Crombie REIT announces fourth quarter and fiscal 2009 results

STELLARTON, NS, Feb. 25 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) is pleased to report its results for the fourth quarter and year ended December 31, 2009.

    
    2009 Highlights

    Improved Balance Sheet strength:

    - Crombie completed an equity offering of 4,725,000 Units and
      3,846,154 Class B LP Units for gross proceeds of $66.9 million on
      June 25, 2009.
    - Crombie completed an offering of Series B Convertible Debentures for
      gross proceeds of $85.0 million on September 30, 2009.
    - Crombie completed the replacement of the Term Facility in November of
      2009.

    Steady operating results:

    - Property revenue for the year ended December 31, 2009 of $207.2 million
      represented an increase of $19.1 million compared to $188.1 million for
      the year ended December 31, 2008.
    - Same-asset NOI for the year ended December 31, 2009 of $87.8 million
      decreased by $0.8 million, or less than 1%, compared to $88.6 million
      for the year ended December 31, 2008.
    - Crombie completed leasing activity on 729,000 square feet of gross
      leaseable area during 2009, which represents approximately 103.7% of
      its 2009 expiring leases.
    - Average net rent per square foot from the leasing activity increased to
      $13.73 from the expiring rent per square foot of $13.58, an increase of
      1.1%.
    - Occupancy for the properties was 94.7% at December 31, 2009 compared
      with 94.2% at September 30, 2009 and 94.9% at December 31, 2008.
    

Commenting on the annual results, Donald E. Clow, FCA, President and Chief Executive Officer stated: "We are pleased with the operating results we have achieved for the 2009 fiscal year. Our grocery-anchored retail property portfolio remained resilient during the very difficult economic environment of 2009, providing predictable, steady operating results. We were also successful in replacing the remaining term facility loan of $178.8 million with a combination of convertible debenture financing and long term mortgage financing; and we issued $66.9 million of new Units and Class B LP Units.

We have started 2010 with the issuance of $45 million of additional convertible debentures, the refinancing of our only 2010 maturing debt resulting in a further $35 million in loan value over the maturing debt, and the closing of the first tranche of property acquisitions announced in November 2009. As a result we are very pleased with the strength of our balance sheet and our liquidity and are optimistic we will see steady prudent growth in the future."

The table below presents a summary of the financial performance for the quarter and year ended December 31, 2009 compared to the same periods in fiscal 2008.

    
    -------------------------------------------------------------------------
                                  Three       Three
                                 months      months        Year        Year
    (In millions of dollars,      ended       ended       ended       ended
     except where otherwise     Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
     noted)                        2009        2008        2009        2008
    -------------------------------------------------------------------------
    Property revenue            $52.378     $52.522    $207.254    $188.142
    Property expenses            19.948      19.649      75.762      70.370
    -------------------------------------------------------------------------
    Property NOI                 32.430      32.873     131.492     117.772
    -------------------------------------------------------------------------
    NOI margin percentage          61.9%       62.6%       63.4%       62.6%
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative             2.102       2.701       9.274       8.636
      Interest                   12.722      11.318      46.319      39.232
      Depreciation and
       amortization              11.705      12.499      46.031      43.786
    -------------------------------------------------------------------------
                                 26.529      26.518     101.624      91.654
    -------------------------------------------------------------------------
    Income from continuing
     operations before other
     items, income taxes and
     non-controlling interest     5.901       6.355      29.868      26.118
    Other income (expenses)       0.500       0.055      (9.389)      0.179
    -------------------------------------------------------------------------
    Income from continuing
     operations before income
     taxes and non-controlling
     interest                     6.401       6.410      20.479      26.297
    Income taxes (recovery) -
     Future                      (0.300)     (3.450)     (0.100)     (1.490)
    -------------------------------------------------------------------------
    Income from continuing
     operations before
     non-controlling interest     6.701       9.860      20.579      27.787
    Income from discontinued
     operations                       -       0.511           -       0.241
    -------------------------------------------------------------------------
    Income before
     non-controlling interest     6.701      10.371      20.579      28.028
    Non-controlling interest      3.178       4.968       9.831      13.440
    -------------------------------------------------------------------------
    Net income                   $3.523      $5.403     $10.748     $14.588
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Basic and diluted net
     income per unit              $0.11       $0.20       $0.36       $0.57
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Same-Asset Property NOI
    -------------------------------------------------------------------------
                                  Three       Three
                                 months      months        Year        Year
                                  ended       ended       ended       ended
                                Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
    (In millions of dollars)       2009        2008        2009        2008
    -------------------------------------------------------------------------
    Same-asset property
     revenue                    $52.378     $52.522    $149.189    $149,376
    Same-asset property
     expenses                    19.948      19.649      61.449      60.779
    -------------------------------------------------------------------------
    Same-asset property NOI     $32.430     $32.873     $87.740     $88.597
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Same-asset NOI margin %        61.9%       62.6%       58.8%       59.3%
    -------------------------------------------------------------------------
    

Same-asset property revenue for the year ended December 31, 2009 of $149.2 million was 0.1% lower than the same period in 2008 due primarily to a one-time head lease adjustment in the second quarter of 2009 and reduced revenue at the Scotia Square Parkade in Nova Scotia due to ongoing parking deck and structural repairs, partially offset by the increased average rent per square foot ($12.42 in 2009 and $12.26 in 2008). Same-asset property expenses of $61.4 million for the year ended December 31, 2009 were $0.670 million, or 1.1% higher than the same period in 2008 due primarily to increased property taxes and common area expenses. As a result of the above, same-asset NOI for the year ended December 31, 2009 remained relatively stable as it decreased by just under 1.0% from the 2008 fiscal year.

Property revenue for the fourth quarter of 2009 is lower by 0.3% than the same period in 2008 due to a reduction in the amortization of below-market lease intangibles, offset in part by increases in contractually due rent and straight-line rent recognition. Property expenses for the fourth quarter of 2009 have increased by 1.5% compared to the same period in 2008 due to slight increases in various recoverable expenses, primarily property taxes, and slight increases in non-recoverable expenses. As a result, same-asset NOI for the fourth quarter of 2009 decreased by 1.3% from the same period in 2008.

Acquisition Property NOI

For the three months ended December 31, 2009 and 2008, all of the 2008

property acquisitions are included in Same-Asset Property NOI.

    
    -------------------------------------------------------------------------
                                  Three       Three
                                 months      months        Year        Year
                                  ended       ended       ended       ended
                                Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
    (In millions of dollars)       2009        2008        2009        2008
    -------------------------------------------------------------------------
    Acquisition property
     revenue                         $-          $-     $58.065     $38.766
    Acquisition property
     expenses                         -           -      14.313       9.591
    -------------------------------------------------------------------------
    Acquisition property NOI         $-          $-     $43.752     $29.175
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Acquisition NOI margin %          -%          -%       75.4%       75.3%
    -------------------------------------------------------------------------
    

The above results were impacted by the 61 property portfolio acquisition and the Saskatoon property acquisition in 2008.

General and Administrative Expenses

General and administrative expenses decreased during the fourth quarter of 2009 to $2.1 million from $2.7 million in 2008 primarily due to lower incentive bonuses and reduced consulting fees. General and administrative expenses increased by 7.4% during the year ended December 31, 2009 to $9.3 million from $8.6 million in 2008 due to one-time costs associated with the retirement of Crombie's Chief Executive Officer on August 5, 2009, offset in part by reduced incentive payments. General and administrative expenses as a percentage of revenue have decreased to 4.0% in the fourth quarter of 2009 compared to 5.1% in 2008 and decreased to 4.5% for the year ended December 31, 2009 compared to 4.6% in 2008.

Interest

    
    -------------------------------------------------------------------------
                                  Three       Three
                                 months      months        Year        Year
                                  ended       ended       ended       ended
                                Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
    (In millions of dollars)       2009        2008        2009        2008
    -------------------------------------------------------------------------
    Same-asset interest
     expense                    $12.722     $11.318     $26.782     $26.358
    Acquisition interest
     expense                          -           -      19.537      12.874
    -------------------------------------------------------------------------
    Interest expense            $12.722     $11.318     $46.319     $39.232
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The increase in total interest expense for the year ended December 31, 2009 was primarily due to the property acquisitions in the first half of 2008. Same-asset interest expense for the year ended December 31, 2009 was higher by 1.6% compared to 2008 due to the amortization of effective, settled interest rate swap agreements offset in part by a decrease in the floating interest rate on the revolving credit facility. Same-asset interest expense for the fourth quarter of 2009 increased by 12.4% due again to the increased amortization of effective settled interest rate swap agreements and the write off of the remaining deferred financing charges related to the Term Facility.

FFO and AFFO

Crombie's Funds From Operations ("FFO") and Adjusted Funds From Operations ("AFFO") had the following results for the fourth quarter and year ended December 31st:

    
                                          Quarter ended December 31,
                                ---------------------------------------------
                                                               Variance
                                                      -----------------------
    (In millions of dollars,
     except per unit amounts)      2009        2008           $           %
    -------------------------------------------------------------------------
    FFO                         $18.106     $18.933     $(0.827)       (4.4)%
    FFO Per Unit                  $0.30       $0.36      $(0.06)      (16.7)%
    FFO Payout ratio               74.9%       61.5%                  (13.4)%
    -------------------------------------------------------------------------
    AFFO before swap
     settlements                $12.683     $14.681     $(1.998)      (13.6)%
    Swap settlements (net of
     amortization)              (20.194)     (1.160)    (19.034)
                               ----------  ----------  ----------
    AFFO                        $(7.511)    $13.521    $(21.032)        N/A
    AFFO Per Unit                $(0.12)      $0.26      $(0.38)        N/A
    AFFO Payout ratio              N/A%        86.2%
    AFFO Payout ratio before
     swap settlements            107.0%        79.4%                  (27.6)%
    -------------------------------------------------------------------------


                                             Year ended December 31,
                                ---------------------------------------------
                                                               Variance
                                                      -----------------------
    (In millions of dollars,
     except per unit amounts)      2009        2008           $           %
    -------------------------------------------------------------------------
    FFO before other income
     (expenses)                 $75.899     $70.605      $5.294         7.5%
    Other income(expenses)       (9.389)      0.179      (9.568)
                               ----------  ----------  ----------
    FFO                         $66.510     $70.784     $(4.274)      (6.0)%
    FFO Per Unit                  $1.17       $1.44      $(0.27)     (18.8)%
    FFO Payout ratio               76.8%       62.2%                 (14.6)%
    -------------------------------------------------------------------------
    AFFO before swap
     settlements                $52.823     $47.150      $5.673       12.0%
    Swap settlements
     (net of amortization)      (34.563)     (3.598)    (30.965)
                               ----------  ----------  ----------
    AFFO                        $18.260     $43.552    $(25.292)     (58.1)%
    AFFO Per Unit                 $0.32       $0.89      $(0.57)     (64.0)%
    AFFO Payout ratio             279.7%      101.1%                (178.6)%
    AFFO Payout ratio before
     swap settlements              96.7%       93.4%                  (3.3)%
    -------------------------------------------------------------------------
    

The decrease in FFO for the quarter ended December 31, 2009 to $18.1 million ($0.30 per unit) from $18.9 million ($0.36 per unit) in the fourth quarter of 2008 was primarily due to the impact of the increased interest expense and same-asset NOI decline, partially offset by the reduced general and administrative expenses. FFO for the year ended December 31, 2009 decreased to $66.5 million ($1.17 per unit) from $70.8 million ($1.44 per unit) for the same period in 2008. The reduction in FFO for the year ended December 31, 2009 was primarily due to the impact of the $8.1 million settlement of an ineffective interest rate swap agreement in the third quarter of 2009, partially offset by the higher net acquisition property results. Excluding the impact of the ineffective swap settlement, the FFO payout ratio would have been 68.4% for the year ended 2009.

AFFO for the fourth quarter of 2009 was $(7.5) million $(0.12) per unit compared to $13.5 million ($0.26 per unit) for the fourth quarter of 2008. AFFO for the year ended December 31, 2009 was $18.3 million ($0.32 per unit) compared to $43.6 million ($0.89 per unit) for the same period in 2008. The AFFO result for the quarter and year to date periods ended December 31, 2009 were primarily affected by management's decision in the third quarter of 2009 to amend it's calculation of AFFO to expense both effective and ineffective swap settlement costs. Excluding the impact of the swaps settled (both effective and ineffective) during the year and quarter ended December 31, 2009, AFFO would have been $52.8 million and $12.7 million respectively while the AFFO payout ratio would have been 96.7% and 107.0% respectively (year ended December 31, 2008 $47.1 million and 93.4% respectively and quarter ended December 31, 2008 $14.7 million and 79.4% respectively).

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 $106.2 million was drawn as at December 31, 2009. Debt to gross book value was 52.4% at December 31, 2009 compared to 54.4% at December 31, 2008. 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 year ended December 31, 2009 were 2.80 times EBITDA and 1.94 times EBITDA. This compares to 2.78 times EBITDA and 2.02 times EBITDA respectively for the year ended December 31, 2008.

Unit Offering - On June 25, 2009 Crombie completed a public offering of 4,725,000 Units at a price of $7.80 per Unit for gross proceeds of $36.9 million. Concurrent with the public offering, in satisfaction of its pre-emptive right, ECL Developments Limited purchased 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 million.

Convertible Debenture Offerings - In September of 2009 Crombie completed an issuance of Series B unsecured convertible debentures ("Series B Debentures") for gross proceeds of $85 million to repay the Term Facility. The Series B Debentures pay an interest rate of 6.25% per annum and are convertible into Units at a conversion price of $11.00. Subsequent to year end, Crombie issued $45 million in Series C Convertible unsecured subordinate Debentures (the "Series C Debentures") 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.

Term Facility repayment - In April of 2008, Crombie entered into an 18 month floating rate Term Facility of $280 million to partially finance the Portfolio Acquisition. The balance of this Term Facility as of December 31, 2008 was $178.8 million and was repaid during 2009 by:

    
    - $91 million of mortgage financing;
    - $85 million gross proceeds from the issuance of the Series B Debentures
      on September 30, 2009; and
    - A draw on Crombie's Revolving Credit Facility.
    

Mortgage Financing - Subsequent to the year end, Crombie completed the refinancing for the office and retail portfolio known as Halifax Developments ("HDL"). The principal amount of the maturing HDL mortgages was approximately $106.1 million with a weighted average interest rate of 5.43%. The new HDL mortgages are for a total of $141 million. The first mortgage financing has a $25 million principal ten year term and a 25 year amortization with a fixed interest of 6.52%. The second refinancing is for $116 million in principal, a ten year term and an amortization period of 25 years with a fixed interest rate of 6.47%.

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 effective 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 115 commercial properties in seven provinces, comprising approximately 11.4 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 fourth quarter and year ended December 31, 2009 results on a conference call to be held Friday, February 26, 2010, at 9:30 AM Eastern time. To join this conference call you may dial (647) 427-7450 or (888) 231-8191. You may also listen to a live audio web cast of the conference call by visiting Crombie's website located at www.crombiereit.com. Replay will be available until midnight March 12, 2010, by dialling (416) 849-0833 or (800) 642-1687 and entering pass code 54701629, or on the Crombie website for 90 days after the meeting.

    
                     CROMBIE REAL ESTATE INVESTMENT TRUST
                      Consolidated Financial Statements
                              December 31, 2009


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

                                                  December 31,  December 31,
                                                         2009          2008
                                              -------------------------------
                                                                   Restated
    Assets                                                          (Note 3)
      Commercial properties (Note 4)               $1,314,611    $1,308,347
      Intangible assets (Note 5)                      103,357       131,403
      Notes receivable (Note 6)                         8,169        11,323
      Other assets (Note 7)                            24,100        20,934
      Cash and cash equivalents                             -         4,028
      Assets related to discontinued
       operations (Note 22)                             6,929         7,184
                                              -------------------------------
                                                   $1,457,166    $1,483,219
                                              -------------------------------
                                              -------------------------------

    Liabilities and Unitholders' Equity
      Commercial property debt (Note 8)              $706,369      $808,971
      Convertible debentures (Note 9)                 110,858        28,968
      Payables and accruals (Note 10)                  39,223        94,462
      Intangible liabilities (Note 11)                 31,558        41,061
      Employee future benefits obligation
       (Note 24)                                        6,260         4,836
      Distributions payable                             4,522         3,883
      Future income tax liability (Note 17)            79,700        79,800
      Liabilities related to discontinued
       operations (Note 22)                             6,334         6,517
                                              -------------------------------
                                                      984,824     1,068,498

      Non-controlling interest (Note 12)              225,367       199,163

      Unitholders' equity                             246,975       215,558
                                              -------------------------------
                                                   $1,457,166    $1,483,219
                                              -------------------------------
                                              -------------------------------

      Commitments and contingencies (Note 19)

      Subsequent events (Note 25)


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

                                                   Year Ended    Year Ended
                                                  December 31,  December 31,
                                                         2009          2008
                                              -------------------------------
                                                                   Restated
    Revenues                                                        (Note 3)

      Property revenue (Note 14)                     $207,254      $188,142
      Lease terminations                                  610           102
                                              -------------------------------
                                                      207,864       188,244
                                              -------------------------------

    Expenses
      Property expenses                                75,762        70,370
      General and administrative expenses               9,274         8,636
      Interest expense (Note 15)                       46,319        39,232
      Depreciation of commercial properties            18,765        16,398
      Depreciation of recoverable capital
       expenditures                                     1,050           929
      Amortization of tenant improvements/
       lease costs                                      4,272         3,488
      Amortization of intangible assets                21,944        22,971
                                              -------------------------------
                                                      177,386       162,024
                                              -------------------------------
    Income from continuing operations before
     other items                                       30,478        26,220
    Other income (expenses) (Note 16)                  (9,999)           77
                                              -------------------------------
    Income from continuing operations before
     income taxes and non-controlling interest         20,479        26,297
    Income tax recovery - Future (Note 17)               (100)       (1,490)
                                              -------------------------------
    Income from continuing operations before
     non-controlling interest                          20,579        27,787
    Write down of asset held for sale
     (Note 22)                                              -          (408)
    Income from discontinued operations
     (Note 22)                                              -           649
                                              -------------------------------
    Income before non-controlling interest             20,579        28,028
    Non-controlling interest                            9,831        13,440
                                              -------------------------------
    Net income                                        $10,748       $14,588
                                              -------------------------------
                                              -------------------------------
    Basic and diluted net income per unit
     (Note 13)
    Continuing operations                               $0.36         $0.56
    Discontinued operations                             $0.00         $0.01
                                              -------------------------------
    Net income                                          $0.36         $0.57
                                              -------------------------------
                                              -------------------------------

    Weighted average number of units
     outstanding
      Basic                                        29,611,781    25,477,768
                                              -------------------------------
                                              -------------------------------

      Diluted                                      29,764,964    25,596,001
                                              -------------------------------
                                              -------------------------------


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

                                                   Year Ended    Year Ended
                                                  December 31,  December 31,
                                                         2009          2008
                                              -------------------------------

    Net income                                        $10,748       $14,588
                                              -------------------------------
      Losses on derivatives designated as cash
       flow hedges transferred to net income
       in the current year                              5,140            96
      Net change in derivatives designated as
       cash flow hedges                                 6,994       (26,663)
                                              -------------------------------
    Other comprehensive income (loss)                  12,134       (26,567)
                                              -------------------------------
    Comprehensive income (loss)                       $22,882      $(11,979)
                                              -------------------------------
                                              -------------------------------


                     CROMBIE REAL ESTATE INVESTMENT TRUST
               Consolidated Statements of Unitholders' Equity
                          (In thousands of dollars)
    -------------------------------------------------------------------------

                                               Accumu-
                                                lated
                                                Other
                                               Compre-
                                     Contri-  hensive
                 REIT       Net       buted    Income      Distri-
                Units    Income     Surplus     (Loss)    butions     Total
             ----------------------------------------------------------------
             (Note 13)

    Unit-
     holders'
     equity,
     January
     1,
     2009    $265,096   $34,652         $34  $(29,567)   $(54,635) $215,580
    Adjust-
     ment
     due to
     change
     in
     accoun-
     ting
     policy
     (Note 3)       -       (22)          -         -           -       (22)
             ----------------------------------------------------------------
    Unit-
     holders'
     equity,
     January
     1,
     2009 as
     resta-
     ted      265,096    34,630          34   (29,567)    (54,635)  215,558
    Units
     relea-
     sed
     under
     EUPP           8         -          (8)        -           -         -
    Units
     issued
     under
     EUPP         341         -           -         -           -       341
    Loans
     recei-
     vable
     under
     EUPP        (341)        -           -         -           -      (341)
    EUPP
     compen-
     sation         -         -          47         -           -        47
    Repayment
     of EUPP
     loans
     recei-
     vable        183         -           -         -           -       183
    Net
     income         -    10,748           -         -           -    10,748
    Distribu-
     tions          -         -           -         -     (26,756)  (26,756)
    Other
     compre-
     hensive
     income         -         -           -    12,134           -    12,134
    Unit
     issue
     proceeds,
     net of
     costs of
     $1,794    35,061         -           -         -           -    35,061
             ----------------------------------------------------------------
    Unit-
     holders'
     equity,
     December
     31,
     2009    $300,348   $45,378         $73  $(17,433)  $(81,391)  $246,975
             ----------------------------------------------------------------
             ----------------------------------------------------------------


    Unit-
     holders'
     equity,
     January
     1, 2008 $205,273   $20,064         $12   $(3,000)   $(31,515) $190,834
    Adjust-
     ment
     due to
     change
     in
     accoun-
     ting
     policy
     (Note 3)       -       (22)          -         -           -       (22)
             ----------------------------------------------------------------
    Unit-
     holders'
     equity,
     January
     1, 2008
     as
     resta-
     ted      205,273    20,042          12    (3,000)    (31,515)  190,812
    Units
     relea-
     sed
     under
     EUPP          20         -         (20)        -           -         -
    Units
     issued
     under
     EUPP         386         -           -         -           -       386
    Loans
     recei-
     vable
     under
     EUPP        (386)        -           -         -           -      (386)
    EUPP
     compen-
     sation         -         -          42         -           -        42
    Repay-
     ment of
     EUPP
     loans
     recei-
     vable        181         -           -         -           -       181
    Net
     income         -    14,588           -         -           -    14,588
    Distri-
     butions        -         -           -         -     (23,120)  (23,120)
    Other
     compre-
     hensive
     loss           -         -           -   (26,567)          -   (26,567)
    Unit
     issue
     proceeds,
     net of
     costs of
     $2,008    60,997         -           -         -           -    60,997
    Unit
     redemp-
     tion      (1,375)        -           -         -           -    (1,375)
             ----------------------------------------------------------------
    Unit-
     holders'
     equity,
     December
     31,
     2008 as
     resta-
     ted     $265,096   $34,630         $34  $(29,567)   $(54,635) $215,558
             ----------------------------------------------------------------
             ----------------------------------------------------------------


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

                                                   Year Ended    Year Ended
                                                  December 31,  December 31,
                                                         2009          2008
                                              -------------------------------
                                                                   Restated
    Cash flows provided by (used in)                                (Note 3)

    Operating Activities
    Net income                                        $10,748       $14,588
    Items not affecting operating cash
     (Note 18)                                         62,007        51,619
                                              -------------------------------
                                                       72,755        66,207

    Additions to tenant improvements and
     lease costs                                       (7,633)      (11,419)
    Change in other non-cash operating items
     (Note 18)                                        (11,134)        6,086
                                              -------------------------------
    Cash provided by operating activities              53,988        60,874
                                              -------------------------------

    Financing Activities
    Issue of commercial property debt                 154,782       493,070
    Increase in deferred financing charges             (3,958)       (4,162)
    Issue of convertible debentures                    85,000        30,000
    Issue costs of convertible debentures              (3,387)       (1,214)
    Units and Class B LP Units issued                  66,855        63,005
    Units and Class B LP Units issue costs             (2,054)       (3,790)
    Settlement of interest rate swap
     agreements                                       (36,204)       (3,961)
    Repayment of commercial property debt            (261,351)     (191,505)
    Decrease in liabilities related to
     discontinued operations                             (183)          (25)
    Collection of notes receivable                      3,154         9,645
    Repayment of EUPP loan receivable                     183           181
    Unit redemption                                         -        (1,375)
    Payment of distributions                          (50,436)      (43,117)
                                              -------------------------------
    Cash provided by (used in) financing
     activities                                       (47,599)      346,752
                                              -------------------------------

    Investing Activities
    Additions to commercial properties                 (9,967)      (19,075)
    Additions to recoverable capital
     expenditures                                        (669)         (828)
    Assets related to discontinued operations               -        (7,250)
    Decrease in assets related to
     discontinued operations                              255            66
    Proceeds on disposal of commercial
     property, net of closing costs                         -        10,186
    Acquisition of commercial properties
     (Note 4)                                             (36)     (389,405)
                                              -------------------------------
    Cash used in investing activities                 (10,417)     (406,306)
                                              -------------------------------
    Increase (decrease) in cash and cash
     equivalents during the year                       (4,028)        1,320
    Cash and cash equivalents, beginning
     of year                                            4,028         2,708
                                              -------------------------------
    Cash and cash equivalents, end of year               $Nil        $4,028
                                              -------------------------------
                                              -------------------------------

       See accompanying notes to the consolidated financial statements.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
                 Notes to Consolidated Financial Statements
             (In thousands of dollars, except per unit amounts)
                              December 31, 2009
    -------------------------------------------------------------------------
    

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 consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles ("GAAP") as prescribed by the Canadian Institute of Chartered Accountants ("CICA").

