Crombie REIT announces third quarter 2009 results and portfolio acquisition

STELLARTON, NS, Nov. 5 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) is pleased to report its results for the third quarter and nine months ended September 30, 2009.

    
      2009 Third Quarter Highlights

    - Crombie completed a prospectus offering of unsecured convertible
      debentures for gross proceeds of $85.0 million on September 30, 2009.
    - Crombie completed leasing activity on 666,000 square feet of gross
      leaseable area at September 30, 2009, which represents approximately
      95% of its 2009 expiring leases.
    - Occupancy for the properties was 94.2% at September 30, 2009 compared
      with 94.1% at June 30, 2009.
    - Property revenue for the quarter ended September 30, 2009 remained
      virtually unchanged at $51.0 million.
    - Same-asset NOI for the third quarter of 2009 of $32.4 million remained
      virtually unchanged compared to the quarter ended September 30, 2008.
    - Debt to gross book value increased slightly to 51.0% at September 30,
      2009 compared to 50.9% at June 30, 2009.
    - Crombie's interest service coverage ratio for the first nine months of
      2009 was 2.85 times EBITDA and debt service coverage ratio was 1.98
      times EBITDA, compared to 2.81 times EBITDA and 2.02 times EBITDA,
      respectively, for the same period in 2008.
    

Donald Clow, FCA, Crombie's President and Chief Executive Officer commented, "The operating results for the third quarter of 2009 reflected the stable, defensive-oriented asset class that we operate. We are pleased with the continued strength of the ongoing results that we were able to achieve during a very difficult economic environment".

Crombie also announced today that it has agreed to acquire a portfolio of eight retail properties from subsidiaries of Empire Company Limited ("Empire"). The purchase price in respect of the eight properties is approximately $62.0 million, excluding closing and transaction costs, and represents an effective capitalization rate of 8.16%. Empire is in the process of obtaining mortgage financing for certain of the properties of an amount anticipated to approximate $30.4 million which will be assumed by Crombie at closing. The remaining amount of the purchase price is intended to be financed by Crombie by drawing on its revolving credit facility. Closing of the acquisition is anticipated to occur in stages over the next six months as due diligence and mortgage financing are finalized for the portfolio.

The properties to be acquired comprise approximately 335,000 square feet of gross leaseable area ("GLA"), consisting of three freestanding tenants and five retail plazas. Each property is newly constructed or recently renovated and the portfolio is 100% leased with approximately 96% of the rental revenue coming from strong national tenants including Sobeys/IGA, and Lawton's. The weighted average lease term is approximately 16.4 years with less than 10% of the GLA expiring in the next 10 years.

Three of the retail plazas are anchored by Sobeys bannered grocery stores. The freestanding locations include a Lawton's, Future Shop and Mountain Equipment Co-op and two are adjacent to locations owned by Crombie. Crombie will enhance its geographic diversification as the acquisition portfolio is located approximately 50% in Atlantic Canada, and 25% each in Ontario and Quebec.

"We are extremely pleased to announce this acquisition which, together with our other acquisitions from Empire, reflects the sustainable competitive advantage that Crombie enjoys through our relationship with Empire and its development pipeline along with reflecting our confidence in the strength of our business. The properties to be acquired will enhance our portfolio diversification and are expected to be immediately accretive to AFFO." said Crombie President and Chief Executive Officer, Donald Clow, FCA.

Crombie is also pleased to report that it has signed a commitment letter for a $37 million mortgage financing with Industrial Alliance Insurance and Financial Services Inc. and Desjardins Asset Management Inc. on six properties acquired in a portfolio acquisition in April of 2008. The financing is anticipated to close on or before November 30, 2009. The proceeds of this financing will be applied to retire the floating rate term facility (the "Term Facility") used to partially finance the acquisition by Crombie of a portfolio of 61 properties (the "Portfolio Acquisition"). The mortgage will have a 10 year term and a 20 year amortization with a fixed interest rate of 6.90%. In connection with the mortgage financing, on October 14, 2009 Crombie cash settled an interest rate swap agreement for a settlement amount of $6.1 million.

Crombie's Funds From Operations ("FFO") and Adjusted Funds From Operations ("AFFO") had the following results during the third quarter and nine months ended September 30th:

    
                                         Quarter ended September 30,
                            -------------------------------------------------
                                                               Variance
                                                        ---------------------
    (In millions of dollars,
     except per unit amounts)      2009        2008           $           %
    -------------------------------------------------------------------------
    FFO before other income
     (expenses)                 $18.929     $19.173     $(0.244)       (1.3)%
    Other income(expenses)       (9.981)      0.027     (10.008)
                                 -------      -----     --------
    FFO                          $8.948     $19.200    $(10.252)      (53.4)%
    -------------------------------------------------------------------------
    FFO Per Unit                  $0.15       $0.37      $(0.22)      (59.5)%
    FFO Payout ratio              151.6%       60.7%                  (90.9)%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    AFFO before swap
     settlements                $10.045     $12.457     $(2.412)      (19.4)%
    Swap settlements
     (net of amortization)      (10.496)     (2.438)     (8.058)
                                --------     -------     -------
    AFFO                        $(0.451)    $10.019    $(10.470)     (104.5)%
    -------------------------------------------------------------------------
    AFFO Per Unit                $(0.01)      $0.19      $(0.20)     (105.3)%
    AFFO Payout ratio               N/A%      116.3%
    AFFO Payout ratio before
     swap settlements             135.0%       93.5%                  (41.5)%
    -------------------------------------------------------------------------


                                     Nine months ended September 30,
                            -------------------------------------------------
                                                               Variance
                                                      -----------------------
    (In millions of dollars,
     except per unit amounts)      2009        2008           $           %
    -------------------------------------------------------------------------
    FFO before other income
     (expenses)                 $58.293     $51.727      $6.566        12.7%
    Other income(expenses)       (9.889)      0.124     (10.013)
                                 -------      -----     --------
    FFO                         $48.404     $51.851     $(3.447)       (6.6)%
    -------------------------------------------------------------------------
    FFO Per Unit                  $0.87       $1.08      $(0.21)      (19.4)%
    FFO Payout ratio               77.5%       62.5%                  (15.0)%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    AFFO before swap
     settlements                $40.140     $32.469      $7.671        23.6%
    Swap settlements
     (net of amortization)      (14.369)     (2.438)    (11.931)
                                --------     -------    --------
    AFFO                        $25.771     $30.031     $(4.260)      (14.2)%
    -------------------------------------------------------------------------
    AFFO Per Unit                 $0.46       $0.62      $(0.16)      (25.8)%
    AFFO Payout ratio             145.5%      107.9%                  (37.6)%
    AFFO Payout ratio before
     swap settlements              93.4%       99.8%                    6.4%
    -------------------------------------------------------------------------
    

FFO for the third quarter of 2009 decreased to $8.9 million ($0.15 per unit) from $19.2 million ($0.37 per unit) in the third quarter of 2008. The decrease of $10.3 million was due to the impact of the $8.1 million settlement of an ineffective interest rate swap agreement during the quarter as previously disclosed and a write off of deferred financing charges of $1.8 million. FFO for the nine months ended September 30, 2009 decreased to $48.4 million ($0.87 per unit) from $51.9 million ($1.08 per unit) for the same period in 2008. The reduction was due to the aforementioned settlement of the ineffective interest rate swap agreement and the write off of deferred financing charges in the third quarter of 2009; partially offset by the operating results from the portfolio acquisition of 61 retail properties from subsidiaries of Empire Company Limited (the "Portfolio Acquisition") in April 2008 and the Saskatoon property acquisition in June 2008.

In accordance with GAAP, Crombie's third quarter financial statements reflect for the first time 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 quarter 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 makes evaluating the economic recurring performance of Crombie's operating activities very difficult. Thus, management has decided to amend its calculation of AFFO, a non-GAAP measure, to expense 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.

AFFO for the third quarter of 2009 was $(0.5) million ($(0.01) per unit) compared to $10.0 million ($0.19 per unit) for the third quarter of 2008. AFFO for the nine months ended September 30, 2009 was $25.8 million ($0.46 per unit) compared to $30.0 million ($0.62 per unit) for the same period in 2008. Reduction in AFFO during the third quarter ended September 30, 2009 was due to the lower FFO results for the quarter, while AFFO for the nine months ended September 30, 2009 was also negatively impacted by an increase of $4.9 million in settled effective hedges over the amount settled in the same period of 2008. The nine months ended September 30, 2009 AFFO payout ratio was 145.5% which is unfavourable to the annual target payout ratio of 95% and the payout ratio of 107.9% for the same period in 2008.

As disclosed in previous reports, recent turmoil in the financial markets have resulted in a significant deterioration of the mark-to-market 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 has cash settled these mark-to-market values, the non-recurring impact of the swap settlements has had a material effect on the AFFO and AFFO payout ratio for the year-to-date period. Excluding the impact of the swaps settled (both effective and ineffective) during the nine months ended September 30, 2009, AFFO would have been $40.140 million and the AFFO payout ratio would have been 93.4% (nine months ended September 30, 2008 $32.469 million and 99.8% respectively).

The table below presents a summary of the financial performance for the quarter and nine months ending September 30, 2009 compared to the same period in fiscal 2008.

    
    -------------------------------------------------------------------------
                                  Three       Three        Nine        Nine
                                 months      months      months      months
    (In millions of dollars,      ended       ended       ended       ended
     except where otherwise     Sep. 30,    Sep. 30,    Sep. 30,    Sep. 30,
     noted)                        2009        2008        2009        2008
    -------------------------------------------------------------------------
    Property revenue            $50.991     $51.044    $154.876    $135.620
    Property expenses            18.585      18.634      55.814      50.721
    -------------------------------------------------------------------------
    Property NOI                 32.406      32.410      99.062      84.899
    -------------------------------------------------------------------------
    NOI margin percentage          63.6%       63.5%       64.0%       62.6%
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative             1.882       2.004       7.172       5.935
      Interest                   11.595      11.449      33.597      27.914
      Depreciation and
       amortization              11.032      12.535      34.326      31.287
    -------------------------------------------------------------------------
                                 24.509      25.988      75.095      65.136
    -------------------------------------------------------------------------
    Income from continuing
     operations before other
     items, income taxes and
     non-controlling interest     7.897       6.422      23.967      19.763
    Other income (expenses)      (9.981)      0.027      (9.889)      0.124
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes and
     non-controlling interest    (2.084)      6.449      14.078      19.887
    Income taxes - Future             -       0.859       0.200       1.960
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations
     before non-controlling
     interest                    (2.084)      5.590      13.878      17.927
    Income (loss) from
     discontinued operations          -      (0.669)          -      (0.270)
    -------------------------------------------------------------------------
    Income (loss) before
     non-controlling interest    (2.084)      4.921      13.878      17.657
    Non-controlling interest     (0.989)      2.358       6.653       8.472
    -------------------------------------------------------------------------
    Net income (loss)           $(1.095)     $2.563      $7.225      $9.185
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Basic and diluted net
     income (loss) per unit      $(0.03)      $0.09       $0.25       $0.37
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Property NOI

Third quarter property NOI for 2009 was unchanged at $32.4 million from the same period in 2008 reflecting the stability of the portfolio. NOI margin increased slightly to 63.6% for the three months ended September 30, 2009 from 63.5% for the same period in 2008. Property NOI for the nine months ended September 30, 2009 increased to $99.1 million (16.7% increase) from the same period in 2008 due to the property acquisitions completed since January 1, 2008. Overall NOI margin increased to 64.0% for the nine months ended September 30, 2009 from 62.6% for the same period in 2008.

    
    Same-Asset Property NOI

    -------------------------------------------------------------------------
                                  Three       Three        Nine        Nine
                                 months      months      months      months
                                  ended       ended       ended       ended
                                Sep. 30,    Sep. 30,    Sep. 30,    Sep. 30,
    (In millions of dollars)       2009        2008        2009        2008
    -------------------------------------------------------------------------
    Same-asset property
     revenue                    $50.991     $51.044    $110.974    $111.916
    Same-asset property
     expenses                    18.585      18.634      45.175      45.022
    -------------------------------------------------------------------------
    Same-asset property NOI     $32.406     $32.410     $65.799     $66.894
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Same-asset NOI margin %        63.6%       63.5%       59.3%       59.8%
    -------------------------------------------------------------------------
    

Same-asset property revenue for the nine months ended September 30, 2009 of $111.0 million was 0.8% lower than the same period in 2008 due primarily to a one-time reduction in head lease revenue recorded during the second quarter of 2009. Same-asset property expenses of $45.2 million for the nine months ended September 30, 2009 were $0.153 million, or 0.3%, higher than the same period in 2008 due to increased recoverable common area expenses. For the three months ended September 30, 2009, same-asset revenue and expenses remained virtually unchanged from the same period in 2008 reflecting the stability of the portfolio.

