
    2011         362,000     34.5%    219,000     13.0%   1,036,000     9.0%
    2012         122,000     11.7%    337,000     20.0%     912,000     7.9%
    2013         107,000     10.2%    156,000      9.2%     864,000     7.5%
    2014          89,000      8.5%     34,000      2.0%     518,000     4.5%
    Thereafter   153,000     14.6%    679,000     40.2%   7,003,000    60.7%
    -------------------------------------------------------------------------
    Total        916,000     87.4%  1,598,000     94.7%  10,957,000    95.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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

    
    -------------------------------------------------------------------------
                     Retail
                     - Free-     Retail -    Retail -
    Year           standing      Plazas    Enclosed      Office   Mixed-use
    -------------------------------------------------------------------------
    2010                $--      $14.27      $17.98      $12.48      $10.92
    2011             $37.50      $14.53      $18.81      $14.24      $11.05
    2012             $25.00      $13.15      $19.64       $9.79       $8.33
    2013                $--       $9.43      $15.04      $13.79      $12.50
    2014                $--      $14.50      $25.06      $12.62      $19.46
    Thereafter       $13.26      $13.62      $11.30      $11.56      $12.12
    -------------------------------------------------------------------------
    Total            $13.32      $13.34      $13.92      $12.83      $11.24
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    March 2009
     Total           $13.35      $13.13      $13.79      $12.63      $10.99
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

FINANCIAL RESULTS

Comparison to Previous Years

    
    -------------------------------------------------------------------------
                                                     As At
                              -----------------------------------------------
                                       March 31,  December 31,     March 31,
                                           2010          2009          2009
                              -----------------------------------------------
    Total assets                     $1,512,676    $1,457,166    $1,466,045
    Total commercial property debt
     and convertible debentures        $875,856      $817,227      $841,371
    Debt to gross book value(1)            54.8%         52.4%         54.8%
    -------------------------------------------------------------------------
    (1)See "Debt to Gross Book Value" for detailed calculation


    -------------------------------------------------------------------------
                                      Quarter Ended March 31,
                                     ------------------------
    (In thousands of dollars,
     except where otherwise noted)         2010          2009      Variance
    -------------------------------------------------------------------------
    Property revenue                    $53,221       $52,992          $229
    Property expenses                    20,008        19,971           (37)
    -------------------------------------------------------------------------
    Property NOI                         33,213        33,021           192
    -------------------------------------------------------------------------
    NOI margin percentage                  62.4%         62.3%          0.1%
    -------------------------------------------------------------------------
    Expenses:
      General and administrative          2,523         1,644          (879)
      Interest                           13,634        10,730        (2,904)
      Depreciation and amortization      11,279        12,491         1,212
    -------------------------------------------------------------------------
                                         27,436        24,865        (2,571)
    -------------------------------------------------------------------------
    Income before other items,
     income taxes and
     non-controlling interest             5,777         8,156        (2,379)
    Other income                              -            92           (92)
    -------------------------------------------------------------------------
    Income from before income taxes
     and non-controlling interest         5,777         8,248        (2,471)
    Income taxes expense (recovery)
     - Future                            (1,100)          200         1,300
    -------------------------------------------------------------------------
    Income before non-controlling
     interest                             6,877         8,048        (1,171)
    Non-controlling interest              3,262         3,856           594
    -------------------------------------------------------------------------
    Net income                           $3,615        $4,192          $577
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net Income per Unit, Basic and
     Diluted                              $0.11         $0.15        $(0.04)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic weighted average Units
     outstanding (in 000's)              31,881        27,147
    ---------------------------------------------------------
    ---------------------------------------------------------
    Diluted weighted average Units
     outstanding (in 000's)              32,048        27,272
    ---------------------------------------------------------
    ---------------------------------------------------------
    Distributions per unit to
     unitholders                          $0.22         $0.22
    ---------------------------------------------------------
    ---------------------------------------------------------
    

Net income for the quarter ended March 31, 2010 of $3,615 decreased by $577 from $4,192 for the quarter ended March 31, 2009. The decrease was primarily due to:

    
    - higher interest expense as a result of the replacement of short-term
      floating rate debt with long-term fixed rate debt;

    - higher general and administrative costs due to fluctuations in
      incentive payments, offset in part by;

    - lower amortization of intangible assets associated with fully amortized
      intangibles on the IPO properties;

    - future income tax recovery associated with a substantively enacted tax
      rate reduction in New Brunswick.
    

Property Revenue and Property Expenses

    
    -------------------------------------------------------------------------
                                            Quarter Ended
                                       ----------------------
                                       March 31,     March 31,
     (In thousands of dollars)             2010          2009      Variance
    -------------------------------------------------------------------------
    Same-asset property revenue         $50,273       $50,365          $(92)
    Acquisition and redevelopment
     property revenue                     2,948         2,627           321
    -------------------------------------------------------------------------
    Property revenue                    $53,221       $52,992          $229
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Same-asset property revenue of $50,273 for the quarter ended March 31, 2010 was 0.2% lower than the quarter ended March 31, 2009 due to a decrease in below-market lease amortization as lease terms expire offset by increased base rent and recoveries as a result of higher overall occupancy.

    
    -------------------------------------------------------------------------
                                            Quarter Ended
                                       ----------------------
                                       March 31,     March 31,
    (In thousands of dollars)              2010          2009      Variance
    -------------------------------------------------------------------------
    Same-asset property expenses        $18,763       $18,774           $11
    Acquisition and redevelopment
     property expenses                    1,245         1,197           (48)
    -------------------------------------------------------------------------
    Property expenses                   $20,008       $19,971          $(37)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Same-asset property expenses of $18,763 for the quarter ended March 31, 2010 were virtually unchanged from the quarter ended March 31, 2009 due primarily to increased recoverable property taxes offset in part by reduced snow clearing costs and non-shareable expenses.

    
    -------------------------------------------------------------------------
                                            Quarter Ended
                                       ----------------------
                                       March 31,     March 31,
    (In thousands of dollars)              2010          2009      Variance
    -------------------------------------------------------------------------
    Same-asset property NOI             $31,510       $31,591          $(81)
    Acquisition and redevelopment
     property NOI                         1,703         1,430           273
    -------------------------------------------------------------------------
    Property NOI                        $33,213       $33,021          $192
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Same-asset NOI for the quarter ended March 31, 2010 remained relatively stable as it decreased by 0.3% from the quarter ended March 31, 2009. Same-asset property NOI for the quarter ended March 31, 2010, increased by $521 or 1.6% compared to the quarter ended December 31, 2009.

    
    Property NOI on a cash basis is as follows:
    -------------------------------------------------------------------------
                                            Quarter Ended
                                       ----------------------
                                       March 31,     March 31,
    (In thousands of dollars)              2010          2009      Variance
    -------------------------------------------------------------------------
    Same-asset property cash NOI        $29,909       $29,573          $336
    Acquisition and redevelopment
     property cash NOI                    1,508         1,191           317
    Straight-line rent and above-
     and below-market rent amortization   1,796         2,257          (461)
    -------------------------------------------------------------------------
    Property NOI                        $33,213       $33,021          $192
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Property NOI, on a cash basis, excludes straight-line rent recognition and amortization of below-market and above-market lease amounts. The increase in same-asset cash NOI for the quarter ended March 31, 2010 over March 31, 2009 is primarily the result of increased occupancy rates combined with the increased average net rent per square foot results from the 2009 leasing activity.

Property NOI for the quarter ended March 31, 2010 by region were as follows:

    
    -------------------------------------------------------------------------
                               2010                         2009
               --------------------------------------
    (In thou-    Pro-
      sands    perty
      of        Reve-  Property   Property   NOI % of   NOI % of
      dollars)   nue   Expenses        NOI    revenue    revenue   Variance
    -------------------------------------------------------------------------
    Nova
     Scotia  $23,585     $9,723    $13,862       58.8%      58.7%       0.1%
    Newfound-
     land
     and La-
     brador    8,940      2,804      6,136       68.6%      66.7%       1.9%
    New
     Brun-
     swick     6,458      2,894      3,564       55.2%      56.4%      (1.2)%
    Ontario    8,148      2,838      5,310       65.2%      66.6%      (1.4)%
    Prince
     Edward
     Island    1,326        379        947       71.4%      71.0%       0.4%
    Quebec     3,998      1,148      2,850       71.3%      70.8%       0.5%
    Saskat-
     chewan      766        222        544       71.0%      71.5%      (0.5)%
    -------------------------------------------------------------------------
    Total    $53,221    $20,008    $33,213       62.4%      62.3%       0.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The increase in NOI as a percentage of revenue in Newfoundland and Labrador is primarily due to increased occupancy at Avalon Mall. The decrease in NOI as a percentage of revenue in New Brunswick and Ontario is attributable to lower recovery of common area expenses. Nova Scotia and New Brunswick have lower NOI as a percentage of revenue when compared to the other provinces as these portfolios hold the office and mixed-use properties which typically have lower NOI percentage returns.

General and Administrative Expenses

The following table outlines the major categories of general and administrative expenses.

    
    -------------------------------------------------------------------------
                                            Quarter Ended
                                       ----------------------
                                       March 31,     March 31,
    (In thousands of dollars)              2010          2009      Variance
    -------------------------------------------------------------------------
    Salaries and benefits                $1,383          $569         $(814)
    Professional fees                       335           453           118
    Public company costs                    323           285           (38)
    Rent and occupancy                      187           188             1
    Other                                   295           149          (146)
    -------------------------------------------------------------------------
    General and administrative
     expenses                            $2,523        $1,644         $(879)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    As a percentage of property
     revenue                                4.7%          3.1%         (1.6)%
    -------------------------------------------------------------------------
    

General and administrative expenses, as a percentage of property revenue, increased by 1.6% for the quarter ended March 31, 2010 when compared to the same period in 2009. Total general and administrative expenses increased to $2,523 for the quarter ending March 31, 2010 compared to $1,644 for the same quarter in 2009. The increase was due to higher incentive payments and travel costs in the first quarter of 2010 combined with reduced incentive payments in the first quarter of 2009.