(b) Basis of consolidation

The consolidated financial statements include the accounts of Crombie and its incorporated and unincorporated subsidiaries.

(c) Property acquisitions

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

Crombie allocates the purchase price based on the following:

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

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

Origination costs for existing leases - Origination costs are determined based on estimates of the costs that would be incurred to put the existing leases in place under the same terms and conditions. These costs include leasing commissions as well as foregone rent and operating cost recoveries during an assumed lease-up period.

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

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

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

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

(d) Commercial properties

Commercial properties include land, buildings and tenant improvements. Commercial properties are carried at cost less accumulated depreciation and are reviewed periodically for impairment as described in Note 2(t).

Depreciation of buildings is calculated using the straight-line method with reference to each property's cost, its estimated useful life (not exceeding 40 years) and its estimated residual value.

Amortization of tenant improvements is determined using the straight-line method over the terms of the tenant lease agreements and renewal periods where applicable.

Improvements that are not recoverable from tenants are either expensed as incurred or, in the case of a major item, capitalized to commercial properties and amortized on a straight-line basis over the expected useful life of the improvement.

(e) Intangible assets and liabilities

Intangible assets include the value of origination costs for existing leases, the value of the differential between original and market rents for above-market existing leases, the value of the immediate cash flow stream from in-place leases and the value of tenant relationships.

Intangible liabilities are the value of the differential between original and market rents for below market existing leases.

Amortization of the value of origination costs, in-place leases and tenant relationships is determined using the straight-line method over the terms of the tenant lease agreements and renewal periods where applicable and is recorded as amortization. The value of the differential between original and market rents for above- and below-market existing leases is recognized using the straight-line method over the terms of the tenant lease agreements and recorded as property revenue.

Intangible assets are reviewed for impairment as described in Note 2(t).

(f) Deferred financing charges

Amortization of deferred financing charges is calculated using the effective interest method over the terms of related debt.

(g) 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.

(h) Cash and cash equivalents

Cash and cash equivalents are defined as cash on hand and cash in bank.

(i) 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.

(j) Financial instruments

Crombie classifies all financial instruments, including derivatives, as either held to maturity, available-for-sale, held for trading, loans and receivables or other financial liabilities. Financial assets held to maturity, loans and receivables, and financial liabilities other than those held for trading, are measured at amortized cost. Available-for-sale financial assets are measured at fair value with unrealized gains and losses recognized in other comprehensive income (loss). Financial instruments classified as held for trading are measured at fair value using the settlement date, with unrealized gains and losses recognized in net income. Fair value measurements that are recognized in the balance sheet that do not have quoted prices in the market place are calculated using inputs that are observable for the liability, either directly as prices, or indirectly derived from prices. Impairment write-downs are recognized in net income.

(k) 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 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 fixed interest rate swap agreements and a number of delayed interest rate swap agreements 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.

(l)Transaction costs

Crombie adds transaction costs directly attributable to the acquisition or issue of a financial asset or financial liability, other than for those classified as held for trading, to the fair value of the financial asset or financial liability on initial recognition, and they are amortized using the effective interest method.

(m) 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.

(n) Employee unit purchase plan

Crombie has a unit purchase plan for certain employees which is described in Note 13. In accordance with the Emerging Issues Committee Abstract 132, loans granted to employees to purchase units under the plan are accounted for as stock-based compensation.

(o) 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.
    

(p) 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 year ended December 31, 2009 $51,075 (year ended December 31, 2008 - $44,044) in cash distributions were declared payable by the Board of Trustees to Crombie Unitholders and Crombie Limited Partnership Unitholders (the "Class B LP Units").

(q) Comprehensive income (loss)

Comprehensive income (loss) 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 (loss), 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.

(r) 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.

(s) 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 classed 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.

(t) 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

Effective January 1, 2009 Crombie adopted two new accounting standards that were issued by the CICA in 2008 and 2009, and one Emerging Issues Committee Abstract issued by the CICA in January 2009. These accounting policy changes have been adopted in accordance with the transitional provisions.

The new standards and accounting policy changes are as follows:

Goodwill and Intangible Assets

Effective January 1, 2009, the accounting and disclosure requirements of the CICA's new accounting standard: "Handbook Section 3064, Goodwill and Intangible Assets" was adopted.

This standard is effective for annual and interim financial statements related to fiscal years beginning on or after October 1, 2008 and was applicable for Crombie's first quarter of fiscal 2009. Section 3064 states that intangible assets may be recognized as assets only if they meet the definition of an intangible asset. Section 3064 also provides further information on the recognition of internally generated intangible assets (including research and development).

This standard has been applied retrospectively with restatement of prior periods. The adoption of this new standard resulted in an increase of $929 to depreciation of commercial properties and a decrease of $929 to property expenses in the consolidated Statements of Income for the year ended December 31, 2008. In the consolidated Balance Sheets, there was an increase of $3,946 to commercial properties, an increase of $38 to receivables, a decrease of $4,246 to prepaid expenses, and a decrease of $220 to payables and accruals at December 31, 2008, and a decrease of $20 to non-controlling interest and a decrease of $22 to unitholders' equity at January 1, 2008.

Financial instruments - recognition and measurement

In January 2009, the CICA issued Emerging Issues Committee Abstract 173 ("EIC 173"), "Credit Risk and the Fair Value of Financial Assets and Financial Liabilities". EIC 173 requires that an entity take into account its own credit risk and the credit risk of its counterparty in determining the fair value of financial assets and financial liabilities. This Abstract must be applied retrospectively without restatement of prior periods to all financial assets and liabilities measured at fair value in interim and annual financial statements for periods ending on or after January 20, 2009. The adoption of EIC 173 did not have a significant impact on Crombie's financial results, position or disclosures.

Financial Instruments - Disclosures

In June 2009, the CICA issued amendments to the existing Section 3862, "Financial Instruments - Disclosures", to more closely align the section with those required under International Financial Reporting Standards ("IFRS"). The amendments include enhanced disclosure requirements relating to fair value measurements of financial instruments and liquidity risks (Note 21). These amendments apply for annual financial statements with fiscal years ending after September 30, 2009. The adoption of the amendments to Section 3862 did not have a material impact on the disclosures of Crombie.

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 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 Canadian 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.

In order to assist Crombie with its transition to IFRS, the Unitholders approved amendments to Crombie's Declaration of Trust, at Crombie's Annual General and Special Meeting held on May 7, 2009, to allow the Trustees to make future amendments to the Declaration of Trust without the requirement to obtain Unitholder approval. These changes are in the same manner as the Declaration of Trust currently permits Trustees to act as it relates to the changes in taxation laws.

The amendments will not result in any material change to the Unitholders, but rather were contemplated in order to assist Crombie to implement changes that will assist in its transition to IFRS. Trustees will be obligated to determine whether any such change is necessary or desirable in the circumstances, and all other matters that are currently required to be approved by Unitholders pursuant to the Declaration of Trust will remain unchanged.

4) COMMERCIAL PROPERTIES

    
                                                   December 31, 2009
                                     ----------------------------------------
                                                  Accumulated      Net Book
                                           Cost  Depreciation         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
                                     ----------------------------------------
                                     ----------------------------------------

                                                   December 31, 2008
                                     ----------------------------------------
                                                  Accumulated      Net Book
                                           Cost  Depreciation         Value
                                     ----------------------------------------
                                       Restated      Restated      Restated
                                        (Note 3)      (Note 3)      (Note 3)
    Land                               $288,566          $Nil      $288,566
    Buildings                         1,029,990        37,276       992,714
    Recoverable capital expenditures      5,902         1,956         3,946
    Tenant improvements and leasing
     costs                               29,754         6,633        23,121
                                     ----------------------------------------
                                     $1,354,212       $45,865    $1,308,347
                                     ----------------------------------------
                                     ----------------------------------------
    

Property Acquisitions and Disposals

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

    
    2009
    ----
    

On June 1, 2009, Crombie acquired a vacant building and 1.1 acres of land adjacent to the Avalon Mall, Newfoundland and Labrador, for $3,527 plus additional closing costs from ECL General Partner Limited, a subsidiary of Empire Company Limited. The building has been leased while management assesses the future development of this site. The acquisition was financed with debt of $3,527 at a fixed rate of 8.00% and a term of 20 years with ECL General Partner Limited and the property is held as security.

The carrying value of land has been reduced by $5,706 along with the reduction in the carrying values of certain property related intangible assets of $3,000 and intangible liabilities of $1,306 as a result of a change in the allocation of costs relating to a property acquired in 2008. The reallocation has resulted in an increase of $7,400 in the carrying value of a building.

    
    2008
    ----
    

On April 22, 2008, Crombie acquired 61 properties in Atlantic Canada, Quebec and Ontario from subsidiaries of Empire Company Limited, representing a 3,288,000 square foot increase to the portfolio, for $428,500 plus additional closing costs. The acquisition was financed through a $280,000 term facility, the issuance of $30,000 Series A convertible debentures, the issuance of $55,000 of Class B LP units of Crombie Limited Partnership to affiliates of Empire, the issuance of $63,005 of REIT units (5,727,750 units at a price of $11.00 per unit), and a draw on Crombie's revolving credit facility.

On May 21, 2008, land attached to a commercial property was sold to an unrelated third party for cash proceeds of $187, net of closing costs, resulting in a gain of $77. (Note 16)

On June 12, 2008, Crombie acquired a property in Saskatoon, Saskatchewan, representing a 160,000 square foot increase to the portfolio, for $27,200 plus additional closing costs, from an unrelated third party. The acquisition was financed through an assumption of an existing mortgage of $16,517 at a fixed rate of 5.35% and a term of three years with the balance of the purchase price paid using funds from the revolving credit facility.

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

    
                                                   Year Ended    Year Ended
                                                  December 31,  December 31,
    Commercial property acquired, net:                   2009          2008
                                              -------------------------------
    Land                                               $3,563      $107,826
    Buildings                                               -       287,154
    Intangible assets:
      Lease origination costs                               -        40,233
      Tenant relationships                                  -        21,622
      Above-market leases                                   -           370
      In-place leases                                       -        35,384
    Intangible liabilities:
      Below-market leases                                   -       (31,848)
                                              -------------------------------
    Net purchase price                                  3,563       460,741
    Assumed mortgages                                  (3,527)      (16,517)
    Fair value debt adjustment on assumed
     mortgages                                              -           181
                                              -------------------------------
                                                          $36      $444,405
                                              -------------------------------
                                              -------------------------------

    Consideration funded by:
    Revolving credit facility                             $36       $16,000
    Term facility                                           -       280,000
    Units                                                   -        63,005
    Convertible debentures                                  -        30,000
    Application of deposit                                  -           400
                                              -------------------------------
    Cash paid                                              36       389,405
    Class B LP Units (non-controlling
     interest) paid                                         -        55,000
                                              -------------------------------
    Total consideration paid                              $36      $444,405
                                              -------------------------------
                                              -------------------------------


    5) INTANGIBLE ASSETS

                                                   December 31, 2009
                                     ----------------------------------------
                                                  Accumulated      Net Book
                                           Cost  Depreciation         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
                                     ----------------------------------------
                                     ----------------------------------------


                                                   December 31, 2008
                                     ----------------------------------------
                                                  Accumulated      Net Book
                                           Cost  Depreciation         Value
                                     ----------------------------------------
    Origination costs for existing
     leases                             $54,419       $11,680       $42,739
    In-place leases                      57,376        19,072        38,304
    Tenant relationships                 57,098        14,746        42,352
    Above-market existing leases         16,015         8,007         8,008
                                     ----------------------------------------
                                       $184,908       $53,505      $131,403
                                     ----------------------------------------
                                     ----------------------------------------
    

6) NOTES RECEIVABLE

On March 23, 2006, Crombie acquired 44 properties from Empire Company Limited's subsidiary, ECL Properties Limited ("ECL") and certain affiliates, resulting in ECL Developments Limited issuing two demand non-interest bearing promissory notes in the amounts of $39,600 and $20,564. Payments on the first note of $39,600 are being received as funding is required for a capital expenditure program relating to eight commercial properties over the period from 2006 to 2010. Payments on the second note of $20,564 are being received on a monthly basis to reduce the effective interest rate to 5.54% on certain assumed mortgages with terms to maturity ranging from February 2010 to April 2022.

The balance of each note is as follows:

    
                                                  December 31,  December 31,
                                                         2009          2008
                                              -------------------------------
    Capital expenditure program                          $436          $505
    Interest rate subsidy                               7,733        10,818
                                              -------------------------------
                                                       $8,169       $11,323
                                              -------------------------------
                                              -------------------------------
    

7) OTHER ASSETS

    
                                                  December 31,  December 31,
                                                         2009          2008
                                              -------------------------------
                                                                   Restated
                                                                    (Note 3)
    Gross accounts receivable                          $7,732        $7,286
    Provision for doubtful accounts                      (326)         (250)
                                              -------------------------------
    Net accounts receivable                             7,406         7,036
    Accrued straight-line rent receivable              10,948         7,786
    Prepaid expenses                                    5,531         5,174
    Restricted cash                                       215           938
                                              -------------------------------
                                                      $24,100       $20,934
                                              -------------------------------
                                              -------------------------------
    

8) COMMERCIAL PROPERTY DEBT

    
                                           Weighted
                                            average    Weighted
                                        contractual     average
                                           interest     term to    December
                                  Range        rate    maturity    31, 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
                                                                 ------------
                                                                 ------------

                                           Weighted
                                            average    Weighted
                                        contractual     average
                                           interest     term to    December
                                  Range        rate    maturity    31, 2008
                              -----------------------------------------------
    Fixed rate mortgages      5.15-6.44%       5.55%  6.1 years    $531,970
    Floating rate term
     facility                                  4.87%  0.8 years     178,824
    Floating rate revolving
     credit facility                           2.75%  2.5 years      93,400
    Floating rate demand
     credit facility                           3.50%     Demand      10,000
    Deferred financing charges                                       (5,223)
                                                                 ------------
                                                                   $808,971
                                                                 ------------
                                                                 ------------
    

As December 31, 2009, debt retirements for the next 5 years are:

    
                                  Fixed    Floating   Financing
                                   Rate        Rate       Costs       Total
                              -----------------------------------------------
    2010                       $122,820        $Nil        $Nil    $122,820
    2011                         43,521     106,160           -     149,681
    2012                         17,393           -           -      17,393
    2013                         48,339           -           -      48,339
    2014                         83,350           -           -      83,350
    Thereafter                  281,738           -           -     281,738
                              -----------------------------------------------
                                597,161     106,160           -     703,321

    Deferred financing charges        -           -      (4,783)     (4,783)

    Fair value debt adjustment    7,831           -           -       7,831
                              -----------------------------------------------
                               $604,992    $106,160     $(4,783)   $706,369
                              -----------------------------------------------
                              -----------------------------------------------
    

The floating rate term facility was used to partially finance the acquisition of 61 properties from subsidiaries of Empire Company Limited. On February 12, 2009, Crombie completed mortgage financings of $39,000 to refinance a portion of the floating rate term facility. Fixed rate first mortgages were placed with a third party for a total of $32,800. The first mortgages have a weighted average interest rate of 4.88% with a maturity date of March 2014. In addition, $6,200 of fixed rate second mortgages were provided by Empire Company Limited. The second mortgages have a weighted average interest rate of 5.38% with a maturity date of March 2014. On August 27, 2009, Crombie completed a mortgage financing of $15,000 with a third party to refinance a portion of the floating rate term facility. The mortgage has an interest rate of 7.30% with a maturity date of September 2029. On September 30, 2009, Crombie issued $85,000 in unsecured convertible debentures to further reduce the floating rate term facility (Note 9). On November 27, 2009, Crombie completed a mortgage financing of $37,000 with a third party to refinance the remainder of the floating rate term facility. The mortgage has an interest rate of 6.9% with a maturity date of December 2019. During the fourth quarter of 2009, the floating rate term facility was cancelled.

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.

Crombie had secured a $13,800 floating rate demand credit facility with Empire on substantially the same terms and conditions that govern the Revolving Credit Facility. This facility was put in place to ensure that Crombie maintained adequate liquidity in order to fund its daily operating activities while volatility in the financial markets continued. As at December 31, 2008, Crombie had $10,000 drawn against this facility which was repaid during the first quarter of 2009. During the third quarter of 2009, as a result of the improved financial market conditions, this facility was cancelled.

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    Maturity    Interest    December    December
                      Price        date        rate    31, 2009    31, 2008
                 ------------------------------------------------------------
    Series A                   March 20,
     (CRR.DB)        $13.00        2013        7.00%    $30,000     $30,000
    Series B                    June 30,
     (CRR.DB.B)      $11.00        2015        6.25%     85,000           -
    Deferred
     financing
     charges                                             (4,142)     (1,032)
                                                      -----------------------
                                                       $110,858     $28,968
                                                      -----------------------
                                                      -----------------------
    

Both the Series A Convertible Debentures, issued on March 20, 2008, and the Series B Convertible Debentures, issued on September 30, 2009, (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.

Each Series A Convertible Debenture and Series B Convertible Debenture is 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 and 90.9091 Units per one thousand principal amount of Series B Convertible Debentures. If all conversion rights attaching to the Series A Convertible Debentures and the Series B Convertible Debentures are exercised, Crombie would be required to issue approximately 2,307,693 Units and 7,727,272 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

    
                                                  December 31,  December 31,
                                                         2009          2008
                                              -------------------------------
                                                                   Restated
                                                                    (Note 3)
    Tenant improvements and capital
     expenditures                                     $20,209       $13,384
    Property operating costs                           10,575        20,166
    Advance rents                                       2,069         5,364
    Interest on commercial property debt and
     debentures                                         2,836         2,504
    Fair value of interest rate swap
     agreements                                         3,534        53,044
                                              -------------------------------
                                                      $39,223       $94,462
                                              -------------------------------
                                              -------------------------------
    

11) INTANGIBLE LIABILITIES

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


                                                   December 31, 2008
                                     ----------------------------------------
                                                  Accumulated      Net Book
                                           Cost  Depreciation         Value
                                     ----------------------------------------
    Below-market existing leases        $55,703       $14,642       $41,061
                                     ----------------------------------------
                                     ----------------------------------------
    

12) NON-CONTROLLING INTEREST

    
                                                 Accu-
                                              mulated
                                                Other
                                               Compre-
                                   Contribu-  hensive
              Class B       Net         ted    Income    Distribu-
             LP Units    Income     Surplus     (Loss)      tions     Total
             ----------------------------------------------------------------
    Balance,
     January
     1,
     2009    $244,520   $32,118        $Nil  $(27,254)   $(50,201) $199,183
    Adjust-
     ment
     due to
     change
     in
     accoun-
     ting
     policy
     (Note 3)       -       (20)          -         -           -       (20)
             ----------------------------------------------------------------
    Balance,
     January
     1,
     2009 as
     resta-
     ted      244,520    32,098         Nil   (27,254)    (50,201)  199,163
    Net
     income         -     9,831           -         -           -     9,831
    Distri-
     butions        -         -           -         -     (24,319)  (24,319)
    Other
     compre-
     hensive
     income         -         -           -    10,952           -    10,952
    Class B
     LP Unit
     issue
     proceeds,
     net of
     costs of
     $260      29,740         -           -         -           -    29,740
             ----------------------------------------------------------------
    Balance,
     December
     31,
     2009    $274,260   $41,929        $Nil  $(16,302)   $(74,520) $225,367
             ----------------------------------------------------------------
             ----------------------------------------------------------------


                                                 Accu-
                                              mulated
                                                Other
                                               Compre-
                                   Contribu-  hensive
              Class B       Net         ted    Income    Distribu-
             LP Units    Income     Surplus     (Loss)      tions     Total
             ----------------------------------------------------------------
    Balance,
     January
     1,
     2008    $191,302   $18,678        $Nil   $(2,784)   $(29,277) $177,919
    Adjust-
     ment
     due to
     change
     in
     accoun-
     ting
     policy
     (Note 3)       -       (20)          -         -           -       (20)
             ----------------------------------------------------------------
    Balance,
     January
     1,
     2008 as
     resta-
     ted      191,302    18,658         Nil    (2,784)    (29,277)  177,899
    Net
     income         -    13,440           -         -           -    13,440
    Distri-
     butions        -         -           -         -     (20,924)  (20,924)
    Other
     compre-
     hensive
     loss           -         -           -   (24,470)          -   (24,470)
    Class B
     LP Unit
     issue
     proceeds,
     net of
     costs of
     $1,782    53,218         -           -         -           -    53,218
             ----------------------------------------------------------------
    Balance,
     December
     31,
     2008 as
     resta-
     ted     $244,520   $32,098        $Nil  $(27,254)   $(50,201) $199,163
             ----------------------------------------------------------------
             ----------------------------------------------------------------
    

13) UNITS OUTSTANDING

    
                                                      Crombie REIT Special
                                                     Voting Units and Class
                                Crombie REIT Units         B LP Units
                                ------------------         ----------
                                 Number                  Number
                               of Units      Amount    of Units      Amount
                            -------------------------------------------------
    Balance, January 1,
     2009                    27,271,888    $265,096  25,079,576    $244,520
    Unit issue proceeds,
     net of costs             4,725,000      35,061   3,846,154      29,740
    Units issued under EUPP      47,411         341           -           -
    Units released under
     EUPP                             -           8           -           -
    Net change in EUPP
     loans receivable                 -        (158)          -           -
                            -------------------------------------------------
    Balance, December 31,
     2009                    32,044,299    $300,348  28,925,730    $274,260
                            -------------------------------------------------
                            -------------------------------------------------

                                                              Total
                                                    -------------------------
                                                         Number
                                                       of Units      Amount
                                                    -------------------------
    Balance, January 1,
     2009                                            52,351,464    $509,616
    Unit issue proceeds,
     net of costs                                     8,571,154      64,801
    Units issued under EUPP                              47,411         341
    Units released under
     EUPP                                                     -           8
    Net change in EUPP
     loans receivable                                         -        (158)
                                                    -------------------------
    Balance, December 31,
     2009                                            60,970,029    $574,608
                                                    -------------------------
                                                    -------------------------


                                                      Crombie REIT Special
                                                     Voting Units and Class
                                Crombie REIT Units         B LP Units
                                ------------------         ----------
                                 Number                  Number
                               of Units      Amount    of Units      Amount
                            -------------------------------------------------
    Balance, January 1,
     2008                    21,648,985    $205,273  20,079,576    $191,302
    Unit issue proceeds,
     net of costs             5,727,750      60,997   5,000,000      53,218
    Units issued under EUPP      34,053         386           -           -
    Units released under
     EUPP                             -          20           -           -
    Net change in EUPP
     loans receivable                 -        (205)          -           -
    Unit redemption            (138,900)     (1,375)          -           -
                            -------------------------------------------------
    Balance, December 31,
     2008                    27,271,888    $265,096  25,079,576    $244,520
                            -------------------------------------------------
                            -------------------------------------------------

                                                              Total
                                                    -------------------------
                                                         Number
                                                       of Units      Amount
                                                    -------------------------
    Balance, January 1,
     2008                                            41,728,561    $396,575
    Unit issue proceeds,
     net of costs                                    10,727,750     114,215
    Units issued under EUPP                              34,053         386
    Units released under
     EUPP                                                     -          20
    Net change in EUPP
     loans receivable                                         -        (205)
    Unit redemption                                    (138,900)     (1,375)
                                                    -------------------------
    Balance, December 31,
     2008                                            52,351,464    $509,616
                                                    -------------------------
                                                    -------------------------
    

Crombie REIT Units

Crombie is authorized to issue an unlimited number of units ("Units") and an unlimited number of Special Voting Units. Issued and outstanding Units may be subdivided or consolidated from time to time by the Trustees without the approval of the Unitholders. Units are redeemable at any time on demand by the holders at a price per Unit equal to the lesser of: (i) 90% of the weighted average price per Crombie Unit during the period of the last 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.