Acquisition Property NOI

For the three months ended September 30, 2009 and 2008, the Portfolio Acquisition and the Saskatoon property acquisition are included in Same-Asset Property NOI. The impact for the nine months ended September 30, 2009 and 2008 for the Portfolio Acquisition and the Saskatoon property acquisition provided the following results:

    
    -------------------------------------------------------------------------
                                  Three       Three        Nine        Nine
                                 months      months      months      months
                                  ended       ended       ended       ended
                                Sep. 30,    Sep. 30,    Sep. 30,    Sep. 30,
    (In millions of dollars)       2009        2008        2009        2008
    -------------------------------------------------------------------------
    Acquisition property revenue     $-          $-     $43.902     $23.704
    Acquisition property expenses     -           -      10.639       5.699
    -------------------------------------------------------------------------
    Acquisition property NOI         $-          $-     $33.263     $18.005
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Acquisition NOI margin %          -%          -%       75.8%       76.0%
    -------------------------------------------------------------------------
    

General and Administrative Expenses

General and administrative expenses decreased marginally during the third quarter of 2009 to $1.9 million from $2.0 million in 2008. General and administrative expenses increased by 20.8% during the nine months ended September 30, 2009 to $7.2 million from $5.9 million in 2008 due to one time retirement costs incurred in the second quarter. General and administrative expenses as a percentage of revenue have decreased to 3.7% in the third quarter of 2009 compared to 3.9% in 2008 and increased to 4.6% for the nine months ended September 30, 2009 compared to 4.4% in 2008.

    
    Interest

    -------------------------------------------------------------------------
                                  Three       Three        Nine        Nine
                                 months      months      months      months
                                  ended       ended       ended       ended
                                Sep. 30,    Sep. 30,    Sep. 30,    Sep. 30,
    (In millions of dollars)       2009        2008        2009        2008
    -------------------------------------------------------------------------
    Same-asset interest
     expense                    $11.595     $11.449     $19.923     $19.204
    Acquisition interest
     expense                          -           -      13.674       8.710
    -------------------------------------------------------------------------
    Interest expense            $11.595     $11.449     $33.597     $27.914
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The increase in total interest expense for the nine months ended September 30, 2009 was primarily due to the property acquisitions in the first half of 2008. Same-asset interest expense for the nine months ended September 30, 2009 was higher by 3.7% compared to 2008 due to the amortization of interest rate swap agreements during the period, offset in part by a decrease in the floating interest rate on the revolving credit facility.

    
    Other Income (Expenses)

    -------------------------------------------------------------------------
                                  Three       Three        Nine        Nine
                                 months      months      months      months
                                  ended       ended       ended       ended
                                Sep. 30,    Sep. 30,    Sep. 30,    Sep. 30,
    (In millions of dollars)       2009        2008        2009        2008
    -------------------------------------------------------------------------
    Expense related to swap
     settlement                 $(8.139)         $-     $(8.139)         $-
    Write off of deferred
     financing charges           (1.860)          -      (1.860)          -
    Other income items            0.018       0.027       0.110       0.124
    -------------------------------------------------------------------------
                                $(9.981)     $0.027     $(9.889)     $0.124
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

On September 14, 2009 in connection with the September 30, 2009 convertible debenture issue, Crombie settled an interest rate swap agreement of a notional amount of $84 million for a settlement amount of $8.139 million. 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 conversion option in the convertible 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 (loss) for the period ended September 30, 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.

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 113 commercial properties in seven provinces, comprising approximately 11.2 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 including statements regarding the anticipated time to closing of the acquisition, the effect on Crombie's portfolio diversification and the accretive nature of the acquisition. 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 2008 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 third quarter results on a conference call to be held Friday, November 6, 2009, at 9:00 AM Eastern time. To join this conference call you may dial (416) 644-3416 or (800) 732-9307. 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 November 20, 2009, by dialling (416) 640-1917 or (877) 289-8525 and entering pass code 4175677#, or on the Crombie website for 90 days after the meeting.

    
                     CROMBIE REAL ESTATE INVESTMENT TRUST
                  Interim Consolidated Financial Statements
                                  Unaudited
                             September 30, 2009


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

                                                      September    December
                                                       30, 2009    31, 2008
                                                -----------------------------
                                                                   Restated
    Assets                                                          (Note 3)
      Commercial properties (Note 4)                 $1,308,086  $1,308,347
      Intangible assets (Note 5)                        112,761     131,403
      Notes receivable (Note 6)                           8,925      11,323
      Other assets (Note 7)                              28,781      20,934
      Cash and cash equivalents                               -       4,028
      Assets related to discontinued
       operations (Note 22)                               7,038       7,184
                                                -----------------------------
                                                     $1,465,591  $1,483,219
                                                -----------------------------
                                                -----------------------------

    Liabilities and Unitholders' Equity
      Commercial property debt (Note 8)                $682,551    $808,971
      Convertible debentures (Note 9)                   110,593      28,968
      Payables and accruals (Note 10)                    63,110      94,462
      Intangible liabilities (Note 11)                   34,626      41,061
      Employee future benefits obligation                 6,222       4,836
      Distributions payable                               4,522       3,883
      Future income tax liability (Note 17)              80,000      79,800
      Liabilities related to discontinued
       operations (Note 22)                               6,373       6,517
                                                -----------------------------
                                                        987,997   1,068,498

      Non-controlling interest (Note 12)                227,948     199,163

      Unitholders' equity                               249,646     215,558
                                                -----------------------------
                                                     $1,465,591  $1,483,219
                                                -----------------------------
                                                -----------------------------

    Commitments and contingencies (Note 19)

    Subsequent events (Note 25)


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

                                  Three       Three        Nine        Nine
                                 Months      Months      Months      Months
                                  Ended       Ended       Ended       Ended
                                Sep. 30,    Sep. 30,    Sep. 30,    Sep. 30,
                                   2009        2008        2009        2008
                             ------------------------------------------------
                                           Restated                Restated
    Revenues                                (Note 3)                (Note 3)

      Property revenue
       (Note 14)                $50,991     $51,044    $154,876    $135,620
      Lease terminations             18          27         110          47
                             ------------------------------------------------
                                 51,009      51,071     154,986     135,667
                             ------------------------------------------------

    Expenses
      Property expenses          18,585      18,634      55,814      50,721
      General and
       administrative
       expenses                   1,882       2,004       7,172       5,935
      Interest expense
       (Note 15)                 11,595      11,449      33,597      27,914
      Depreciation of
       commercial properties      4,721       4,544      14,022      11,903
      Depreciation of
       recoverable capital
       expenditures                 268         233         794         695
      Amortization of tenant
       improvements/lease
       costs                      1,161         989       3,184       2,457
      Amortization of
       intangible assets          4,882       6,769      16,326      16,232
                             ------------------------------------------------
                                 43,094      44,622     130,909     115,857
                             ------------------------------------------------

    Income from continuing
     operations before other
     items                        7,915       6,449      24,077      19,810
    Other income (expenses)
     (Note 16)                   (9,999)          -      (9,999)         77
                             ------------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes and
     non-controlling interest    (2,084)      6,449      14,078      19,887
    Income tax expense -
     Future  (Note 17)                -         859         200       1,960
                             ------------------------------------------------
    Income (loss) from
     continuing operations
     before non-controlling
     interest                    (2,084)      5,590      13,878      17,927
    Write down of asset held
     for sale (Note 22)               -        (895)          -        (895)
    Income from discontinued
     operations (Note 22)             -         226           -         625
                             ------------------------------------------------
    Income (loss) before
     non-controlling interest    (2,084)      4,921      13,878      17,657
    Non-controlling interest       (989)      2,358       6,653       8,472
                             ------------------------------------------------
    Net income (loss)           $(1,095)     $2,563      $7,225      $9,185
                             ------------------------------------------------
                             ------------------------------------------------

    Basic and diluted net
     income (loss) per unit
     (Note 13)
    Continuing operations        $(0.03)      $0.10       $0.25       $0.38
    Discontinued operations       $0.00      $(0.01)      $0.00      $(0.01)
                             ------------------------------------------------
    Net income (loss)            $(0.03)      $0.09       $0.25       $0.37
                             ------------------------------------------------
                             ------------------------------------------------

    Weighted average number
     of units outstanding
      Basic                  31,878,814  27,147,380  28,847,800  24,917,168
                             ------------------------------------------------
                             ------------------------------------------------

      Diluted                31,878,814  27,271,888  28,996,836  25,033,294
                             ------------------------------------------------
                             ------------------------------------------------


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

                                  Three       Three        Nine        Nine
                                 Months      Months      Months      Months
                                  Ended       Ended       Ended       Ended
                                Sep. 30,    Sep. 30,    Sep. 30,    Sep. 30,
                                   2009        2008        2009        2008
                             ------------------------------------------------
    Net income (loss)           $(1,095)     $2,563      $7,225      $9,185
                             ------------------------------------------------
      Losses on derivatives
       designated as cash
       flow hedges
       transferred to net
       income (loss) in the
       current period             4,514           -       4,859           -
      Net change in
       derivatives designated
       as cash flow hedges       (2,210)     (3,744)      6,490      (6,551)
                             ------------------------------------------------

    Other comprehensive
     income (loss)                2,304      (3,744)     11,349      (6,551)
                             ------------------------------------------------
    Comprehensive income
     (loss)                      $1,209     $(1,181)    $18,574      $2,634
                             ------------------------------------------------
                             ------------------------------------------------


                     CROMBIE REAL ESTATE INVESTMENT TRUST
               Consolidated Statements of Unitholders' Equity
                          (In thousands of dollars)
                                 (Unaudited)
    -------------------------------------------------------------------------
                                               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         -         -          35         -           -        35
    Repayment
     of EUPP
     loans
     recei-
     vable        169         -           -         -           -       169
    Net
     income         -     7,225           -         -           -     7,225
    Distribu-
     tions          -         -           -         -     (19,626)  (19,626)
    Other
     compre-
     hensive
     income         -         -           -    11,349           -    11,349
    Unit
     issue
     proceeds,
     net of
     costs of
     $1,919    34,936         -           -         -           -    34,936
             ----------------------------------------------------------------
    Unit-
     holders'
     equity,
     Septem-
     ber 30,
     2009    $300,209   $41,855         $61  $(18,218)   $(74,261) $249,646
             ----------------------------------------------------------------
             ----------------------------------------------------------------


    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         -         -          31         -           -        31
    Repayment
     of EUPP
     loans
     recei-
     vable        171         -           -         -           -       171
    Net
     income         -     9,185           -         -           -     9,185
    Distribu-
     tions          -         -           -         -     (17,051)  (17,051)
    Other
     compre-
     hensive
     loss           -         -           -    (6,551)          -    (6,551)
    Unit
     issue
     proceeds,
     net of
     costs of
     $2,008    60,997         -           -         -           -    60,997
    Unit
     redemp-
     tion      (1,375)        -           -         -           -    (1,375)
             ----------------------------------------------------------------
    Unit-
     holders'
     equity,
     Septem
     ber 30,
     2008 as
     resta-
     ted     $265,086   $29,227         $23   $(9,551)   $(48,566) $236,219
             ----------------------------------------------------------------
             ----------------------------------------------------------------


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

                                  Three       Three        Nine        Nine
                                 Months      Months      Months      Months
                                  Ended       Ended       Ended       Ended
                                Sep. 30,    Sep. 30,    Sep. 30,    Sep. 30,
                                   2009        2008        2009        2008
                             ------------------------------------------------
                                           Restated                Restated
    Cash flows provided by
     (used in)                              (Note 3)                (Note 3)

    Operating Activities
    Net income (loss)           $(1,095)     $2,563      $7,225      $9,185
    Items not affecting
     operating cash (Note 18)    19,200      14,874      47,145      38,919
                             ------------------------------------------------
                                 18,105      17,437      54,370      48,104

    Additions to tenant
     improvements and lease
     costs                       (4,083)     (1,330)     (6,627)     (9,658)
    Change in other non-cash
     operating items
     (Note 18)                    9,561      (2,166)     (7,084)     (2,435)
                             ------------------------------------------------
    Cash provided by
     operating activities        23,583      13,941      40,659      36,011
                             ------------------------------------------------

    Financing Activities
    Issue of commercial
     property debt               24,405     120,320      82,717     470,895
    Increase in deferred
     financing charges             (485)       (116)     (2,827)     (3,663)
    Issue of convertible
     debentures                  85,000           -      85,000      30,000
    Issue costs of
     convertible debentures      (3,557)          -      (3,557)     (1,214)
    Units and Class B LP
     Units issued                     -           -      66,855      63,005
    Units and Class B LP
     Units issue costs                -           -      (2,281)     (3,790)
    Settlement of interest
     rate swap agreements       (10,946)     (2,438)    (15,481)     (2,438)
    Repayment of commercial
     property debt             (103,108)   (111,784)   (213,228)   (157,519)
    Decrease in liabilities
     related to discontinued
     operations                     (38)          -        (144)          -
    Collection of notes
     receivable                     835         818       2,398       5,234
    Repayment of EUPP loan
     receivable                      79           7         169         171
    Unit redemption                   -           -           -      (1,375)
    Payment of distributions    (13,565)    (11,649)    (36,869)    (31,468)
                             ------------------------------------------------
    Cash provided by (used in)
     financing activities       (21,380)     (4,842)    (37,248)    367,838
                             ------------------------------------------------

    Investing Activities
    Additions to commercial
     properties                  (1,965)     (9,099)     (6,887)    (16,614)
    Additions to recoverable
     capital expenditures          (254)          -        (662)       (725)
    Decrease in assets
     related to discontinued
     operations                      16           -         146           -
    Proceeds on disposal of
     land, net of closing
     costs (Note 4)                   -           -           -         187
    Acquisition of
     commercial properties
     (Note 4)                         -           -         (36)   (389,405)
                             ------------------------------------------------
    Cash used in investing
     activities                  (2,203)     (9,099)     (7,439)   (406,557)
                             ------------------------------------------------
    Decrease in cash and cash
     equivalents during the
     period                         Nil         Nil      (4,028)     (2,708)
    Cash and cash equivalents,
     beginning of period            Nil         Nil       4,028       2,708
                             ------------------------------------------------
    Cash and cash equivalents,
     end of period                 $Nil        $Nil        $Nil        $Nil
                             ------------------------------------------------
                             ------------------------------------------------

    See accompanying notes to the interim consolidated financial statements.