Crombie anticipates that general and administrative expenses will approximate 4.0% to 4.5% of property revenue for the full year of 2010.

Interest Expense

    
    -------------------------------------------------------------------------
                                            Quarter Ended
                                       ----------------------
                                       March 31,     March 31,
    (In thousands of dollars)              2010          2009      Variance
    -------------------------------------------------------------------------
    Same-asset interest expense         $11,780        $9,528       $(2,252)
    Acquisition and redevelopment
     interest expense                       470           515            45
    Amortization of effective swaps and
    deferred financing charges            1,384           687          (697)
    -------------------------------------------------------------------------
    Interest expense                    $13,634       $10,730       $(2,904)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Same-asset interest expense has increased by $2,252 or 23.6%. The increase reflects Crombie's replacement of short-term floating rate debt with long-term fixed rate mortgages and convertible debentures. The weighted average contractual interest rate on fixed rate mortgages increased to 5.86% at March 31, 2010 from 5.51% at March 31, 2009, primarily due to the refinancing on February 1, 2010 of the maturing Halifax Developments mortgages. Floating rate debt decreased from $251,723 at March 31, 2009 to $54,500 at March 31, 2010.

There is an agreement between ECLD and Crombie whereby ECLD provides a monthly interest rate subsidy to Crombie to reduce the effective interest rates to 5.54% on certain mortgages that were assumed at Crombie's IPO for their remaining term. The remaining mortgage terms mature through April 2022, and management expects to realize a further $7,225 over that period. The amount of the interest rate subsidy received during the quarter ended March 31, 2010 was $508 (quarter ended March 31, 2009 - $786). The interest rate subsidy is received by Crombie through monthly repayments by ECLD of amounts due under one of the demand notes issued by ECLD to Crombie Developments Limited ("CDL").

    
    Depreciation and Amortization
    -------------------------------------------------------------------------
                                            Quarter Ended
                                       ----------------------
                                       March 31,     March 31,
    (In thousands of dollars)              2010          2009      Variance
    -------------------------------------------------------------------------
    Same-asset depreciation and
     amortization                       $10,860       $12,126        $1,266
    Acquisition and redevelopment
     depreciation and amortization          419           365           (54)
    -------------------------------------------------------------------------
    Depreciation and amortization       $11,279       $12,491        $1,212
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Same-asset depreciation and amortization of $10,860 for the quarter ended March 31, 2010 was 10.4% lower than the quarter ended March 31, 2009 due primarily to the intangible assets related to the origination costs and the in-place leases associated with the properties purchased at the date of IPO being fully amortized, offset in part by depreciation on fixed asset additions and amortization on tenant improvements and lease costs incurred since December 31, 2009. Depreciation and amortization consists of:

    
    -------------------------------------------------------------------------
                                            Quarter Ended
                                       ----------------------
                                       March 31,     March 31,
    (In thousands of dollars)              2010          2009      Variance
    -------------------------------------------------------------------------
    Depreciation of commercial
     properties                          $4,830        $4,544         $(286)
    Depreciation of recoverable
     capital expenditures                   289           256           (33)
    Amortization of tenant
     improvements/lease costs             1,234         1,131          (103)
    Amortization of intangible
     assets                               4,926         6,560         1,634
    -------------------------------------------------------------------------
    Depreciation and amortization       $11,279       $12,491        $1,212
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Income Taxes

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 otherwise apply to trusts classified as specified investment flow-through entities ("SIFTs").

Crombie has organized its assets and operations to permit Crombie to satisfy the criteria contained in the Income Tax Act (Canada) in regard to the definition of a REIT. 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 the 2008 and 2009 fiscal years. 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.

The future income tax expense represents the future tax provision for CDL, the wholly-owned corporate subsidiary which is subject to income taxes. The future income tax recovery in the first quarter of 2010 is due to the reduction in the enacted effective income tax rates in New Brunswick that will be applicable when the timing differences are expected to reverse.

Sector Information

While Crombie does not distinguish or group its operations on a geographical or other basis, Crombie provides the following sector information as supplemental disclosure. Sector information for the quarter ended March 31, 2009 has been restated for comparative purposes for property reclassifications.

    
    Retail Freestanding Properties
    -------------------------------------------------------------------------
              Quarter Ended March 31, 2010     Quarter Ended March 31, 2009
              ---------------------------------------------------------------
    (In
     thousands
     of
     dollars,           Acquisi-                         Acquisi-
     except as          tions &                          tions &
     otherwise  Same-    Redeve-                 Same-    Redeve-
     noted)    Asset   lopments      Total      Asset   lopments      Total
    -------------------------------------------------------------------------
    Property
     revenue  $6,334        $11     $6,345     $6,641         $-     $6,641
    Property
     expenses  1,110          -      1,110      1,457          -      1,457
    -------------------------------------------------------------------------
    Property
     NOI      $5,224        $11     $5,235     $5,184         $-     $5,184
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %   82.5%     100.0%      82.5%      78.1%         -%      78.1%
    -------------------------------------------------------------------------
    Occu-
     pancy %   100.0%     100.0%     100.0%     100.0%         -%     100.0%
    -------------------------------------------------------------------------
    

Same-asset retail freestanding property revenue and property expenses decreased due to a number of tenants now paying their own property taxes directly, thus reducing expenses and recoveries and improving the overall NOI Margin %.

    
    Retail Plaza Properties
    -------------------------------------------------------------------------
              Quarter Ended March 31, 2010     Quarter Ended March 31, 2009
              ---------------------------------------------------------------
    (In
     thousands
     of
     dollars,           Acquisi-                         Acquisi-
     except as          tions &                          tions &
     otherwise  Same-    Redeve-                 Same-    Redeve-
     noted)    Asset   lopments      Total      Asset   lopments      Total
    -------------------------------------------------------------------------
    Property
     revenue $18,349     $1,292    $19,641    $18,355       $926    $19,281
    Property
     expenses  5,990        403      6,393      5,646        376      6,022
    -------------------------------------------------------------------------
    Property
     NOI     $12,359       $889    $13,248    $12,709       $550    $13,259
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %   67.4%      68.8%      67.5%      69.2%      59.4%      68.8%
    -------------------------------------------------------------------------
    Occu-
     pancy %    96.2%      96.2%      96.2%      94.9%      95.7%      95.3%
    -------------------------------------------------------------------------
    

Same-asset property expenses increased primarily due to increases in property taxes in Nova Scotia. Same-asset property revenue increased due to the increase in recoverable property taxes; however this was offset by a decrease related to the reduced amortization of below market leases.

    
    Retail Enclosed Properties
    -------------------------------------------------------------------------
              Quarter Ended March 31, 2010     Quarter Ended March 31, 2009
              ---------------------------------------------------------------
    (In
     thousands
     of
     dollars,           Acquisi-                         Acquisi-
     except as          tions &                          tions &
     otherwise  Same-    Redeve-                 Same-    Redeve-
     noted)    Asset   lopments      Total      Asset   lopments      Total
    -------------------------------------------------------------------------
    Property
     revenue $12,126       $558    $12,684    $11,703       $575    $12,278
    Property
     expenses  4,557        297      4,854      4,538        303      4,841
    -------------------------------------------------------------------------
    Property
     NOI      $7,569       $261     $7,830     $7,165       $272     $7,437
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %   62.4%      46.8%      61.7%      61.2%      47.3%      60.6%
    -------------------------------------------------------------------------
    Occupancy % 92.8%      93.3%      92.8%      91.3%      84.3%      90.5%
    -------------------------------------------------------------------------
    

Same-asset property revenue increased $423, or 3.6%, due to the improved occupancy rate and increased results in Avalon Mall, Newfoundland and Labrador.

    
    Office Properties
    -------------------------------------------------------------------------
              Quarter Ended March 31, 2010     Quarter Ended March 31, 2009
              ---------------------------------------------------------------
    (In
     thousands
     of
     dollars,           Acquisi-                         Acquisi-
     except as          tions &                          tions &
     otherwise  Same-    Redeve-                 Same-    Redeve-
     noted)    Asset   lopments      Total      Asset   lopments      Total
    -------------------------------------------------------------------------
    Property
     revenue  $5,546         $-     $5,546     $5,887         $-     $5,887
    Property
     expenses  3,154          -      3,154      3,228          -      3,228
    -------------------------------------------------------------------------
    Property
     NOI      $2,392         $-     $2,392     $2,659         $-     $2,659
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %   43.1%         -%      43.1%      45.2%         -%      45.2%
    -------------------------------------------------------------------------
    Occupancy % 87.4%         -%      87.4%      87.6%         -%      87.6%
    -------------------------------------------------------------------------
    

Property revenue, NOI and NOI margin % have decreased when compared with the results for the first quarter of 2009 as a result of lower recoveries in Terminal Centres, New Brunswick.

    
    Mixed-Use Properties
    -------------------------------------------------------------------------
              Quarter Ended March 31, 2010     Quarter Ended March 31, 2009
              ---------------------------------------------------------------
    (In
     thousands
     of
     dollars,           Acquisi-                         Acquisi-
     except as          tions &                          tions &
     otherwise  Same-    Redeve-                 Same-    Redeve-
     noted)    Asset   lopments      Total      Asset   lopments      Total
    -------------------------------------------------------------------------
    Property
     revenue  $7,918     $1,087     $9,005     $7,779     $1,126     $8,905
    Property
     expenses  3,952        545      4,497      3,905        518      4,423
    -------------------------------------------------------------------------
    Property
     NOI      $3,966       $542     $4,508     $3,874       $608     $4,482
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %   50.1%      49.9%      50.1%      49.8%      54.0%      50.3%
    -------------------------------------------------------------------------
    Occupancy % 94.4%      95.9%      94.7%      94.1%      99.5%      95.4%
    -------------------------------------------------------------------------
    

Same-asset revenue increased primarily due to improved rental revenue at Park Lane retail in Halifax, Nova Scotia and increases in property tax recoveries. Same-asset property expenses increased due to property tax increases primarily at the Halifax Developments properties and increases in other recoverable expenses.