The aggregate redemption price payable by Crombie in respect of any Units surrendered for redemption during any calendar month will be satisfied by way of a cash payment in Canadian dollars within 30 days after the end of the calendar month in which the Units were tendered for redemption, provided that the entitlement of Unitholders to receive cash upon the redemption of their Units is subject to the limitations that:

    
    i.   the total amount payable by Crombie in respect of such Units and
         all other Units tendered for redemption, in the same calendar month
         must not exceed $50 (provided that such limitation may be waived at
         the discretion of the Trustees);
    ii.  at the time such Units are tendered for redemption, the outstanding
         Units must be listed for trading on the TSX or traded or quoted on
         any other stock exchange or market which the Trustees consider, in
         their sole discretion, provides representative fair market value
         prices for the Units; and
    iii. the normal trading of Units is not suspended or halted on any stock
         exchange on which the Units are listed (or if not listed on a stock
         exchange, in any market where the Units are quoted for trading) on
         the redemption date or for more than five trading days during the
         ten-day trading period commencing immediately after the redemption
         date.
    

On June 25, 2009, Crombie closed a public offering, on a bought deal basis, of 4,725,000 Units, after full exercise of the underwriters' over-allotment option, to the public at a price of $7.80 per Unit for proceeds of $35,061 net of issue costs.

Crombie REIT Special Voting Units and Class B LP Units

The Declaration of Trust and the Exchange Agreement provide for the issuance of voting non-participating Units (the "Special Voting Units") to the holders of Class B LP Units used solely for providing voting rights proportionate to the votes of Crombie's Units. The Special Voting Units are not transferable separately from the Class B LP Units to which they are attached and will be automatically transferred upon the transfer of such Class B LP 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 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.

On June 25, 2009, concurrently with the issuance of the Units, in satisfaction of its pre-emptive right, ECL Developments Limited purchased 3,846,154 Class B LP Units and the attached Special Voting Units at a price of $7.80 per Class B LP Unit for proceeds of $29,740 net of issue costs, on a private placement basis.

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 ("LTIP") cash awards received, as payments on interest and principal. As at December 31, 2009, there are loans receivable from executives of $1,445 under Crombie's EUPP, representing 165,485 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 December 31, 2009 was $1,796.

The compensation expense related to the EUPP during the year ended December 31, 2009 was $47 (year ended December 31, 2008 - $42).

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 December 31, 2009, there are no other dilutive items.

14) PROPERTY REVENUE

    
                                                   Year Ended    Year Ended
                                                  December 31,  December 31,
                                                         2009          2008
                                              -------------------------------
    Rental revenue contractually due
     from tenants                                    $198,997      $181,978
    Straight-line rent recognition                      3,162         1,932
    Below-market lease amortization                     8,197         7,290
    Above-market lease amortization                    (3,102)       (3,058)
                                              -------------------------------
                                                     $207,254      $188,142
                                              -------------------------------
                                              -------------------------------
    

15) INTEREST

    
                                                   Year Ended    Year Ended
                                                  December 31,  December 31,
                                                         2009          2008
                                              -------------------------------
    Fixed rate mortgages                              $35,987       $25,136
    Floating rate term, revolving and
     demand facilities                                  6,878        12,459
    Convertible debentures                              3,454         1,637
                                              -------------------------------
    Interest expense                                   46,319        39,232
    Change in fair value debt adjustment                3,090         3,353
    Interest paid on discontinued operations                -           337
    Change in accrued interest                           (332)         (743)
    Amortization of effective swap agreements          (1,641)         (184)
    Amortization of deferred financing charges         (2,815)       (1,349)
                                              -------------------------------
    Interest paid                                     $44,621       $40,646
                                              -------------------------------
                                              -------------------------------
    

16) OTHER INCOME (EXPENSES)

    
                                                   Year Ended    Year Ended
                                                  December 31,  December 31,
                                                         2009          2008
                                              -------------------------------
    Expense related to settlement of
     ineffective swap                                 $(8,139)           $-
    Write off of deferred financing charges            (1,860)            -
    Gain on disposition of land                             -            77
                                              -------------------------------
                                                      $(9,999)          $77
                                              -------------------------------
                                              -------------------------------
    

On September 14, 2009, in connection with the Series B Convertible Debenture issue, Crombie settled an interest rate swap agreement related to a notional amount of $84,000 for a settlement amount of $8,139. The delayed interest rate swap hedge had been designated to mitigate exposure to interest rate increases prior to replacing the floating rate term facility with long-term financing. Due to the reduction of the floating rate term facility using gross proceeds of the Series B Convertible Debenture offering (Note 9), the associated interest rate swap agreement was no longer deemed to be an effective hedge. As a result, Crombie recognized an expense in net income during the third quarter of 2009 for the settlement amount. In addition, Crombie wrote off the deferred financing charges related to the repaid component of the floating rate term facility.

On May 20, 2008, land attached to a commercial property was sold to an unrelated third party, resulting in a gain of $77.

17) 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:

    
                                                  December 31,  December 31,
                                                         2009          2008
                                              -------------------------------
    Tax liabilities relating to difference
     in tax and book value                            $87,389       $86,060
    Tax asset relating to non-capital
     loss carry-forward                                (7,689)       (6,260)
                                              -------------------------------
    Future income tax liability                       $79,700       $79,800
                                              -------------------------------
                                              -------------------------------
    

The future income tax recovery consists of the following:

    
                                                   Year Ended    Year Ended
                                                  December 31,  December 31,
                                                         2009          2008
                                              -------------------------------
    Provision for income taxes at the
     expected rate                                     $7,133        $9,023
    Tax effect of income attribution to
     Crombie's unitholders                             (7,233)       (4.441)
    Decreased income tax resulting from a
     change in expected rate                                -        (6,072)
                                              -------------------------------
    Income tax recovery                                 $(100)      $(1,490)
                                              -------------------------------
                                              -------------------------------
    

18) SUPPLEMENTARY CASH FLOW INFORMATION

a) Items not affecting operating cash

    
                                                   Year Ended    Year Ended
                                                  December 31,  December 31,
                                                         2009          2008
                                              -------------------------------
                                                                   Restated
                                                                    (Note 3)
    Items not affecting operating cash:
      Non-controlling interest                         $9,831       $13,440
      Depreciation of commercial properties            18,765        16,456
      Depreciation of recoverable capital
       expenditures                                     1,050           929
      Amortization of tenant
       improvements/lease costs                         4,272         3,511
      Amortization of deferred financing
       charges                                          2,815         1,349
      Write off of deferred financing
       charges (Note 16)                                1,860             -
      Expense related to swap
       settlement (Note 16)                             8,139             -
      Amortization of effective swap
       agreements (Note 15)                             1,641           184
      Amortization of intangible assets                21,944        23,019
      Amortization of above-market
       leases (Note 14)                                 3,102         3,087
      Amortization of below-market
       leases (Note 14)                                (8,197)       (7,297)
      Loss on disposition of land                           -           331
      Accrued rental revenue                           (3,162)       (1,942)
      Unit based compensation                              47            42
      Future income tax recovery                         (100)       (1,490)
                                              -------------------------------
                                                      $62,007       $51,619
                                              -------------------------------
                                              -------------------------------
    

b) Change in other non-cash operating items

    
                                                   Year Ended    Year Ended
                                                  December 31,  December 31,
                                                         2009          2008
                                              -------------------------------
                                                                   Restated
                                                                    (Note 3)
    Cash provided by (used in):
      Receivables                                       $(370)      $(1,535)
      Prepaid expenses and other assets                   366        (1,035)
      Payables and other liabilities                  (11,130)        8,656
                                              -------------------------------
                                                     $(11,134)       $6,086
                                              -------------------------------
                                              -------------------------------
    

19) 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 20).

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 15.3 and 75.7 years remaining, including renewal options.

Crombie obtains letters of credit to support its obligations with respect to construction work on its commercial properties and defeasing commercial property debt. 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, Crombie has $296 in standby letters of credit for construction work that is being performed on its commercial properties. Crombie does not believe that any of these standby letters of credit are likely to be drawn upon.

Crombie has agreed to acquire a portfolio of eight retail properties from subsidiaries of Empire Company Limited. The purchase price in respect of the eight properties is approximately $59,500, excluding closing and transaction costs, and represents an effective capitalization rate of 8.16%. The properties to be acquired comprise approximately 336,000 square feet of gross leaseable area, consisting of three freestanding tenants and five retail plazas.

20) RELATED PARTY TRANSACTIONS

As at December 31, 2009, Empire Company Limited, through its wholly-owned subsidiary ECL, holds a 47.4% (fully diluted 42.0%) 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 Properties Limited, a subsidiary of Empire Company Limited ("Management Cost Sharing Agreement"). The costs assumed by Empire Company Limited pursuant to the agreement during the year ended December 31, 2009 were $1,055 (year ended December 31, 2008 - $1,393) 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 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. The cost assumed by Empire Company Limited pursuant to the Management Cost Sharing Agreement during the year ended December 31, 2009 were $1,148 (year ended December 31, 2008 $2,013) and were netted against property expenses owing by Crombie to Empire Company Limited. The head lease subsidy during the year ended December 31, 2009 was $854 (year ended December 31 2008 - $897).

Crombie also earned rental revenue of $62,634 for the year ended December 31, 2009 (year ended December 31, 2008 - $50,483) from Sobeys Inc., Empire Theatres and ASC Commercial Leasing Limited ("ASC"). These companies were all subsidiaries of Empire Company Limited until September 8, 2008 when ASC was sold. Property revenue from ASC is included in this note disclosure until the sale date.

Crombie had secured a $13,800 floating rate demand credit facility with Empire on substantially the same terms and conditions that govern the Revolving Credit Facility. This facility was put in place to ensure that Crombie maintained adequate liquidity in order to fund its daily operating activities while volatility in the financial markets continued. As at December 31, 2008, Crombie had $10,000 drawn against this facility which was repaid during the first quarter of 2009. During the third quarter of 2009, as a result of the improved financial market conditions, this facility was cancelled.

On February 12, 2009, Crombie completed fixed rate second mortgage financings of $6,200. The mortgages were provided by Empire Company Limited and have a weighted average interest rate of 5.38% and a maturity date of March 2014.

On June 1, 2009, Crombie acquired 1.1 acres of land adjacent to the Avalon Mall, Newfoundland and Labrador, for $3,527 plus additional closing costs from ECL General Partner Limited, an affiliate of Empire Company Limited. ECL General Partner Limited provided debt of $3,527 at a fixed rate of 8.00% and a term of 20 years.

On June 25, 2009, concurrent with the public offering, in satisfaction of its pre-emptive rights, ECL Developments Limited purchased $30,000 of Class B LP Units and the attached Special Voting Units, on a private-placement basis.

On September 30, 2009, as part of a prospectus offering, in satisfaction of its pre-emptive rights, Empire Company Limited purchased $10,000 of Series B Convertible Debentures.

Crombie has agreed to acquire a portfolio of eight retail properties from subsidiaries of Empire Company Limited. The purchase price in respect of the eight properties is approximately $59,500, excluding closing and transaction costs, and represents an effective capitalization rate of 8.16%. The properties to be acquired comprise approximately 336,000 square feet of gross leaseable area, consisting of three freestanding tenants and five retail plazas.

21) 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 and 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.

    
                                December 31, 2009       December 31, 2008
                            -------------------------------------------------
                               Carrying        Fair    Carrying        Fair
                                  Value       Value       Value       Value
                            -------------------------------------------------
    Assets related to
     discontinued operations     $6,929      $7,066      $7,184      $7,477
                            -------------------------------------------------
                            -------------------------------------------------
    Commercial property debt   $711,152    $708,401    $814,194    $812,488
                            -------------------------------------------------
                            -------------------------------------------------
    Convertible debentures     $115,000    $120,200     $30,000     $25,950
                            -------------------------------------------------
                            -------------------------------------------------
    Liabilities related to
     discontinued operations     $6,334      $6,270      $6,487      $6,599
                            -------------------------------------------------
                            -------------------------------------------------
    

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 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 December 31, 2009:

    
    - Excluding Sobeys (which accounts for 32.7% 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 9.4% of the gross leaseable area
      of Crombie will expire in any one year.
    

As outlined in Note 20, Crombie earned rental revenue of $62,634 for the year ended December 31, 2009 (year ended December 31, 2008 - $50,483) 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 December 31, 2009:

    
    - Crombie's weighted average term to maturity of the fixed rate mortgages
      was 5.8 years; and
    - Crombie's exposure to floating rate debt, including the impact of the
      fixed rate swap agreements discussed below, was 8.0% 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. Turmoil in the financial markets materially affected interest swap rates. The interest swap rates are based on Canadian bond yields, plus a premium, called the swap spread, which reflects the risk of trading with a private counterparty as opposed to the Canadian government. Swap spreads fell far below historical average values and the effect of the abnormally low swap spreads, combined with the decline in the Canadian bond yields, resulted in a significant deterioration of the mark-to-market values for the interest rate swap agreements. A summary of the interest rate swaps settled during the year ended December 31, 2009 is as follows:

    
                                                       Notional  Settlement
    Settlement Date                     Hedged Item      Amount      Amount
                            -------------------------------------------------
    February 2, 2009                  Term Facility     $42,000      $4,535
    August 27, 2009                   Term Facility     $16,000       2,807
    September 14, 2009                Term Facility     $84,000       8,139
    October 15, 2009                  Term Facility     $38,000       6,116
    November 23, 2009       HDL Properties Mortgage     $91,980      14,607
                                                                 ------------
                                                                    $36,204
                                                                 ------------
                                                                 ------------
    

Swap settlement amounts on February 2, 2009, August 27, 2009, October 15, 2009 and November 23, 2009 have been recognized in other comprehensive income (loss) since the inception of the interest rate swap agreements as the swaps were all designated and effective hedges. These amounts will be reclassified to interest expense using the effective interest method over the terms of the mortgages. The swap settlement amount on September 14, 2009 has been expensed in net income during the third quarter of 2009 as it was determined to be an ineffective hedge. (Note 16)

The breakdown of the swaps in place at December 31, 2009 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 December 31, 2009, had an
      unfavourable mark-to-market exposure of $2,896 (December 31, 2008 -
      unfavourable $4,024) 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 (December 31, 2008 - $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 $638 compared to the face value
      December 31, 2009 (December 31, 2008 - unfavourable $20,901). The
      change in this amount has been recognized in other comprehensive income
      (loss).
    

Crombie estimates that $4,025 of other comprehensive income (loss) will be reclassified to interest expense during the year ending December 31, 2010 based on interest rate swap agreements settled to December 31, 2009.

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:

    
                                December 31, 2009       December 31, 2008
                               ----------------------------------------------
                                   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                     $(794)       $794     $(1,231)     $1,231
    -------------------------------------------------------------------------

                                December 31, 2009       December 31, 2008
                               ----------------------------------------------
                                   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                    $687       $(710)    $10,678    $(11,288)
    -------------------------------------------------------------------------
    

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 (see 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 23, 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 Flows(1)       2010        2011        2012
                           --------------------------------------------------
    Fixed rate mortgages(2)    $766,153    $151,021     $68,946     $41,217
    Convertible debentures      151,046       7,413       7,413       7,413
                           --------------------------------------------------
                                917,199     158,434      76,359      48,630
    Floating rate revolving
     credit facility            108,596       1,624     106,972           -
                           --------------------------------------------------
    Total                    $1,025,795    $160,058    $183,331     $48,630
                           --------------------------------------------------
                           --------------------------------------------------


                                               2013        2014  Thereafter
                                       --------------------------------------
    Fixed rate mortgages(2)                 $70,968     $98,805    $335,196
    Convertible debentures                   35,838       5,313      87,656
                                       --------------------------------------
                                            106,806     104,118     422,852
    Floating rate revolving
     credit facility                              -           -           -
                                       --------------------------------------
    Total                                  $106,806    $104,118    $422,852
                                       --------------------------------------
                                       --------------------------------------

    (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:

    
                                  Total        2010        2011        2012
                           --------------------------------------------------
    Swap agreement               $3,534      $1,930      $1,604          $-

                                               2013        2014  Thereafter
                                       --------------------------------------
    Swap agreement                               $-          $-          $-

    

Crombie was able to access the equity capital markets in June 2009 for gross proceeds of $66,855 (Note 13) and the debt capital markets in September 2009 for gross proceeds of $85,000 (Note 9).

Crombie has $106,079 of fixed rate mortgage debt maturing in the first quarter of 2010. On February 1, 2010, this amount was refinanced as described in "Subsequent Events" (Note 25).

Crombie was also able to access the debt capital markets in February 2010 for gross proceeds of $45,000 as described in "Subsequent Events" (Note 25).

22) ASSET HELD FOR SALE AND DISCONTINUED OPERATIONS

(a) On May 21, 2008, land attached to a commercial property was sold to an unrelated third party, resulting in a gain of $77.

(b) During the second quarter of 2008, Crombie and an unrelated third party signed a purchase and sale agreement for a commercial property. The purchase and sale agreement closed on October 24, 2008. During the year ended December 31, of 2008, the asset held for sale was written down to estimate the property's fair value resulting in a charge of $408 (net of taxes $210).

(c) 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 mature between January 22, 2009 and 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.

The following tables set forth the balance sheets associated with the income property classified as held for sale as at December 31, 2009 and December 31, 2008 and the statements of income for the property held for sale for the year ended December 31, 2009 and December 31, 2008.

    
    Balance Sheets
                                                  December 31,  December 31,
                                                         2009          2008
                                                 ----------------------------
    Assets
      Assets related to discontinued operations        $6,929        $7,184
                                                 ----------------------------
    Liabilities
      Accounts payable and accrued liabilities              -            30
      Liabilities related to discontinued
       operations                                       6,334         6,487
                                                 ----------------------------
                                                        6,334         6,517
                                                 ----------------------------

    Net investment in asset held for sale                $595          $667
                                                 ----------------------------
                                                 ----------------------------

    Statements of Income

                                                   Year Ended    Year Ended
                                                  December 31,  December 31,
                                                         2009          2008
                                                 ----------------------------
    Property revenue
      Rental revenue contractually
       due from tenants                                    $-        $2,214
      Straight-line rent recognition                        -            10
      Below-market lease amortization                       -             7
      Above-market lease amortization                       -           (29)
                                                 ----------------------------
                                                            -         2,202
                                                 ----------------------------
    Expenses
      Property expenses                                     -         1,087
      Interest                                              -           337
      Depreciation of commercial properties                 -            58
      Amortization of tenant
       improvements/lease costs                             -            23
      Amortization of intangible assets                     -            48
                                                 ----------------------------
                                                            -         1,553
                                                 ----------------------------
    Income from discontinued operations                    $-          $649
                                                 ----------------------------
                                                 ----------------------------
    

23) 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:

    
                                                  December 31,  December 31,
                                                         2009          2008
                                                 ----------------------------
                                                                   Restated
                                                                    (Note 3)
    Commercial property debt                         $706,369      $808,971
    Convertible debentures                            110,858        28,968
    Non-controlling interest                          225,367       199,163
    Unitholders' equity                               246,975       215,558
                                                 ----------------------------
                                                   $1,289,569    $1,252,660
                                                 ----------------------------
                                                 ----------------------------
    

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 any convertible debentures)
    

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

    
                                                  December 31,  December 31,
                                                         2009          2008
                                                 ----------------------------
                                                                   Restated
                                                                    (Note 3)
    Mortgages payable                                $604,992      $531,970
    Convertible debentures                            115,000        30,000
    Term facility                                           -       178,824
    Revolving credit facility                         106,160        93,400
    Demand credit facility                                  -        10,000
                                                 ----------------------------
    Total debt outstanding                            826,152       844,194
    Less: Applicable fair value debt adjustment        (7,733)      (10,818)
                                                 ----------------------------
    Debt                                             $818,419      $833,376
                                                 ----------------------------
                                                 ----------------------------

    Total assets                                   $1,457,166    $1,483,219
    Add:
    Deferred financing charges                          8,925         6,255
    Accumulated depreciation of
     commercial properties                             69,952        45,865
    Accumulated amortization of
     intangible assets                                 78,551        53,505
    Less:
    Assets held related to discontinued
     operations                                        (6,929)       (7,184)
    Interest rate subsidy                              (7,733)      (10,818)
    Fair value adjustment to future taxes             (39,245)      (39,245)
                                                 ----------------------------
    Gross book value                               $1,560,687    $1,531,597
                                                 ----------------------------
                                                 ----------------------------
    Debt to gross book value                             52.4%         54.4%
                                                 ----------------------------
                                                 ----------------------------
    

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 December 31, 2009, Crombie is in compliance with all externally imposed capital requirements and all covenants relating to its debt facilities.

24) 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. During the second quarter of 2009, Crombie announced the retirement of its Chief Executive Officer. As a result of this announcement, an adjustment of $1,180 was made to the employee future benefit obligation to recognize service costs and interest costs.

The total defined benefit cost related to pension plans and post retirement benefit plans for the year ended December 31, 2009 was $1,531 (year ended December 31, 2008 - $382).

Crombie uses December 31 as a measurement date for accounting purposes for its defined benefit pension plans.

    

                                             Most recent      Next required
                                          valuation date     valuation date
                                      ---------------------------------------
    Senior Management Pension Plan     December 31, 2009  December 31, 2012
    Post-retirement Benefit Plans            May 1, 2008        May 1, 2011
    

Defined benefit plans

Information about Crombie's defined benefit plans are as follows:

    
                               December 31, 2009       December 31, 2008
                           --------------------------------------------------
                                 Senior        Post-     Senior        Post-
    Accrued benefit          Management  Retirement  Management  Retirement
    obligation                  Pension     Benefit     Pension     Benefit
                                   Plan       Plans        Plan       Plans
                           --------------------------------------------------
    Balance, beginning
     of year                       $951      $2,545        $951      $2,941
    Impact of assumption
     changes                          -           -           -           -
    Current service cost             29         112          40         145
    Interest cost                   152         179          52         162
    Actuarial loss (gain)           530         472         (92)       (698)
    Benefits paid                  (100)         (7)          -          (5)
    Termination benefits          1,131           -           -           -
                           --------------------------------------------------
    Balance, end of year          2,693       3,301         951       2,545
                           --------------------------------------------------
    Plan Assets
    Fair value at the
     beginning of the year           $-          $-          $-          $-
    Employer contributions          100           7           -           5
    Benefits paid                  (100)         (7)          -          (5)
                           --------------------------------------------------
    Fair value at end
     of year                         $-          $-          $-          $-
                           --------------------------------------------------
    Funded status - deficit       2,693       3,301         951       2,545
    Unamortized actuarial
     gains                         (379)        645         151       1,189
                           --------------------------------------------------
    Accrued benefit
     obligation recorded as
     a liability                 $2,314      $3,946      $1,102      $3,734
                           --------------------------------------------------
                           --------------------------------------------------

    Net expense
    Current service cost            $29        $112         $40        $145
    Interest cost                   152         179          52         162
    Actuarial loss (gains)          530         472         (92)       (698)
    Termination benefits          1,131           -           -           -
                           --------------------------------------------------
    Expense before
     adjustments                  1,842         763           -        (391)
    Recognized vs. actual
     actuarial (losses)
     gains                         (530)       (544)         92         682
                           --------------------------------------------------
    Net expense                  $1,312        $219         $92        $291
                           --------------------------------------------------
                           --------------------------------------------------
    

The significant actuarial assumptions adopted in measuring the Company's accrued benefit obligations and pension cost are as follows:

    
                               December 31, 2009       December 31, 2008
                           --------------------------------------------------
                                 Senior        Post-     Senior        Post-
                             Management  Retirement  Management  Retirement
                                Pension     Benefit     Pension     Benefit
                                   Plan       Plans        Plan       Plans
                           --------------------------------------------------
    Discount rate -
     accrued benefit
     obligation                    5.50%       6.25%       6.25%       6.75%
    Discount rate -
     periodic cost                 6.25%       6.75%       5.25%       5.25%
    Rate of compensation
     increase                      4.00%        N/A        4.00%        N/A
    

For measurement purposes, a 9.0% fiscal 2009 annual rate of increase in the per capita cost of covered health care benefits was assumed. The cumulative rate expectation to 2018 is 5.0%. The EARSL for the active employees covered by the pension benefit plans range from 3 to 5 years at year end. The EARSL of the active employees covered by the other benefit plans range from 10 to 13 years at year end.