                     CROMBIE REAL ESTATE INVESTMENT TRUST
           Notes to the Interim Consolidated Financial Statements
             (In thousands of dollars, except per unit amounts)
                                 (Unaudited)
                             September 30, 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 interim consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles ("GAAP") as prescribed by the Canadian Institute of Chartered Accountants ("CICA"). These interim consolidated financial statements do not include all of the disclosures included in Crombie's annual consolidated financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2008 as set out in the 2008 Annual Report.

The accounting policies used in preparation of these interim consolidated financial statements conform with those used in the 2008 annual consolidated financial statements, except as described in Note 3.

(b) Property acquisitions

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

    
    Crombie allocates the purchase price based on the following:

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

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

    Origination costs for existing leases - Origination costs are determined
    based on estimates of the costs that would be incurred to put the
    existing leases in place under the same terms and conditions. These costs
    include 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.
    

(c) Revenue recognition

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

(d) Income taxes

Crombie is taxed as a "mutual fund trust" for income tax purposes. Pursuant to the terms of the Declaration of Trust, Crombie must make distributions not less than the amount necessary to ensure that Crombie will not be liable to pay income tax, except for the amounts incurred in its incorporated subsidiaries.

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

(e) Employee future benefits obligation

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

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

(f) Use of estimates

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

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

(g) Payment of distributions

The determination to declare and make payable distributions from Crombie are 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 nine months ended September 30, 2009 $37,508 (nine months ended September 30, 2008 - $32,395) in cash distributions were declared payable by the Board of Trustees to Crombie Unitholders and Crombie Limited Partnership Unitholders (the "Class B LP Units").

(h) Convertible debentures

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

(i) Hedges

Crombie has cash flow hedges which are used to manage exposures to increases in variable interest rates. Cash flow hedges are recognized on the balance sheet at fair value with the effective portion of the 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.

(j) 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 (loss) and other comprehensive income (loss) for the period. Accumulated other comprehensive income (loss), has been added to the consolidated statements of Unitholders' equity.

(k) Discontinued operations

Crombie classifies properties that meet certain criteria as held for sale and separately discloses any net income and gain (loss) on disposal for current and prior periods as discontinued operations. A property is classified as held for sale at the point in time when it is available for immediate sale, management has committed to a plan to sell the property and is actively locating a purchaser for the property at a sales price that is reasonable in relation to the current estimated fair value of the property, and the sale is expected to be completed within a one year period. Properties held for sale are carried at the lower of their carrying values and estimated fair value less costs to sell. In addition, assets held for sale are no longer depreciated and amortized. A property that is subsequently reclassified as held in use is measured at the lower of its carrying value amount before it was 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.

(l) Impairment of long-lived assets

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

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

3) CHANGES IN ACCOUNTING POLICIES

Effective January 1, 2009 Crombie adopted one new accounting standard that was 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 is 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 $233 to depreciation of commercial properties and a decrease of $233 to property expenses in the consolidated Statements of Income(Loss) for the three months ended September 30, 2008 and an increase of $695 to depreciation of commercial properties and a decrease of $695 to property expenses for the nine months ended September 30, 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, 2009.

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.

Effect of new accounting standards not yet Implemented

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. These amendments apply for annual financial statements with fiscal years ending after September 30, 2009. The adoption of the amendments to Section 3862 is not expected to have a material impact on the disclosures of Crombie.

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.

An example of a potential change to the Declaration of Trust in order to comply with IFRS standards as they are currently drafted include the fact that Crombie's units may be regarded under IFRS as a "liability" rather than "equity" (as they are currently recognized under Canadian GAAP). This interpretation is influenced principally by the requirement in the Declaration of Trust that Crombie "shall" distribute in each year an amount at least equal to its taxable income. Under IFRS, the units would be classified as a liability if they contain "a contractual obligation to deliver cash or another financial asset to another entity".

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

                                                  September 30, 2009
                                         ------------------------------------
                                                    Accumulated
                                                        Depreci-   Net Book
                                               Cost       ation       Value
                                         ------------------------------------
    Land                                   $292,187        $Nil    $292,187
    Buildings                             1,036,819      51,298     985,521
    Recoverable capital expenditures          6,564       2,750       3,814
    Tenant improvements and leasing
     costs                                   36,381       9,817      26,564
                                         ------------------------------------
                                         $1,371,951     $63,865  $1,308,086
                                         ------------------------------------
                                         ------------------------------------


                                                   December 31, 2008
                                         ------------------------------------
                                                    Accumulated
                                                        Depreci-   Net Book
                                               Cost       ation       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, an affiliate of Empire Company Limited. The building has been leased for a one year period 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.

    
    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 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.

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:

    
                                  Three       Three        Nine        Nine
                                 Months      Months      Months      Months
                                  Ended       Ended       Ended       Ended
    Commercial property         Sep. 30,    Sep. 30,    Sep. 30,    Sep. 30,
     acquired, net:                2009        2008        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

                                                  September 30, 2009
                                         ------------------------------------
                                                    Accumulated
                                                         Amorti-   Net Book
                                               Cost      zation       Value
                                         ------------------------------------
    Origination costs for existing leases   $54,419     $15,919     $38,500
    In-place leases                          57,376      24,826      32,550
    Tenant relationships                     57,098      21,079      36,019
    Above-market existing leases             16,015      10,323       5,692
                                         ------------------------------------
                                           $184,908     $72,147    $112,761
                                         ------------------------------------
                                         ------------------------------------


                                                   December 31, 2008
                                         ------------------------------------
                                                    Accumulated
                                                         Amorti-   Net Book
                                               Cost      zation       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 an average term to maturity of approximately 2.5 years.

    
    The balance of each note is as follows:

                                                      September    December
                                                       30, 2009    31, 2008
                                                -----------------------------
    Capital expenditure program                            $436        $505
    Interest rate subsidy                                 8,489      10,818
                                                -----------------------------
                                                         $8,925     $11,323
                                                -----------------------------
                                                -----------------------------


    7) OTHER ASSETS

                                                      September    December
                                                       30, 2009    31, 2008
                                                -----------------------------
                                                                   Restated
                                                                    (Note 3)
    Gross accounts receivable                            $6,501      $7,286
    Provision for doubtful accounts                        (297)       (250)
                                                -----------------------------
    Net accounts receivable                               6,204       7,036
    Accrued straight-line rent receivable                10,560       7,786
    Prepaid expenses                                     11,992       5,174
    Restricted cash                                          25         938
                                                -----------------------------
                                                        $28,781     $20,934
                                                -----------------------------
                                                -----------------------------


    8) COMMERCIAL PROPERTY DEBT

                                           Weighted    Weighted
                                            average     average
                                           interest     term to   September
                                  Range        rate    maturity    30, 2009
                             ------------------------------------------------
    Fixed rate mortgages      4.85-8.00%       5.57%  6.0 years    $573,615
    Floating rate term
     facility                                  4.40%  1.7 years      41,378
    Floating rate revolving
     credit facility                           3.63%  1.8 years      72,217
    Deferred financing charges                                       (4,659)
                                                                  -----------
                                                                   $682,551
                                                                  -----------
                                                                  -----------


                                           Weighted    Weighted
                                            average     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                           4.37%  2.5 years      93,400
    Floating rate demand
     credit facility                           3.50%     Demand      10,000
    Deferred financing charges                                       (5,223)
                                                                  -----------
                                                                   $808,971
                                                                  -----------
                                                                  -----------


    As September 30, 2009, debt retirements for the next 5 years are:

                                  Fixed    Floating   Financing
                                   Rate        Rate       Costs       Total
                             ------------------------------------------------
    Remaining 2009               $4,879        $Nil        $Nil      $4,879
    2010                        121,919           -           -     121,919
    2011                         42,557     113,595           -     156,152
    2012                         16,362           -           -      16,362
    2013                         47,235           -           -      47,235
    Thereafter                  332,075           -           -     332,075
                             ------------------------------------------------
                                565,027     113,595           -     678,622
    Deferred financing
     charges                          -           -      (4,659)     (4,659)
    Fair value debt
     adjustment                   8,588           -           -       8,588
                             ------------------------------------------------
                               $573,615    $113,595     $(4,659)   $682,551
                             ------------------------------------------------
                             ------------------------------------------------
    

The floating rate term facility is 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 June 4, 2009, Crombie completed the syndication of the floating rate term facility and extended the maturity date to May 2011. The floating interest rate is based on a specific margin over prime rate or the bankers acceptance rate. It is secured by a charge on the secured properties, together with an assignment of leases. The floating rate term facility contains financial and non-financial covenants that are customary for a credit facility of this nature and which mirror the covenants set forth in the floating rate revolving credit facility.

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.

    
    9) CONVERTIBLE DEBENTURES

                               Maturity    Interest   September    December
                                   date        rate    30, 2009    31, 2008
                             ------------------------------------------------
    Series A             March 20, 2013        7.00%    $30,000     $30,000

    Series B              June 30, 2015        6.25%     85,000           -
    Deferred financing
     charges                                             (4,407)     (1,032)
                                                -----------------------------
                                                       $110,593     $28,968
                                                -----------------------------
                                                -----------------------------
    

Series A Convertible Debentures - Refer to the note disclosure in Crombie's 2008 Annual Report.

Series B Convertible Debentures

On September 30, 2009, Crombie issued $85,000 in unsecured convertible debentures (the "Series B Debentures"), the net proceeds of which were used to reduce the floating rate term facility.

Each Series B Debenture is convertible into units of Crombie at the option of the Series B Debenture holder up to the maturity date of June 30, 2015 at a conversion price of $11 per unit.

The Series B Debentures bear interest at an annual fixed rate of 6.25%, payable semi-annually on June 30 and December 31 in each year commencing on December 31, 2009. The Series B Debentures are not redeemable prior to September 30, 2012, except upon the satisfaction of certain conditions. On or after September 30, 2012 and prior to September 30, 2013, the Series B Debentures may be redeemed by Crombie, 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 of redemption is given exceeds 125% of the conversion price ($13.75 per unit). On or after September 30, 2013, the Series B Debentures may be redeemed by Crombie, in whole or in part, at a redemption price equal to the principal amount thereof plus accrued and unpaid interest.

Crombie also has an option to satisfy its obligation to pay, in whole or in part, the principal amount of the Series B Debentures that are to be redeemed or that have matured by issuing units to Series B Debenture holders. In addition, Crombie also has the option to pay interest on any interest payment date by selling units and applying the proceeds to satisfy its interest obligation.