OTHER 2010 PERFORMANCE MEASURES

FFO and AFFO are not measures recognized under GAAP and do not have standardized meanings prescribed by GAAP. As such, these non-GAAP financial measures should not be considered as an alternative to net income, cash provided by operating activities or any other measure prescribed under GAAP. FFO represents a supplemental non-GAAP industry-wide financial measure of a real estate organization's operating performance. AFFO is presented in this MD&A because management believes this non-GAAP measure is relevant to the ability of Crombie to earn and distribute returns to unitholders. FFO and AFFO as computed by Crombie may differ from similar computations as reported by other REIT's and, accordingly, may not be comparable to other such issuers.

Funds from Operations

FFO represents a supplemental non-GAAP industry-wide financial measure of a real estate organization's operating performance. Crombie has calculated FFO in accordance with the recommendations of the Real Property Association of Canada ("REALpac") which defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable real estate and extraordinary items, plus depreciation and amortization expense, plus future income taxes, and after adjustments for equity-accounted entities and non-controlling interests. Crombie's method of calculating FFO may differ from other issuers' methods and accordingly may not be directly comparable to FFO reported by other issuers. A calculation of FFO for the quarter ended March 31, 2010 and 2009 is as follows:

    
    -------------------------------------------------------------------------
                                            Quarter Ended
                                       ----------------------
                                       March 31,     March 31,
    (In thousands of dollars)              2010          2009      Variance
    -------------------------------------------------------------------------
    Net income                           $3,615        $4,192         $(577)
    Add (deduct):
    Non-controlling interest              3,262         3,856          (594)
    Depreciation of commercial
     properties                           4,830         4,544           286
    Depreciation of recoverable
     capital expenditures                   289           256            33
    Amortization of tenant
     improvements/lease costs             1,234         1,131           103
    Amortization of intangible assets     4,926         6,560        (1,634)
    Future income taxes expense
     (recovery)                          (1,100)          200        (1,300)
    -------------------------------------------------------------------------
    FFO                                 $17,056       $20,739       $(3,683)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The reduction in FFO for the quarter ended March 31, 2010 was primarily due to increased interest expense as a result of refinancing short-term floating rate debt with long-term fixed rate mortgages and convertible debentures, combined with higher general and administrative costs as previously discussed.

Adjusted Funds from Operations

Crombie considers AFFO to be a measure useful in evaluating the recurring economic performance of Crombie's operating activities which will be used to support future distribution payments. AFFO reflects cash available for distribution after the provision for non-cash adjustments to revenue, maintenance capital expenditures, maintenance tenant improvements ("TI") and leasing costs and the settlement of effective interest rate swap agreements. Comparative AFFO information has been restated to reflect the retrospective application of the settlement of effective swap agreements. The calculation of AFFO for the quarter ended March 31, 2010 and 2009 is as follows:

    
    -------------------------------------------------------------------------
                                            Quarter Ended
                                       ----------------------
                                       March 31,     March 31,
    (In thousands of dollars)              2010          2009      Variance
    -------------------------------------------------------------------------
                                                 (as restated)

    FFO                                 $17,056       $20,739       $(3,683)
    Add:
    Amortization of effective swap
     agreements                             827           207           620
    Above-market lease amortization         781           771            10
    Less:
    Below-market lease amortization      (1,619)       (2,145)          526
    Straight-line rent adjustment          (958)         (883)          (75)
    Maintenance capital expenditures     (2,693)       (1,216)       (1,477)
    Maintenance TI and leasing costs       (650)       (1,240)          590
    Settlement of effective interest
     rate swap agreements                     -        (4,535)        4,535
    -------------------------------------------------------------------------
    AFFO                                $12,744       $11,698        $1,046
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The AFFO for the first quarter of 2010 was $12,744, an improvement of $1,046 over the same period in 2009 due primarily to the lack of settlement costs on effective interest rate swap agreements, offset in part by the reduced FFO results as previously discussed and higher maintenance capital expenditures. Details of the maintenance capital and TI and leasing expenditures are outlined in the "Tenant Improvement and Capital Expenditures" section of the MD&A.

Pursuant to CSA Staff Notice 52-306 "(Revised) Non-GAAP Financial Measures", non-GAAP measures such as AFFO should be reconciled to the most directly comparable GAAP measure, which is interpreted to be the cash flow from operating activities rather than net income. The reconciliation is as follows:

    
    -------------------------------------------------------------------------
                                            Quarter Ended
                                       ----------------------
                                       March 31,     March 31,
    (In thousands of dollars)              2010          2009      Variance
    -------------------------------------------------------------------------
                                                 (as restated)

    Cash provided by operating
     activities                         $23,275       $10,664       $12,611
    Add back (deduct):
    Recoverable/productive capacity
     enhancing TIs                           63             -            63
    Change in non-cash operating items   (7,332)        7,276       (14,608)

    Unit-based compensation expense         (12)          (11)           (1)
    Amortization of deferred financing
     charges                               (557)         (480)          (77)
    Settlement of effective interest
     rate swap agreements                     -        (4,535)        4,535
    Maintenance capital expenditures     (2,693)       (1,216)       (1,477)
    -------------------------------------------------------------------------
    AFFO                                $12,744       $11,698        $1,046
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Funds

Cash flow generated from operating the property portfolio represents the primary source of liquidity used to service the interest on debt, fund general and administrative expenses, reinvest into the portfolio through capital expenditures, as well as fund TI costs and distributions. In addition, Crombie has the following sources of financing available to finance future growth: secured short-term financing through an authorized revolving credit facility of up to $150,000, of which $54,500 was drawn at March 31, 2010, and the issue of new equity, mortgage debt, and unsecured convertible debentures pursuant to the Declaration of Trust.

    
    -------------------------------------------------------------------------
                                            Quarter Ended
                                       ----------------------
                                       March 31,     March 31,
    (In thousands of dollars)              2010          2009      Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Operating activities                $23,275       $10,664       $12,611
    Financing activities                $36,759      $(12,504)      $49,263
    Investing activities               $(57,173)      $(2,020)     $(55,153)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Operating Activities
    -------------------
    -------------------------------------------------------------------------
                                            Quarter Ended
                                       ----------------------
                                       March 31,     March 31,
    (In thousands of dollars)              2010          2009      Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Net income and non-cash items       $16,656       $19,180       $(2,524)
    TI and leasing costs                   (713)       (1,240)          527
    Non-cash working capital              7,332        (7,276)       14,608
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                         $23,275       $10,664       $12,611
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Fluctuations in cash provided by operating activities are largely influenced by the change in non-cash working capital which can be affected by the timing of receipts and payments. The details of the TI and leasing costs during the quarter ended March 31, 2010 are outlined in the "Tenant Improvements and Capital Expenditures" section of the MD&A.

    
    Financing Activities
    --------------------
    -------------------------------------------------------------------------
                                            Quarter Ended
                                       ----------------------
                                       March 31,     March 31,
    (In thousands of dollars)              2010          2009      Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Net issue of convertible
     debentures                         $42,713            $-       $42,713
    Settlement of interest rate
     swap agreements                          -        (4,535)        4,535
    Net issue of commercial
     property debt                        7,001         2,952         4,049
    Payment of distributions            (13,568)      (11,649)       (1,919)
    Other items (net)                       613           728          (115)
    -------------------------------------------------------------------------
    Cash provided by (used in)
     financing activities               $36,759      $(12,504)      $49,263
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Cash from financing activities in the first quarter ended March 31, 2010 increased by $49,263 over the quarter ended March 31, 2009 primarily due to the issue of Series C Debentures and the additional $35,000 of mortgage proceeds from the Halifax Developments refinancing, partially offset by the reduction of the revolving credit facility during the quarter.

    
    Investing Activities
    --------------------
    

Cash used in investing activities for the quarter ended March 31, 2010 was $57,173. Of this, $51,610 was used for acquisition of the eight retail properties and $5,127 was used for additions to commercial properties. Cash used in investing activities for the quarter ended March 31, 2009 was $2,020 of which $1,730 was used for additions to commercial properties.

    
    Tenant Improvement and Capital Expenditures
    -------------------------------------------
    

There are two types of TI and capital expenditures:

    
    - maintenance TI and capital expenditures that maintain existing
      productive capacity; and

    - productive capacity enhancement expenditures.
    

Maintenance TI and capital expenditures are reinvestments in the portfolio to maintain the productive capacity of the existing assets. These costs are capitalized and depreciated over their useful lives and deducted when calculating AFFO.

Productive capacity enhancement expenditures are costs incurred that increase the property level NOI, or expand the GLA of a property by a minimum threshold, and thus enhance the property's overall value. Productive capacity enhancement expenditures are capitalized and depreciated over their useful lives, but not deducted when calculating AFFO.

Obligations for expenditures for TI's occur when renewing existing tenant leases or for new tenants occupying a new space. Typically, leasing costs for existing tenants are lower on a per square foot basis than for new tenants. However, new tenants may provide more overall cash flow to Crombie through higher rents or improved traffic to a property. The timing of such expenditures fluctuates depending on the satisfaction of contractual terms contained in the leases.