The table below outlines the sensitivity of the fiscal 2009 key economic assumptions used in measuring the accrued benefit plan obligations and related expenses of Crombie's pension and other benefit plans. The sensitivity of each key assumption has been calculated independently. Changes to more than one assumption simultaneously may amplify or reduce the impact on the accrued benefit obligation or benefit plan expenses.

    
                              Senior Management          Post-Retirement
                                 Pension Plan             Benefit Plans
                             ------------------------------------------------
                                Benefit                 Benefit
                                 Obliga-    Benefit      Obliga-    Benefit
                                  tions      Cost(1)      tions      Cost(1)
                             ------------------------------------------------
    Discount
     Rate                          5.50%       5.50%       6.25%       6.25%
    Impact of:  1% increase       $(243)       $253       $(634)       $(48)
                1% decrease        $287       $(129)       $785         $54
    Growth rate
     of health
     costs(2)                                               9.0%        9.0%
    Impact of:  1% increase                                $723         $73
                1% decrease                               $(561)       $(55)


    (1) Reflects the impact on the current service costs, the interest cost
        and the expected return on assets.
    (2) Gradually decreasing to 5.0% in 2018 and remaining at that level
        thereafter.
    

For the year ended December 31, 2009, the net defined contribution pension plans expense was $350 (year ended December 31, 2008 - $303).

25) SUBSEQUENT EVENTS

a) On January 21, 2010, Crombie declared distributions of 7.417 cents per unit for the period from January 1, 2010 to and including, January 31, 2010. The distribution was paid on February 15, 2010 to Unitholders of record as at January 31, 2010.

b) On February 1, 2010, Crombie completed the refinancing for the office and retail portfolio known as Halifax Developments ("HDL"). The principal amount of the maturing HDL mortgages is approximately $106,079 with a weighted average interest rate of 5.43%. The new HDL mortgages are for a total of $141,000. The first mortgage financing has a $25,000 principal, a ten year term and a 25 year amortization with a fixed interest rate of 6.52%. The second refinancing is for $116,000 in principal; a ten year term and an amortization period of 25 years with a fixed interest rate of 6.47%.

c) On February 8, 2010, Crombie issued $45,000 in Series C Convertible unsecured subordinate Debentures (the "Series C Debentures") to reduce the revolving credit facility. The Series C Debentures pay interest at a rate of 5.75% per annum, paid 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. Each Series C Debenture is convertible into Units at the option of the debenture holder at any time up to the maturity date, at a conversion price of $15.30, being a conversion rate of approximately 65.3595 Units per one thousand principal. The Series C Debentures have a maturity date of June 30, 2017.

d) On February 10, 2010, Crombie executed commitments for first mortgage financing on five properties. The mortgages are for a total of $33,850 in principal, with an eight year term, a fixed rate interest rate of 5.70% and a weighted average amortization period of 21.6 years. The mortgages are anticipated to close on February 26, 2010.

e) On February 18, 2010, Crombie declared distributions of 7.417 cents per unit for the period from February 1, 2010 to and including, February 28, 2010. The distribution will be payable on March 15, 2010 to Unitholders of record as at February 28, 2010.

f) 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 is approximately $31,530, excluding closing and transaction costs. The purchase price was funded through $8,400 of assumed mortgages and the balance from Crombie's floating rate revolving credit facility. This is the first stage of the acquisitions announced on November 5, 2009. The acquisition of the remaining three retail properties for approximately $28,000, with approximately 150,000 square feet of gross leaseable area is expected to close during the first quarter of 2010.

26) 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.

27) 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 year and quarter ended December 31, 2009, with a comparison to the financial condition and results of operations for the comparable period in 2008 and 2007.

This MD&A should be read in conjunction with Crombie's audited consolidated financial statements and accompanying notes for the years ended December 31, 2009, December 31, 2008 and December 31, 2007 and the related MD&A's for those periods. Information in this MD&A related to the years ended December 31, 2008 and December 31, 2007, and the quarterly information from those years has been restated to reflect the retrospective application of the change in accounting policy related to the accounting for recoverable capital expenditures. 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) overall indebtedness levels, which could be impacted by the level of acquisition activity Crombie is able to achieve and future financing opportunities;

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

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

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

(ix) the effect that any contingencies would have on Crombie's financial statements;

* 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;

(xi) 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;

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

(xiii) the acquisitions of the remaining properties in the portfolio acquisition announced on November 5, 2009, which is subject to the conditions of closing.

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

Financial and Operational Summary

Comparative figures have been restated for retrospective application of the change in accounting policy related to the accounting for recoverable capital expenditures. Comparative AFFO information has been restated to reflect the retrospective application of the settlement of effective interest rate swap agreements.

    
    -------------------------------------------------------------------------
                                   Year        Year     Quarter     Quarter
    (in thousands of dollars,     Ended       Ended       Ended       Ended
     except per unit amounts    Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
     and as otherwise noted)       2009        2008        2009        2008
    -------------------------------------------------------------------------
    Property revenue           $207,254    $188,142     $52,378     $52,522
    Net income                  $10,748     $14,588      $3,523      $5,403
    Basic and diluted net
     income per unit              $0.36       $0.57       $0.11       $0.20
    -------------------------------------------------------------------------
    FFO                         $66,510     $70,784     $18,106     $18,933
    FFO per unit(1)               $1.17       $1.44       $0.30       $0.36
    FFO payout ratio (%)           76.8%       62.2%       74.9%       61.5%
    AFFO                        $18,260     $43,552     $(7,511)    $13,521
    AFFO per unit(1)              $0.32       $0.89      $(0.12)      $0.26
    AFFO payout ratio (%)         279.7%      101.1%        N/A%       86.2%
    -------------------------------------------------------------------------
    (1) FFO and AFFO per unit are calculated as FFO or AFFO, as the case may
        be, divided by the diluted weighted average of the total Units and
        Special Voting Units outstanding of 56,846,648 for the year ended
        December 31, 2009 and 49,172,845 for the year ended December 31,
        2008, 60,970,029 for the quarter ended December 31, 2009 and
        52,351,464 for the quarter ended December 31, 2008.
    

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 December 31, 2009, Crombie owned a portfolio of 113 commercial properties in seven provinces, comprising approximately 11.2 million square feet of gross leaseable area ("GLA"). Empire Company Limited ("Empire"), through ECL, holds a 47.4% economic and voting interest in Crombie at December 31, 2009.

The most significant acquisition completed by Crombie since the initial public offering ("IPO") was a 61 retail property portfolio (the "Portfolio Acquisition") on April 22, 2008. This transaction represented approximately 3.3 million square feet of GLA acquired from certain affiliates of Empire Company Limited ("Empire Subsidiaries"). The cost of the Portfolio Acquisition was $428,500, excluding closing and transaction costs. The portfolio consisted of 40 single-use freestanding Sobeys grocery stores of various Sobeys banners, 20 Sobeys anchored retail plazas and one Sobeys anchored partially enclosed centre.

The Portfolio Acquisition was financed by:

    
    - A public offering of 5,727,750 subscription receipts, including the
      over-allotment option, at a price of $11.00 per subscription receipt
      (each subscription receipt converted into one Unit of Crombie upon
      closing) for gross proceeds of $63,005;

    - The issuance of unsecured convertible debentures (the "Series A
      Debentures") for gross proceeds of $30,000;

    - The issuance of 5,000,000 Class B LP Units of Crombie Limited
      Partnership ("Class B LP Units") to Empire Subsidiaries at the $11.00
      offering price for gross proceeds of $55,000;

    - A draw on Crombie's revolving credit facility; and

    - A $280,000, 18 month floating rate term facility ("Term Facility").
    

The Term Facility has since been repaid as follows:

    
    - $191,000 of mortgage financing completed between September 30, 2008 and
      November 27, 2009;

    - $85,000 gross proceeds from the issuance of unsecured convertible
      debentures (the "Series B Debentures") on September 30, 2009; and

    - A draw on Crombie's revolving credit facility.
    

On October 24, 2008, Crombie completed the sale of West End Mall in Halifax, Nova Scotia. Under GAAP, the financial position and operating results were reclassified on the financial statements for Crombie as assets and liabilities related to discontinued operations on a retrospective basis. The leasing and operating results tables in this MD&A also exclude the results of this property in the comparative information.

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 ECL 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 the $85,000 Series B Debenture issue; and

    - The agreement to acquire eight retail properties, representing
      approximately 336,000 square feet of GLA from ECL for a purchase price
      of approximately $59,500, including closing and transaction cost (see
      "Subsequent Events").
    

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 ECL. The relationship with ECL 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 ECL 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 ECL, subject to approval by the independent trustees. This relationship between Crombie and ECL continues to provide promising opportunities for growth through future developments on both new and existing sites in Crombie's portfolio. The following table outlines the acquisitions completed since the IPO which highlight the growth opportunities provided through the Empire Subsidiaries / ECL relationship. On November 5, 2009 Crombie entered into an agreement to acquire eight additional properties from Empire Subsidiaries which is expected to close in the first quarter of 2010 (see Subsequent Events):

    
    -------------------------------------------------------------------------
                                                        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
    -------------------------------------------------------------------------
    Portfolio                    Retail                              Empire
     Acquisition    Apr. 22,     - Free-                              Subsi-
     (61 proper-       2008    standing   1,589,000    $428,500     diaries
     ties)
                                 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
    -------------------------------------------------------------------------
    Total                                 4,056,000    $570,685
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excluding closing and transaction costs.
    

ECL currently owns approximately 1.8 million square feet in 20 development properties that can be offered to Crombie on a preferential right through the development agreement when the properties are sufficiently developed to meet Crombie's acquisition criteria. The properties are primarily retail plazas and approximately 50% 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

The global economic recession and credit crisis had a significant impact on the real estate industry in the second half of 2008 and continued for much of 2009. During this period, credit markets experienced a dramatic reduction in liquidity as both the ability and willingness of financial institutions to lend money was greatly reduced and financial institutions became increasingly risk adverse. During this time, Crombie took a cautious approach with respect to liquidity and use of available capital resources. While the credit environment is improving, the possibility of tightening credit availability and terms continue to be a major risk to the capital intensive real estate investment trust ("REIT") business environment. Crombie has been able to successfully raise equity and unsecured convertible debenture financing to further strengthen its available capital resources.

The turmoil in the financial markets also caused bond yields to materially decline and dramatically reduced interest rate swap spreads. This resulted in a significant deterioration of the values for the interest rate swap agreements Crombie had entered into to hedge its exposure to potential increases in Canadian bond yields associated with variable rate debt and future debt issuances. The impact is more fully explained under the "Risk Management" section of this MD&A.

In light of the economic recession and credit crisis, capitalization rates began to expand in early 2009. While higher capitalization rates normally make acquisition opportunities more affordable, the higher cost of capital caused by the tightening credit markets and the higher yield on Crombie's equity made it very challenging to find and fund accretive acquisitions. 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 enter into an agreement in late 2009 to acquire eight retail properties from ECL. Crombie will only pursue acquisitions that provide an acceptable return, including any acquisitions that may result from the relationship between Crombie and ECL.

In terms of occupancy rates, both the retail and office markets 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 U.S. and Canadian economies 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.

2009 HIGHLIGHTS

    
    - Crombie completed an equity offering of 4,725,000 Units and
      3,846,154 Class B LP Units for gross proceeds of $66,855 on June 25,
      2009.

    - Crombie completed an offering of Series B Debentures for gross proceeds
      of $85,000 on September 30, 2009.

    - Crombie completed the replacement of the Term Facility in November of
      2009.

    - Debt to gross book value was 52.4% at December 31, 2009
      compared to 54.4% at December 31, 2008.

    - Property revenue for the year ended December 31, 2009 of $207,254
      represented an increase of $19,112 compared to $188,142 for the year
      ended December 31, 2008.

    - Same-asset NOI for the year ended December 31, 2009 of $87,740
      decreased by $857, or less than 1%, compared to $88,597 for the year
      ended December 31, 2008.

    - Crombie completed leasing activity on 729,000 square feet of GLA during
      2009, which represents approximately 103.7% of its 2009 expiring
      leases.

    - Average net rent per square foot from the leasing activity increased to
      $13.73 from the expiring rent per square foot of $13.58, an increase of
      1.1%.

    - Occupancy for the properties was 94.7% at December 31, 2009 compared
      with 94.2% at September 30, 2009 and 94.9% at December 31, 2008.

    - The FFO payout ratio for the year ended December 31, 2009 was 76.8%
      which was unfavourable to the target annual payout ratio of 70% and
      unfavourable to the payout ratio of 62.2% for the same period in 2008.
      Excluding the impact of the ineffective swap settlement amount, this
      FFO payout ratio would have been 68.4% in 2009.

    - The AFFO payout ratio for the year ended December 31, 2009 was 279.7%
      which was unfavourable to the target annual AFFO payout ratio of 95%
      and was unfavourable to the payout ratio of 101.1% for the same period
      in 2008. Excluding the impact of the swaps settled, this AFFO payout
      ratio would have been 96.7% in 2009 and 93.4% in 2008.

    - Crombie's interest service coverage for the year ended December
      31, 2009 was 2.80 times EBITDA and debt service coverage was
      1.94 times EBITDA, compared to 2.78 times EBITDA and 2.02 times EBITDA,
      respectively, for the same period in 2008.

    - On August 6, 2009, Crombie appointed Donald E. Clow, FCA, as its new
      President and Chief Executive Officer to replace the retiring J. Stuart
      Blair.
    

OVERVIEW OF THE PROPERTY PORTFOLIO

Property Profile

At December 31, 2009 the property portfolio consisted of 113 commercial properties that contain approximately 11.2 million square feet of GLA. The properties are located in seven provinces: Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island, Ontario, Quebec and Saskatchewan.

As at December 31, 2009, 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   5,065,000        45.2%       41.0%       95.1%
    Ontario              22   1,646,000        14.7%       16.9%       95.9%
    New Brunswick        20   1,634,000        14.6%       12.3%       89.9%
    Newfoundland
     and Labrador        13   1,490,000        13.3%       17.5%       94.7%
    Quebec               13     825,000         7.4%        7.7%       98.4%
    Prince Edward
     Island               3     385,000         3.4%        3.1%       94.3%
    Saskatchewan          1     160,000         1.4%        1.5%       97.8%
    -------------------------------------------------------------------------
    Total               113  11,205,000       100.0%      100.0%       94.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For purposes of calculating occupancy percentage, Crombie considers
        GLA covered by the head lease agreement in favour of ECL as occupied
        as there is head lease revenue being earned on the GLA.
    

Overall occupancy has increased from 94.2% at September 30, 2009 to 94.7% at December 31, 2009 primarily due to the 47,000 square feet of committed renewals and 16,000 square feet of new leasing activity in the quarter.

Crombie looks to diversify its geographic composition through growth opportunities, as indicated by seven acquisitions in Ontario, one acquisition in Quebec and one acquisition in Saskatchewan, plus 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 five properties that are under redevelopment. Fort Edward Mall in Windsor, Nova Scotia is nearing completion of converting 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. Valley Mall in Corner Brook, Newfoundland and Labrador is being reconfigured to replace an existing food court with a new Hart store. Fairvale Plaza in New Brunswick is being redeveloped to facilitate the renovation and expansion of an existing Sobeys store and additional customer parking. Charlotte Mall, St. Stephen, New Brunswick is being converted from an enclosed mall to a retail plaza. Finally, Aberdeen Shopping Centre in New Glasgow, Nova Scotia is being expanded to accommodate the needs of Pictou County Health Authority. Costs for properties under redevelopment are classified as productive capacity enhancements to the extent that Crombie determines they are financeable costs by virtue of increasing a property's NOI and appraised value by a minimum threshold (see "Tenant Improvements and Capital Expenditures").

The following table outlines properties under redevelopment:

    
    -------------------------------------------------------------------------
                                                                      Esti-
                                                                      mated
                                                      Esti-   Incurr- Comple-
                                       Redevelop-     mated   ed to   tion
    Province       Property   GLA      ment           Cost    Date    Date
    -------------------------------------------------------------------------
    Nova Scotia    Fort       140,000  Convert from   $1,400  $1,064  June
                   Edward              retail                         2010
                   Mall                enclosed to
                                       retail plaza

    Nova Scotia    Aberdeen   392,000  Expansion for                  July
                   Centre              Pictou County  $4,300  $513    2010
                                       Health

    Newfoundland   Valley     166,000  Replace food   $1,900  $812    April
     & Labrador    Mall                court with                     2010
                                       Hart Store

    New Brunswick  Fairvale   52,000   Expand Sobeys  $800    $340    May
                   Plaza               and add                        2010
                                       additional
                                       parking

    New Brunswick  Charlotte  113,000  Convert from   $1,800  $667    June
                   Mall                retail                         2010
                                       enclosed to
                                       retail plaza
                                       Phase I
    -------------------------------------------------------------------------
    

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 December 31, 2009.

    
    -------------------------------------------------------------------------
                                                                    Average
                                                  % of Annual     Remaining
    Tenant                                       Minimum Rent    Lease Term
    -------------------------------------------------------------------------
    Sobeys(1)                                            32.7%   16.1 years
    Empire Theatres                                       2.2%    8.3 years
    Zellers                                               2.2%    8.0 years
    Shoppers Drug Mart                                    2.0%    7.0 years
    Nova Scotia Power Inc                                 1.9%    1.3 years
    CIBC                                                  1.6%   17.2 years
    Province of Nova Scotia                               1.4%    6.0 years
    Bell (Aliant)                                         1.4%    8.7 Years
    Public Works Canada                                   1.3%    1.7 Years
    Good Life Fitness                                     1.3%    7.5 Years
    -------------------------------------------------------------------------
    Total                                                48.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes Lawtons and Fast Fuel locations.
    

Crombie's portfolio is leased to a wide variety of tenants. Other than Sobeys, that accounts for 32.7% 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 with the existing sub-leased tenants in addition to 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. Public Works Canada occupies 74,563 square feet in six properties with an average remaining lease term of 1.7 years. Crombie anticipates that 68,848 square feet of that space will be renewed at market rates.

Lease Maturities

The following table sets out as of December 31, 2009 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 Rent
                                            Renewal       % of       per Sq.
                              Number of        Area       Total      Ft. at
    Year                         Leases    (sq. ft.)        GLA   Expiry ($)
    -------------------------------------------------------------------------
    2010                            255     774,000         6.9%     $13.44
    2011                            222   1,028,000         9.2%     $14.43
    2012                            172     901,000         8.1%     $11.99
    2013                            160     879,000         7.8%     $11.92
    2014                            157     503,000         4.5%     $17.56
    Thereafter                      368   6,520,000        58.2%     $12.57
    -------------------------------------------------------------------------
    Total                         1,334  10,605,000        94.7%     $12.97
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

2009 Portfolio Lease Expiries and Leasing Activity

The portfolio lease expiries and leasing activity for the year ending December 31, 2009 were as follows:

    
    -------------------------------------------------------------------------
               Retail -              Retail -
                 Free-   Retail -     Enclo-                Mixed-
             standing    Plazas         sed    Office         use     Total
    -------------------------------------------------------------------------

    Expiries
     (sq. ft.)      -   160,000     220,000   103,000     220,000   703,000
    Average
     net
     rent per
     sq. ft.       $-    $16.28      $13.97    $12.66      $11.64    $13.58
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Committed
     renewals
     (sq. ft.)      -    94,000     116,000    52,000     127,000   389,000
    Average
     net
     rent per
     sq. ft.       $-    $16.34      $16.57    $12.98      $11.27    $14.30
    New
     leasing
     (sq. ft.)  4,000    66,000     168,000    47,000      55,000   340,000
    Average
     net
     rent per
     sq. ft.   $23.00    $15.68      $10.55    $14.70      $15.55    $13.09
    -------------------------------------------------------------------------
    Total
     renewals/
     new
     leasing
     (sq. ft.)  4,000   160,000     284,000    99,000     182,000   729,000
    Total
     average
     net
     rent per
     sq. ft.   $23.00    $16.06      $13.01    $13.80      $12.56    $13.73
    -------------------------------------------------------------------------
    

During the year ended December 31, 2009, Crombie had renewals or entered into new leases in respect of approximately 729,000 square feet at an average net rent of $13.73 per square foot, compared with expiries for 2009 of approximately 703,000 square feet at an average net rent of $13.58 per square foot. Of the 703,000 square feet of expiries, approximately 135,000 square feet involve tenants that are still paying property revenues on a holdover basis. Rent per square foot for the completed new leasing activity in the retail enclosed properties is below the average net rent per square foot of total expiries in 2009 due primarily to one relatively large lease in a small rural location to replace the last vacant SAAN store that went into bankruptcy in 2008, plus two new anchor leases to complete the Highland Square renovation in New Glasgow, Nova Scotia. Overall, committed renewals and new leasing activity have resulted in an increase in average net rent per square foot of 1.1%. Excluding the impact of the three specific retail enclosed lease deals, average net rent per square foot has increased 5.8% over 2009 expired rents.

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.