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

    
    10) PAYABLES AND ACCRUALS
                                                      September    December
                                                       30, 2009    31, 2008
                                                    -------------------------
                                                                   Restated
                                                                    (Note 3)
    Tenant improvements and capital expenditures        $15,785     $13,384
    Property operating costs                             16,803      20,166
    Advance rents                                         2,232       5,364
    Interest on commercial property debt and
     debentures                                           3,200       2,504
    Fair value of interest rate swap agreements          25,090      53,044
                                                    -------------------------
                                                        $63,110     $94,462
                                                    -------------------------
                                                    -------------------------


    11) INTANGIBLE LIABILITIES
                                                   September 30, 2009
                                        -------------------------------------
                                                    Accumulated
                                                       Amortiza-        Net
                                               Cost        tion  Book Value
                                        -------------------------------------
    Below-market existing leases            $55,703     $21,077     $34,626
                                        -------------------------------------
                                        -------------------------------------


                                                    December 31, 2008
                                        -------------------------------------
                                                    Accumulated
                                                       Amortiza-        Net
                                               Cost        tion  Book 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 ac-
     counting
     policy
     (Note 3)       -       (20)          -         -           -       (20)
            -----------------------------------------------------------------
    Balance,
     January
     1, 2009
     as res-
     tated    244,520    32,098         Nil   (27,254)    (50,201)  199,163
    Net
     income         -     6,653           -         -           -     6,653
    Distri-
     butions        -         -           -         -     (17,882)  (17,882)
    Other
     compre-
     hensive
     income         -         -           -    10,376           -    10,376
    Class B
     LP Unit
     issue
     proceeds,
     net of
     costs
     of $362   29,638         -           -         -           -    29,638
            -----------------------------------------------------------------
    Balance,
     September
     30,
     2009    $274,158   $38,751        $Nil  $(16,878)   $(68,083) $227,948
            -----------------------------------------------------------------
            -----------------------------------------------------------------


                                          Accumulated
                                                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 ac-
    counting
     policy
     (Note 3)       -       (20)          -         -           -       (20)
            -----------------------------------------------------------------
    Balance,
     January
     1, 2008
     as res-
     tated    191,302    18,658         Nil    (2,784)    (29,277)  177,899
    Net
     income         -     8,472           -         -           -     8,472
    Distrib-
    utions          -         -           -         -     (15,344)  (15,344)
    Other
     compre-
     hensive
     income
     (loss)         -         -           -    (6,060)          -    (6,060)
    Class B
     LP Unit
     issue
     proceeds,
     net of
     costs
     of
     $1,782    53,218         -           -         -           -    53,218
            -----------------------------------------------------------------
    Balance,
     Septem-
     ber 30,
     2008 as
     resta-
     ted     $244,520   $27,130        $Nil   $(8,844)   $(44,621) $218,185
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    13) UNITS OUTSTANDING

                                 Crombie REIT Special
                                   Voting Units and
             Crombie REIT Units    Class B LP Units            Total
          ---------------------  --------------------  ----------------------
               Number                Number                Number
             of Units    Amount    of Units    Amount    of Units    Amount
          -------------------------------------------------------------------
    Balance,
     January
     1,
     2009  27,271,888  $265,096  25,079,576  $244,520  52,351,464  $509,616
    Unit
     issue
     proceeds,
     net of
     costs  4,725,000    34,936   3,846,154    29,638   8,571,154    64,574
    Units
     issued
     under
     EUPP      47,411       341           -         -      47,411       341
    Units
     released
     under
     EUPP           -         8           -         -           -         8
    Net
     change
     in
     EUPP
     loans
     receivable     -      (172)          -         -           -      (172)
          -------------------------------------------------------------------
    Balance,
     Septem-
     ber
     30,
     2009  32,044,299  $300,209  28,925,730  $274,158  60,970,029  $574,367
          -------------------------------------------------------------------
          -------------------------------------------------------------------

                                 Crombie REIT Special
                                   Voting Units and
             Crombie REIT Units    Class B LP Units            Total
          ---------------------  --------------------  ----------------------
               Number                Number                Number
             of Units    Amount    of Units    Amount    of Units    Amount
          -------------------------------------------------------------------
    Balance,
     January
     1,
     2008  21,648,985  $205,273  20,079,576  $191,302  41,728,561  $396,575
    Unit
     issue
     proceeds,
     net of
     costs  5,727,750    60,997   5,000,000    53,218  10,727,750   114,215
    Units
     issued
     under
     EUPP      34,053       386           -         -      34,053       386
    Units
     released
     under
     EUPP           -        20           -         -           -        20
    Net
     change
     in
     EUPP
     loans
     receivable     -      (215)          -         -           -      (215)
    Unit
     redem-
     ption   (138,900)   (1,375)          -         -    (138,900)   (1,375)
          -------------------------------------------------------------------
    Balance,
     September
     30,
     2008  27,271,888  $265,086  25,079,576  $244,520  52,351,464  $509,606
          -------------------------------------------------------------------
          -------------------------------------------------------------------
    

Crombie REIT Units

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 $34,936 net of issue costs.

Crombie REIT Special Voting Units and Class B LP Units

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 $29,638 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 September 30, 2009, there are loans receivable from executives of $1,459 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 September 30, 2009 was $1,706.

The compensation expense related to the EUPP during the three months ended and nine months ended September 30, 2009 were $12 and $35 (three months ended and nine months ended September 30, 2008 - $11 and $31 respectively).

Income (Loss) per Unit Computations

Basic net income (loss) per Unit is computed by dividing net income (loss) by the weighted average number of Units outstanding during the period. Diluted net income (loss) per Unit is calculated on the assumption that all EUPP loans were repaid at the beginning of the period. For all periods, 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 (loss) per unit or diluted weighted average number of units outstanding. Crombie incurred a loss from continuing operations for the three months ended September 30, 2009, and as such the inclusion of any potential units in the calculation of the diluted net income (loss) per Unit for that three month period would be anti-dilutive. As at September 30, 2009, there are no other dilutive items.

    
    14) PROPERTY REVENUE
                                  Three       Three        Nine        Nine
                                 Months      Months      Months      Months
                              Ended Sep.  Ended Sep.  Ended Sep.  Ended Sep.
                               30, 2009    30, 2008    30, 2009    30, 2008
                            -------------------------------------------------
    Rental revenue
     contractually due from
     tenants                    $48,971     $48,929    $147,983    $131,002
    Straight-line rent
     recognition                    648         741       2,774       1,759
    Below-market lease
     amortization                 2,145       2,145       6,435       5,145
    Above-market lease
     amortization                  (773)       (771)     (2,316)     (2,286)
                            -------------------------------------------------
                                $50,991     $51,044    $154,876    $135,620
                            -------------------------------------------------
                            -------------------------------------------------


    15) INTEREST
                                  Three       Three        Nine        Nine
                                 Months      Months      Months      Months
                              Ended Sep.  Ended Sep.  Ended Sep.  Ended Sep.
                               30, 2009    30, 2008    30, 2009    30, 2008
                            -------------------------------------------------
    Fixed rate mortgages         $9,320      $5,903     $26,393     $17,241
    Floating rate term,
     revolving and demand
     facilities                   1,731       5,018       5,610       9,558
    Convertible debentures          544         528       1,594       1,115
                            -------------------------------------------------
    Interest expense             11,595      11,449      33,597      27,914
    Change in fair value
     debt adjustment                768         821       2,332       2,558
    Interest paid on
     discontinued
     operations                       -          88           -         266
    Change in accrued
     interest                      (610)       (773)       (696)       (935)
    Amortization of
     effective swap
     agreements                    (450)          -      (1,112)          -
    Amortization of deferred
     financing charges             (716)       (349)     (1,713)       (826)
                            -------------------------------------------------
    Interest paid               $10,587     $11,236     $32,408     $28,977
                            -------------------------------------------------
                            -------------------------------------------------


    16) OTHER INCOME (EXPENSES)
                                  Three       Three        Nine        Nine
                                 Months      Months      Months      Months
                              Ended Sep.  Ended Sep.  Ended Sep.  Ended Sep.
                               30, 2009    30, 2008    30, 2009    30, 2008
                            -------------------------------------------------
    Expense related to swap
     settlement                 $(8,139)         $-     $(8,139)         $-
    Write off of deferred
     financing charges           (1,860)          -      (1,860)          -
    Gain on disposition of
     land                             -           -           -          77
                            -------------------------------------------------
                                $(9,999)         $-     $(9,999)        $77
                            -------------------------------------------------
                            -------------------------------------------------
    

On September 14, 2009, in connection with the Series B 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 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 (loss) for the period ended September 30, 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.

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 their 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:

    
                                                      September    December
                                                       30, 2009    31, 2008
                                                    -------------------------
    Tax liabilities relating to difference in tax
     and book value                                     $86,655     $86,060
    Tax asset relating to non-capital loss
     carry-forward                                       (6,655)     (6,260)
                                                    -------------------------
    Future income tax liability                         $80,000     $79,800
                                                    -------------------------
                                                    -------------------------


    The future income tax expense consists of the following:

                                  Three       Three        Nine        Nine
                                 Months      Months      Months      Months
                              Ended Sep.  Ended Sep.  Ended Sep.  Ended Sep.
                               30, 2009    30, 2008    30, 2009    30, 2008
                            -------------------------------------------------
    Provision for income
     taxes at the expected
     rate                         $(627)     $2,193      $4,176      $6,762
    Tax effect of income
     attribution to Crombie's
     unitholders                    627      (1,334)     (3,976)     (4,802)
                            -------------------------------------------------
    Income tax expense             $Nil        $859        $200      $1,960
                            -------------------------------------------------
                            -------------------------------------------------


    18) SUPPLEMENTARY CASH FLOW INFORMATION

    a) Items not affecting operating cash

                                  Three       Three        Nine        Nine
                                 Months      Months      Months      Months
                              Ended Sep.  Ended Sep.  Ended Sep.  Ended Sep.
                               30, 2009    30, 2008    30, 2009    30, 2008
                            -------------------------------------------------
                                           Restated                Restated
                                            (Note 3)                (Note 3)
    Items not affecting
     operating cash:
      Non-controlling interest    $(989)     $2,358      $6,653      $8,472
      Depreciation of commercial
       properties                 4,721       4,544      14,022      11,961
      Depreciation of
       recoverable capital
       expenditures                 268         233         794         695
      Amortization of tenant
       improvements/lease costs   1,161         989       3,184       2,480
      Amortization of deferred
       financing charges            716         349       1,713         826
      Write off of deferred
       financing charges(Note 16) 1,860           -       1,860           -
      Expense related to swap
       settlement (Note 16)       8,139           -       8,139           -
      Amortization of effective
       swap agreements              450           -       1,112           -
      Amortization of intangible
       assets                     4,882       6,759      16,326      16,280
      Amortization of above-
       market leases                773         766       2,316       2,315
      Amortization of below-
       market leases             (2,145)     (2,144)     (6,435)     (5,153)
      Gain on disposition of
       land                           -           -           -         (77)
      Accrued rental revenue       (648)       (745)     (2,774)     (1,766)
      Unit based compensation        12          11          35          31
      Write down of asset held
       for sale (Note 22)             -         895           -         895
      Future income tax expense       -         859         200       1,960
                            -------------------------------------------------
                                $19,200     $14,874     $47,145     $38,919
                            -------------------------------------------------
                            -------------------------------------------------

    b) Change in other non-cash operating items

                                  Three       Three        Nine        Nine
                                 Months      Months      Months      Months
                              Ended Sep.  Ended Sep.  Ended Sep.  Ended Sep.
                               30, 2009    30, 2008    30, 2009    30, 2008
                            -------------------------------------------------
                                           Restated                Restated
                                            (Note 3)                (Note 3)
    Cash provided by (used in):
      Receivables                $1,171       $(159)       $832     $(1,079)
      Prepaid expenses and
       other assets              (1,994)     (3,941)     (5,905)     (8,258)
      Payables and other
       liabilities               10,384       1,934      (2,011)      6,902
                            -------------------------------------------------
                                $ 9,561     $(2,166)    $(7,084)    $(2,435)
                            -------------------------------------------------
                            -------------------------------------------------
    

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 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 15.6 and 75.9 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 $145 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.

20) RELATED PARTY TRANSACTIONS

As at September 30, 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. The costs assumed by Empire Company Limited pursuant to the agreement during the three months ended and nine months ended September 30, 2009 were $206 and $781 (three months ended and nine months ended September 30, 2008 - $285 and $1,126 respectively) 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. In addition, for various periods, ECL has an obligation to provide rental income and interest rate subsidies. The costs assumed by Empire Company Limited pursuant to the agreement during the three months ended and nine months ended September 30, 2009 were $229 and $878 (three months ended and nine months ended September 30, 2008 - $343 and $1,516 respectively) and was netted against property expenses owing by Crombie to Empire Company Limited. The head lease subsidy during the three months ended and nine months ended September 30, 2009 were $311 and $715 (three months ended and nine months ended September 30, 2008 - $105 and $734 respectively).

Crombie also earned rental revenue of $14,356 for the three months ended September 30, 2009 and $47,566 for the nine months ended September 30, 2009 (three months ended and nine months ended September 30, 2008 - $13,578 and $33,075 respectively) 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 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 Debentures.