    
    -------------------------------------------------------------------------
                                                          Quarter Ended
                                                     ------------------------
                                                     March 31,     March 31,
    (In thousands of dollars)                            2010          2009
    -------------------------------------------------------------------------
    Total additions to commercial properties           $5,127        $1,730
    Less: amounts recoverable from ECLD                     -             -
    -------------------------------------------------------------------------
    Net additions to commercial properties              5,127         1,730
    Less: productive capacity enhancements             (2,434)         (514)
    -------------------------------------------------------------------------
    Maintenance capital expenditures                   $2,693        $1,216
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                          Quarter Ended
                                                     ------------------------
                                                     March 31,     March 31,
    (In thousands of dollars)                            2010          2009
    -------------------------------------------------------------------------
    Total additions to TI and leasing costs              $713        $1,240
    Less: amounts recoverable from ECLD                   (63)            -
    -------------------------------------------------------------------------
    Net additions to TI and leasing costs                 650         1,240
    Less: productive capacity enhancements                  -             -
    -------------------------------------------------------------------------
    Maintenance TI and leasing costs                     $650        $1,240
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

As maintenance TI and capital expenditures are not incurred evenly throughout the fiscal year, there can be volatility on a quarterly basis.

The higher maintenance capital expenditures for the quarter ended March 31, 2010 are primarily as a result of payments made for the ongoing parking deck and structural repairs at the Scotia Square parkade in Halifax, Nova Scotia and storm water management at Aberdeen Business Centre in New Glasgow, Nova Scotia.

The lower maintenance TI expenditures during the quarter ended March 31, 2010, when compared to the same period in 2009 relates primarily to the timing of the satisfaction of Crombie's obligations.

Productive capacity enhancements during the first quarter ended March 31, 2010 consisted primarily of redevelopment work on Valley Mall in Corner Brook, Newfoundland and Labrador and the addition of a retail Nova Scotia Liquor Commission outlet in Spryfield, Nova Scotia.

    
    Capital Structure
    -------------------------------------------------------------------------

    (In thousands   Mar. 31,    Dec. 31,    Sep. 30,    Jun. 30,    Mar. 31,
     of dollars)       2010        2009        2009        2009        2009
    -------------------------------------------------------------------------
    Commercial
     property
     debt          $722,017    $706,369    $682,551    $759,223    $812,342
    Convertible
     debentures    $153,839    $110,858    $110,593     $29,090     $29,029
    Non-
     controlling
     interest      $222,734    $225,367    $227,948    $233,292    $197,115
    Unitholders'
     equity        $244,216    $246,975    $249,646    $255,475    $213,351
    -------------------------------------------------------------------------
    

Bank Credit Facilities and Commercial Property Debt

Crombie has in place an authorized floating rate revolving credit facility of up to $150,000 (the "Revolving Credit Facility"), $54,500 of which was drawn as at March 31, 2010. The Revolving Credit Facility is secured by a pool of first and second mortgages and negative pledges on certain properties. The floating interest rate is based on specified margins over prime rate or bankers acceptance rates. The specified margin increases as Crombie's overall debt leverage increases. Funds available for drawdown, pursuant to the Revolving Credit Facility, are determined with reference to the value of the Borrowing Base (as defined under "Borrowing Capacity and Debt Covenants") relative to certain financial covenants of Crombie. As at March 31, 2010, Crombie had sufficient Borrowing Base to permit $150,000 of funds to be drawn down pursuant to the Revolving Credit Facility, subject to certain other financial covenants. See "Borrowing Capacity and Debt Covenants".

On February 1, 2010, Crombie completed two first mortgage refinancings to replace the maturing mortgages for the office and retail portfolio known as Halifax Developments. The initial mortgage financing has a $25,000 principal, a 25 year amortization, a fixed interest rate of 6.52% with a maturity date of February 2020. The additional mortgage has a $116,000 principal, a 25 year amortization, a fixed interest rate of 6.47% with a maturity date of February 2020.

On February 22, 2010, Crombie assumed two mortgages totalling $8,358 as part of the financing for a five retail property acquisition. The mortgages have a weighted average term of 8.6 years, a 25 year amortization period and a weighted average interest rate of 6.26%. In addition, Crombie repaid $3,471 to ECL General Partner Limited, to retire a loan used to finance an acquisition at Avalon Mall in 2009, as required under the terms of the agreement.

On February 26, 2010, Crombie completed first mortgage financing on five properties. The mortgages are for a total of $33,850 in principal, with an eight year term, a fixed interest rate of 5.70% and a weighted average amortization period of 21.6 years.

As of March 31, 2010, Crombie had fixed rate mortgages outstanding of $666,158 ($673,481 after including the marked-to-market adjustment of $7,323), carrying a weighted average interest rate of 5.86% (after giving effect to the interest rate subsidy from ECLD under an omnibus subsidy agreement) and a weighted average term to maturity of 7.5 years.

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 "Risk Management").

    
    Principal repayments of the debt are scheduled as follows:
    -------------------------------------------------------------------------
                             Fixed Rate
                                   Debt
                               Maturing
                Payments of      during    Floating       Total        % of
    Year          Principal        Year   Rate Debt    Maturity       Total
    -------------------------------------------------------------------------
    2010            $14,725          $-          $-     $14,725         2.0%
    2011             20,164      26,786      54,500     101,450        14.1%
    2012             21,050           -           -      21,050         2.9%
    2013             22,185      30,042           -      52,227         7.3%
    2014             19,826      69,797           -      89,623        12.4%
    Thereafter       87,857     353,726           -     441,583        61.3%
    -------------------------------------------------------------------------
    Total(1)       $185,807    $480,351     $54,500    $720,658       100.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes fair value debt adjustment of $7,323 and the deferred
        financing costs of $5,964

    Convertible debentures
    ----------------------
    -------------------------------------------------------------------------
                                       Series A      Series B      Series C
    -------------------------------------------------------------------------
    Issue value                         $30,000       $85,000       $45,000
    Interest rate (payable semi-
     annually)                             7.00%         6.25%         5.75%
    Conversion price per unit            $13.00        $11.00        $15.30
    Issue date                         March 20, September 30,   February 8,
                                           2008          2009          2010
    Maturity date                      March 20,      June 30,      June 30,
                                           2013          2015          2017
    Trading symbol                       CRR.DB      CRR.DB.B      CRR.DB.C
    -------------------------------------------------------------------------
    

On February 8, 2010, Crombie issued $45,000 in convertible unsecured subordinated debentures (the "Series C Debentures"). The proceeds were used to reduce the Revolving Credit Facility.

The Series A Debentures, the Series B Debentures and the Series C Debentures (collectively the "Debentures") pay interest semi-annually on June 30 and December 31 of each year and Crombie has the option to pay interest on any interest payment date by selling units and applying the proceeds to satisfy its interest obligation.

The Debentures are convertible into Units at the option of the debenture holder at any time up to the maturity date, at the conversion price indicated in the table above, being a conversion rate of approximately 76.9231 Units per one thousand dollars principal amount of Series A Debentures, 90.9091 Units per one thousand dollars principal amount of Series B Debentures, and 65.3595 Units per one thousand dollars principal amount of Series C Debentures. If all conversion rights attaching to the Series A Debentures, Series B Debentures and the Series C Debentures are exercised, Crombie would be required to issue approximately 2,307,693 Units, 7,727,272 Units and 2,941,176 Units respectively, subject to anti-dilution adjustments.

For the first three years from the date of issue, there is no ability to redeem the Debentures, after which, each series of Debentures has a period, lasting one year, during which the Debentures may be redeemed, in whole or in part, on not more than 60 days' and not less than 30 days' prior notice, at a redemption price equal to the principal amount thereof plus accrued and unpaid interest, provided that the volume-weighted average trading price of the Units on the Toronto Stock Exchange for the 20 consecutive trading days ending on the fifth trading day preceding the date on which notice on redemption is given exceeds 125% of the conversion price. After the end of the fourth year, and to the maturity date, the Debentures may be redeemed, in whole or in part, at anytime at the redemption price equal to the principal amount thereof plus accrued and unpaid interest. Provided that there is not a current event of default, Crombie will have the option to satisfy its obligation to pay the principal amount of the Debentures at maturity or upon redemption, in whole or in part, by issuing the number of units equal to the principal amount of the Debentures then outstanding divided by 95% of the volume-weighted average trading price of the units for a stipulated period prior to the date of redemption or maturity, as applicable. Upon change of control of Crombie, Debenture holders have the right to put the Debentures to Crombie at a price equal to 101% of the principal amount plus accrued and unpaid interest.

Transaction costs related to the Debentures have been deferred and are being amortized into interest expense over the term of the Debentures using the effective interest method.

    
    Unitholders' Equity
    -------------------
    

In March 2010 there were 17,157 Units awarded as part of the Employee Unit Purchase Plan (April 2009 - 43,408; September 2009 - 4,003). Total units outstanding at May 6, 2010 were as follows:

    
    -------------------------------------------------------------------------
    Units                                                        32,061,456
    Special Voting Units(1)                                      28,925,730
    -------------------------------------------------------------------------
    (1) Crombie Limited Partnership, a subsidiary of Crombie, has also issued
        28,925,730 Class B LP Units. These Class B LP units accompany the
        Special Voting Units, are the economic equivalent of a Unit, and are
        convertible into Units on a one-for-one basis.
    

On March 23, 2010, Crombie announced a normal course issuer bid ("NCIB") where Crombie may purchase for cancellation up to 100,000 of its units, which represents approximately 0.31% of the outstanding units, during the period March 26, 2010 to March 25, 2011. The purchases will be made through the facilities of the TSX. The price that Crombie will pay for any such units will be the market price at the time of acquisition. Under the TSX policies, Crombie is entitled to purchase a maximum of 14,143 units per trading day. To date, Crombie has not purchased any units under the NCIB. Unitholders may obtain a copy of the NCIB notice filed with the TSX, without charge, by contacting the secretary of Crombie at 115 King Street, Stellarton, Nova Scotia, B0K 1S0.