As at December 31, 2009, the portfolio distribution of the GLA by asset type was as follows:

    
    -------------------------------------------------------------------------
                     Number                                % of
                         of                              Annual
                     Proper-       GLA                  Minimum
    Asset Type         ties    (sq. ft.)   % of GLA        Rent  Occupancy(1)
    -------------------------------------------------------------------------
    Retail -
     Freestanding        42   1,699,000        15.2%       15.6%      100.0%
    Retail - Plazas      44   3,969,000        35.4%       36.8%       96.3%
    Retail - Enclosed    14   2,782,000        24.8%       25.3%       91.9%
    Office                5   1,048,000         9.4%        9.0%       88.0%
    Mixed-Use             8   1,707,000        15.2%       13.3%       94.1%
    -------------------------------------------------------------------------
    Total               113  11,205,000       100.0%      100.0%       94.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For purposes of calculating occupancy percentage, Crombie considers
        GLA covered by the head lease agreement in favour of ECL as occupied

    As at December 31, 2008, the portfolio distribution of the GLA by asset
type was as follows:

    -------------------------------------------------------------------------
                     Number                                % of
                         of                              Annual
                     Proper-       GLA                  Minimum
    Asset Type         ties    (sq. ft.)   % of GLA        Rent  Occupancy(1)
    -------------------------------------------------------------------------
    Retail -
     Freestanding        42   1,696,000        15.2%       15.7%      100.0%
    Retail - Plazas      44   3,974,000        35.5%       37.2%       96.7%
    Retail - Enclosed    14   2,756,000        24.6%       24.5%       90.4%
    Office                5   1,048,000         9.4%        9.0%       89.7%
    Mixed-Use             8   1,706,000        15.3%       13.6%       96.1%
    -------------------------------------------------------------------------
    Total               113  11,180,000       100.0%      100.0%       94.9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For purposes of calculating occupancy percentage, Crombie considers
        GLA covered by the head lease agreement in favour of ECL as occupied

    The following table sets out as of December 31, 2009, 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            -         -%    274,000       6.9%    217,000       7.8%
    2011        1,000       0.1%    304,000       7.7%    141,000       5.1%
    2012        5,000       0.3%    304,000       7.7%    137,000       4.9%
    2013            -         -%    389,000       9.8%    216,000       7.8%
    2014        3,000       0.2%    194,000       4.9%    184,000       6.6%
    There-
     after  1,690,000      99.4%  2,356,000      59.3%  1,662,000      59.7%
    -------------------------------------------------------------------------
    Total   1,699,000     100.0%  3,821,000      96.3%  2,557,000      91.9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Year             Office             Mixed - Use               Total
    -------------------------------------------------------------------------
              (sq. ft.)      (%)    (sq. ft.)      (%)    (sq. ft.)      (%)
    -------------------------------------------------------------------------
    2010       89,000       8.5%    194,000      11.4%    774,000       6.9%
    2011      364,000      34.7%    218,000      12.8%  1,028,000       9.2%
    2012      118,000      11.3%    337,000      19.7%    901,000       8.1%
    2013      106,000      10.1%    168,000       9.8%    879,000       7.8%
    2014       91,000       8.7%     31,000       1.9%    503,000       4.5%
    There-
     after    155,000      14.7%    657,000      38.5%  6,520,000      58.2%
    -------------------------------------------------------------------------
    Total     923,000      88.0%  1,605,000      94.1% 10,605,000      94.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    -------------------------------------------------------------------------
                      Retail -   Retail -    Retail -                 Mixed -
    Year        Freestanding     Plazas    Enclosed      Office         Use
    -------------------------------------------------------------------------
    2010             $    -      $14.26      $14.91      $12.18      $11.21
    2011             $37.50      $14.47      $19.95      $14.23      $11.03
    2012             $25.00      $13.16      $19.83      $ 9.70      $ 8.33
    2013             $    -      $ 9.76      $14.25      $13.50      $12.91
    2014             $ 7.41      $15.24      $22.06      $12.54      $20.73
    Thereafter       $13.30      $13.60      $10.89      $11.51      $11.92
    -------------------------------------------------------------------------
    Total            $13.35      $13.37      $13.31      $12.74      $11.24
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    2008 Total       $13.38      $13.34      $13.38      $12.59      $10.95
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

FINANCIAL RESULTS

Comparison to Previous Years

Comparative figures have been restated for retrospective application of the change in accounting policy related to the accounting for recoverable capital expenditures. Comparative AFFO information has been restated to reflect the retrospective application of the impact of settlement of effective interest rate swap agreements.

    
    -------------------------------------------------------------------------
                                                  As at December 31,
                                    -----------------------------------------
                                           2009          2008          2007
                                    -----------------------------------------
    Total assets                     $1,457,166    $1,483,219    $1,013,982
    Total commercial property debt
     and convertible debentures        $817,227      $837,939      $493,945
    Debt to gross book value(1)            52.4%         54.4%         48.0%
    -------------------------------------------------------------------------
    (1) See "Debt to Gross Book Value Ratio" for detailed calculation


    -------------------------------------------------------------------------
                                                     Year Ended
                                    -----------------------------------------
    (In thousands of dollars,       December 31,  December 31,  December 31,
     except where otherwise noted)         2009          2008          2007
    -------------------------------------------------------------------------
    Property revenue                   $207,254      $188,142      $141,235
    Property expenses                    75,762        70,370        57,267
    -------------------------------------------------------------------------
    Property NOI                        131,492       117,772        83,968
    -------------------------------------------------------------------------
    NOI margin percentage                  63.4%         62.6%         59.5%
    -------------------------------------------------------------------------
    Expenses:
      General and administrative          9,274         8,636         8,177
      Interest                           46,319        39,232        24,913
      Depreciation and amortization      46,031        43,786        29,692
    -------------------------------------------------------------------------
                                        101,624        91,654        62,782
    -------------------------------------------------------------------------
    Income from continuing
     operations before other items,
     income taxes and
     non-controlling interest            29,868        26,118        21,186
    Other income (expenses)              (9,389)          179             -
    -------------------------------------------------------------------------
    Income from continuing
     operations before income taxes
     and non-controlling interest        20,479        26,297        21,186
    Income taxes expense (recovery)
     - Future                              (100)       (1,490)        1,030
    -------------------------------------------------------------------------
    Income from continuing operations
     before non-controlling interest     20,579        27,787        20,156
    Write down of assets held for sale        -          (408)            -
    Income from discontinued
     operations                               -           649           394
    -------------------------------------------------------------------------
    Income before non-controlling
     interest                            20,579        28,028        20,550
    Non-controlling interest              9,831        13,440         9,891
    -------------------------------------------------------------------------
    Net income                          $10,748       $14,588       $10,659
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income from continuing
     operations per unit, Basic and
     Diluted                              $0.36         $0.56         $0.47
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net Income per Unit, Basic
     and Diluted                          $0.36         $0.57         $0.49
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic weighted average Units
     outstanding (in 000's)              29,612        25,478        21,535
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted weighted average Units
     outstanding (in 000's)              29,765        25,596        21,646
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions per unit to
     unitholders                          $0.89         $0.87         $0.83
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Net income for the year ended December 31, 2009 of $10,748 decreased by $3,840 from $14,588 for the year ended December 31, 2008. The decrease was primarily due to:

    
    - expense on settlement of an ineffective interest rate swap agreement
      and the associated write off of deferred financing charges; offset in
      part by;

    - higher property NOI from the Saskatoon and Portfolio Acquisitions; less
      the higher interest and depreciation and amortization charges
      applicable to those acquisitions.


    Property Revenue and Property Expenses

    -------------------------------------------------------------------------
                                             Year Ended
                                    --------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Same-asset property revenue        $149,189      $149,376         $(187)
    -------------------------------------------------------------------------
    Acquisition property revenue         58,065        38,766        19,299
    -------------------------------------------------------------------------
    Property revenue                   $207,254      $188,142       $19,112
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset property revenue of $149,189 for the year ended December 31,
2009 was 0.1% lower than the year ended December 31, 2008 due to:

    - a one-time head lease adjustment upon final release of the obligation
      governing the agreement between ECL and Crombie for County Fair Mall in
      Prince Edward Island and Uptown Centre in New Brunswick;

    - reduced rental revenue and recoveries at the Terminal Centres office
      complex in New Brunswick;

    - reduced revenue at the Scotia Square Parkade in Nova Scotia due to
      ongoing parking deck and structural repairs; and

    - the expiring of Sobeys lease at Loch Lomond Mall in New Brunswick;

    - partially offset by the increased average rent per square foot
      ($12.42 in 2009 and $12.26 in 2008)
    

Excluding the one time head lease adjustment, same-asset revenue would have been 0.2% higher in 2009 than in 2008. The adjustment was paid to ECL to reflect their overachievement in the leasing results for these two locations which will benefit Crombie in higher rental income on an ongoing basis.

    
    -------------------------------------------------------------------------
                                             Year Ended
                                    --------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008(1)   Variance
    -------------------------------------------------------------------------
    Same-asset property expenses        $61,449       $60,779         $(670)
    Acquisition property expenses        14,313         9,591        (4,722)
    -------------------------------------------------------------------------
    Property expenses                   $75,762       $70,370       $(5,392)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Comparative figures have been restated for retrospective changes
        in GAAP.

    Same-asset property expenses of $61,449 for the year ended December 31,
2009 were 1.1% higher than the year ended December 31, 2008 due primarily to
increased recoverable property taxes and common area expenses.

    -------------------------------------------------------------------------
                                             Year Ended
                                    --------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Same-asset property NOI             $87,740       $88,597         $(857)
    Acquisition property NOI             43,752        29,175        14,577
    -------------------------------------------------------------------------
    Property NOI                       $131,492      $117,772       $13,720
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset NOI for the year ended December 31, 2009 remained relatively
stable as it decreased by just under 1.0% from the year ended December 31,
2008.  Excluding the one-time head lease adjustment, the same-asset NOI would
have increased by 0.2% over 2008.
    Property NOI for the year ended December 31, 2009 by region was as
follows:

    -------------------------------------------------------------------------
    (In                        2009                          2008
     thou-   -----------------------------------------
     sands       Pro-
     of         perty  Property    Property  NOI % of    NOI % of
     dollars) Revenue  Expenses         NOI   revenue     revenue  Variance
    -------------------------------------------------------------------------
    Nova
     Scotia   $94,109   $38,841    $55,268       58.7%       58.4%      0.3%
    Newfound-
     land and
     Labrador  32,903     9,658     23,245       70.6%       70.5%      0.1%
    New
     Brunswick 24,721    10,437     14,284       57.8%       55.6%      2.2%
    Ontario    32,830    10,612     22,218       67.7%       66.0%      1.7%
    Prince
     Edward
     Island     4,849     1,280      3,569       73.6%       70.4%      3.2%
    Quebec     14,998     4,140     10,858       72.4%       74.8%     (2.4)%
    Saskat-
     chewan     2,844       794      2,050       72.1%       75.3%     (3.2)%
    -------------------------------------------------------------------------
    Total    $207,254   $75,762    $131,492      63.4%       62.6%      0.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The overall 0.8% increase in NOI as a percentage of revenue, as well as specific provincial increases in Nova Scotia, Newfoundland and Labrador, New Brunswick, Ontario and Prince Edward Island was primarily due to the Portfolio Acquisition. Quebec's decrease in NOI as a percentage of revenue is attributable to higher recoverable common area expenses. The decrease in NOI in Saskatchewan is due to higher annualized property expenses from this June 2008 acquired property. Nova Scotia and New Brunswick have lower NOI as a percentage of revenue results when compared to the other provinces as these provincial 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.

    
    -------------------------------------------------------------------------
                                             Year Ended
                                    --------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Salaries and benefits                $4,696        $4,185         $(511)
    Professional fees                     1,875         2,107           232
    Public company costs                  1,069           905          (164)
    Rent and occupancy                      747           687           (60)
    Other                                   887           752          (135)
    -------------------------------------------------------------------------
    General and administrative expenses  $9,274        $8,636         $(638)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    As a percentage of property revenue     4.5%          4.6%          0.1%
    -------------------------------------------------------------------------
    

General and administrative expenses, as a percentage of property revenue, decreased by 0.1% for the year ended December 31, 2009 when compared to the same period in 2008. Total general and administrative expenses increased to $9,274 for the 2009 year ended compared to $8,636 for the year ended December 31, 2008. The increase was primarily due to one-time costs associated with the retirement of Crombie's Chief Executive Officer on August 5, 2009, offset in part by reduced incentive payments.

Interest Expense

    
    -------------------------------------------------------------------------
                                             Year Ended
                                    --------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Same-asset interest expense         $26,782       $26,358         $(424)
    Acquisition interest expense         19,537        12,874        (6,663)
    -------------------------------------------------------------------------
    Interest expense                    $46,319       $39,232       $(7,087)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Same-asset interest expense of $26,782 for the year ended December 31, 2009 increased by 1.6% when compared to the year ended December 31, 2008. The same-asset interest expense reflects increased costs due to the amortization of the effective, settled interest rate swap agreements offset in part by a decrease in the floating interest rate on the revolving credit facility.

There is an agreement between ECL and Crombie whereby ECL provides a monthly interest rate subsidy to Crombie to reduce the effective interest rates to 5.54% on certain mortgages that were assumed at Crombie's IPO for their remaining term. The remaining mortgage terms mature between February 2010 and April 2022, and management expects to realize a further $7,733 over that period. The amount of the interest rate subsidy received during the year ended December 31, 2009 was $3,085 (year ended December 31, 2008 - $3,333). The interest rate subsidy is received by Crombie through monthly repayments by ECL of amounts due under one of the demand notes issued by ECL to Crombie Developments Limited ("CDL").

Depreciation and Amortization

    
    -------------------------------------------------------------------------
                                             Year Ended
                                    ----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008(1)   Variance
    -------------------------------------------------------------------------
    Same-asset depreciation and
     amortization                       $28,305       $31,676        $3,371
    Acquisition depreciation and
     amortization                        17,726        12,110        (5,616)
    -------------------------------------------------------------------------
    Depreciation and amortization       $46,031       $43,786       $(2,245)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Comparative figures have been restated for retrospective changes
        in GAAP
    

Same-asset depreciation and amortization of $28,305 for the year ended December 31, 2009 was 10.6% lower than the year ended December 31, 2008 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, 2008. Depreciation and amortization consists of:

    
    -------------------------------------------------------------------------
                                             Year Ended
                                    ----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008(1)   Variance
    -------------------------------------------------------------------------
    Depreciation of commercial
     properties                         $18,765       $16,398       $(2,367)
    Depreciation of recoverable
     capital expenditures                 1,050           929          (121)
    Amortization of tenant
     improvements/lease costs             4,272         3,488          (784)
    Amortization of intangible
     assets                              21,944        22,971         1,027
    -------------------------------------------------------------------------
    Depreciation and amortization       $46,031       $43,786       $(2,245)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Comparative figures have been restated for retrospective changes
        in GAAP


    Other Income (Expenses)

    -------------------------------------------------------------------------
                                             Year Ended
                                    --------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
     Expense related to settlement
      of an ineffective swap            $(8,139)          $ -       $(8,139)
     Write off of deferred financing
      charges                            (1,860)            -        (1,860)
     Other income items                     610           179           431
    -------------------------------------------------------------------------
                                        $(9,389)         $179       $(9,568)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

On September 14, 2009 in connection with the September 30, 2009 Series B Debenture issue, Crombie settled an interest rate swap agreement of a notional amount of $84,000 for a settlement amount of $8,139. The delayed interest rate swap hedge had been designated to mitigate exposure to interest rate increases prior to replacing the Term Facility with long-term financing. Due to the conversion option in the Series B Debenture issue, the associated interest rate swap agreement was no longer deemed to be an effective hedge. As a result, Crombie recognized an expense in net income for the year ended December 31, 2009 for the settlement amount. In addition, Crombie wrote off the deferred financing charges related to the repaid component of the Term Facility.

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 expenses represent the future tax provision of the wholly-owned corporate subsidiary which is subject to income taxes.

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.

    
    Retail Freestanding Properties
    -------------------------------------------------------------------------
    (In thousands        Year Ended                     Year Ended
     of dollars,     December 31, 2009              December 31, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-    Acqui-
     noted)     Asset   sitions       Total     Asset   sitions       Total
    -------------------------------------------------------------------------
    Property
     revenue   $1,702   $26,085     $27,787    $1,521     $17,706   $19,227
    Property
     expenses     424     5,187       5,611       260       4,291     4,551
    -------------------------------------------------------------------------
    Property
     NOI       $1,278   $20,898     $22,176    $1,261     $13,415   $14,676
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    75.1%     80.1%       79.8%     82.9%       75.8%     76.3%
    -------------------------------------------------------------------------
    Occu-
     pancy %      100%      100%        100%    100.0%      100.0%    100.0%
    -------------------------------------------------------------------------

    The improvement in the retail freestanding property NOI was caused by the
Portfolio Acquisition.  The same-asset property NOI remained virtually
unchanged, while the same-asset NOI margin % is lower as a result of increases
in recoverable expenses for landscaping, paving, and taxes.

     Retail Plaza Properties
    -------------------------------------------------------------------------
    (In thousands        Year Ended                     Year Ended
     of dollars,     December 31, 2009              December 31, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-    Acqui-
     noted)     Asset   sitions       Total     Asset   sitions       Total
    -------------------------------------------------------------------------
    Property
     revenue  $41,204   $30,162     $71,366   $41,082     $19,865   $60,947
    Property
     expenses  13,508     8,529      22,037    13,679       4,971    18,650
    -------------------------------------------------------------------------
    Property
     NOI      $27,696   $21,633     $49,329   $27,403     $14,894   $42,297
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    67.2%     71.7%       69.1%     66.7%       75.0%     69.4%
    -------------------------------------------------------------------------
    Occu-
    pancy %      94.9%     98.1%       96.3%     95.5%       97.7%     96.7%
    -------------------------------------------------------------------------

    The increase in the retail plaza property NOI was primarily caused by the
Portfolio Acquisition.  NOI margin % is lower for the acquisition properties
due to increased recoverable expenses for taxes and snow clearing.

    Retail Enclosed Properties
    -------------------------------------------------------------------------
    (In thousands        Year Ended                     Year Ended
     of dollars,     December 31, 2009              December 31, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-    Acqui-
     noted)     Asset   sitions       Total     Asset   sitions       Total
    -------------------------------------------------------------------------
    Property
     revenue  $48,029    $1,818     $49,847   $47,511      $1,195   $48,706
    Property
     expenses  17,406       597      18,003    17,349         329    17,678
    -------------------------------------------------------------------------
    Property
     NOI      $30,623    $1,221     $31,844   $30,162        $866   $31,028
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    63.8%     67.2%       63.9%     63.5%       72.5%     63.7%
    -------------------------------------------------------------------------
    Occu-
    pancy %      92.1%     87.9%       91.9%     90.2%       94.0%     90.4%
    -------------------------------------------------------------------------
    

The improvement in retail enclosed property NOI was primarily caused by the improved results at Avalon Mall in St. John's, Newfoundland and Labrador and the Portfolio Acquisition, partially offset by the one-time head lease adjustment as previously discussed. The acquisition property is represented by Fundy Trail Mall, Truro, Nova Scotia. NOI margin % and occupancy declined in this property compared to 2008 due primarily to the loss of one large tenant.

    
    Office Properties
    -------------------------------------------------------------------------
    (In thousands        Year Ended                     Year Ended
     of dollars,     December 31, 2009              December 31, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-    Acqui-
     noted)     Asset   sitions       Total     Asset   sitions       Total
    -------------------------------------------------------------------------
    Property
     revenue  $23,117       $ -     $23,117   $23,550       $ -     $23,550
    Property
     expenses  12,580         -      12,580    12,425         -      12,425
    -------------------------------------------------------------------------
    Property
     NOI      $10,537       $ -     $10,537   $11,125       $ -     $11,125
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    45.6%        -%       45.6%     47.2%        -%       47.2%
    -------------------------------------------------------------------------
    Occu-
    pancy %      88.0%        -%       88.0%     89.7%        -%       89.7%
    -------------------------------------------------------------------------
    

Occupancy levels have decreased slightly at the Halifax Developments Properties when compared to the prior year, while occupancy remained steady at Terminal Centres in Moncton, New Brunswick. Higher net rent per square foot at the Halifax Developments Properties was offset by lower rent at Terminal Centres due to a decline in the rent per square foot leasing results. Halifax Developments also incurred higher common area expenses resulting in overall lower property NOI and NOI margin % for the office properties in 2009 compared to 2008.

    
    Mixed-Use Properties
    -------------------------------------------------------------------------
    (In thousands        Year Ended                     Year Ended
     of dollars,     December 31, 2009              December 31, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-    Acqui-
     noted)     Asset   sitions       Total     Asset   sitions       Total
    -------------------------------------------------------------------------
    Property
     revenue  $35,137       $ -     $35,137   $35,712       $ -     $35,712
    Property
     expenses  17,531         -      17,531    17,066         -      17,066
    -------------------------------------------------------------------------
    Property
     NOI      $17,606       $ -     $17,606   $18,646       $ -     $18,646
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    50.1%        -%       50.1%     52.2%        -%       52.2%
    -------------------------------------------------------------------------
    Occu-
    pancy %      94.1%        -%       94.1%     96.1%        -%       96.1%
    -------------------------------------------------------------------------
    

The decrease in mixed-use occupancy levels from 96.1% in 2008 to 94.1% in 2009 was a result of the decline in occupancy in Aberdeen Business Centre, New Glasgow, Nova Scotia due to ongoing redevelopment work. Property revenue was primarily reduced as a result of ongoing parking deck and structural repairs at Scotia Square parkade while property expenses were primarily increased due to higher property taxes at this same location.

OTHER 2009 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. Due to the accounting changes related to the capitalization of items previously classified as deferred tenant charges, and Crombie adjusting the treatment of swap settlements for AFFO purposes, FFO and AFFO for prior periods have been restated. 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 year ended December 31, 2009 and 2008 is as follows:

    
    -------------------------------------------------------------------------
                                             Year Ended
                                    --------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
                                                 (as restated)

    Net income                          $10,748       $14,588       $(3,840)
    Add (deduct):
    Non-controlling interest              9,831        13,440        (3,609)
    Depreciation of commercial
     properties                          18,765        16,398         2,367
    Depreciation of recoverable
     capital expenditures                 1,050           929           121
    Amortization of tenant
     improvements/lease costs             4,272         3,488           784
    Amortization of intangible assets    21,944        22,971        (1,027)
    Depreciation and amortization on
     discontinued operations                  -           129          (129)
    Future income taxes recovery           (100)       (1,490)        1,390
    Write down of asset held for sale         -           408          (408)
    Loss (gain) on disposal of assets         -           (77)           77
    -------------------------------------------------------------------------
    FFO                                 $66,510       $70,784       $(4,274)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The reduction in FFO for the year ended December 31, 2009 was primarily due to the impact of the settlement of the ineffective interest rate swap agreement, partially offset by the higher net acquisition property results 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.

During the third quarter of 2009 Crombie amended its calculation of AFFO. The amendment reflects the fact that, in accordance with GAAP, Crombie's financial statements reflect two distinct accounting treatments for the settlement of interest rate swap agreements. Settlement amounts related to interest rate swap agreements deemed ineffective hedges during the year have been expensed in full, while settlement amounts related to interest rate swap agreements deemed effective hedges continue to be deferred and amortized. Having two distinct accounting treatments complicates the evaluation of the economic recurring performance of Crombie's operating activities. Thus, management has decided to amend its calculation of AFFO to deduct both effective and ineffective swap settlement costs. Management believes that this presentation better reflects the true economic costs of the swap settlement in the period settled and eliminates the distortion to future AFFO calculations of any non-cash swap amortization. Crombie has restated comparative AFFO calculations to reflect this change retrospectively. The calculation of AFFO for the year ended December 31, 2009 and 2008 is as follows:

    
    -------------------------------------------------------------------------
                                             Year Ended
                                    --------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
                                                 (as restated)

    FFO                                 $66,510       $70,784       $(4,274)
    Add:
    Amortization of effective swap
     agreements                           1,641           184         1,457
    Above-market lease amortization       3,102         3,058            44
    Non-cash revenue impacts on
     discontinued operations                  -            12           (12)
    Less:
    Below-market lease amortization      (8,197)       (7,290)         (907)
    Straight-line rent adjustment        (3,162)       (1,932)       (1,230)
    Maintenance capital expenditures     (6,126)       (8,647)        2,521
    Maintenance TI and leasing costs     (7,443)       (8,835)        1,392
    Settlement of effective interest
     rate swap agreements               (28,065)       (3,782)      (24,283)
    -------------------------------------------------------------------------
    AFFO                                $18,260       $43,552      $(25,292)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The AFFO result for the year ended December 31, 2009 was affected by the increased settlement costs on effective interest rate swaps and the decrease in FFO for the period, offset in part by lower maintenance capital and TI and leasing 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.

As discussed in the "Risk Management" section of this MD&A, recent turmoil in the financial markets has caused bond yields to materially decline and dramatically reduced interest rate swap spreads. This resulted in a significant deterioration of the values for the interest rate swap agreements Crombie had entered into to hedge its exposure to potential increases in Canadian bond yields associated with variable rate debt and future debt issuances. During 2009, as Crombie cash settled these interest rate swap agreements, the non-recurring impact of the settlements has had a material effect on the AFFO and AFFO payout ratio. Excluding the impact of the swaps settled (both effective and ineffective) during the year ended December 31, 2009, AFFO would have been $52,823 and the AFFO payout ratio would have been 96.7% (year ended December 31, 2008 - $47,150 and 93.4% respectively).

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:

    
    -------------------------------------------------------------------------
                                             Year Ended
                                    --------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
                                                 (as restated)

    Cash provided by operating
     activities                         $53,988       $60,874       $(6,886)
    Add back (deduct):
    Recoverable/productive
     capacity enhancing TIs                 190         2,584        (2,394)
    Change in non-cash operating
     items                               11,134        (6,086)       17,220
    Unit-based compensation expense         (47)          (42)           (5)
    Amortization of deferred
     financing charges                   (2,815)       (1,349)       (1,466)
    Write down of deferred
     financing charges                   (1,860)            -        (1,860)
    Settlement of ineffective
     interest rate swap agreement        (8,139)            -        (8,139)
    Settlement of effective
     interest rate swap agreements      (28,065)       (3,782)      (24,283)
    Maintenance capital expenditures     (6,126)       (8,647)        2,521
    -------------------------------------------------------------------------
    AFFO                                $18,260       $43,552      $(25,292)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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 $106,160 was drawn at December 31, 2009, and the issue of new equity, mortgage debt, and unsecured convertible debentures pursuant to the Declaration of Trust.