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.

    
                               September 30, 2009      December 31, 2008
                            ------------------------------------------------
                               Carrying                Carrying
                                  Value  Fair Value       Value  Fair Value
                            ------------------------------------------------
    Assets related to
     discontinued operations     $7,038      $7,226      $7,184      $7,477
                            ------------------------------------------------
                            ------------------------------------------------
    Commercial property debt   $687,210    $678,349    $814,194    $812,488
                            ------------------------------------------------
                            ------------------------------------------------
    Convertible debentures     $115,000    $115,824     $30,000     $25,950
                            ------------------------------------------------
                            ------------------------------------------------
    Liabilities related to
     discontinued operations     $6,373      $6,348      $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 September 30, 2009;

    
    - Excluding Sobeys (which accounts for 32.9% 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 9.3% of the gross leaseable area
      of Crombie will expire in any one year.
    

As outlined in Note 20, Crombie earned rental revenue of $14,356 for the three months ended September 30, 2009 and $47,566 for the nine months ended September 30, 2009 (three months ended and nine months ended September 30, 2008 - $13,578 and $33,075 respectively) 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 September 30, 2009:

    
    - Crombie's weighted average term to maturity of the fixed rate mortgages
      was 6.0 years; and

    - Crombie's exposure to floating rate debt, including the impact of the
      fixed rate swap agreements discussed below, was 9.3% of the total
      commercial property debt. Excluding the floating rate term facility,
      which is to be replaced with permanent fixed rate financing during the
      next two years, the exposure to floating rate debt is 3.5%.
    

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. Recent turmoil in the financial markets has 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 remain below historical average values and the effect of the abnormally low swap spreads, combined with the decline in the Canadian bond yields, has resulted in a significant deterioration of the mark-to-market values for the interest rate swap agreements. At September 30, 2009, the mark-to-market exposure on the interest rate swap agreements was approximately $25,090. There is no immediate cash impact from the mark-to-market adjustment. The unfavourable difference in the mark-to-market amount of the remaining interest rate swap agreements is reflected in other comprehensive income(loss) rather than net income(loss)as the swaps are all designated and effective hedges. The breakdown of the swaps in place 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 September 30, 2009, had
      an unfavourable mark-to-market exposure of $3,280 (September 30, 2008 -
      unfavourable $1,608) 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 number of delayed interest rate swap
      agreements of a notional amount of $100,334 (September 30, 2008 -
      $110,431) with settlement dates between February 1, 2010 and July 2,
      2011, maturing between February 1, 2019 and July 2, 2021 to mitigate
      exposure to interest rate increases for mortgages maturing in 2010 and
      2011. The fair value of these delayed interest rate swap agreements had
      an unfavourable mark-to-market exposure of $15,082 compared to the face
      value September 30, 2009 (September 30, 2008 - unfavourable $8,037).
      The change in these amounts has been recognized in other comprehensive
      income (loss).

    - In relation to the acquisition of a portfolio of 61 retail properties
      from subsidiaries of Empire Company Limited, Crombie has entered into a
      delayed interest rate swap agreement of a notional amount of $38,000
      (September 30, 2008 - $180,000) with a settlement date of October 15,
      2009 to mitigate exposure to interest rate increases prior to replacing
      the floating rate term facility with long-term financing. The fair
      value of this agreement had an unfavourable mark-to-market exposure of
      $6,728 compared to the face value on September 30, 2009 (September 30,
      2008 - unfavourable $6,168). The change in this amount has been
      recognized in other comprehensive income (loss). Subsequent to period
      end, the agreement was settled for $6,116 (see Note 25(b)).
    

During the first quarter of 2009, Crombie settled an interest rate swap agreement related to a notional amount of $42,000 for a settlement amount of $4,535. This settlement amount has been recognized in other comprehensive income (loss) since the inception of the interest rate swap agreements. This amount will be reclassified to interest expense using the effective interest method over the five year term of the mortgage.

On August 27, 2009, Crombie settled an interest rate swap agreement related to a notional amount of $16,000 for a settlement amount of $2,807. This settlement amount has been recognized in other comprehensive income (loss) since the inception of the interest rate swap agreements. This amount will be reclassified to interest expense using the effective interest method over the five year term of the mortgage.

On September 14, 2009, Crombie settled an interest rate swap agreement related to a notional amount of $84,000 for a settlement amount of $8,139 (Note 16).

Crombie estimates that $503 of other comprehensive income (loss) will be reclassified to interest expense during the remaining quarter of 2009 based on interest rate swap agreements settled to September 30, 2009.

A fluctuation in interest rates would have an impact on Crombie's net income (loss) 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:

    
                                Three months ended      Three months ended
                                September 30, 2009      September 30, 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                     $(189)       $189       $(501)       $501
    -------------------------------------------------------------------------


                                 Nine months ended       Nine months ended
                                September 30, 2009      September 30, 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                     $(703)       $703       $(866)       $866
    -------------------------------------------------------------------------


                                September 30, 2009      September 30, 2008
                            -------------------------------------------------
                                    0.5%        0.5%        0.5%        0.5%
                               increase    decrease    increase    decrease
    -------------------------------------------------------------------------
    Impact on other compre-
     hensive income and non-
     controlling interest
     items due to changes
     in fair value of
     derivatives designated
     as a cash flow hedge        $6,139     $(6,434)     $9,486     $(9,903)
    -------------------------------------------------------------------------
    

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.

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 security provided by Crombie. The mark-to-market adjustment on the interest rate swap agreements reached an out-of-the-money position of approximately $25,090 at September 30, 2009. The deterioration in the mark-to-market position may have the impact of reducing Crombie's available credit in the revolving credit facility.

Crombie has no mortgages maturing in fiscal 2009 and during the second quarter of 2009 completed the extension of the floating rate term facility from the original maturity date of October 2009 to May 2011. In addition, 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. Negotiations on refinancing have begun and Crombie does not anticipate difficulty in refinancing the debt prior to maturity.

22) ASSET HELD FOR SALE AND DISCONTINUED OPERATIONS

During the second quarter of 2008, Crombie and a potential purchaser signed a purchase and sale agreement for a commercial property. The purchase and sale agreement closed on October 24, 2008. In September 2008, the asset held for sale was written down to estimate the property's fair value at September 30, 2008, resulting in a charge of $895 (net of taxes $461).

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 3.64% 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 September 30, 2009 and December 31, 2008 and the statements of income for the property held for sale for the three months ended and nine months ended September 30, 2009 and September 30, 2008.

    
    Balance Sheets
                                                      September    December
                                                       30, 2009    31, 2008
                                                    -------------------------
    Assets
      Assets related to discontinued operations          $7,038      $7,184
                                                    -------------------------
    Liabilities
      Accounts payable and accrued liabilities                -          30
      Liabilities related to discontinued operations      6,373       6,487
                                                    -------------------------
                                                          6,373       6,517
                                                    -------------------------

    Net investment in asset held for sale                  $665        $667
                                                    -------------------------
                                                    -------------------------


    Statements of Income
                                  Three       Three        Nine        Nine
                                 Months      Months      Months      Months
                              Ended Sep.  Ended Sep.  Ended Sep.  Ended Sep.
                               30, 2009    30, 2008    30, 2009    30, 2008
                            -------------------------------------------------
    Property revenue
      Rental revenue
       contractually due
       from tenants                  $-        $593          $-      $2,010
      Straight-line rent
       recognition                    -           4           -           7
      Below-market lease
       amortization                   -          (1)          -           8
      Above-market lease
       amortization                   -           5           -         (29)
                            -------------------------------------------------
                                      -         601           -       1,996
                            -------------------------------------------------

    Expenses
      Property expenses               -         297           -         976
      Interest                        -          88           -         266
      Depreciation of
       commercial properties          -           -           -          58
      Amortization of
       tenant improvements/
       lease costs                    -           -           -          23
      Amortization of
       intangible assets              -         (10)          -          48
                            -------------------------------------------------
                                      -         375           -       1,371
                            -------------------------------------------------
    Income from discontinued
     operations                      $-        $226          $-        $625
                            -------------------------------------------------
                            -------------------------------------------------
    

23) CAPITAL MANAGEMENT

Crombie's objective when managing capital on a long-term basis is to maintain overall indebtedness in the range of 50% to 55% 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:

    
                                                      September    December
                                                       30, 2009    31, 2008
                                                    -------------------------
                                                                   Restated
                                                                    (Note 3)
    Commercial property debt                           $682,551    $808,971
    Convertible debentures                              110,593      28,968
    Non-controlling interest                            227,948     199,163
    Unitholders' equity                                 249,646     215,558
                                                    -------------------------
                                                     $1,270,738  $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:

                                                      September    December
                                                       30, 2009    31, 2008
                                                    -------------------------
                                                                   Restated
                                                                    (Note 3)
    Mortgages payable                                  $573,615    $531,970
    Convertible debentures                              115,000      30,000
    Term facility                                        41,378     178,824
    Revolving credit facility                            72,217      93,400
    Demand credit facility                                    -      10,000
                                                    -------------------------
    Total debt outstanding                              802,210     844,194
    Less: Applicable fair value debt adjustment          (8,489)    (10,818)
                                                    -------------------------
    Debt                                               $793,721    $833,376
                                                    -------------------------
                                                    -------------------------

    Total assets                                     $1,465,591  $1,483,219
    Add:
    Deferred financing charges                            9,066       6,255
    Accumulated depreciation of commercial properties    63,865      45,865
    Accumulated amortization of intangible assets        72,147      53,505
    Less:
    Assets held related to discontinued operations       (7,038)     (7,184)
    Interest rate subsidy                                (8,489)    (10,818)
    Fair value adjustment to future taxes               (39,245)    (39,245)
                                                    -------------------------
    Gross book value                                 $1,555,897  $1,531,597
                                                    -------------------------
                                                    -------------------------
    Debt to gross book value                               51.0%       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 September 30, 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 three months ended and nine months ended September 30, 2009 were $63 and $208 (three months ended and nine months ended September 30, 2008 - $96 and $287 respectively).

25) SUBSEQUENT EVENTS

a) On October 22, 2009, Crombie declared distributions of 7.417 cents per unit for the period from October 1, 2009 to and including, October 31, 2009. The distribution will be payable on November 16, 2009 to Unitholders of record as at October 31, 2009.

b) On September 23, 2009, Crombie signed a commitment letter for mortgage financing of $37,000 with a third party. Upon closing, the mortgage will have an interest rate of 6.9% and a term of 10 years. On receipt, the mortgage funds will be used to reduce the floating rate term facility. In connection with the mortgage financing, on October 14, 2009, Crombie cash settled an interest rate swap with a notional value of $38,000 for a settlement amount of $6,116. As at September 30, 2009, the swap had a mark-to-market value of $6,728. The settlement amount will be reclassified to interest expense using the effective interest method over the 10 year term of the mortgage.

c) On November 5, 2009, Crombie entered into an agreement to acquire eight retail properties, representing approximately 335,000 square feet of gross leaseable area, from subsidiaries of Empire Company Limited. The purchase price of the properties is approximately $62,000, excluding closing and transaction costs. The acquisition is expected to close in stages over the next six months as due diligence and mortgage financing for the properties are finalized. The purchase price will be funded through a combination of assumed mortgage financing and Crombie's floating rate revolving credit facility.

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 period's presentation.

Management Discussion and Analysis

(In thousands of dollars, except per unit amounts)

The following is Management's Discussion and Analysis ("MD&A") of the consolidated financial condition and results of operations of Crombie Real Estate Investment Trust ("Crombie") for the quarter and year-to-date ended September 30, 2009, with a comparison to the financial condition and results of operations for the comparable period in 2008.

This MD&A should be read in conjunction with Crombie's interim consolidated financial statements and accompanying notes for the period ended September 30, 2009, and the audited consolidated financial statements and accompanying notes for the year ended December 31, 2008 and the related MD&A. Information about Crombie can be found on SEDAR at www.sedar.com.

Forward-looking Information

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

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

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

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

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

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

(v) 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;

(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) estimated losses on derivatives that will be reclassified to interest expenses during the remaining quarter of 2009;

(xiii) anticipated refinancing of debt maturities, which is dependent on liquidity risks; and

(xiv) anticipated 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.

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 impact of settlement of effective interest rate swap agreements.