Taxation of Distributions

Crombie, through its subsidiaries, has a large asset base that is depreciable for Canadian income tax purposes. Consequently, certain of the distributions from Crombie are treated as returns of capital and are not taxable to Canadian resident unitholders for Canadian income tax purposes. The composition for tax purposes of distributions from Crombie may change from year to year, thus affecting the after-tax return to unitholders.

The following table summarizes the history of the taxation of distributions from Crombie:

    
    -------------------------------------------------------------------------
                                      Return of    Investment       Capital
    Taxation Year                       Capital        Income         Gains
    -------------------------------------------------------------------------
    2006 per $ of distribution             40.0%         60.0%            -
    2007 per $ of distribution             25.5%         74.4%          0.1%
    2008 per $ of distribution             27.2%         72.7%          0.1%
    2009 per $ of distribution             51.0%         49.0%            -
    -------------------------------------------------------------------------
    

Borrowing Capacity and Debt Covenants

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 coverage ratios above prescribed levels:

    
    - 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

    - distributions to Unitholders are limited to 100% of Distributable
      Income as defined in the revolving credit facility.
    

The Revolving Credit Facility also contains a covenant of Crombie that ECLD must maintain a minimum 40% voting interest in Crombie. If ECLD reduces its voting interest below this level, Crombie will be required to renegotiate the Revolving Credit Facility or obtain alternative financing. Pursuant to an exchange agreement and while such covenant remains in place, ECLD will be required to give Crombie at least six months' prior written notice of its intention to reduce its voting interest below 40%.

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 negative mark-to-market position on any interest rate swap agreements or other hedging instruments may not exceed the "Aggregate Coverage Amount", which is based on a modified calculation of the Borrowing Base, as defined in the Revolving Credit Facility.

At March 31, 2010, the remaining amount available under the Revolving Credit Facility was $95,500 (prior to reduction for standby letters of credit outstanding)and was not limited by the Aggregate Coverage Amount.

At March 31, 2010, Crombie remained in compliance with all debt covenants.

Debt to Gross Book Value

When calculating debt to gross book value, debt is defined under the terms of the Declaration of Trust as bank loans plus commercial property debt and convertible debentures. Gross book value means, at any time, the book value of the assets of Crombie and its consolidated subsidiaries plus deferred financing charges, accumulated depreciation and amortization in respect of Crombie's properties (and related intangible assets) less (i) the amount of any receivable reflecting interest rate subsidies on any debt assumed by Crombie and (ii) the amount of future income tax liability arising out of the fair value adjustment in respect of the indirect acquisitions of certain properties. If approved by a majority of the independent trustees, the appraised value of the assets of Crombie and its consolidated subsidiaries may be used instead of book value.

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

    
    -------------------------------------------------------------------------
    (In thousands
     of dollars,
     except as        As at       As at       As at       As at       As at
     otherwise      Mar. 31,    Dec. 31,    Sep. 30,    Jun. 30,    Mar. 31,
     noted)            2010        2009        2009        2009        2009
    -------------------------------------------------------------------------
    Mortgages
     payable       $673,481    $604,992    $573,615    $564,101    $565,980
    Convertible
     debentures     160,000     115,000     115,000      30,000      30,000
    Term facility         -           -      41,378     139,000     140,323
    Revolving
     credit
     facility
     payable         54,500     106,160      72,217      62,812     111,400
    -------------------------------------------------------------------------
    Total debt
     outstanding    887,981     826,152     802,210     795,913     847,703
    Less:
     Applicable
     fair value
     debt
     adjustment      (7,225)     (7,733)     (8,489)     (9,256)    (10,032)
    -------------------------------------------------------------------------
    Debt           $880,756    $818,419    $793,721    $786,657    $837,671
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total
     assets      $1,512,676  $1,457,166  $1,465,591  $1,470,474  $1,466,045
    Add:
    Deferred
     financing
     charges         12,125       8,925       9,066       7,600       6,332
    Accumulated
     depreciation
     of
     commercial
     properties      74,694      69,952      63,865      57,715      51,796
    Accumulated
     amortization
     of
     intangible
     assets          62,002      78,551      72,147      66,492      60,836
    Less:
    Assets
     related to
     discontinued
     operations      (6,912)     (6,929)     (7,038)     (7,054)     (7,162)
    Interest
     rate
     subsidy         (7,225)     (7,733)     (8,489)     (9,256)    (10,032)
    Fair value
     adjustment
     to future
     taxes          (39,245)    (39,245)    (39,245)    (39,245)    (39,245)
    -------------------------------------------------------------------------
    Gross book
     value       $1,608,115  $1,560,687  $1,555,897  $1,546,726  $1,528,570
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Debt to
     gross book
     value             54.8%       52.4%       51.0%       50.9%       54.8%
    Maximum
     borrowing
     capacity(1)         65%         65%         65%         65%         65%
    -------------------------------------------------------------------------
    (1) Maximum permitted by the Declaration of Trust
    

Debt and Interest Service Coverage

Crombie's interest and debt service coverage for the quarter ended March 31, 2010 were 2.44 times EBITDA and 1.73 times EBITDA. This compares to 2.99 times EBITDA and 2.11 times EBITDA respectively for the quarter ended March 31, 2009. EBITDA should not be considered an alternative to net income, cash provided by operating activities or any other measure of operations as prescribed by GAAP. EBITDA is not a GAAP financial measure; however, Crombie believes it is an indicative measure of its ability to service debt requirements, fund capital projects and acquire properties. EBITDA may not be calculated in a comparable measure reported by other entities.

    
    -------------------------------------------------------------------------
                                                          Quarter Ended
                                                    -------------------------
                                                     March 31,     March 31,
    (In thousands of dollars)                            2010          2009
    -------------------------------------------------------------------------
                                                               (as restated)

    Property revenue                                  $53,221       $52,992
    Amortization of above-market leases                   781           771
    Amortization of below-market leases                (1,619)       (2,145)
    -------------------------------------------------------------------------
    Adjusted property revenue                          52,383        51,618
    Property expenses                                 (20,008)      (19,971)
    General and administrative expenses                (2,523)       (1,644)
    -------------------------------------------------------------------------
    EBITDA(1)                                         $29,852       $30,003
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Interest expense                                  $13,634       $10,730
    Amortization of deferred financing charges           (557)         (480)
    Amortization of effective swap agreements            (827)         (207)
    -------------------------------------------------------------------------
    Adjusted interest expense(2)                      $12,250       $10,043
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Debt repayments                                  $166,379       $53,491
    Amortization of fair value debt premium                (1)           (1)
    Payments relating to interest rate subsidy           (508)         (786)
    Payments relating to Revolving Credit Facility    (51,660)      (38,501)
    Payments relating to demand credit facility             -       (10,000)
    Balloon payments on mortgages                    (109,240)            -
    -------------------------------------------------------------------------
    Adjusted debt repayments(3)                        $4,970        $4,203
    -------------------------------------------------------------------------
    Interest service coverage ratio((1)/(2))             2.44          2.99
    -------------------------------------------------------------------------
    Debt service coverage ratio((1)/((2)+(3)))           1.73          2.11
    -------------------------------------------------------------------------
    The March 31, 2009 adjusted interest expense calculation has been
    restated to reflect the impact of amortization of effective swap
    agreements
    

The reduction in interest service coverage is attributable to the increased interest expense as Crombie has replaced short-term floating rate debt with long-term fixed rate mortgages and convertible debentures.

The reduction in debt service coverage is impacted by the increased interest expense as well as the increased debt repayments on the long-term fixed rate amortizing mortgages.

Distributions and Distribution Payout Ratios

    
    Distribution Policy
    -------------------
    

Pursuant to Crombie's Declaration of Trust, cash distributions are to be determined by the trustees in their discretion. Crombie intends, subject to approval of the Board of Trustees, to make distributions to Unitholders 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. Crombie, subject to the discretion of the Board of Trustees, targets to make annual cash distributions to Unitholders equal to approximately 95% of its AFFO on an annual basis.

    
    Details of distributions to Unitholders are as follows:
    -------------------------------------------------------------------------
                                                          Quarter Ended
                                                    -------------------------
    (Distribution amounts represented                March 31,     March 31,
     in thousands of dollars)                            2010          2009
    -------------------------------------------------------------------------
    Distributions to Unitholders                       $7,132        $6,068
    Distributions to Special Voting Unitholders         6,436         5,581
    -------------------------------------------------------------------------
    Total distributions                               $13,568       $11,649
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO payout ratio                                     79.5%         56.2%
    AFFO payout ratio (target ratio equals 95%)         106.5%         99.6%
    -------------------------------------------------------------------------
    

Total distributions increased due to the equity issuance completed in June of 2009 of 4,725,000 units and 3,846,154 Class B LP Units.

The FFO payout ratio of 79.5% was impacted by the higher distributions and reduced FFO as previously discussed.

The AFFO payout ratio of 106.5% was unfavourable to the target ratio due to the reduced FFO as previously discussed and the timing of maintenance capital expenditures. As maintenance TI and capital expenditures are not incurred evenly throughout the fiscal year, there can be volatility to the AFFO payout ratio on a quarterly basis.

As discussed in Crombie's previous MD&A's, during 2009 Crombie amended its calculation of AFFO to reflect the impact of the settlement of effective interest rate swap agreements. The March 31, 2009 AFFO has been restated to reflect this change. Excluding the impact of the settlement of effective interest rate swap agreements, the AFFO payout ratio for March 31, 2009 would have been 72.7%.

EFFECT OF NEW ACCOUNTING POLICIES NOT YET IMPLEMENTED

    
    International Financial Reporting Standards
    -------------------------------------------
    

The Accounting Standards Board of Canada ("AcSB") has announced that publicly accountable enterprises must adopt IFRS for interim and annual financial statements related to fiscal years beginning on or after January 1, 2011, with retrospective adoption and restatement of the comparative fiscal year ended December 31, 2010. Accordingly, the conversion from current GAAP to IFRS will be applicable to Crombie's reporting for the first quarter of fiscal 2011 for which the current and comparative information will be prepared under IFRS.