    
    -------------------------------------------------------------------------
                                             Year Ended
                                    --------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Operating activities                $53,988       $60,874       $(6,886)
    Financing activities               $(47,599)     $346,752     $(394,351)
    Investing activities               $(10,417)    $(406,306)     $395,889
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Operating Activities
    --------------------
    -------------------------------------------------------------------------
                                             Year Ended
                                    --------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Net income and non-cash items       $72,755       $66,207        $6,548
    TI and leasing costs                 (7,633)      (11,419)        3,786
    Non-cash working capital            (11,134)        6,086       (17,220)
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                         $53,988       $60,874       $(6,886)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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 year ended 2009 are outlined in the "Tenant Improvements and Capital Expenditures" section of the MD&A.

    
    Financing Activities
    --------------------
    -------------------------------------------------------------------------
                                             Year Ended
                                    --------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Net issue of convertible
     debentures                         $81,613       $28,786       $52,827
    Net issue of units                   64,801        59,215         5,586
    Settlement of interest rate
     swap agreements                    (36,204)       (3,961)      (32,243)
    Net issue (repayment) of
     commercial property debt          (110,527)      297,403      (407,930)
    Payment of distributions            (50,436)      (43,117)       (7,319)
    Other items (net)                     3,154         8,426        (5,272)
    -------------------------------------------------------------------------
    Cash provided by (used in)
     financing activities              $(47,599)     $346,752     $(394,351)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

In 2009, net financing proceeds of $81,613 from the issuance of Series B Debentures and $64,801 from the issuance of Units and Class B LP Units, along with $91,000 of gross mortgage financing proceeds, were more than offset by the repayment of the $178,824 Term Facility, the $36,204 cash settlement of the interest rate swap agreements, the $50,436 in distribution payments and the $18,415 in mortgage principal repayments. During 2008, Crombie received gross proceeds related to the debt and equity financing of the Portfolio Acquisition (the acquisition cost of which is reflected in the Investing Activities).

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

Cash used in investing activities for the year ended December 31, 2009 was $10,417. Of this, $9,967 was used for additions to commercial properties. Cash used in investing activities for the year ended December 31, 2008 of $406,306 was primarily due to the cost of the Portfolio Acquisition on April 22, 2008.

    
    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. These costs are then evaluated to ensure they are fully financeable. Productive capacity enhancement expenditures are capitalized and depreciated over their useful lives, but not deducted when calculating AFFO as they are considered financeable rather than having to be funded from operations.

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.

    
    -------------------------------------------------------------------------
                                                           Year Ended
                                                  ---------------------------
                                                  December 31,  December 31,
    (In thousands of dollars)                            2009          2008
    -------------------------------------------------------------------------
    Total additions to commercial properties           $9,967       $19,075
    Less: amounts recoverable from ECL                      -        (3,796)
    -------------------------------------------------------------------------
    Net additions to commercial properties              9,967        15,279
    Less: productive capacity enhancements             (3,841)       (6,632)
    -------------------------------------------------------------------------
    Maintenance capital expenditures                   $6,126        $8,647
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                           Year Ended
                                                  ---------------------------
                                                  December 31,  December 31,
    (In thousands of dollars)                            2009          2008
    -------------------------------------------------------------------------
    Total additions to TI and leasing costs            $7,633       $11,419
    Less: amounts recoverable from ECL                   (159)       (2,133)
    -------------------------------------------------------------------------
    Net additions to TI and leasing costs               7,474         9,286
    Less: productive capacity enhancements                (31)         (451)
    -------------------------------------------------------------------------
    Maintenance TI and leasing costs                   $7,443        $8,835
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The lower maintenance capital expenditures for the year are primarily as a result of the cautious outlook on capital intensive projects during the economic environment experienced in the first half of 2009.

The lower maintenance TI expenditures during the year ended 2009, when compared to the same period in 2008, was primarily due to early renegotiation in the first quarter of 2008 of lease renewals that were scheduled to expire in 2009 at a cost of $2,823.

Productive capacity enhancements during the year consisted of redevelopment work on Valley Mall in Corner Brook, Newfoundland and Labrador, work on the conversion of Fort Edward Mall in Windsor, Nova Scotia and on Charlotte Mall in St. Stephen, New Brunswick from retail enclosed properties to retail plazas and construction of an expanded area at Aberdeen Shopping Centre in New Glasgow, Nova Scotia to accommodate the needs of Pictou County Health Authority.

Capital Structure

    
    -------------------------------------------------------------------------
    (In thousands   Dec. 31,    Sep. 30,    Jun. 30,    Mar. 31,    Dec. 31,
     of dollars)       2009        2009        2009        2009        2008
    -------------------------------------------------------------------------
    Commercial
     property
     debt          $706,369    $682,551    $759,223    $812,342    $808,971
    Convertible
     debentures    $110,858    $110,593     $29,090     $29,029     $28,968
    Non-
     controlling
     interest      $225,367    $227,948    $233,292    $197,115    $199,163
    Unitholders'
     equity        $246,975    $249,646    $255,475    $213,351    $215,558
    -------------------------------------------------------------------------
    

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"), $106,160 of which was drawn as at December 31, 2009. 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 December 31, 2009, 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".

As of December 31, 2009, Crombie had fixed rate mortgages outstanding of $597,161 ($604,992 after including the marked-to-market adjustment of $7,831), carrying a weighted average interest rate of 5.66% (after giving effect to the interest rate subsidy from ECL under an omnibus subsidy agreement) and a weighted average term to maturity of 5.8 years.

In April of 2008, Crombie entered into an 18 month floating rate Term Facility of $280,000 to partially finance the Portfolio Acquisition. The balance of this Term Facility as of December 31, 2008 was $178,824 and has since been repaid during 2009 by:

    
    - $91,000 of mortgage financing;

    - $85,000 gross proceeds from the issuance of unsecured convertible
      debentures (the "Series B Debentures") on September 30, 2009; and

    - A draw on Crombie's Revolving Credit Facility.
    

Crombie had secured a $13,800 floating rate demand credit facility with Empire on substantially the same terms and conditions that govern the Revolving Credit Facility. This facility was put in place to ensure that Crombie maintained adequate liquidity in order to fund its daily operating activities while volatility in the financial markets continued. As at December 31, 2008, Crombie had $10,000 drawn against this facility which was repaid during the first quarter of 2009. During the third quarter of 2009, as a result of the improved financial market conditions, this facility was cancelled.

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            $16,741    $106,079         $ -    $122,820        17.5%
    2011             16,735      26,786     106,160     149,681        21.3%
    2012             17,393           -           -      17,393         2.4%
    2013             18,297      30,042           -      48,339         6.9%
    2014             15,692      67,658           -      83,350        11.9%
    Thereafter       67,952     213,786           -     281,738        40.0%
    -------------------------------------------------------------------------
    Total(1)       $152,810    $444,351    $106,160    $703,321       100.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes fair value debt adjustment of $7,831 and the deferred
        financing costs of $4,783

    Subsequent to year end, Crombie completed refinancing related to the
$106,079 of maturing 2010 debt as further explained in the "Subsequent Events"
section of the MD&A.

    Convertible debentures
    ----------------------
    -------------------------------------------------------------------------
                                                     Series A      Series B
    -------------------------------------------------------------------------
    Issue value                                       $30,000       $85,000
    Interest rate (payable semi-annually)                7.00%         6.25%
    Conversion price per unit                             $13           $11
    Issue date                                       March 20, September 30,
                                                         2008          2009
    Maturity date                                    March 20,      June 30,
                                                         2013          2015
    Trading symbol                                     CRR.DB      CRR.DB.B
    -------------------------------------------------------------------------
    

The Series A Debentures were issued in relation to the Portfolio Acquisition and the Series B Debentures were issued to repay the Term Facility.

Both the Series A Debentures and the Series B 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.

Each Series A Debenture and Series B Debenture is 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 $1,000 principal amount of Series A Debentures and 90.9091 Units per $1,000 principal amount of Series B Debentures. If all conversion rights attaching to the Series A Debentures and the Series B Debentures are exercised, Crombie would be required to issue approximately 2,307,693 Units and 7,727,272 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.

Subsequent to year end, Crombie issued $45,000 of Series C convertible debentures as further explained in the "Subsequent Events" section of this MD&A.

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

In April 2009 there were 43,408 Units awarded as part of the Employee Unit Purchase Plan with an additional 4,003 issued in September 2009 (April 2008 - 34,053). On June 25, 2009, there were 4,725,000 Units issued, including the underwriters' over-allotment Units, through a public offering. Concurrent with the public offering of Units, in satisfaction of its pre-emptive right, ECL purchased 3,846,154 Class B LP Units and the attached Special Voting Units on a private placement basis. Total units outstanding at February 25, 2010 were as follows:

    
    -------------------------------------------------------------------------
    Units                                                        32,044,299
    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.
    

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%
    -------------------------------------------------------------------------
    

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; and

    - annualized NOI on all properties must be a minimum of 1.4 times the
      coverage of all annualized debt service requirements.
    

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

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 December 31, 2009, the amount available under the Revolving Credit Facility was $43,840 and was not limited by the Aggregate Coverage Amount.

At December 31, 2009, 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 52.4% at December 31, 2009 compared to 54.4% at December 31, 2008. 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      Dec. 31,    Sep. 30,    Jun. 30,    Mar. 31,    Dec. 31,
     noted)            2009        2009        2009        2009        2008
    -------------------------------------------------------------------------
    Mortgages
     payable       $604,992    $573,615    $564,101    $565,980    $531,970
    Convertible
     debentures     115,000     115,000      30,000      30,000      30,000
    Term facility         -      41,378     139,000     140,323     178,824
    Revolving
     credit
     facility
     payable        106,160      72,217      62,812     111,400      93,400
    Demand credit
     facility
     payable              -           -           -           -      10,000
    -------------------------------------------------------------------------
    Total debt
     outstanding    826,152     802,210     795,913     847,703     844,194
    Less:
     Applicable
     fair value
     debt
     adjustment      (7,733)     (8,489)     (9,256)    (10,032)    (10,818)
    -------------------------------------------------------------------------
    Debt           $818,419    $793,721    $786,657    $837,671    $833,376
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total
     assets      $1,457,166  $1,465,591  $1,470,474  $1,466,045  $1,483,219
    Add:
    Deferred
     financing
     charges          8,925       9,066       7,600       6,332       6,255
    Accumulated
     depreciation
     of
     commercial
     properties      69,952      63,865      57,715      51,796      45,865
    Accumulated
     amortization
     of
     intangible
     assets          78,551      72,147      66,492      60,836      53,505
    Less:
    Assets
     related to
     discontinued
     operations      (6,929)     (7,038)     (7,054)     (7,162)     (7,184)
    Interest
     rate subsidy    (7,733)     (8,489)     (9,256)    (10,032)    (10,818)
    Fair value
     adjustment
     to future
     taxes          (39,245)    (39,245)    (39,245)    (39,245)    (39,245)
    -------------------------------------------------------------------------
    Gross book
     value       $1,560,687  $1,555,897  $1,546,726  $1,528,570  $1,531,597
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Debt to
     gross book
     value             52.4%       51.0%       50.9%       54.8%       54.4%
    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 year ended December 31, 2009 were 2.80 times EBITDA and 1.94 times EBITDA. This compares to 2.78 times EBITDA and 2.02 times EBITDA respectively for the year ended December 31, 2008. EBITDA should not be considered an alternative to net income, cash provided by operating activities or any other measure of operations as prescribed by Canadian GAAP. EBITDA is not a GAAP financial measure; however, Crombie believes it is an indicative measure of its ability to service debt requirements, fund capital projects and acquire properties. EBITDA may not be calculated in a comparable measure reported by other entities.

    
    -------------------------------------------------------------------------
                                                           Year Ended
                                                  ---------------------------
                                                  December 31,  December 31,
    (In thousands of dollars)                            2009          2008
    -------------------------------------------------------------------------
                                                               (as restated)

    Property revenue                                 $207,254      $188,142
    Amortization of above-market leases                 3,102         3,058
    Amortization of below-market leases                (8,197)       (7,290)
    -------------------------------------------------------------------------
    Adjusted property revenue                         202,159       183,910
    Property expenses                                 (75,762)      (70,370)
    General and administrative expenses                (9,274)       (8,636)
    -------------------------------------------------------------------------
    EBITDA(1)                                        $117,123      $104,904
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Interest expense                                  $46,319       $39,232
    Amortization of deferred financing charges         (2,815)       (1,349)
    Amortization of effective swap agreements          (1,641)         (184)
    -------------------------------------------------------------------------
    Adjusted interest expense(2)                      $41,863       $37,699
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Debt repayments                                  $261,351      $191,505
    Debt repayments on discontinued operations              -          (121)
    Amortization of fair value debt premium                (5)          (21)
    Payments relating to interest rate subsidy         (3,085)       (3,333)
    Payments relating to Term Facility               (178,824)     (101,176)
    Payments relating to Revolving Credit Facility    (51,022)      (58,185)
    Payments relating to demand credit facility       (10,000)            -
    Balloon payments on mortgages                           -       (14,447)
    -------------------------------------------------------------------------
    Adjusted debt repayments(3)                       $18,415       $14,222
    -------------------------------------------------------------------------
    Interest service coverage ratio((1)/(2))             2.80          2.78
    -------------------------------------------------------------------------
    Debt service coverage ratio((1)/((2)+(3)))           1.94          2.02
    -------------------------------------------------------------------------

    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 70% of its FFO and 95% of its AFFO on an annual basis.

Details of distributions to Unitholders are as follows:

    
    -------------------------------------------------------------------------
                                                           Year Ended
                                                  ---------------------------
    (Distribution amounts represented             December 31,  December 31,
     in thousands of dollars)                            2009          2008
    -------------------------------------------------------------------------
    Distributions to Unitholders                      $26,756       $23,120
    Distributions to Special Voting Unitholders        24,319        20,924
    -------------------------------------------------------------------------
    Total distributions                               $51,075       $44,044
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO payout ratio (target ratio equals 70%)           76.8%         62.2%
    AFFO payout ratio (target ratio equals 95%)         279.7%        101.1%
    -------------------------------------------------------------------------
    

The FFO payout ratio of 76.8% was unfavourable to the target ratio as the FFO was impacted by the settlement of an ineffective interest rate swap agreement and the write off of deferred financing charges. Excluding the impact of the ineffective swap settlement amount, this FFO payout ratio would have been 68.4% in 2009. The AFFO payout ratio of 279.7% was unfavourable to the target ratio as a result of the reduced FFO and the adjustment for the settlement of effective interest rate swap agreements.

As discussed in the "Risk Management" section of this MD&A, recent turmoil in the financial markets caused bond yields to materially decline and dramatically reduce interest rate swap spreads. This resulted in a significant deterioration of the values for the interest rate swap agreements Crombie had entered into to hedge its exposure to potential increases in Canadian bond yields associated with variable rate debt and future debt issuances. During 2009, as Crombie cash settled these interest rate swap agreements, the non-recurring impact of the settlements has had a material effect on the AFFO and AFFO payout ratio. Excluding the impact of the swaps settled (both effective and ineffective) during the year ended December 31, 2009, AFFO would have been $52,823 and the AFFO payout ratio would have been 96.7% (year ended December 31, 2008 - $47,150 and 93.4% respectively).

FOURTH QUARTER RESULTS

Comparison to Previous Year

Comparative figures have been restated for retrospective application of the change in accounting policy related to the accounting for recoverable capital expenditures. Comparative AFFO information has been restated to reflect the retrospective application of the impact of settlement of effective interest rate swap agreements.

    
                                                    Quarter Ended
                                   ------------------------------------------
    (In thousands of dollars,       December 31,  December 31,
     except where otherwise noted)         2009          2008      Variance
    -------------------------------------------------------------------------
    Property revenue                    $52,378       $52,522         $(144)
    Property expenses                    19,948        19,649          (299)
    -------------------------------------------------------------------------
    Property NOI                         32,430        32,873          (443)
    -------------------------------------------------------------------------
    NOI margin percentage                  61.9%         62.6%         (0.7)%
    -------------------------------------------------------------------------
    Expenses:
      General and administrative          2,102         2,701           599
      Interest                           12,722        11,318        (1,404)
      Depreciation and amortization      11,705        12,499           794
    -------------------------------------------------------------------------
                                         26,529        26,518           (11)
    -------------------------------------------------------------------------
    Income from continuing
     operations before other
     items, income taxes and
     non-controlling interest             5,901         6,355          (454)
    Other income                            500            55           445
    -------------------------------------------------------------------------
    Income from continuing
     operations before income
     taxes and non-controlling
     interest                             6,401         6,410            (9)
    Income taxes expense
     (recovery) - Future                   (300)       (3,450)       (3,150)
    -------------------------------------------------------------------------
    Income from continuing
     operations before non-
     controlling interest                 6,701         9,860        (3,159)
    Gain on sale of discontinued
     operations                               -           487          (487)
    Income from discontinued
     operations                               -            24           (24)
    -------------------------------------------------------------------------
    Income before non-controlling
     interest                             6,701        10,371        (3,670)
    Non-controlling interest              3,178         4,968         1,790
    -------------------------------------------------------------------------
    Net income                           $3,523        $5,403       $(1,880)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net income
     per Unit                             $0.11         $0.20        $(0.09)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic weighted average Units
     outstanding (in 000's)              31,879        27,147
    ----------------------------------------------------------
    ----------------------------------------------------------
    Diluted weighted average Units
     outstanding (in 000's)              32,044        27,272
    ----------------------------------------------------------
    ----------------------------------------------------------
    

Net income for the quarter ended December 31, 2009 of $3,523 decreased by $1,880 from the net income of $5,403 for the quarter ended December 31, 2008. The decrease was primarily due to:

    
    - lower income tax recovery and higher interest costs, offset in part by;

    - lower amortization charges on intangible assets as some intangibles
      have become fully amortized, and reduced general and administrative
      expenses during the quarter.
    

For the quarter ended December 31, 2009, all previous acquisitions are included in same-asset property revenue on a comparative basis.

Property Revenue and Property Expenses

    
    -------------------------------------------------------------------------
                                           Quarter Ended
                                   -----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008(1)   Variance
    -------------------------------------------------------------------------
    Same-asset property revenue         $52,378       $52,522         $(144)
    Acquisition property revenue              -             -             -
    -------------------------------------------------------------------------
    Property revenue                    $52,378       $52,522         $(144)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Comparative figures have been restated for retrospective changes in
        GAAP.
    

Property revenue for the quarter is lower by 0.3% than the same period in 2008 due to a reduction in the amortization of below-market lease intangibles, offset in part by increases in contractually due rent and straight-line rent recognition. Contractually due rental revenue increased from $50,976 in the fourth quarter of 2008 to $51,014 in the fourth quarter of 2009 as a result of increased average rent per square foot ($12.83 in 2009 and $12.16 in 2008) partially offset by the slight decrease in occupancy.

    
    -------------------------------------------------------------------------
                                           Quarter Ended
                                   -----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Same-asset property expenses        $19,948       $19,649         $(299)
    Acquisition property expenses             -             -             -
    -------------------------------------------------------------------------
    Property expenses                   $19,948       $19,649         $(299)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Property expenses for the quarter have increased by 1.5% compared to the same period in 2008 due to slight increases in various recoverable expenses, primarily property taxes, and slight increases in non-recoverable expenses.

    
    -------------------------------------------------------------------------
                                           Quarter Ended
                                   -----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Same-asset property NOI             $32,430       $32,873         $(443)
    Acquisition property NOI                  -             -             -
    -------------------------------------------------------------------------
    Property NOI                        $32,430       $32,873         $(443)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Same-asset NOI decreased during the fourth quarter of 2009 by 1.3% compared to the same period in 2008.

Property NOI for the quarter ended December 31, 2009 by region was as follows:

    
    -------------------------------------------------------------------------
    (In                        2009                          2008
     thou-   -----------------------------------------
     sands       Pro-
     of         perty  Property    Property  NOI % of    NOI % of
     dollars) Revenue  Expenses         NOI   revenue     revenue  Variance
    -------------------------------------------------------------------------
    Nova
     Scotia   $23,885   $10,741     $13,144      55.0%       57.4%     (2.4)%
    Newfound-
     land and
     Labrador   8,527     2,482       6,045      70.9%       74.6%     (3.7)%
    New
     Bruns-
     wick       6,251     2,649       3,602      57.6%       54.8%      2.8%
    Ontario     8,003     2,504       5,499      68.7%       63.7%      5.0%
    Prince
     Edward
     Island     1,294       301         993      76.7%       65.6%     11.1%
    Quebec      3,692     1,069       2,623      71.0%       73.1%     (2.1)%
    Saskat-
     chewan       726       202         524      72.2%       75.0%     (2.8)%
    -------------------------------------------------------------------------
    Total     $52,378   $19,948     $32,430      61.9%       62.6%     (0.7)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Overall, NOI as a percentage of revenue decreased slightly when compared with the same quarter in 2008. NOI % has increased in Prince Edward Island due partially to the successful redevelopment of County Fair Mall. Ontario's NOI as a percentage of revenue increased due to a decrease in recoverable expenses in numerous locations. NOI as a percentage of revenue has decreased in Nova Scotia due to an increase in property tax expenses and non-recoverable costs including the Scotia Square parkade. Newfoundland and Labrador's NOI as a percentage of revenue declined due to decreased property revenue as a result of ongoing redevelopment work at Valley Mall.

General and Administrative Expenses

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

    
    -------------------------------------------------------------------------
                                           Quarter Ended
                                   -----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Salaries and benefits                  $771        $1,294          $523
    Professional fees                       548           927           379
    Public company costs                    309           109          (200)
    Rent and occupancy                      174           173            (1)
    Other                                   300           198          (102)
    -------------------------------------------------------------------------
    General and administrative
     expenses                            $2,102        $2,701          $599
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    As a percentage of property
     revenue                                4.0%          5.1%          1.1%
    -------------------------------------------------------------------------
    

General and administrative expenses, as a percentage of property revenue, decreased by 1.1% for the quarter ended December 31, 2009 when compared to the same period in 2008. Total general and administrative expenses decreased to $2,102 for the fourth quarter of 2009 compared to $2,701 for the fourth quarter of 2008. The decrease in expenses was primarily due to lower incentive bonuses and a decrease in consulting fees.

Interest Expense

    
    -------------------------------------------------------------------------
                                           Quarter Ended
                                   -----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Same-asset interest expense         $12,722       $11,318       $(1,404)
    Acquisition interest expense              -             -             -
    -------------------------------------------------------------------------
    Interest expense                    $12,722       $11,318       $(1,404)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Same-asset interest expense of $12,722 for the quarter ended December 31, 2009 increased by 12.4% when compared to the quarter ended December 31, 2008 due to the increase in the amortization of effective settled interest rate swap agreements of $345, the write off of the remaining $501 of deferred financing charges related to the Term Facility, and increased interest expenses on the fixed mortgage financings used to repay the floating interest Term Facility.

There is an agreement between ECL and Crombie whereby ECL provides a monthly interest rate subsidy to Crombie to reduce the effective interest rates to 5.54% on certain mortgages that were assumed at Crombie's IPO for their remaining term. Over the term of this agreement, management expects this subsidy to aggregate to the amount of approximately $20,564. The amount of the interest rate subsidy received during the quarter ended December 31, 2009 was $756 (quarter ended December 31, 2008 - $797). The interest rate subsidy is received by Crombie through monthly repayments by ECL of amounts due under one of the demand notes issued by ECL to CDL.