    
    -------------------------------------------------------------------------
                                                           Nine        Nine
                                Quarter     Quarter      Months      Months
    (in thousands of dollars,     Ended       Ended       Ended       Ended
     except per unit amounts    Sep. 30,    Sep. 30,    Sep. 30,    Sep. 30,
     and as otherwise noted)       2009        2008        2009        2008
    -------------------------------------------------------------------------
    Property revenue            $50,991     $51,044    $154,876    $135,620
    Net income (loss)           $(1,095)     $2,563      $7,225      $9,185
    Basic and diluted net
     income (loss) per unit      $(0.03)      $0.09       $0.25       $0.37
    -------------------------------------------------------------------------
    FFO                          $8,948     $19,200     $48,404     $51,851
    FFO per unit(1)               $0.15       $0.37       $0.87       $1.08
    FFO payout ratio (%)          151.6%       60.7%       77.5%       62.5%
    AFFO                          $(451)    $10,019     $25,771     $30,031
    AFFO per unit(1)             $(0.01)      $0.19       $0.46       $0.62
    AFFO payout ratio (%)           N/A%      116.3%      145.5%      107.9%
    -------------------------------------------------------------------------
                                Sep. 30,    Sep. 30,
                                   2009        2008
    -------------------------------------------------------------------------
    Debt to gross book
     value(2)                      51.0%       55.1%
    Total assets             $1,465,591  $1,501,186
    Total commercial
     property debt and
     convertible debentures    $793,144    $849,541
    -------------------------------------------------------------------------
    (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 60,804,544 for the quarter ended
        September 30, 2009 and 52,351,464 for the quarter ended September
        30, 2008, 55,457,083 for the nine months ended September 30, 2009 and
        48,105,571 for the nine months ended September 30, 2008.
    (2) See "Debt to Gross Book Value Ratio" for detailed calculation.
    

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 September 30, 2009, Crombie owned a portfolio of 113 commercial properties in seven provinces, comprising approximately 11.2 million square feet of gross leaseable area ("GLA").

On April 22, 2008, Crombie closed an acquisition of a 61 retail property portfolio representing approximately 3.3 million square feet of GLA (the "Portfolio Acquisition") from certain affiliates of Empire Company Limited ("Empire Subsidiaries"). The cost of the Portfolio Acquisition to Crombie was $428,500, excluding closing and transaction costs. The portfolio consists of 40 single-use freestanding Sobeys grocery stores of various Sobeys banners, 20 Sobeys anchored retail strip centres and one Sobeys anchored partially enclosed centre. The GLA of the portfolio is as follows: Atlantic Canada - 78%; Quebec - 7%; and Ontario - 15%.

In order to partially finance the Portfolio Acquisition, on March 20, 2008, Crombie completed 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) and $30,000 of unsecured convertible debentures (the "Series A Debentures") for aggregate gross proceeds of $93,005.

Empire Subsidiaries took $55,000 of the purchase price in Class B LP Units of Crombie Limited Partnership ("Class B LP Units") at the $11.00 offering price.

The remainder of the purchase price was satisfied with a $280,000, 18 month floating rate term financing ("Term Facility") and a draw on Crombie's revolving credit facility. On September 30, 2008, Crombie completed a refinancing of $100,000 of the Term Facility with fixed rate mortgages. On February 12, 2009, Crombie completed mortgage financing on an additional $39,000 of the Term Facility. On June 4, 2009, Crombie extended the Term Facility with a syndicate of seven Canadian chartered banks. The maturity date of the Term Facility was extended to May 2011 and is secured by a charge on the secured properties, together with an assignment of leases. On August 27, 2009 Crombie completed mortgage financings for an additional $15,000 of the Term Facility. On September 30, 2009, Crombie issued $85,000 in unsecured convertible debentures (the "Series B Debentures") to further reduce the Term Facility. (See "Commercial Property Debt").

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

On June 25, 2009, Crombie closed a public offering of 4,725,000 Units, including the underwriters' over-allotment option Units, at a price of $7.80 per Unit for gross proceeds of $36,855. Concurrent with the public offering, in satisfaction of its pre-emptive right, ECL purchased $30,000 of Class B LP Units and the attached Special Voting Units, on a private-placement basis, at the $7.80 offering price. Empire Company Limited ("Empire"), through ECL, holds a 47.4% economic and voting interest in Crombie as of September 30, 2009.

    
    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. All acquisitions completed to date have been purchased at costs which ensure they will be immediately accretive to cash available for distribution. The relationship with ECL includes currently owned and future development properties, as well as opportunities through the rights of first refusal 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 for the year ended December 31, 2008. 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 will also enable 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. The history of the relationship between Crombie and ECL continues to provide promising opportunities for growth through future development opportunities on both new and existing sites in Crombie's portfolio.

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, tightened 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 over the last two quarters to further strengthen its available capital resources.

The turmoil in the financial markets also caused bond yields to materially decline and has dramatically reduced interest rate swap spreads. This resulted in a significant deterioration of the mark-to-market 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 "Borrowing Capacity and Debt Covenants" and "Risk Management" sections 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 can now be considered. 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 THIRD QUARTER HIGHLIGHTS

    
    - Crombie completed a prospectus offering of unsecured convertible
      debentures for gross proceeds of $85,000 on September 30, 2009.

    - Crombie completed leasing activity on 666,000 square feet of GLA at
      September 30, 2009, which represents approximately 95% of its 2009
      expiring leases.

    - Occupancy for the properties was 94.2% at September 30, 2009 compared
      with 94.1% at June 30, 2009.

    - Property revenue for the quarter ended September 30, 2009 remained
      virtually unchanged at $50,991 compared to $51,044 for the quarter
      ended September 30, 2008.

    - Same-asset NOI for the third quarter of 2009 of $32,406 decreased by
      $4 compared to $32,410 for the quarter ended September 30, 2008.

    - The FFO payout ratio for the nine months ended September 30, 2009 was
      77.5% which was unfavourable to the target annual payout ratio of 70%
      and unfavourable to the payout ratio of 62.5% for the same period in
      2008.

    - The AFFO payout ratio for the nine months ended September 30, 2009 was
      145.5% which was unfavourable to the target annual AFFO payout ratio of
      95% and was unfavourable to the payout ratio of 107.9% for the same
      period in 2008.

    - Debt to gross book value increased slightly to 51.0% at September 30,
      2009 compared to 50.9% at June 30, 2009.

    - Crombie's interest service coverage ratio for the first nine months
      of 2009 was 2.85 times EBITDA and debt service coverage ratio was
      1.98 times EBITDA, compared to 2.81 times EBITDA and 2.02 times EBITDA,
      respectively, for the same period in 2008.
    

OVERVIEW OF THE PROPERTY PORTFOLIO

Property Profile

At September 30, 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 September 30, 2009, the portfolio distribution of the GLA by province was as follows:

    
    -------------------------------------------------------------------------
                                                           % of
                                                         Annual
                  Number of         GLA        % of     Minimum
    Province     Properties     (sq. ft.)       GLA        Rent  Occupancy(1)
    -------------------------------------------------------------------------
    Nova Scotia          41   5,065,000        45.2%       41.1%       94.3%
    Ontario              22   1,646,000        14.7%       16.9%       95.7%
    New Brunswick        20   1,630,000        14.6%       12.4%       89.8%
    Newfoundland and
     Labrador            13   1,490,000        13.3%       17.2%       94.4%
    Quebec               13     825,000         7.4%        7.8%       98.4%
    Prince Edward
     Island               3     385,000         3.4%        3.1%       94.6%
    Saskatchewan          1     160,000         1.4%        1.5%       97.8%
    -------------------------------------------------------------------------
    Total               113  11,201,000       100.0%      100.0%       94.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For purposes of calculating occupancy percentage, Crombie considers
        GLA covered by the head lease agreement in favour of ECL as occupied
        as there is head lease revenue being earned on the GLA
    

Overall occupancy has marginally increased from 94.1% at June 30, 2009 to 94.2% at September 30, 2009 primarily due to the increase of 101,000 square feet of committed renewals and 96,000 square feet of new leasing activity in the quarter. Of the total of 324,000 square feet in GLA of new tenancies, as shown in the "2009 Portfolio Lease Expiries and Leasing Activity", approximately 60,000 square feet is related to GLA to be occupied in future quarters of 2009 and 2010. This additional new leasing represents approximately 0.5% of Crombie's GLA.

Crombie looks to diversify its geographic composition through growth opportunities, as indicated by the seven acquisitions in Ontario, one acquisition in Quebec and one acquisition in Saskatchewan, plus the Portfolio Acquisition since Crombie's initial public offering (the "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 four properties that are under redevelopment. Fort Edward Mall in Windsor, Nova Scotia is in the process of conversion 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. Finally, Aberdeen Shopping Centre in New Glasgow, Nova Scotia is being expanded to add approximately 10,000 square feet 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").

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 September 30, 2009.

    
    -------------------------------------------------------------------------
                                                                    Average
                                                    % of Annual   Remaining
    Tenant                                         Minimum Rent  Lease Term
    -------------------------------------------------------------------------
    Sobeys (1)                                             32.9% 16.3 years
    Empire Theatres                                         2.2%  8.5 years
    Zellers                                                 2.2%  8.2 years
    Shoppers Drug Mart                                      2.0%  6.6 years
    Nova Scotia Power Inc                                   1.9%  1.5 years
    CIBC                                                    1.6% 17.5 years
    Province of Nova Scotia                                 1.5%  5.9 years
    Bell (Aliant)                                           1.4%  8.9 years
    Public Works Canada                                     1.3%  1.9 years
    Good Life Fitness                                       1.3%  7.7 years
    -------------------------------------------------------------------------
    Total                                                  48.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes Lawtons and Fast Fuel locations.
    

Crombie's portfolio is leased to a wide variety of tenants. Other than Sobeys, that accounts for 32.9% of the annual minimum rent, no other tenant accounts for more than 2.2% of Crombie's minimum rent.

Lease Maturities

The following table sets out as of September 30, 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 10.3 years.

    
    -------------------------------------------------------------------------
                                                                    Average
                                                                   Net Rent
                                            Renewal                     per
                                 Number        Area        % of  Sq. Ft. at
    Year                      of Leases    (sq. ft.)  Total GLA   Expiry ($)
    -------------------------------------------------------------------------
    Remaining 2009                  104     232,000         2.1%     $16.08
    2010                            201     654,000         5.8%     $12.79
    2011                            214   1,044,000         9.3%     $14.37
    2012                            169     911,000         8.1%     $11.87
    2013                            157     876,000         7.8%     $11.83
    Thereafter                      474   6,836,000        61.1%     $12.92
    -------------------------------------------------------------------------
    Total                         1,319  10,553,000        94.2%     $12.94
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    2009 Portfolio Lease Expiries and Leasing Activity

    As at September 30, 2009, portfolio lease expiries and leasing activity
for the year ending December 31, 2009 were as follows:

    -------------------------------------------------------------------------
              Retail -
                 Free-   Retail -    Retail -               Mixed-
             standing    Plazas    Enclosed    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.)      -    78,000     103,000    44,000     117,000   342,000
    Average net
     rent per
     sq. ft.       $-    $16.48      $14.15    $13.20       $9.77    $13.07
    New leasing
     (sq. ft.)  4,000    55,000     163,000    47,000      55,000   324,000
    Average net
     rent per
     sq. ft.   $23.00    $16.80      $10.52    $14.70      $15.58    $13.22
    -------------------------------------------------------------------------
    Total
     renewals/
     new
     leasing
     (sq. ft.)  4,000   133,000     266,000    91,000     172,000   666,000
    Total
     average
     net rent
     per
     sq. ft.   $23.00    $16.61      $11.92    $13.97      $11.63    $13.14
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

During the nine months ended September 30, 2009, Crombie had renewals or entered into new leases in respect of approximately 666,000 square feet at an average net rent of $13.14 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 149,000 square feet involve tenants that were 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 location that went into bankruptcy in 2008, plus two new anchor leases to complete the Highland Square renovation in New Glasgow, Nova Scotia. Rent per square foot for the renewals in the mixed-use properties was lower than the average expiry rate due to the renewal of three long term tenants at previously negotiated terms favourable to the tenants. Excluding the impact of these six new/renewal deals, average rent per square foot for all remaining leases of approximately 523,000 square feet was $15.10, an increase of 11.2% over the average net rent per square foot for 2009 expiring 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 September 30, 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%       15.7%      100.0%
    Retail - Plazas      44   3,965,000        35.4%       37.1%       96.2%
    Retail - Enclosed    14   2,782,000        24.8%       25.1%       91.1%
    Office                5   1,048,000         9.4%        9.0%       87.4%
    Mixed-Use             8   1,707,000        15.2%       13.1%       93.1%
    -------------------------------------------------------------------------
    Total               113  11,201,000       100.0%      100.0%       94.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For purposes of calculating occupancy percentage, Crombie considers
        GLA covered by the head lease agreement in favour of ECL as occupied