Crombie, with the assistance of its external advisors, has launched an internal initiative to govern the conversion process and is currently evaluating the potential impact of the conversion to IFRS on its consolidated financial statements. This will be an ongoing process as new standards are issued by the AcSB and International Accounting Standards Board ("IASB"). At this time, the impact on Crombie's future financial position and results of operations is not reasonably determinable or estimatable. Crombie expects the transition to IFRS to impact accounting, financial reporting, internal control over financial reporting, information systems and business processes.

Crombie has developed a formal project governance structure, and is providing regular progress reports to senior management and the audit committee. Crombie has also completed a diagnostic impact assessment, which involved a high level review of the major differences between current GAAP and IFRS, as well as establishing an implementation guideline. In accordance with this guideline Crombie has established a staff training program and is in the process of completing analysis of the key decision areas, including analyzing the appropriate accounting policy selections from available IFRS options, assessing exemptions and exceptions available on first-time adoptions of IFRS and making recommendations on the same.

Crombie will continue to assess the impact of the transition to IFRS and to review all of the proposed and ongoing projects of the IASB to determine their impact on Crombie. Additionally, Crombie will continue to invest in training and resources throughout the transition period to facilitate a timely conversion.

Crombie's IFRS changeover plan is summarized below which details Crombie's progress towards completion of selected key activities.

    
    -------------------------------------------------------------------------
                       KEY            MILESTONES/           PROGRESS
                    ACTIVITIES         DEADLINES            TO DATE
    -------------------------------------------------------------------------

    Financial       Review          Audit Committee       Completed
    statement       differences     sign off for all      diagnostic impact
    presentation    in Canadian     key IFRS              assessment during
    and             GAAP/IFRS       accounting policy     2009, which
    disclosure      accounting      choices.              involved a high
                    policies                              level review of
                                                          major differences
                                                          between IFRS and
                    Evaluate and                          Canadian GAAP.
                    select IFRS                           Presented position
                    policies &                            papers on
                    IFRS 1 choices                        significant IFRS
                                                          accounting policy
                                                          choices, exemptions
                                                          and exceptions and
                                                          received Board
                                                          approval

    -------------------------------------------------------------------------

                    Develop         Draft skeleton        Draft skeleton
                    financial       IFRS annual and       IFRS financial
                    statement       interim financial     statements have
                    format and      statements by Q3      been developed
                    disclosure      fiscal 2009           and continue to
                                                          be tested with
                                                          current financial
                                                          data


                    Quantify        Final                 IFRS 1 exemptions
                    effects of      quantification        applicable to the
                    transition      of conversion         entity have been
                    to IFRS.        effects by Q2         identified;
                                    fiscal 2010           assessment of
                                                          alternatives is
                                                          ongoing


                    Develop a       Completion of fair    All data has been
                    fair value      value process by Q4   accumulated for
                    process for     of fiscal 2009,       the transition date
                    investment      including             fair value
                    properties      accumulation of all   determination.
                    for transition  fair value data for   The final
                    and continual   opening balance       determination of
                    disclosure      sheet.                transition date
                                    Determinations of     fair value is
                                    final transition      expected to be
                                    date fair values by   completed in Q2 of
                                    Q2 of fiscal 2010     fiscal 2010.

    -------------------------------------------------------------------------

    Training        Educate the     Ongoing training      All key employees
    and             Board of        provided to all       have undertaken
    communication   Trustees,       groups to align       advanced levels of
                    Audit           with changeover       IFRS training,
                    Committee,                            including
                    management,                           attendance at
                    key employees,  Additional            courses, seminars
                    and other       training will         and conferences.
                    stakeholders    occur as needed       Additional IFRS-
                                    during the            knowledgeable staff
                                    changeover year       has been hired.
                                                          Completed training
                                                          for general
                                                          awareness of IFRS
                                                          to broad group of
                                                          finance employees,
                                                          Board of Trustees,
                                                          and Audit Committee


                    Communicate     Communicate           Frequent project
                    progress of     project status        status
                    changeover      updates regularly     communications have
                    plan to         until completion      been provided to
                    internal and    of IFRS               internal and
                    external        implementation        external
                    stakeholders                          stakeholders


                    Monitor ongoing Ongoing monitoring    Frequent attendance
                    IFRS accounting of standards,         at relevant
                    standards       exposure drafts,      seminars,
                    developments    interpretations       participation in
                                    and pronouncements    industry groups
                                                          events, web site
                                                          monitoring

    -------------------------------------------------------------------------

    Information     Determine if    IT implementation     Assessment of
    systems         business        plan completed        business processes
                    processes                             is underway in
                    require change                        conjunction with
                    to be IFRS                            work on accounting
                    compliant                             policies


                    Determine if    Changes to            System impacts for
                    software        systems and dual      IFRS differences
                    requires        record-keeping        are being assessed,
                    upgrades,       process to be         including an
                    changes, or     completed during      assessment of dual
                    additions to    Q1 of fiscal          record-keeping
                    support IFRS    2010
                    reporting
                    requirements

    -------------------------------------------------------------------------

    Contractual     Assess the      Complete necessary    Preliminary
    arrangements    affect of       covenant              analysis is
    and             IFRS on:        negotiations          underway in
    compensation                    during fiscal 2010    conjunction with
                    Financial                             work on accounting
                    covenants                             policies, and also
                                                          as part of the key
                    Compensation                          performance
                    arrangements                          indicators ("KPI")
                                                          and budgeting IFRS
                    Budgeting and                         project groups
                    planning


                    Make any        Complete review
                    required        of compensation
                    changes to      arrangements
                    plans and       during fiscal
                    arrangements    2010

                                    Complete
                                    budgeting plan
                                    during fiscal
                                    2010

    -------------------------------------------------------------------------

    Control         Assess and      Changes to ICFR       Analysis of control
    environment     design internal and DC&P              issues is underway
                    controls over   related to IFRS       in conjunction with
                    financial       to be completed       the review of IFRS
                    reporting       during 2010           accounting issues
                    ("ICFR") for                          and policies
                    all accounting  Test and evaluate
                    policy changes  revised controls
                                    throughout fiscal
                                    2010

                    Assess and      Update Chief          MD&A disclosures
                    design          Executive Officer/    are regularly
                    disclosure      Chief Financial       reviewed and
                    controls and    Officer               updated
                    procedures      certification
                    ("DC&P") for    process by            IFRS
                    all identified  fiscal 2010           communications
                    accounting                            committee,
                    policy changes                        which includes
                                                          Investor Relations,
                                                          has been assembled
                                                          and is engaged

    -------------------------------------------------------------------------
    

IMPACT OF TRANSITION TO IFRS

On conversion to IFRS, the financial statements are to be presented as if Crombie had always reported under IFRS; thus any comparative information must be restated. There are transitional provisions that assist with this first-time adoption, primarily to assist with the possible need to restate historical information by allowing for prospective, rather than retroactive, treatment as prescribed by IFRS 1, First-time Adoption of IFRS.

    
    IFRS 1 First-time Adoption of IFRS
    ----------------------------------
    

IFRS 1 applies to the conversion to IFRS when an entity first adopts IFRS. The general provisions of IFRS 1 require retrospective application of IFRS to the first reporting period. However the standard provides certain mandatory exceptions and allows specific exemptions from this general retrospective application. The most significant available options to Crombie are discussed below.

Fair Value as Deemed Cost

IFRS 1 permits an entity to measure a component of an investment property at fair value upon transition, and to adopt this fair value as deemed cost. Crombie's Board of Trustees has approved the adoption of the cost model for investment property, and to adjust selected property components using fair value as deemed cost. This may result in an adjustment to the carrying value of investment properties on transition from GAAP to IFRS. Such change, if any, would also impact the transitional amount of Unitholders' Equity and Non-controlling Interest as at January 1, 2010.

In addition, currently reported separated intangibles may be included in the reported value of investment properties.

Subsequent to the application of fair value as the deemed cost, Crombie does not intend to revalue its investment properties, unless impaired; but will disclose the fair value of its investment properties in the notes to the financial statements.

Crombie currently does not anticipate a material change in the carrying value of its assets in total.

Business Combinations

IFRS 1 permits the business accounting standard to be applied retrospectively (entirely or from a specific date) or prospectively. Retrospective application would require restatement of all previous acquisitions that meet the definition of a business under IFRS. Crombie intends to elect to apply this standard prospectively.

    
    IFRS Accounting Standards
    -------------------------
    

While IFRS is based on a similar conceptual framework to that of GAAP, there are significant differences in certain aspects of recognition, measurement and disclosure. The significant IFRS differences identified by Crombie to GAAP that may potentially have a material impact on Crombie's financial statements include the following:

Investment Property

All of Crombie's commercial properties qualify as investment property, which is defined as property held to earn rentals or for capital appreciation, or both. Investment property must be initially measured at cost, however subsequent to initial recognition, IFRS allows an entity to choose either the cost or fair value model. If the fair value model is selected, income properties will be carried on the balance sheet at their current fair values, no depreciation or amortization is recorded on the investment properties and the changes in fair values each period would be recorded in the statement of income. If the historical cost model is selected then the asset values, subject to IFRS 1 revaluation, are left unchanged (except for impairment), depreciation and amortization continue to be recorded on the investment properties and the fair value of the investment properties must be disclosed in the notes to the financial statements.

As discussed above, Crombie's Board of Trustees have approved the adoption of the cost model for investment property, and to adjust selected property components using fair value as deemed cost under IFRS 1. This may result in a one-time adjustment to the opening balance sheet, including opening investment properties, unitholders equity and non-controlling interest as at January 1, 2010. Crombie currently does not anticipate a material change in the carrying value of its assets in total.