Depreciation and Amortization

    
    -------------------------------------------------------------------------
                                           Quarter Ended
                                   -----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008(1)   Variance
    -------------------------------------------------------------------------
    Same-asset depreciation and
     amortization                       $11,705       $12,499          $794
    Acquisition depreciation and
     amortization                             -             -             -
    -------------------------------------------------------------------------
    Depreciation and amortization       $11,705       $12,499          $794
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Comparative figures have been restated for retrospective changes in
        GAAP.
    

Same-asset depreciation and amortization of $11,705 for the quarter ended December 31, 2009 was 6.4% lower than the quarter ended December 31, 2008 due primarily to the intangible assets related to the origination costs, the in-place leases and tenant relationships associated with the properties purchased at the date of the 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, 2008. Depreciation and amortization consists of:

    
    -------------------------------------------------------------------------
                                           Quarter Ended
                                   -----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008(1)   Variance
    -------------------------------------------------------------------------
    Depreciation of commercial
     properties                          $4,743        $4,495         $(248)
    Depreciation of recoverable
     capital expenditures                   256           234           (22)
    Amortization of tenant
     improvements/lease costs             1,088         1,031           (57)
    Amortization of intangible
     assets                               5,618         6,739         1,121
    -------------------------------------------------------------------------
    Depreciation and amortization       $11,705       $12,499          $794
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Comparative figures have been restated for retrospective changes in
        GAAP.
    

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.

    
    Retail Freestanding Properties
    -------------------------------------------------------------------------
    (In thousands       Quarter Ended                  Quarter Ended
     of dollars,      December 31, 2009              December 31, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue   $6,830        $-      $6,830    $6,748          $-    $6,748
    Property
     expenses   1,401         -       1,401     1,665           -     1,665
    -------------------------------------------------------------------------
    Property
     NOI       $5,429        $-      $5,429    $5,083          $-    $5,083
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    79.5%        -%       79.5%     75.3%          -%     75.3%
    -------------------------------------------------------------------------
    Occu-
     pancy %    100.0%        -%      100.0%    100.0%          -%    100.0%
    -------------------------------------------------------------------------
    

The improvement in the retail freestanding property NOI and NOI % margin is a result of increased revenue due to the expansion of Sobeys in Spryfield, Nova Scotia and a decrease in recoverable costs, primarily property taxes.

    
    Retail Plaza Properties
    -------------------------------------------------------------------------
    (In thousands       Quarter Ended                  Quarter Ended
     of dollars,      December 31, 2009              December 31, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue  $18,060        $-     $18,060   $17,524          $-   $17,524
    Property
     expenses   5,985         -       5,985     5,805           -     5,805
    -------------------------------------------------------------------------
    Property
     NOI      $12,075        $-     $12,075   $11,719          $-   $11,719
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    66.9%        -%       66.9%     66.9%          -%     66.9%
    -------------------------------------------------------------------------
    Occu-
     pancy %     96.3%        -%       96.3%     96.7%          -%     96.7%
    -------------------------------------------------------------------------
    

The retail plaza property revenue for the fourth quarter of 2009 increased over the fourth quarter of 2008 due to the successful redevelopment of Uptown Centre in New Brunswick.

    
    Retail Enclosed Properties
    -------------------------------------------------------------------------
    (In thousands       Quarter Ended                  Quarter Ended
     of dollars,      December 31, 2009              December 31, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue  $12,659        $-     $12,659   $13,042          $-   $13,042
    Property
     expenses   4,336         -       4,336     4,638           -     4,638
    -------------------------------------------------------------------------
    Property
     NOI       $8,323        $-      $8,323    $8,404          $-    $8,404
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    65.7%        -%       65.7%     64.4%          -%     64.4%
    -------------------------------------------------------------------------
    Occu-
     pancy %     91.9%        -%       91.9%     90.4%          -%     90.4%
    -------------------------------------------------------------------------
    

The improved NOI margin % in retail enclosed properties is due to an offsetting decrease in property tax expenses and recoveries at the Port Colborne property in Ontario and Sydney Shopping Centre in Nova Scotia.

    
    Office Properties
    -------------------------------------------------------------------------
    (In thousands       Quarter Ended                  Quarter Ended
     of dollars,      December 31, 2009              December 31, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue   $5,992        $-      $5,992    $6,046          $-    $6,046
    Property
     expenses   3,485         -       3,485     3,418           -     3,418
    -------------------------------------------------------------------------
    Property
     NOI       $2,507        $-      $2,507    $2,628          $-    $2,628
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    41.8%        -%       41.8%     43.5%          -%     43.5%
    -------------------------------------------------------------------------
    Occu-
     pancy %     88.0%        -%       88.0%     89.7%          -%     89.7%
    -------------------------------------------------------------------------
    

Property NOI and NOI margin % have decreased in the fourth quarter of 2009 when compared the same period in 2008 as a result of a decrease in occupancy and property revenue at CIBC Building in the Halifax Development properties in Nova Scotia.

    
    Mixed-Use Properties
    -------------------------------------------------------------------------
    (In thousands       Quarter Ended                  Quarter Ended
     of dollars,      December 31, 2009              December 31, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue   $8,837        $-      $8,837    $9,162          $-    $9,162
    Property
     expenses   4,741         -       4,741     4,123           -     4,123
    -------------------------------------------------------------------------
    Property
     NOI       $4,096        $-      $4,096    $5,039          $-    $5,039
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    46.4%        -%       46.4%     55.0%          -%     55.0%
    -------------------------------------------------------------------------
    Occu-
     pancy %     94.1%        -%       94.1%     96.1%          -%     96.1%
    -------------------------------------------------------------------------
    

The decrease in mixed-use occupancy levels from 96.1% in 2008 to 94.1% in 2009 was due primarily to the decrease in occupancy in Aberdeen Business Centre, Nova Scotia, as a result of the ongoing redevelopment work. Property revenue was reduced at Scotia Square parkade, in Nova Scotia due to ongoing parking deck and structural repairs, and slightly reduced recoveries at Scotia Square mall in Nova Scotia. The NOI margin % has decreased as a result of these reduced recoveries combined with increased property taxes at the Scotia Square Parkade and increased recoverable and non-recoverable expenses at Barrington Place and Brunswick Place in the Halifax Developments properties in Nova Scotia.

OTHER FOURTH QUARTER PERFORMANCE MEASURES

Funds from Operations

A calculation of FFO for the quarters ended December 31, 2009 and 2008 is as follows:

    
    -------------------------------------------------------------------------
                                           Quarter Ended
                                   -----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Net income                           $3,523        $5,403       $(1,880)
    Add (deduct):
    Non-controlling interest              3,178         4,968        (1,790)
    Depreciation of commercial
     properties                           4,743         4,495           248
    Depreciation of recoverable
     capital expenditures                   256           234            22
    Amortization of tenant
     improvements/lease costs             1,088         1,031            57
    Amortization of intangible
     assets                               5,618         6,739        (1,121)
    Future income taxes                    (300)       (3,450)        3,150
    Gain on sale of discontinued
     operations                               -          (487)          487
    -------------------------------------------------------------------------
    FFO                                 $18,106       $18,933         $(827)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The decrease in FFO for the quarter ended December 31, 2009 was primarily due to the impact of the increased interest expense and same-asset NOI decline, partially offset by the reduced general and administrative expenses as previously discussed.

Adjusted Funds from Operations

The calculation of AFFO for the quarters ended December 31, 2009 and 2008 is as follows:

    
    -------------------------------------------------------------------------
                                           Quarter Ended
                                   -----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
                                                 (as restated)

    FFO                                 $18,106       $18,933         $(827)
    Add:
    Amortization of effective swap
     agreements                             529           184           345
    Above-market lease amortization         786           772            14
    Deduct:
    Below-market lease amortization      (1,762)       (2,145)          383
    Straight-line rent adjustment          (388)         (173)         (215)
    Maintenance capital expenditures     (3,053)       (1,581)       (1,472)
    Maintenance TI and leasing costs     (1,006)       (1,123)          117
    Settlement of effective interest
     rate swap agreements               (20,723)       (1,344)      (19,379)
    Non-cash revenue impacts on
     discontinued operations                  -            (2)            2
    -------------------------------------------------------------------------
    AFFO                                $(7,511)      $13,521      $(21,032)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The AFFO result for the quarter ended December 31, 2009 was primarily affected by the settlement of effective interest rate swap agreements in the quarter and the reduced FFO. Details of the maintenance TI and capital expenditures are outlined in the "Tenant Improvement and Capital Expenditures" section of the MD&A.

As discussed in the "Risk Management" section of this MD&A, recent turmoil in the financial markets has caused bond yields to materially decline and dramatically reduced interest rate swap spreads. This resulted in a significant deterioration of the values for the interest rate swap agreements Crombie had entered into to hedge its exposure to potential increases in Canadian bond yields associated with variable rate debt and future debt issuances. During 2009, as Crombie cash settled these interest rate swap agreements, the non-recurring impact of the swap settlements has had a material effect on the AFFO and AFFO payout ratio. Excluding the impact of the swaps settled during the quarter ended December 31, 2009, AFFO would have been $12,683 and the AFFO payout ratio would have been 107.0% (quarter ended December 31, 2008 - $14,681 and 79.4% respectively).

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
                                   -----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
                                                 (as restated)

    Cash provided by operating
     activities                         $13,329       $24,863      $(11,534)
    Add back (deduct):
    Recoverable/productive
     capacity enhancing TIs                   -           638          (638)
    Change in non-cash operating
     items                                4,050        (8,521)       12,571
    Unit-based compensation expense         (12)          (11)           (1)
    Amortization of deferred
     financing charges                   (1,102)         (523)         (579)
    Settlement of effective
     interest rate swap agreements      (20,723)       (1,344)      (19,379)
    Maintenance capital expenditures     (3,053)       (1,581)       (1,472)
    -------------------------------------------------------------------------
    AFFO                                $(7,511)      $13,521      $(21,032)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Cash Flow

    
    -------------------------------------------------------------------------
                                           Quarter Ended
                                   -----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Operating activities                $13,329       $24,863      $(11,534)
    Financing activities               $(10,351)     $(21,086)      $10,735
    Investing activities                $(2,978)         $251       $(3,229)
    ------------------------------------------------------------------------

    Operating Activities
    --------------------
    -------------------------------------------------------------------------
                                           Quarter Ended
                                   -----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Net income and non-cash items       $18,385       $18,103          $282
    TI and leasing costs                 (1,006)       (1,761)          755
    Non-cash working capital             (4,050)        8,521       (12,571)
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                         $13,329       $24,863      $(11,534)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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 fourth quarter of 2009 are outlined in the "Tenant Improvements and Capital Expenditures" section of the MD&A.

    
    Financing Activities
    --------------------
    -------------------------------------------------------------------------
                                           Quarter Ended
                                   -----------------------------
                                    December 31,  December 31,
    (In thousands of dollars)              2009          2008      Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Settlement of interest rate
     swap agreements                   $(20,723)      $(1,523)     $(19,200)
    Net issue (repayment) of
     commercial property debt            22,811       (12,310)       35,121
    Payment of distributions            (13,567)      (11,649)       (1,918)
    Other items (net)                     1,128         4,396        (3,268)
    -------------------------------------------------------------------------
    Cash used in financing
     activities                        $(10,351)     $(21,086)      $10,735
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Cash used in financing activities during the fourth quarter of 2009 included proceeds from a mortgage financing used to repay the remaining Term Facility, as well as the settlement of the interest rate swap agreements and payment of distributions. Cash used on the fourth quarter of 2008 was due primarily to the principal payments on commercial property debt and distributions.

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

Cash used in investing activities during the fourth quarter of 2009 for the quarter ended December 31, 2009 was $2,978, represented primarily by the $3,080 of additions to commercial properties. Cash provided from investing activities for the quarter ended December 31, 2008 of $251 was primarily due to the receipt of proceeds from the sale of West End Mall in Halifax, Nova Scotia during the quarter, partially offset by additions to commercial properties.

    
    Tenant Improvements and Capital Expenditures
    --------------------------------------------

    -------------------------------------------------------------------------
                                                         Quarter Ended
                                                -----------------------------
                                                  December 31,  December 31,
    (In thousands of dollars)                            2009          2008
    -------------------------------------------------------------------------
    Total additions to commercial properties           $3,080        $2,461
    Less: amounts recoverable from ECL                      -           145
    -------------------------------------------------------------------------
    Net additions to commercial properties              3,080         2,606
    Less: productive capacity enhancements                (27)       (1,025)
    -------------------------------------------------------------------------
    Maintenance capital expenditures                   $3,053        $1,581
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                         Quarter Ended
                                                -----------------------------
                                                  December 31,  December 31,
    (In thousands of dollars)                            2009          2008
    -------------------------------------------------------------------------
    Total additions to TI and leasing costs            $1,006        $1,761
    Less: amounts recoverable from ECL                      -          (638)
    -------------------------------------------------------------------------
    Net additions to TI and leasing costs               1,006         1,123
    Less: productive capacity enhancements                  -             -
    -------------------------------------------------------------------------
    Maintenance TI and leasing costs                   $1,006        $1,123
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The increase in maintenance capital expenditures during the fourth quarter of 2009 was due primarily to work undertaken at Park Lane in Nova Scotia, Brampton Plaza in Ontario, Uptown Centre in New Brunswick and Brunswick Place in Nova Scotia. The reduced productive capacity enhancement expenditures during the quarter are a result of the timing of payments.

CHANGES IN ACCOUNTING POLICIES

Effective January 1, 2009 Crombie adopted two new accounting standards that were issued by the CICA in 2008 and one Emerging Issues Committee Abstract issued by the CICA in January 2009. These accounting policy changes have been adopted in accordance with the transitional provisions.

The new standards and accounting policy changes are as follows:

    
    Goodwill and Intangible Assets
    ------------------------------
    

Effective January 1, 2009, the accounting and disclosure requirements of the CICA's new accounting standard: "Handbook Section 3064, Goodwill and Intangible Assets" was adopted.

This standard is effective for annual and interim financial statements related to fiscal years beginning on or after October 1, 2008 and was applicable for Crombie's first quarter of fiscal 2009. Section 3064 states that intangible assets may be recognized as assets only if they meet the definition of an intangible asset. Section 3064 also provides further information on the recognition of internally generated intangible assets, (including research and development).

This standard has been applied retrospectively with restatement of prior periods. The adoption of this new standard resulted in an increase of $929 to depreciation of commercial properties and a decrease of $929 to property expenses in the consolidated Statements of Income for the year ended December 31, 2008. In the consolidated Balance Sheets, there was an increase of $3,946 to commercial properties, an increase of $38 to receivables, a decrease of $4,246 to prepaid expenses, and a decrease of $220 to payables and accruals at December 31, 2008, and a decrease of $20 to non-controlling interest and a decrease of $22 to unitholders' equity at January 1, 2008.

    
    Financial instruments - recognition and measurement
    ---------------------------------------------------
    

In January 2009, the CICA issued Emerging Issues Committee Abstract 173 ("EIC 173"), "Credit Risk and the Fair Value of Financial Assets and Financial Liabilities". EIC 173 requires that a company take into account its own credit risk and the credit risk of its counterparty in determining the fair value of financial assets and financial liabilities. This Abstract must be applied retrospectively without restatement of prior periods to all financial assets and liabilities measured at fair value in interim and annual financial statements for periods ending on or after January 20, 2009. The adoption of EIC 173 did not have a significant impact on Crombie's financial results, position or disclosures.

    
    Financial Instrument Disclosures
    --------------------------------
    

In June 2009, the CICA issued amendments to the existing Section 3862, "Financial Instruments - Disclosures", to more closely align the section with those required under International Financial Reporting Standards ("IFRS"). The amendments include enhanced disclosure requirements relating to fair value measurements of financial instruments and liquidity risks. These amendments apply for annual financial statements with fiscal years ending after September 30, 2009. The adoption of the amendments to Section 3862 did not have a material impact on the disclosures of Crombie.

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 Canadian 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 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.

In order to assist Crombie with its transition to IFRS, the Unitholders approved amendments to Crombie's Declaration of Trust, at Crombie's Annual General and Special Meeting held on May 7, 2009, to allow the Trustees to make future amendments to the Declaration of Trust without the requirement to obtain Unitholder approval. These changes are in the same manner as the Declaration of Trust currently permits Trustees to act as it relates to the changes in taxation laws.

The amendments will not result in any material change to the Unitholders, but rather were contemplated in order to assist Crombie to implement changes that will assist in its transition to IFRS. Trustees will be obligated to determine whether any such change is necessary or desirable in the circumstances, and all other matters that are currently required to be approved by Unitholders pursuant to the Declaration of Trust will remain unchanged.

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
                                                          Canadian GAAP.
                    Evaluate and                          Presented position
                    select IFRS                           papers on
                    policies &                            significant IFRS
                    IFRS 1 choices                        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          statements by Q3      been developed
                    and 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
                                    changeover year       staff 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             assessment of dual
                    additions to    during Q1 of          record-keeping
                    support IFRS    fiscal 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 to be        issues is underway
                    controls over   completed by          in conjunction with
                    financial       Q1 2010               the review of IFRS
                    reporting                             accounting issues
                    ("ICFR") for    Test and evaluate     and policies
                    all accounting  revised controls
                    policy changes  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, which
                    policy changes                        includes Investor
                                                          Relations, has been
                                                          assembled and is
                                                          engaged

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

IMPACT OF TRANSITION TO IFRS

On conversion to International Financial Reporting Standards 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 a one-time adjustment to the opening balance sheet, including opening Investment Properties, 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 Canadian GAAP, there are significant differences in certain aspects of recognition, measurement and disclosure. The significant IFRS differences identified by Crombie to Canadian 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 Canadian 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 Canadian 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. Management anticipates a reduction in property revenue as a result of IFRS adoption, however it cannot estimate the impact of the adjustment 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 December 31, 2009, Empire, through its wholly-owned subsidiary ECL, holds a 47.4% (fully diluted 42.0%) 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 Crombie Developments Limited, a subsidiary of Crombie, and ECL Properties Limited, a subsidiary of Empire ("Management Cost Sharing Agreement"). The costs assumed by Empire pursuant to the agreement during the year ended December 31, 2009 were $1,055 (year ended December 31, 2008 - $1,393) 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, ECL 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. The cost assumed by Empire pursuant to the Management Cost Sharing Agreement during the year ended December 31, 2009 were $1,148 (year ended December 31, 2008 - $2,013) and were netted against property expenses owing by Crombie to Empire. The head lease subsidy during the year ended December 31, 2009 was $854 (year ended December 31 2008 - $897).

Crombie also earned rental revenue of $62,634 for the year ended December 31, 2009 (year ended December 31, 2008 - $50,483) from Sobeys Inc., Empire Theatres and ASC Commercial Leasing Limited ("ASC"). These companies were all subsidiaries of Empire Company Limited until September 8, 2008 when ASC was sold. Property revenue from ASC is included in this note disclosure until the sale date.

Crombie had secured a $13,800 floating rate demand credit facility with Empire on substantially the same terms and conditions that govern the Revolving Credit Facility. This facility was put in place to ensure that Crombie maintained adequate liquidity in order to fund its daily operating activities while volatility in the financial markets continued. As at December 31, 2008, Crombie had $10,000 drawn against this facility which was repaid during the first quarter of 2009. During the third quarter of 2009, as a result of the improved financial market conditions, this facility was cancelled.

On February 12, 2009, Crombie completed fixed rate second mortgage financings of $6,200. The mortgages were provided by Empire Company Limited and have a weighted average interest rate of 5.38% and a maturity date of March 2014.

On June 1, 2009, Crombie acquired 1.1 acres of land adjacent to the Avalon Mall, Newfoundland and Labrador, for $3,527 plus additional closing costs from ECL General Partner Limited, an affiliate of Empire Company Limited. ECL General Partner Limited provided debt of $3,527 at a fixed rate of 8.00% and a term of 20 years.

On June 25, 2009, concurrent with the public offering, in satisfaction of its pre-emptive rights, ECL Developments Limited purchased $30,000 of Class B LP Units and the attached Special Voting Units, on a private-placement basis.

On September 30, 2009, as part of a prospectus offering, in satisfaction of its pre-emptive rights, ECL Developments Limited purchased $10,000 of Series B Convertible Debentures.

Crombie has agreed to acquire a portfolio of eight retail properties from subsidiaries of Empire Company Limited. The purchase price in respect of the eight properties is approximately $59,500, excluding closing and transaction costs, and represents an effective capitalization rate of 8.16%. The properties to be acquired comprise approximately 336,000 square feet of gross leaseable area, consisting of three freestanding tenants and five retail plazas.

CRITICAL ACCOUNTING ESTIMATES

Property Acquisitions

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

Crombie allocates the purchase price based on the following:

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

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

Origination costs for existing leases - Origination costs are determined based on estimates of the costs that would be incurred to put the existing leases in place under the same terms and conditions. These costs include leasing commissions as well as foregone rent and operating cost recoveries during an assumed lease-up period.

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

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

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

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

Commercial properties

Commercial properties include land, buildings and tenant improvements. Commercial properties are carried at cost less accumulated depreciation and are reviewed periodically for impairment.

Depreciation of buildings is calculated using the straight-line method with reference to each property's cost, its estimated useful life (not exceeding 40 years) and its residual value.

Amortization of tenant improvements is determined using the straight-line method over the terms of the tenant lease agreements and renewal periods where applicable.

Improvements that are not recoverable from tenants are either expensed as incurred or, in the case of a major item, capitalized to commercial properties and amortized on a straight-line basis over the expected useful life of the improvement.

Revenue recognition

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

Use of estimates

The preparation of consolidated financial statements in conformity with 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.
    

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.

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.

    
                                  December 31, 2009       December 31, 2008
                             ------------------------------------------------
                               Carrying        Fair    Carrying        Fair
                                  Value       Value       Value       Value
                             ------------------------------------------------
    Assets related to
     discontinued operations     $6,929      $7,066      $7,184      $7,477
                             ------------------------------------------------
                             ------------------------------------------------
    Commercial property debt   $711,152    $708,401    $814,194    $812,488
                             ------------------------------------------------
                             ------------------------------------------------
    Convertible debentures     $115,000    $120,200     $30,000     $25,950
                             ------------------------------------------------
                             ------------------------------------------------
    Liability related to
     discontinued operations     $6,334      $6,270      $6,487      $6,599
                             ------------------------------------------------
                             ------------------------------------------------
    

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.

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 15.3 and 75.7 years remaining, including renewal options.

Crombie obtains letters of credit to support its obligations with respect to construction work on its commercial properties and defeasing commercial property debt. 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, Crombie has $296 in standby letters of credit for construction work that is being performed on its commercial properties. Crombie does not believe that any of these standby letters of credit are likely to be drawn upon.

Crombie has agreed to acquire a portfolio of eight retail properties from subsidiaries of Empire Company Limited. The purchase price in respect of the eight properties is approximately $59,500, excluding closing and transaction costs, and represents an effective capitalization rate of 8.16%. The properties to be acquired comprise approximately 336,000 square feet of gross leaseable area, consisting of three freestanding tenants and five retail plazas.

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:

Risk Factors Related to the Real Estate Industry

    
    Real Property Ownership and Tenant Risks
    ----------------------------------------
    

All real property investments are subject to elements of risk. The value of real property and any improvements thereto depend on the credit and financial stability of tenants and upon the vacancy rates of the properties. In addition, certain significant expenditures, including property taxes, ground rent, mortgage payments, insurance costs and related charges must be made throughout the period of ownership of real property regardless of whether a property is producing any income. Cash available for distribution will be adversely affected if a significant number of tenants are unable to meet their obligations under their leases or if a significant amount of available space in the properties becomes vacant and cannot be leased on economically favourable lease terms.

Upon the expiry of any lease, there can be no assurance that the lease will be renewed or the tenant replaced. The terms of any subsequent lease may be less favourable to Crombie than those of an existing lease. The ability to rent unleased space in the properties in which Crombie has an interest will be affected by many factors, including general economic conditions, local real estate markets, changing demographics, supply and demand for leased premises, competition from other available premises and various other factors. Management utilizes staggered lease maturities so that Crombie is not required to lease unusually large amounts of space in any given year. In addition, the diversification of our property portfolio by geographic location, tenant mix and asset type also help to mitigate this risk.

    
    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 December 31, 2009;

    
    - Excluding Sobeys (which accounts for 32.7% 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 9.4% of the gross leaseable area
      of Crombie will expire in any one year.
    