    The following table sets out as of September 30, 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.)       (%)
    -------------------------------------------------------------------------
    Remaining
     2009           -         -%     70,000       1.8%     83,000       3.0%
    2010            -         -%    234,000       5.9%    180,000       6.5%
    2011        1,000       0.1%    322,000       8.1%    144,000       5.2%
    2012        5,000       0.3%    295,000       7.4%    150,000       5.4%
    2013            -         -%    391,000       9.9%    212,000       7.6%
    There-
     after  1,693,000      99.6%  2,502,000      63.1%  1,765,000      63.4%
    -------------------------------------------------------------------------
    Total   1,699,000     100.0%  3,814,000      96.2%  2,534,000      91.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Year            Office             Mixed - Use              Total
    -------------------------------------------------------------------------
             (sq. ft.)       (%)   (sq. ft.)       (%)   (sq. ft.)       (%)
    -------------------------------------------------------------------------
    Remaining
     2009      17,000       1.6%     62,000       3.6%    232,000       2.1%
    2010       79,000       7.5%    161,000       9.4%    654,000       5.8%
    2011      359,000      34.3%    218,000      12.8%  1,044,000       9.3%
    2012      123,000      11.7%    338,000      19.8%    911,000       8.1%
    2013      105,000      10.0%    168,000       9.8%    876,000       7.8%
    There-
     after    233,000      22.3%    643,000      37.7%  6,836,000      61.1%
    -------------------------------------------------------------------------
    Total     916,000      87.4%  1,590,000      93.1% 10,553,000      94.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    -------------------------------------------------------------------------
                    Retail -
                       Free-    Retail -    Retail -                 Mixed -
    Year           standing      Plazas    Enclosed      Office        Use
    -------------------------------------------------------------------------
    Remaining 2009      $ -      $16.63      $17.55      $12.60      $14.47
    2010                $ -      $13.75      $13.25      $11.92      $11.32
    2011             $37.50      $14.16      $20.10      $14.21      $11.03
    2012             $25.00      $13.22      $19.03       $9.69       $8.10
    2013                $ -       $9.79      $13.88      $13.51      $12.91
    Thereafter       $13.29      $13.72      $11.92      $12.09      $11.86
    -------------------------------------------------------------------------
    Total            $13.35      $13.37      $13.25      $12.75      $11.10
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    2009 RESULTS OF OPERATIONS

    Acquisitions

    The following table outlines the acquisitions made which affected the
results of operations when compared to the previous year's results. The
following acquisitions took place between January 2008 and September 2009.

    -------------------------------------------------------------------------
                       Date                              GLA    Acquisition
    Property       Acquired      Property Type      (sq. ft.)        Cost(1)
    -------------------------------------------------------------------------
    Portfolio      April 22,            Retail -   1,589,000       $428,500
     Acquisition       2008       Freestanding
                                Retail - Plaza     1,571,000
                             Retail - Enclosed       128,000
    -------------------------------------------------------------------------
    River City      June 12,    Retail - Plaza       160,000        $27,200
     Centre,           2008
     Saskatoon,
     Saskatchewan
    -------------------------------------------------------------------------
    Total                                          3,448,000       $455,700
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excluding closing and transaction costs.
    

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.

    
                                            Nine Months Ended
                                          -----------------------------------
    (In thousands of dollars,             September   September
     except where otherwise noted)         30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Property revenue                       $154,876    $135,620     $19,256
    Property expenses                        55,814      50,721      (5,093)
    -------------------------------------------------------------------------
    Property NOI                             99,062      84,899      14,163
    -------------------------------------------------------------------------
    NOI margin percentage                      64.0%       62.6%        1.4%
    -------------------------------------------------------------------------
    Expenses:
      General and administrative              7,172       5,935      (1,237)
      Interest                               33,597      27,914      (5,683)
      Depreciation and amortization          34,326      31,287      (3,039)
    -------------------------------------------------------------------------
                                             75,095      65,136      (9,959)
    -------------------------------------------------------------------------
    Income from continuing operations
     before other items, income taxes and
     non-controlling interest                23,967      19,763       4,204
    Other income (expenses)                  (9,889)        124     (10,013)
    -------------------------------------------------------------------------
    Income from continuing operations
     before income taxes and
     non-controlling interest                14,078      19,887      (5,809)
    Income taxes expense - Future               200       1,960       1,760
    -------------------------------------------------------------------------
    Income from continuing operations
     before non-controlling interest         13,878      17,927      (4,049)
    Write down of assets held for sale            -        (895)        895
    Income from discontinued operations           -         625        (625)
    -------------------------------------------------------------------------
    Income before non-controlling interest   13,878      17,657      (3,779)
    Non-controlling interest                  6,653       8,472       1,819
    -------------------------------------------------------------------------
    Net income                               $7,225      $9,185     $(1,960)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net income per Unit     $0.25       $0.37      $(0.12)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic weighted average Units
     outstanding (in 000's)                  28,848      24,917
    ------------------------------------------------------------
    ------------------------------------------------------------
    Diluted weighted average Units
     outstanding (in 000's)                  28,997      25,033
    ------------------------------------------------------------
    ------------------------------------------------------------

    Net income for the nine months ended September 30, 2009 of $7,225
decreased by $1,960 from $9,185 for the nine months ended September 30, 2008.
The decrease was primarily due to:

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

    - higher property NOI from the individual property acquisition and the
      Portfolio Acquisition; less the higher interest and depreciation and
      amortization charges applicable to those acquisitions.

    Property Revenue and Property Expenses

    -------------------------------------------------------------------------
                                            Nine Months Ended
                                          ----------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Same-asset property revenue            $110,974    $111,916       $(942)
    Acquisition property revenue             43,902      23,704      20,198
    -------------------------------------------------------------------------
    Property revenue                       $154,876    $135,620     $19,256
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Same-asset property revenue of $110,974 for the nine months ended September 30, 2009 was 0.8% lower than the nine months ended September 30, 2008 due primarily 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 Summerside, Prince Edward Island and Uptown Centre in Fredericton, New Brunswick, partially offset by the increased average rent per square foot ($12.38 in 2009 and $12.32 in 2008) and increased recoverable common area expenses. 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.

    
    -------------------------------------------------------------------------
                                            Nine Months Ended
                                          ----------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Same-asset property expenses            $45,175     $45,022       $(153)
    Acquisition property expenses            10,639       5,699      (4,940)
    -------------------------------------------------------------------------
    Property expenses(1)                    $55,814     $50,721     $(5,093)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Comparative figures have been restated for retrospective changes in
        GAAP.

    Same-asset property expenses of $45,175 for the nine months ended
September 30, 2009 were 0.3% higher than the nine months ended September 30,
2008 due to increased recoverable common area expenses primarily from
increased property taxes, utility costs and seasonal repair costs such as roof
repairs and paving.

    -------------------------------------------------------------------------
                                            Nine Months Ended
                                          ----------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Same-asset property NOI                 $65,799     $66,894     $(1,095)
    Acquisition property NOI                 33,263      18,005      15,258
    -------------------------------------------------------------------------
    Property NOI                            $99,062     $84,899     $14,163
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Same-asset NOI for the nine months ended September 30, 2009 decreased by
1.6% from the nine months ended September 30, 2008.

    Property NOI for the nine months ended September 30, 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   $70,317   $28,211     $42,106      59.9%       58.7%      1.2%
    Newfound-
     land and
     Labrador  24,347     7,142      17,205      70.7%       68.6%      2.1%
    New
     Bruns-
     wick      18,448     7,762      10,686      57.9%       55.9%      2.0%
    Ontario    24,795     8,069      16,726      67.5%       66.9%      0.6%
    Prince
     Edward
     Island     3,551       973       2,578      72.6%       71.7%      0.9%
    Quebec     11,300     3,064       8,236      72.9%       75.6%     (2.7)%
    Saskat-
     chewan     2,118       593       1,525      72.0%       75.5%     (3.5)%
    -------------------------------------------------------------------------
    Total    $154,876   $55,814     $99,062      64.0%       62.6%      1.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The overall 1.4% increase in NOI as a % of revenue, as well as specific provincial increases in Nova Scotia, Newfoundland and Labrador, New Brunswick, Ontario and Price Edward Island was primarily due to the Portfolio Acquisition. Quebec's decrease in NOI % of revenue is attributable to higher recoverable common area expenses. The decrease in NOI % of revenue in Saskatchewan is due to River City Centre being owned by Crombie for only 111 days in 2008 and the fluctuations that can occur within a single property's results.

General and Administrative Expenses

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

    
    -------------------------------------------------------------------------
                                            Nine Months Ended
                                          ----------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Salaries and benefits                    $3,925      $2,891     $(1,034)
    Professional fees                         1,327       1,181        (146)
    Public company costs                        760         795          35
    Rent and occupancy                          573         512         (61)
    Other                                       587         556         (31)
    -------------------------------------------------------------------------
    General and administrative expenses      $7,172      $5,935     $(1,237)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    As a percentage of revenue                  4.6%        4.4%        0.2%
    -------------------------------------------------------------------------
    

General and administrative expenses, as a percentage of revenue, increased by 0.2% for the nine months ended September 30, 2009 to $7,172 compared to $5,935 for the nine months ended September 30, 2008. The increase in expenses was primarily due to one time retirement costs associated with the retirement of Crombie's Chief Executive Officer on August 5, 2009, increased salaries and increased legal and information technology professional fees partially offset by reduced incentive payments.

Interest Expense

    
    -------------------------------------------------------------------------
                                            Nine Months Ended
                                          ----------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Same-asset interest expense             $19,923     $19,204       $(719)
    Acquisition interest expense             13,674       8,710      (4,964)
    -------------------------------------------------------------------------
    Interest expense                        $33,597     $27,914     $(5,683)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Same-asset interest expense of $19,923 for the nine months ended September 30, 2009 increased by 3.7% when compared to the nine months ended September 30, 2008 due to the amortization of payments made on the settlement of interest rate swap agreements and slightly higher average interest rates on mortgages entered into during 2008 for properties held since the IPO, 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. 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 nine months ended September 30, 2009 was $2,329 (nine months ended September 30, 2008 - $2,536). 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

Comparative figures have been restated for retrospective changes in GAAP.

    
    -------------------------------------------------------------------------
                                            Nine Months Ended
                                          ----------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Same-asset depreciation and
     amortization                           $21,595     $24,223      $2,628
    Acquisition depreciation and
     amortization                            12,731       7,064      (5,667)
    -------------------------------------------------------------------------
    Depreciation and amortization           $34,326     $31,287     $(3,039)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Same-asset depreciation and amortization of $21,595 for the nine months ended September 30, 2009 was 10.8% lower than the nine months ended September 30, 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 the IPO being fully amortized, offset in part by depreciation on fixed asset additions and amortization on tenant improvement and lease costs incurred since September 30, 2008.

    
    -------------------------------------------------------------------------
                                            Nine Months Ended
                                          ----------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Depreciation of commercial
     properties                             $14,022     $11,903     $(2,119)
    Depreciation of recoverable capital
     expenditures                               794         695         (99)
    Amortization of tenant improvements/
     lease costs                              3,184       2,457        (727)
    Amortization of intangible assets        16,326      16,232         (94)
    -------------------------------------------------------------------------
    Depreciation and amortization           $34,326     $31,287     $(3,039)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other Income (Expenses)

    -------------------------------------------------------------------------
                                            Nine Months Ended
                                          ----------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Expense related to swap settlement      $(8,139)         $-     $(8,139)
    Write off of deferred financing
     charges                                 (1,860)          -      (1,860)
    Other income items                          110         124         (14)
    -------------------------------------------------------------------------
                                            $(9,889)      $ 124    $(10,013)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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 (loss) for the period ended September 30, 2009 for the settlement amount. In addition, Crombie wrote off the deferred financing charges related to the repaid component of the Term Facility.

Future 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's management and their advisors have completed an extensive review of Crombie's organizational structure and operations to support Crombie's assertion that it currently satisfies the technical tests contained in the Income Tax Act (Canada) in regard to the definition of a REIT (and thus is not a SIFT). However, 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     Nine Months Ended               Nine Months Ended
     of dollars,     September 30, 2009              September 30, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue   $1,275   $19,683     $20,958    $1,148     $11,330   $12,478
    Property
     expenses     312     3,899       4,211       201       2,683     2,884
    -------------------------------------------------------------------------
    Property
     NOI         $963   $15,784     $16,747      $947      $8,647    $9,594
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    75.5%     80.2%       79.9%     82.5%       76.3%     76.9%
    -------------------------------------------------------------------------
    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 NOI % margin is lower as a result of
increases in recoverable expenses for paving and taxes.