Impairment

Under GAAP, impairment is recognized for non-financial assets when the undiscounted future cash flows from an asset exceed the carrying value and any subsequent improvement in value cannot be recorded. Under IFRS, impairment is recognized when the discounted present value of future cash flows from an asset exceed the carrying value, however IFRS requires the reversal of an impairment loss to be recorded (limited to the depreciated value had impairment not occurred). Management cannot estimate the impact, if any, of any impairment adjustments at this time.

Leases

Under GAAP, tenant improvements and certain other leasing costs are capitalized and amortized through amortization expense. Under IFRS, a portion of such costs are likely to be considered to be leasing incentives and will need to be amortized as a reduction in property revenue. As a result of this reclassification of amortization expense on adoption of IFRS, management anticipates a reduction in reported property revenue; however, this does not impact overall reported operating results. The extent of the reclassification of amortization expense is not determinable at this time.

Classification of Unitholders' Equity and Non-controlling Interest

Crombie is assessing the impact of IAS 32 Financial Instruments: Presentation. This standard has language that differs from CICA Handbook section 3863 Financial Instruments- Presentation. The potential impact of application of these language differences could result in balance sheet classification changes for Unitholders' Equity and/or Non-controlling Interest and financial statement changes for the presentation of distributions paid on Unitholders' Equity and/or Non-controlling Interest, as well as measurement of these amounts in the financial statements. Management is in the process of assessing the implication of the IFRS standard.

The above items reflect the current IFRS standards expected to be adopted by Crombie upon conversion. Changes to the IFRS standards, if any, may result in changes in the impacts to the financial statements upon adoption. In addition, the IASB is in the process of reviewing and possibly amending a number of the IFRS standards that may be applicable to Crombie.

RELATED PARTY TRANSACTIONS

As at March 31, 2010, Empire through its wholly-owned subsidiary ECLD, holds a 47.4% (fully diluted 40.3%) indirect interest in Crombie. Crombie uses the exchange amount as the measurement basis for the related party transactions.

For a period of five years commencing March 23, 2006, certain executive management individuals and other employees of Crombie will provide general management, financial, leasing, administrative, and other administration support services to certain real estate subsidiaries of Empire on a cost sharing basis, pursuant to a Management Cost Sharing Agreement dated March 23, 2006 between CDL a subsidiary of Crombie, and ECLD a subsidiary of Empire ("Management Cost Sharing Agreement"). The costs assumed by Empire pursuant to the agreement during the three months ended March 31, 2010 were $277 (three months ended March 31, 2009 - $297) and were netted against general and administrative expenses owing by Crombie to Empire.

For a period of five years, commencing March 23, 2006, certain on-site maintenance and management employees of Crombie will provide property management services to certain real estate subsidiaries of Empire on a cost sharing basis pursuant to the Management Cost Sharing Agreement. In addition, for various periods, ECLD has an obligation to provide rental income and interest rate subsidies pursuant to an Omnibus Subsidy Agreement dated March 23, 2006 between CDL, Crombie Limited Partnership and ECLD. The costs assumed by Empire pursuant to the Management Cost Sharing Agreement during the three months ended March 31, 2010 were $283 (three months ended March 31, 2009 - $376) and were netted against property expenses owing by Crombie to Empire. The head lease subsidy during the three months ended March 31, 2010 was $186 (three months ended March 31, 2009 - $250).

Crombie also earned rental revenue of $15,009 for the three months ended March 31, 2010 (three months ended March 31, 2009 - $14,560) from Sobeys Inc. and Empire Theatres, subsidiaries of Empire.

On February 22, 2010, Crombie acquired five properties for $31,530 and assumed two mortgages of $8,358 from subsidiaries of Empire. In addition, Crombie repaid $3,471 to ECL General Partner Limited to retire a loan as required under the terms of the agreement.

On March 24, 2010, Crombie acquired three properties for $27,746 from subsidiaries of Empire.

CRITICAL ACCOUNTING ESTIMATES

Critical accounting estimates are discussed under the section "Critical Accounting Estimates" in the 2009 Annual Report.

Financial Instruments

The fair value of a financial instrument is the estimated amount that Crombie would receive or pay to settle the financial assets and financial liabilities as at the reporting date.

Crombie has classified its financial instruments in the following categories:

    
    - Held for trading - Restricted cash and cash and cash equivalents
    - Held to maturity investments - assets related to discontinued
      operations
    - Loans and receivables - Notes receivable and accounts receivable
    - Other financial liabilities - Commercial property debt, liability
      related to discontinued operations, convertible debentures, tenant
      improvements and capital expenditures payable, property operating costs
      payable and interest payable
    

The book values of cash and cash equivalents, restricted cash, receivables, payables and accruals approximate fair values at the balance sheet date. 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. Such fair value estimates are not necessarily indicative of the amounts Crombie might pay or receive in actual market transactions.

The following table summarizes the carrying value (excluding deferred financing charges) and fair value of those financial instruments which have a fair value different from their book value at the balance sheet date.

    
                                   March 31, 2010        December 31, 2009
                             ------------------------------------------------
                               Carrying        Fair    Carrying        Fair
                                  Value       Value       Value       Value
                             ------------------------------------------------
    Assets related to
     discontinued operations     $6,912      $7,015      $6,929      $7,066
                             ------------------------------------------------
                             ------------------------------------------------
    Commercial property debt   $727,981    $725,476    $711,152    $708,401
                             ------------------------------------------------
                             ------------------------------------------------
    Convertible debentures     $160,000    $170,115    $115,000    $120,200
                             ------------------------------------------------
                             ------------------------------------------------
    Liability related to
     discontinued operations     $6,294      $6,222      $6,334      $6,270
                             ------------------------------------------------
                             ------------------------------------------------
    

The following summarizes the significant methods and assumptions used in estimating the fair values of the financial instruments reflected in the above table:

Assets related to discontinued operations: The fair value of the bonds and treasury bills are based on market trading prices at the reporting date.

Commercial property debt and liability related to discontinued operations: The fair value of Crombie's commercial property debt and liability related to discontinued operations is estimated based on the present value of future payments, discounted at the yield on a Government of Canada bond with the nearest maturity date to the underlying debt, plus an estimated credit spread at the reporting date.

Convertible debentures: The fair value of the convertible debentures is estimated based on the market trading prices, at the reporting date, of the convertible debentures.

COMMITMENTS AND CONTINGENCIES

There are various claims and litigation, which Crombie is involved with, arising out of the ordinary course of business operations. In the opinion of management, any liability that would arise from such contingencies would not have a significant adverse effect on these financial statements.

Crombie has agreed to indemnify 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 has entered into a management cost sharing agreement with a subsidiary of Empire. Details of this agreement are described in "Related Party Transactions".

Crombie has land leases on certain properties. These leases have annual payments of $969 per year over the next five years. The land leases have terms of between 15.1 and 74.8 years remaining, including renewal options.

Crombie obtains letters of credit to support its obligations with respect to construction work on its commercial properties, defeasing commercial property debt and satisfying mortgage financing requirements. Crombie has $223 in standby letters of credit for construction work that is being performed on its commercial properties. In connection with the defeasance of the discontinued operations commercial property debt, Crombie has issued a standby letter of credit in the amount of $1,715 in favour of the mortgage lender. In addition, to satisfy the requirements of mortgage financings, Crombie has issued standby letters of credit in the amount of $8,100 in favour of the mortgage lender. Crombie does not believe that any of these standby letters of credit are likely to be drawn upon.

RISK MANAGEMENT

In the normal course of business, Crombie is exposed to a number of financial risks that can affect its operating performance. These risks, and the action taken to manage them, are as follows:

    
    Credit risk
    -----------
    

Credit risk arises from the possibility that tenants may experience financial difficulty and be unable to fulfill their lease commitments. Crombie's credit risk is limited to the recorded amount of tenant receivables. An allowance for doubtful accounts is taken for all anticipated problem accounts.

Crombie mitigates credit risk by geographical diversification, utilizing staggered lease maturities, diversifying both its tenant mix and asset mix and conducting credit assessments for new and renewing tenants. As at March 31, 2010;

    
    - Excluding Sobeys (which accounts for 32.6% of Crombie's minimum rent),
      no other tenant accounts for more than 2.2% of Crombie's minimum rent,
      and

    - Over the next five years, no more than 9.0% of the GLA of Crombie will
      expire in any one year.
    

Crombie earned rental revenue of $15,009 for three months ended March 31, 2010 (three months ended March 31, 2009 - $14,560) from subsidiaries of Empire.

    
    Interest rate risk
    ------------------
    

Interest rate risk is the potential for financial loss arising from increases in interest rates. Crombie mitigates interest rate risk by utilizing staggered debt maturities, limiting the use of permanent floating rate debt and utilizing interest rate swap agreements. As at March 31, 2010:

    
    - Crombie's weighted average term to maturity of the fixed rate mortgages
      was 7.5 years; and

    - Crombie's exposure to floating rate debt, including the impact of the
      fixed rate swap agreements discussed below, was 0.6% of the total
      commercial property debt.
    

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. The breakdown of the swaps in place at March 31, 2010 as part of the interest rate management program, and their associated mark-to-market amounts are as follows:

    
    - Crombie has entered into a fixed interest rate swap to fix the amount
      of interest to be paid on $50,000 of the revolving credit facility.
      The fair value of the fixed interest rate swap at March 31, 2010,
      had an unfavourable mark-to-market exposure of $2,398 (March 31, 2009 -
      unfavourable $4,231) compared to its face value. The change in this
      amount has been recognized in other comprehensive income (loss).
      The mark-to-market amount of fixed interest rate swap reduce to $Nil
      upon maturity of the swap.