Crombie earned rental revenue of $62,634 for year ended December 31, 2009 (year ended December 31, 2008 - $50,483) from subsidiaries of Empire.

    
    Competition
    -----------
    

The real estate business is competitive. Numerous other developers, managers and owners of properties compete with Crombie in seeking tenants. Some of the properties located in the same markets as Crombie's properties are newer, better located, less levered or have stronger anchor tenants than Crombie's properties. Some property owners with properties located in the same markets as Crombie's properties may be better capitalized and may be stronger financially and hence better able to withstand an economic downturn. Competitive pressures in such markets could have a negative effect on Crombie's ability to lease space in its properties and on the rents charged or concessions granted.

Risk Factors Related to the Business of Crombie

    
    Significant Relationship
    ------------------------
    

Crombie's anchor tenants are concentrated in a relatively small number of retail operators. Specifically, 32.7% of the annual minimum rent generated from Crombie's properties is derived from anchor tenants that are owned and/or operated by Sobeys. Therefore, Crombie is reliant on the sustainable operation by Sobeys in these locations.

    
    Retail and Geographic Concentration
    -----------------------------------
    

Crombie's portfolio of properties is heavily weighted in retail properties. Consequently, changes in the retail environment and general consumer spending could adversely impact Crombie's financial condition. Crombie's portfolio of properties is also heavily concentrated in Atlantic Canada. An economic downturn concentrated in the Atlantic Canada region could also adversely impact Crombie's financial condition. The geographic breakdown of properties and percentage of annual minimum rent of Crombie's properties for 2009 are as follows: 41 properties in Nova Scotia comprising 41.0%; 22 properties in Ontario comprising 16.9%; 20 properties in New Brunswick comprising 12.3%; 13 properties in Newfoundland and Labrador comprising 17.5%; three properties in Prince Edward Island comprising 3.1%; 13 properties in Quebec comprising 7.7%; and one property in Saskatchewan comprising 1.5%. Crombie's growth strategy of expansion outside of Atlantic Canada is predicated on reducing the geographic concentration risk.

    
    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 December 31, 2009:

    
    - Crombie's weighted average term to maturity of the fixed rate mortgages
      was 5.8 years; and
    - Crombie's exposure to floating rate debt, including the impact of the
      fixed rate swap agreements discussed below, was 8.0% 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. Turmoil in the financial markets materially affected interest swap rates. The interest swap rates are based on Canadian bond yields, plus a premium, called the swap spread, which reflects the risk of trading with a private counterparty as opposed to the Canadian government. Swap spreads fell far below historical average values and the effect of the abnormally low swap spreads, combined with the decline in the Canadian bond yields, resulted in a significant deterioration of the mark-to-market values for the interest rate swap agreements. A summary of the interest rate swaps settled during the year ended December 31, 2009 is as follows:

    
    -------------------------------------------------------------------------
                                                     Notional    Settlement
    Settlement Date                 Hedged Item        Amount        Amount
    -------------------------------------------------------------------------
    February 2, 2009              Term Facility       $42,000        $4,535
    August 27, 2009               Term Facility       $16,000         2,807
    September 14, 2009            Term Facility       $84,000         8,139
    October 15, 2009              Term Facility       $38,000         6,116
    November 23, 2009   HDL Properties Mortgage       $91,980        14,607
                                                             ----------------
                                                                    $36,204
                                                             ----------------
                                                             ----------------
    

Swap settlement amounts on February 2, 2009, August 27, 2009, October 15, 2009 and November 23, 2009 have been recognized in other comprehensive income (loss) since the inception of the interest rate swap agreements as the swaps were all designated and effective hedges. These amounts will be reclassified to interest expense using the effective interest method over the terms of the mortgages. The swap settlement amount on September 14, 2009 has been expensed in net income during the third quarter of 2009 as it was determined to be an ineffective hedge.

The breakdown of the swaps in place at December 31, 2009 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 December 31, 2009, had an
      unfavourable mark-to-market exposure of $2,896 (December 31, 2008 -
      unfavourable $4,024) 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 (December 31, 2008 - $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 $638 compared to the face
      value December 31, 2009 (December 31, 2008 - unfavourable $20,901). The
      change in this amount has been recognized in other comprehensive income
      (loss).
    

Crombie estimates that $4,025 of other comprehensive income (loss) will be reclassified to interest expense during the year ending December 31, 2010 based on interest rate swap agreements settled to December 31, 2009.

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:

    
                                 December 31, 2009      December 31, 2008
                               ----------------------------------------------
                                    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     $(794)      $794     $(1,231)     $1,231
    -------------------------------------------------------------------------

                                 December 31, 2009      December 31, 2008
                               ----------------------------------------------
                                    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             $687       $(710)    $10,678    $(11,288)
    -------------------------------------------------------------------------
    

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 December 31, 2009, the amount available under the Revolving Credit Facility was $43,840 and was not limited by the Aggregate Coverage Amount.

Crombie was able to access the equity capital markets in June 2009 for gross proceeds of $66,855 and the debt capital markets in September 2009 for gross proceeds of $85,000.

Crombie has $106,079 of fixed rate mortgage debts maturing in the first quarter of 2010. On February 1, 2010, this amount was refinanced as described in Subsequent Events section of this MD&A.

Crombie was also able to access the debt capital markets in February 2010 for gross proceeds of $45,000 as described in the Subsequent Events section of this MD&A.

    
    Environmental Matters
    ---------------------
    

Environmental legislation and regulations have become increasingly important in recent years. As an owner of interests in real property in Canada, Crombie is subject to various Canadian federal, provincial and municipal laws relating to environmental matters.

Such laws provide that Crombie could become liable for environmental harm, damage or costs, including with respect to the release of hazardous, toxic or other regulated substances into the environment, and the removal or other remediation of hazardous, toxic or other regulated substances that may be present at or under its properties. The failure to remove or otherwise address such substances or properties, if any, may adversely affect Crombie's ability to sell such property, realize the full value of such property or borrow using such property as collateral security, and could potentially result in claims against Crombie by public or private parties by way of civil action.

Crombie's operating policy is to obtain a Phase I environmental site assessment, conducted by an independent and experienced environmental consultant, prior to acquiring a property and to have Phase II environmental site assessment work completed where recommended in a Phase I environmental site assessment.

Crombie is not aware of any material non-compliance with environmental laws at any of its properties, and is not aware of any pending or threatened investigations or actions by environmental regulatory authorities in connection with any of its properties. Crombie has implemented policies and procedures to assess, manage and monitor environmental conditions at its properties to manage exposure to liability.

    
    Potential Conflicts of Interest
    -------------------------------
    

The trustees will, from time to time, in their individual capacities, deal with parties with whom Crombie may be dealing, or may be seeking investments similar to those desired by Crombie. The interests of these persons could conflict with those of Crombie. The Declaration of Trust contains conflict of interest provisions requiring the trustees to disclose their interests in certain contracts and transactions and to refrain from voting on those matters. In addition, certain decisions regarding matters that may give rise to a conflict of interest must be made by a majority of independent trustees only.

Conflicts may exist due to the fact that certain trustees, senior officers and employees of Crombie are directors and/or senior officers of ECL and/or its affiliates or will provide management or other services to ECL and its affiliates. ECL and its affiliates are engaged in a wide variety of real estate and other business activities. Crombie may become involved in transactions that conflict with the interests of the foregoing. The interests of these persons could conflict with those of Crombie. To mitigate these potential conflicts, Crombie and ECL have entered into a number of agreements to outline how potential conflicts of interest will be dealt with including a Non-Competition Agreement, Management Cost Sharing Agreement and Development Agreement. As well, the Declaration of Trust contains a number of provisions to manage potential conflicts of interest including setting limits to the number of ECL appointees to the Board, "conflict of interest" guidelines, as well as outlining which matters require the approval of a majority of the independent trustees such as any property acquisitions or dispositions between Crombie and ECL or another related party.

    
    Reliance on Key Personnel
    -------------------------
    

The management of Crombie depends on the services of certain key personnel. The loss of the services of any key personnel could have an adverse effect on Crombie and adversely impact Crombie's financial condition. Crombie does not have key-man insurance on any of its key employees.

    
    Reliance on ECL and Other Empire Affiliates
    -------------------------------------------
    

ECL has agreed to support Crombie under an omnibus subsidy agreement and to pay ongoing rent pursuant to a head lease and a ground lease. In addition, Crombie's ability to acquire new development properties is dependent upon ECL and the successful operation of the Development Agreement. Also, a significant portion of Crombie's rental income will be received from tenants that are affiliates of Empire. Finally, ECL has obligations to indemnify Crombie in respect to the cost of environmental remediation of certain properties acquired by Crombie from ECL to a maximum permitted amount. There is no certainty that ECL will be able to perform its obligations to Crombie in connection with these agreements. ECL has not provided any security to guarantee these obligations. If ECL, Empire or such affiliates are unable or otherwise fail to fulfill their obligations to Crombie, such failure could adversely impact Crombie's financial condition.

    
    Prior Commercial Operations
    ---------------------------
    

Crombie Limited Partnership ("Crombie LP") acquired from ECL all of the outstanding shares of CDL. CDL is the company resulting from the amalgamation of predecessor companies which began their operations in 1964 and have since been involved in various commercial activities in the real estate sector. In addition, the share capital of CDL and its predecessors has been subject to various transfers, redemptions and other modifications. Pursuant to the Business Acquisition, ECL made certain representations and warranties to Crombie with respect to CDL, including with respect to the structure of its share capital and the scope and amount of its existing and contingent liabilities. ECL also provided an indemnity to Crombie under the Business Acquisition which provides, subject to certain conditions and thresholds, that ECL will indemnify Crombie for breaches of such representations and warranties. There can be no assurance that Crombie will be fully protected in the event of a breach of such representations and warranties or that ECL will be in a position to indemnify Crombie if any such breach occurs. ECL has not provided any security for its obligations and is not required to maintain any cash within ECL for this purpose.

Crombie LP acquired from ECL directly and indirectly 61 properties as discussed in "Overview of the Business and Recent Developments". Pursuant to the Portfolio Acquisition, ECL made certain representations and warranties to Crombie with respect to the properties, including with respect to the scope and amount of its existing and contingent liabilities. ECL also provided an indemnity to Crombie under the Portfolio Acquisition which provides, subject to certain conditions and thresholds, that ECL will indemnify Crombie for breaches of such representations and warranties. There can be no assurance that Crombie will be fully protected in the event of a breach of such representations and warranties or that ECL will be in a position to indemnify Crombie if any such breach occurs. ECL has not provided any security for its obligations and is not required to maintain any cash within ECL for this purpose.

Risk Factors Related to the Units

    
    Cash Distributions Are Not Guaranteed
    -------------------------------------
    

There can be no assurance regarding the amount of income to be generated by Crombie's properties. The ability of Crombie to make cash distributions and the actual amount distributed are entirely dependent on the operations and assets of Crombie and its subsidiaries, and are subject to various factors including financial performance, obligations under applicable credit facilities, the sustainability of income derived from anchor tenants and capital expenditure requirements. Cash available to Crombie to fund distributions may be limited from time to time because of items such as principal repayments, tenant allowances, leasing commissions, capital expenditures and redemptions of Units, if any. Crombie may be required to use part of its debt capacity or to reduce distributions in order to accommodate such items. The market value of the Units will deteriorate if Crombie is unable to maintain its distribution in the future, and that deterioration may be significant. In addition, the composition of cash distributions for tax purposes may change over time and may affect the after-tax return for investors.

    
    Restrictions on Redemptions
    ---------------------------
    

It is anticipated that the redemption of Units will not be the primary mechanism for holders of Units to liquidate their investments. The entitlement of Unitholders to receive cash upon the redemption of their Units is subject to the following limitations: (i) the total amount payable by Crombie in respect of such Units and all other Units tendered for redemption in the same calendar month must not exceed $50 (provided that such limitation may be waived at the discretion of the Trustees); (ii) at the time such Units are tendered for redemption, the outstanding Units must be listed for trading on a stock exchange or traded or quoted on another market which the Trustees consider, in their sole discretion, provides fair market value prices for the Units; and (iii) the trading of Units is not suspended or halted on any stock exchange on which the Units are listed (or, if not listed on a stock exchange, on any market on which the Units are quoted for trading) on the redemption date for more than five trading days during the 10-day trading period commencing immediately after the redemption date.

    
    Potential Volatility of Unit Prices
    -----------------------------------
    

One of the factors that may influence the market price of the Units is the annual yield on the Units. An increase in market interest rates may lead purchasers of Units to demand a higher annual yield, which accordingly could adversely affect the market price of the Units. In addition, the market price of the Units may be affected by changes in general market conditions, fluctuations in the markets for equity securities and numerous other factors beyond the control of Crombie.

    
    Tax-Related Risk Factors
    ------------------------
    

Crombie intends to make distributions not less than the amount necessary to eliminate Crombie's liability for tax under Part I of the Income Tax Act (Canada). Where the amount of net income and net realized capital gains of Crombie in a taxation year exceeds the cash available for distribution in the year, such excess net income and net realized capital gains will be distributed to Unitholders in the form of additional Units. Unitholders will generally be required to include an amount equal to the fair market value of those Units in their taxable income, notwithstanding that they do not directly receive a cash distribution.

Income fund or REIT structures in which there is a significant corporate subsidiary such as CDL generally involve a significant amount of inter-company or similar debt, generating substantial interest expense, which reduces earnings and therefore income tax payable. Management believes that the interest expense inherent in the structure of Crombie is supportable and reasonable in the circumstances; however, there can be no assurance that taxation authorities will not seek to challenge the amount of interest expense deducted on the debt owing by CDL to Crombie LP. If such a challenge were to succeed, it could adversely affect the amount of cash available for distribution.

Certain properties have been acquired by Crombie Limited Partnership on a tax deferred basis, whereby the tax cost of these properties is less than their fair market value. Accordingly if one or more of such properties are disposed of, the gain for tax purposes recognized by Crombie Limited Partnership will be in excess of that which it would have been if it had acquired the properties at a tax cost equal to their fair market values.

The cost amount for taxation purposes of various properties of CDL will be lower than their fair market value, generally resulting in correspondingly lower deductions for taxation purposes and higher recapture of depreciation or capital gains on their disposition. In addition, CDL (unlike Crombie) may not reduce its taxable income through cash distributions. If CDL should become subject to corporate income tax, the cash available for distribution to Unitholders would likely be reduced.

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

While REITs were exempted from the SIFT taxation, the Act proposed a number of technical tests to determine which entities would qualify as a REIT. These technical tests did not fully accommodate the business structures used by many Canadian REITs.

Crombie and its advisors underwent an extensive review of Crombie's organizational structure and operations to support Crombie's assertion that it meets the REIT technical tests contained in the Act 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.

Notwithstanding that Crombie may meet the criteria for a REIT under the Act and thus be exempt from the distribution tax, there can be no assurance that the Department of Finance (Canada) or other governmental authority will not undertake initiatives which have an adverse impact on Crombie or its unitholders.

    
    Indirect Ownership of Units by Empire
    -------------------------------------
    

ECL holds a 47.4% economic interest in Crombie through the ownership of Class B LP Units. Pursuant to the Exchange Agreement, each Class B LP Unit will be exchangeable at the option of the holder for one Unit of Crombie and will be attached to a Special Voting Unit of Crombie, providing for voting rights in Crombie. Furthermore, pursuant to the Declaration of Trust, ECL is entitled to appoint a certain number of Trustees based on the percentage of Units held by it. Thus, Empire is in a position to exercise a certain influence with respect to the affairs of Crombie. If Empire sells substantial amounts of its Class B LP Units or exchanges such units for Units and sells these Units in the public market, the market price of the Units could fall. The perception among the public that these sales will occur could also produce such effect.

    
    Ownership of Debentures
    -----------------------
    

The Debentures may trade at lower than issued prices depending on many factors, including liquidity of the Debentures, prevailing interest rates and the markets for similar securities, the market price of the Units, general economic conditions and Crombie's financial condition, historic financial performance and future prospects.

SUBSEQUENT EVENTS

On January 21, 2010, Crombie declared distributions of 7.417 cents per unit for the period from January 1, 2010 to and including, January 31, 2010. The distribution was paid on February 15, 2010 to Unitholders of record as at January 31, 2010.

On February 1, 2010, Crombie completed the refinancing for the office and retail portfolio known as Halifax Developments ("HDL"). The principal amount of the maturing HDL mortgages is approximately $106,079 with a weighted average interest rate of 5.43%. The new HDL mortgages are for a total of $141,000. The first mortgage financing has a $25,000 principal, a ten year term and a 25 year amortization with a fixed interest of 6.52%. The second refinancing is for $116,000 in principal, a ten year term and an amortization period of 25 years with a fixed interest rate of 6.47%.

On February 8, 2010, Crombie issued $45,000 in Series C Convertible unsecured subordinate Debentures (the "Series C Debentures") to reduce the revolving credit facility. The Series C Debentures pay interest at a rate of 5.75% per annum, paid 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. Each Series C Debenture is convertible into Units at the option of the debenture holder at any time up to the maturity date, at a conversion price of $15.30, being a conversion rate of approximately 65.3595 Units per $1,000 principal. The Series C Debentures have a maturity date of June 30, 2017.

On February 10, 2010, Crombie executed commitments for 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 mortgages are anticipated to close on February 26, 2010.

On February 18, 2010, Crombie declared distributions of 7.417 cents per unit for the period from February 1, 2010 to and including, February 28, 2010. The distribution will be payable on March 15, 2010 to Unitholders of record as at February 28, 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 is approximately $31,530, excluding closing and transaction costs. The purchase price was funded through $8,400 of assumed mortgages and the balance from Crombie's Revolving Credit Facility. This is the first stage of the acquisitions announced on November 5, 2009. The acquisition of the remaining three retail properties for approximately $28,000, with approximately 150,000 square feet of gross leaseable area is expected to close during the first quarter of 2010.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is 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. The control framework Management used to design ICFR is COSO, which is the Committee of Sponsoring Organizations of the Treadway Commission. The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of Crombie's ICFR and have concluded as at December 31, 2009 that Crombie's ICFR were designed and operated effectively, and that there are no material weaknesses relating to the design or operation of Crombie's ICFR. There were no changes to Crombie's ICFR for the year ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect Crombie's ICFR.

DISCLOSURE CONTROLS AND PROCEDURES

Management is responsible for establishing and maintaining disclosure controls and procedures ("DC&P") to provide reasonable assurance that material information relating to Crombie is made known to Management by others, particularly during the period in which the annual filings are being prepared, and that information required to be disclosed by Crombie in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation. The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of Crombie's DC&P and have concluded as at December 31, 2009 that these DC&P were designed and operated effectively, and that there are no material weaknesses relating to the design or operation of Crombie's DC&P.

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,   Dec. 31,    Sep. 30,    Jun. 30,    Mar. 31,
     except per unit amounts)      2009        2009        2009        2009
    -------------------------------------------------------------------------
    Property revenue            $52,378     $50,991     $50,893     $52,992
    Property expenses            19,948      18,585      17,258      19,971
    -------------------------------------------------------------------------
    Property net operating
     income                      32,430      32,406      33,635      33,021
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative             2,102       1,882       3,646       1,644
      Interest                   12,722      11,595      11,272      10,730
      Depreciation and
       amortization              11,705      11,032      10,803      12,491
    -------------------------------------------------------------------------
                                 26,529      24,509      25,721      24,865
    -------------------------------------------------------------------------
    Income from continuing
     operations before other
     items, income taxes and
     non-controlling interest     5,901       7,897       7,914       8,156
    Other income (expense)
     items                          500      (9,981)          -          92
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes and
     non-controlling interest     6,401      (2,084)      7,914       8,248
    Income tax expense
     (recovery) -Future            (300)          -           -         200
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations
     before non-controlling
     interest                     6,701      (2,084)      7,914       8,048
    Gain/(loss) on sale of
     discontinued operations          -           -           -           -
    Income from discontinued
     operations                       -           -           -           -
    -------------------------------------------------------------------------
    Income (loss) before
     non-controlling interest     6,701      (2,084)      7,914       8,048
    Non-controlling interest      3,178        (989)      3,786       3,856
    -------------------------------------------------------------------------
    Net income (loss)            $3,523     $(1,095)     $4,128      $4,192
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net
     income (loss) per unit       $0.11      $(0.03)      $0.15       $0.15
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                      Quarter Ended (as restated)
    -------------------------------------------------------------------------
    (In thousands of dollars,   Dec. 31,    Sep. 30,    Jun. 30,    Mar. 31,
     except per unit amounts)      2009        2009        2009        2009
    -------------------------------------------------------------------------
    AFFO                        $(7,511)      $(451)    $14,524     $11,698
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO                         $18,106      $8,948     $18,717     $20,739
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions               $13,567     $13,566     $12,294     $11,649
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    AFFO per unit(1)             $(0.12)     $(0.01)      $0.27       $0.22
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO per unit(1)               $0.30       $0.15       $0.35       $0.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions per unit(1)     $0.22       $0.22       $0.23       $0.22
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                              -----------------------------------------------
                                      Quarter Ended (as restated)
    -------------------------------------------------------------------------
    (In thousands of dollars,   Dec. 31,    Sep. 30,    Jun. 30,    Mar. 31,
     except per unit amounts)      2008        2008        2008        2008
    -------------------------------------------------------------------------
    Property revenue            $52,522     $51,044     $47,314     $37,262
    Property expenses            19,649      18,634      16,775      15,312
    -------------------------------------------------------------------------
    Property net operating
     income                      32,873      32,410      30,539      21,950
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative             2,701       2,004       1,979       1,952
      Interest                   11,318      11,449       9,965       6,500
      Depreciation and
       amortization              12,499      12,535      10,757       7,995
    -------------------------------------------------------------------------
                                 26,518      25,988      22,701      16,447
    -------------------------------------------------------------------------
    Income from continuing
     operations before other
     items, income taxes and
     non-controlling interest     6,355       6,422       7,838       5,503
    Other income (expense)
     items                           55          27          97           -
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes and
     non-controlling interest     6,410       6,449       7,935       5,503
    Income tax expense
     (recovery) -Future          (3,450)        859         701         400
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations
     before non-controlling
     interest                     9,860       5,590       7,234       5,103
    Gain/(loss) on sale of
     discontinued operations        487        (895)          -           -
    Income from discontinued
     operations                      24         226         136         263
    -------------------------------------------------------------------------
    Income (loss) before
     non-controlling interest    10,371       4,921       7,370       5,366
    Non-controlling interest      4,968       2,358       3,531       2,583
    -------------------------------------------------------------------------
    Net income (loss)            $5,403      $2,563      $3,839      $2,783
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net
     income (loss) per unit       $0.20       $0.09       $0.15       $0.13
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                      Quarter Ended (as restated)
    -------------------------------------------------------------------------
    (In thousands of dollars,   Dec. 31,    Sep. 30,    Jun. 30,    Mar. 31,
     except per unit amounts)      2008        2008        2008        2008
    -------------------------------------------------------------------------
    AFFO                        $13,521     $10,019     $11,916      $8,096
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO                         $18,933     $19,200     $18,812     $13,839
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions               $11,649     $11,649     $11,879      $8,867
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    AFFO per unit(1)             $0.26        $0.19       $0.24       $0.19
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO per unit(1)              $0.36        $0.37       $0.38       $0.33
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions per unit(1)    $0.22        $0.22       $0.23       $0.21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) AFFO, FFO and distributions per unit are calculated by AFFO, FFO or
        distributions, as the case maybe, divided by the diluted weighted
        average of the total Units and Special Voting Units outstanding of
        60,970,029 for the quarter ended December 31, 2009, 60,804,544 for
        the quarter ended September 30, 2009, 52,959,049 for the quarter
        ended June 30, 2009, 52,351,464 for the quarter ended March 31, 2009,
        52,351,464 for the quarter ended December 31, 2008, 52,351,464 for
        the quarter ended September 30, 2008, 49,954,256 for the quarter
        ended June 30, 2008, 41,728,561 for the quarter ended March 31, 2008.
        The quarterly results of these calculations may not add to the annual
        calculations due to rounding.
    

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: February 25, 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


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890