    - Crombie has entered into a delayed interest rate swap agreement of a
      notional amount of $8,204 (March 31, 2009 - $100,334) with a settlement
      date of July 2, 2011 and maturing July 2, 2021 to mitigate exposure to
      interest rate increases for a mortgage maturing in 2011. The fair value
      of this delayed interest rate swap agreement had an unfavourable mark-
      to-market exposure of $821 compared to the face value March 31, 2010
      (March 31, 2009 - unfavourable $21,330). The change in this amount has
      been recognized in other comprehensive income (loss).
    

Crombie estimates that $3,206 of other comprehensive income (loss) will be reclassified to interest expense during the next three quarters of 2010 based on interest rate swap agreements settled to March 31, 2010.

A fluctuation in interest rates would have had an impact on Crombie's net income and other comprehensive income (loss) items. Based on the previous year's rate changes, a 0.5% interest rate change would reasonably be considered possible. The changes would have had the following impact:

    
                                    March 31, 2010          March 31, 2009
                              -----------------------------------------------
                                    0.5%        0.5%        0.5%        0.5%
                               increase    decrease    increase    decrease
    -------------------------------------------------------------------------
    Impact on net income of
     interest rate changes on
     the floating rate
     revolving credit facility     $(33)        $33       $(270)       $270
    -------------------------------------------------------------------------

                                    March 31, 2010          March 31, 2009
                              -----------------------------------------------
                                    0.5%        0.5%        0.5%        0.5%
                               increase    decrease    increase    decrease
    -------------------------------------------------------------------------
    Impact on other
     comprehensive income
     and non-controlling
     interest items due to
     changes in fair value
     of derivatives designated
     as a cash flow hedge          $631       $(653)    $10,024     $(9,577)
    -------------------------------------------------------------------------
    

Crombie does not enter into these interest rate swap transactions on a speculative basis. Crombie is prohibited by its Declaration of Trust in purchasing, selling or trading in interest rate future contracts other than for hedging purposes.

    
    Liquidity risk
    --------------
    

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 the growth program and/or refinance the debt obligations as they mature.

Cash flow generated from operating the property portfolio represents the primary source of liquidity used to service the interest on debt, fund general and administrative expenses, reinvest into the portfolio through capital expenditures, as well as fund tenant improvement 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.

There is a risk that the debt capital markets may not refinance maturing debt on terms and conditions acceptable to Crombie or at any terms at all. Crombie seeks to mitigate this risk by staggering the debt maturity dates. There is also a risk that the equity capital markets may not be receptive to an equity issue from Crombie with financial terms acceptable to Crombie. Crombie mitigates its exposure to liquidity risk utilizing a conservative approach to capital management.

Access to the Revolving Credit Facility is also limited to the amount utilized under the facility, plus any negative mark-to-market position on the interest rate swap agreements not exceeding the Aggregate Coverage Amount. At March 31, 2010, the remaining amount available under the Revolving Credit Facility was $95,500 and was not limited by the Aggregate Coverage Amount.

SUBSEQUENT EVENTS

On April 22, 2010, Crombie declared distributions of 7.417 cents per unit for the period from April 1, 2010 to and including, April 30, 2010. The distribution will be payable on May 14, 2010 to Unitholders of record as at April 30, 2010.

On April 22, 2010, Crombie completed the first tranche of financing for the Mountain Locks Plaza in St. Catharines, Ontario. The mortgage of $10,500 has a 10 year term, a 25 year amortization period and a fixed interest rate of 5.88%. The second tranche of financing for $2,500 is anticipated to close prior to the end of the second quarter of 2010, subject to meeting final closing conditions.

CONTROLS AND PROCEDURES

The Chief Executive Officer and the Chief Financial Officer, together with the assistance of management, are responsible for establishing and maintaining adequate internal control over financial reporting ("ICFR") to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. There were no changes to Crombie's ICFR for the quarter ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect Crombie's ICFR.

QUARTERLY INFORMATION

The following table shows information for revenues, net income (loss), AFFO, FFO, distributions and per unit amounts for the eight most recently completed quarters.

    
                              -----------------------------------------------
                                      Quarter Ended (as restated)
    -------------------------------------------------------------------------
    (In thousands of dollars,   Mar. 31,    Dec. 31,    Sep. 30,    Jun. 30,
     except per unit amounts)      2010        2009        2009        2009
    -------------------------------------------------------------------------
    Property revenue            $53,221     $52,378     $50,991     $50,893
    Property expenses            20,008      19,948      18,585      17,258
    -------------------------------------------------------------------------
    Property net operating
     income                      33,213      32,430      32,406      33,635
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative             2,523       2,102       1,882       3,646
      Interest                   13,634      12,722      11,595      11,272
      Depreciation and
       amortization              11,279      11,705      11,032      10,803
    -------------------------------------------------------------------------
                                 27,436      26,529      24,509      25,721
    -------------------------------------------------------------------------
    Income from continuing
     operations before other
     items, income taxes and
     non-controlling interest     5,777       5,901       7,897       7,914
    Other income (expense)
     items                            -         500      (9,981)          -
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes and
     non-controlling interest     5,777       6,401      (2,084)      7,914
    Income tax expense
     (recovery) -Future          (1,100)       (300)          -           -
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations
     before non-controlling
     interest                     6,877       6,701      (2,084)      7,914
    Gain/(loss) on sale of
     discontinued operations          -           -           -           -
    Income from discontinued
     operations                       -           -           -           -
    -------------------------------------------------------------------------
    Income (loss) before
     non-controlling interest     6,877       6,701      (2,084)      7,914
    Non-controlling interest      3,262       3,178        (989)      3,786
    -------------------------------------------------------------------------
    Net income (loss)            $3,615      $3,523     $(1,095)     $4,128
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net
     income (loss) per unit       $0.11       $0.11      $(0.03)      $0.15
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                              -----------------------------------------------
                                      Quarter Ended (as restated)
    -------------------------------------------------------------------------
    (In thousands of dollars,   Mar. 31,    Dec. 31,    Sep. 30,    Jun. 30,
     except per unit amounts)      2009        2008        2008        2008
    -------------------------------------------------------------------------
    Property revenue            $52,992     $52,522     $51,044     $47,314
    Property expenses            19,971      19,649      18,634      16,775
    -------------------------------------------------------------------------
    Property net operating
     income                      33,021      32,873      32,410      30,539
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative             1,644       2,701       2,004       1,979
      Interest                   10,730      11,318      11,449       9,965
      Depreciation and
       amortization              12,491      12,499      12,535      10,757
    -------------------------------------------------------------------------
                                 24,865      26,518      25,988      22,701
    -------------------------------------------------------------------------
    Income from continuing
     operations before other
     items, income taxes and
     non-controlling interest     8,156       6,355       6,422       7,838
    Other income (expense)
     items                           92          55          27          97
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes and
     non-controlling interest     8,248       6,410       6,449       7,935
    Income tax expense
     (recovery) -Future             200      (3,450)        859         701
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations
     before non-controlling
     interest                     8,048       9,860       5,590       7,234
    Gain/(loss) on sale of
     discontinued operations          -         487        (895)          -
    Income from discontinued
     operations                       -          24         226         136
    -------------------------------------------------------------------------
    Income (loss) before
     non-controlling interest     8,048      10,371       4,921       7,370
    Non-controlling interest      3,856       4,968       2,358       3,531
    -------------------------------------------------------------------------
    Net income (loss)            $4,192      $5,403      $2,563      $3,839
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net
     income (loss) per unit       $0.15       $0.20       $0.09       $0.15
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                      Quarter Ended (as restated)
    -------------------------------------------------------------------------
    (In thousands of dollars,   Mar. 31,    Dec. 31,    Sep. 30,    Jun. 30,
     except per unit amounts)      2010        2009        2009        2009
    -------------------------------------------------------------------------
    AFFO                        $12,744     $(7,511)      $(451)    $14,524
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO                         $17,056     $18,106      $8,948     $18,717
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions               $13,568     $13,567     $13,566     $12,294
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    AFFO per unit - basic         $0.21      $(0.12)     $(0.01)      $0.27
    AFFO per unit - diluted(1)    $0.20      $(0.12)     $(0.01)      $0.27
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO per unit - basic          $0.28       $0.30       $0.15       $0.35
    FFO per unit - diluted(1)     $0.27       $0.28       $0.15       $0.35
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions per unit        $0.22       $0.22       $0.22       $0.23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                      Quarter Ended (as restated)
    -------------------------------------------------------------------------
    (In thousands of dollars,   Mar. 31,    Dec. 31,    Sep. 30,    Jun. 30,
     except per unit amounts)      2009        2008        2008        2008
    -------------------------------------------------------------------------
    AFFO                        $11,698     $13,521     $10,019     $11,916
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO                         $20,739     $18,933     $19,200     $18,812
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions               $11,649     $11,649     $11,649     $11,879
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    AFFO per unit - basic         $0.22       $0.26       $0.19       $0.24
    AFFO per unit - diluted(1)    $0.22       $0.26       $0.19       $0.24
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO per unit - basic          $0.40       $0.36       $0.37       $0.38
    FFO per unit - diluted(1)     $0.39       $0.36       $0.36       $0.37
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions per unit        $0.22       $0.22       $0.22       $0.23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) FFO and AFFO per unit are calculated on a diluted basis. The diluted
        weighted average number of total Units and Special Voting Units
        includes the conversion of all series of convertible debentures
        outstanding during the period, excluding any series that is anti-
        dilutive. Distributions per unit for each period is based on the
        total distributions per unit declared during the specific period.
    

Additional information relating to Crombie, including its latest Annual Information Form, can be found on the SEDAR web site for Canadian regulatory filings at www.sedar.com.

Dated: May 6, 2010

Stellarton, Nova Scotia, Canada

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


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