    Retail Plaza Properties
    -------------------------------------------------------------------------
    (In thousands     Nine Months Ended               Nine Months Ended
     of dollars,     September 30, 2009              September 30, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue  $30,647   $22,839     $53,486   $31,719     $11,687   $43,406
    Property
     expenses  10,738     6,305      17,043     9,989       2,867    12,856
    -------------------------------------------------------------------------
    Property
     NOI      $19,909   $16,534     $36,443   $21,730      $8,820   $30,550
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    65.0%     72.4%       68.1%     68.5%       75.5%     70.4%
    -------------------------------------------------------------------------
    Occu-
     pancy %     94.3%     98.6%       96.2%     94.7%       97.4%     96.1%
    -------------------------------------------------------------------------
    

The improvement in the retail plaza property NOI was primarily caused by the Portfolio Acquisition, partially offset by increased non-recoverable maintenance costs in same-asset properties. The slight decline in occupancy in the same-asset properties combined with a slightly lower average net rent per square foot has led to the decrease in revenue compared to the prior year.

    
    Retail Enclosed Properties
    -------------------------------------------------------------------------
    (In thousands     Nine Months Ended               Nine Months Ended
     of dollars,     September 30, 2009              September 30, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue  $35,692    $1,380     $37,072   $34,994        $687   $35,681
    Property
     expenses  12,314       435      12,749    12,882         149    13,031
    -------------------------------------------------------------------------
    Property
     NOI      $23,378      $945     $24,323   $22,112        $538   $22,650
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    65.5%     68.5%       65.6%     63.2%       78.3%     63.5%
    -------------------------------------------------------------------------
    Occu-
     pancy %     91.3%     87.4%       91.1%     90.4%       92.1%     90.4%
    -------------------------------------------------------------------------
    

The improvement in NOI was primarily caused by the improved results at Avalon Mall in St. John's, Newfoundland and Labrador and the Portfolio Acquisition. Same-asset NOI margin % is higher than 2008 due to the lower common area expenses in 2009 and higher average net rent per square foot, combined with an increase in occupancy due to leasing in Amherst Centre, Nova Scotia. Acquisition property occupancy declined to 87.4% due the loss of a tenant at Fundy Trail Mall in Truro, Nova Scotia.

    
    Office Properties
    -------------------------------------------------------------------------
    (In thousands     Nine Months Ended               Nine Months Ended
     of dollars,     September 30, 2009              September 30, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue  $17,083        $-     $17,083   $17,504          $-   $17,504
    Property
     expenses   9,045         -       9,045     9,006           -     9,006
    -------------------------------------------------------------------------
    Property
     NOI       $8,038        $-      $8,038    $8,498          $-    $8,498
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    47.1%        -%       47.1%     48.5%          -%     48.5%
    -------------------------------------------------------------------------
    Occu-
     pancy %     87.4%        -%       87.4%     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 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     Nine Months Ended              Nine Months Ended
     of dollars,     September 30, 2009             September 30, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue  $26,277        $-     $26,277   $26,551          $-   $26,551
    Property
     expenses  12,766         -      12,766    12,944           -    12,944
    -------------------------------------------------------------------------
    Property
     NOI      $13,511        $-     $13,511   $13,607          $-   $13,607
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    51.4%        -%       51.4%     51.2%          -%     51.2%
    -------------------------------------------------------------------------
    Occu-
     pancy %     93.1%        -%       93.1%     96.8%          -%     96.8%
    -------------------------------------------------------------------------
    

The decrease in mixed-use occupancy levels from 96.8% in 2008 to 93.1% in 2009 was due to the decline in occupancy in Aberdeen Business Centre, New Glasgow, Nova Scotia.

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 nine months ended September 30, 2009 and 2008 is as follows:

    
    -------------------------------------------------------------------------
                                            Nine Months Ended
                                          ----------------------
                                          September   September
    (In thousands of dollars)              30, 2009     30,2008     Variance
    -------------------------------------------------------------------------
                                                    (as restated)
    Net income                               $7,225      $9,185     $(1,960)
    Add (deduct):
    Non-controlling interest                  6,653       8,472      (1,819)
    Depreciation of commercial properties    14,022      11,903       2,119
    Depreciation of recoverable capital
     expenditures                               794         695          99
    Amortization of tenant
     improvements/lease costs                 3,184       2,457         727
    Amortization of intangible assets        16,326      16,232          94
    Depreciation and amortization on
     discontinued operations                      -         129        (129)
    Future income taxes                         200       1,960      (1,760)
    Write down of asset held for sale             -         895        (895)
    Gain (loss) on disposal of assets             -         (77)         77
    -------------------------------------------------------------------------
    FFO                                     $48,404     $51,851     $(3,447)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The reduction in FFO for the nine months ended September 30, 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 has amended its calculation of AFFO. The amendment reflects the fact that, in accordance with GAAP, Crombie's third quarter financial statements reflect for the first time 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 quarter 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 makes evaluating the economic recurring performance of Crombie's operating activities very difficult. Thus, management has decided to amend its calculation of AFFO to expense 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 nine months ended September 30, 2009 and 2008 is as follows:

    
    -------------------------------------------------------------------------
                                            Nine Months Ended
                                          ----------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008     Variance
    -------------------------------------------------------------------------
                                                     (as restated)
    FFO                                     $48,404     $51,851     $(3,447)
    Add:
    Amortization of effective swap
     agreements                               1,112           -       1,112
    Above-market lease amortization           2,316       2,286          30
    Non-cash revenue impacts on
     discontinued operations                      -          14         (14)
    Less:
    Below-market lease amortization          (6,435)     (5,145)     (1,290)
    Straight-line rent adjustment            (2,774)     (1,759)     (1,015)
    Maintenance capital expenditures         (3,073)     (7,066)      3,993
    Maintenance TI and leasing costs         (6,437)     (7,712)      1,275
    Settlement of effective interest rate
     swap agreements                         (7,342)     (2,438)     (4,904)
    -------------------------------------------------------------------------
    AFFO                                    $25,771     $30,031     $(4,260)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The AFFO result for the nine months ended September 30, 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 TI and leasing expenditures. 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 "Borrowing Capacity and Debt Covenants" and "Risk Management" sections of this MD&A, recent turmoil in the financial markets have resulted in a significant deterioration of the mark-to-market 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 has cash settled these mark-to-market values, the non-recurring impact of the swap settlements has had a material effect on the AFFO and AFFO payout ratio for the year-to-date period. Excluding the impact of the swaps settled (both effective and ineffective) during the nine months ended September 30, 2009, AFFO would have been $40,140 and the AFFO payout ratio would have been 93.4% (nine months ended September 30, 2008 $32,469 and 99.8% 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:

    
    -------------------------------------------------------------------------
                                            Nine Months Ended
                                          ----------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
                                                    (as restated)
    Cash provided by operating activities   $40,659     $36,011      $4,648
    Add back (deduct):
    Recoverable/productive capacity
     enhancing TIs                              190       1,946      (1,756)
    Change in non-cash operating items        7,084       2,435       4,649
    Unit-based compensation expense             (35)        (31)         (4)
    Amortization of deferred financing
     charges                                 (1,713)       (826)       (887)
    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                         (7,342)     (2,438)     (4,904)
    Maintenance capital expenditures         (3,073)     (7,066)      3,993
    -------------------------------------------------------------------------
    AFFO                                    $25,771     $30,031     $(4,260)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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 $72,217 was drawn at September 30, 2009, and the issue of new equity, mortgage debt, and unsecured convertible debentures pursuant to the Declaration of Trust.

    
    -------------------------------------------------------------------------
                                            Nine Months Ended
                                          ----------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Operating activities                    $40,659     $36,011      $4,648
    Financing activities                   $(37,248)   $367,838   $(405,086)
    Investing activities                    $(7,439)  $(406,557)   $399,118
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Operating Activities
    --------------------
    -------------------------------------------------------------------------
                                            Nine Months Ended
                                          ----------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Net income and non-cash items           $54,370     $48,104      $6,266
    TI and leasing costs                     (6,627)     (9,658)      3,031
    Non-cash working capital                 (7,084)     (2,435)     (4,649)
    -------------------------------------------------------------------------
    Cash provided by operating activities   $40,659     $36,011      $4,648
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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

    
    Financing Activities
    --------------------
    -------------------------------------------------------------------------
                                            Nine Months Ended
                                          ----------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Net issue of convertible debentures     $81,443     $28,786     $52,657
    Net issue of units                       64,574      59,215       5,359
    Settlement of interest rate swap
     agreements                             (15,481)     (2,438)    (13,043)
    Net issue (repayment) of commercial
     property debt                         (133,338)    309,713    (443,051)
    Payment of distributions                (36,869)    (31,468)     (5,401)
    Other items (net)                         2,423       4,030      (1,607)
    -------------------------------------------------------------------------
    Cash provided by (used in)
     financing activities                  $(37,248)   $367,838   $(405,086)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Cash used in financing activities for the nine months ended September 30, 2009 was $405,086 more than the nine months ended September 30, 2008. On June 25, 2009, Crombie received net proceeds of $64,574 from the public offering of Units and the private placement of Class B LP Units with Empire Subsidiaries; and on September 30, 2009, Crombie received net proceeds of $81,443 from the prospectus offering of Series B Debentures. These proceeds were used to reduce commercial property debt. During 2008, Crombie received gross proceeds related to the debt and equity financing of the Portfolio Acquisition and this inflow is offset by acquisition costs reflected in the Investing Activities.

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

    Cash used in investing activities for the nine months ended September 30,
2009 was $7,439. Of this, $6,887 was used for additions to commercial
properties. Cash used in investing activities for the nine months ended
September 30, 2008 of $406,557 was primarily due to 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.

    
    -------------------------------------------------------------------------
                                                         Nine Months Ended
                                                    -------------------------
                                                      September   September
    (In thousands of dollars)                          30, 2009    30, 2008
    -------------------------------------------------------------------------
    Total additions to commercial properties             $6,887     $16,614
    Less: amounts recoverable from ECL                        -      (3,566)
    -------------------------------------------------------------------------
    Net additions to commercial properties                6,887      13,048
    Less: productive capacity enhancements               (3,814)     (5,982)
    -------------------------------------------------------------------------
    Maintenance capital expenditures                     $3,073      $7,066
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                         Nine Months Ended
                                                    -------------------------
                                                      September   September
    (In thousands of dollars)                          30, 2009    30, 2008
    -------------------------------------------------------------------------
    Total additions to TI and leasing costs              $6,627      $9,658
    Less: amounts recoverable from ECL                     (159)     (1,495)
    -------------------------------------------------------------------------
    Net additions to TI and leasing costs                 6,468       8,163
    Less: productive capacity enhancements                  (31)       (451)
    -------------------------------------------------------------------------
    Maintenance TI and leasing costs                     $6,437      $7,712
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The lower maintenance capital expenditures are primarily as a result of the cautious outlook on capital intensive projects during the economic environment experienced during most of 2009.

The lower maintenance TI expenditures during the first nine months of 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 quarter consisted of the redevelopment of Valley Mall in Corner Brook, Newfoundland and Labrador, the work on the conversion of Fort Edward Mall in Windsor, Nova Scotia from a retail enclosed property to a retail plaza and construction of an additional estimated 10,000 square feet at Aberdeen Shopping Centre in New Glasgow, Nova Scotia to accommodate the needs of Pictou County Health Authority.

    
    Capital Structure

    -------------------------------------------------------------------------
    (In thousands   Sep. 30,    Jun. 30,    Mar. 31,    Dec. 31,    Sep. 30,
    of dollars)        2009        2009        2009        2008        2008
    -------------------------------------------------------------------------
    Commercial
     property
     debt          $682,551    $759,223    $812,342    $808,971    $820,634
    Convertible
     debentures    $110,593     $29,090     $29,029     $28,968     $28,907
    Non-
     controlling
     interest      $227,948    $233,292    $197,115    $199,163    $218,205
    Unitholders'
     equity        $249,646    $255,475    $213,351    $215,558    $236,241
    -------------------------------------------------------------------------
    

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"), $72,217 of which was drawn as at September 30, 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 September 30, 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 September 30, 2009, Crombie had fixed rate mortgages outstanding of $573,615 ($565,027 after including the marked-to-market adjustment of $8,588), carrying a weighted average interest rate of 5.57% (after giving effect to the interest rate subsidy from ECL under an omnibus subsidy agreement) and a weighted average term to maturity of 6.0 years.

In April of 2008, Crombie entered into an 18 month floating rate Term Facility of $280,000 to partially finance the Portfolio Acquisition. On September 30, 2008, Crombie completed a mortgage financing on certain of the properties acquired in order to refinance $100,000 of the Term Facility. On February 12, 2009, Crombie completed $39,000 of additional fixed rate mortgage financings for eight of the properties acquired pursuant to the Portfolio Acquisition in order to refinance the Term Facility. A third party provided $32,800 of fixed rate first mortgage financing, while $6,200 of fixed rate second mortgage financing was provided by Empire. In June of 2009, Crombie completed the extension of the remaining Term Facility for two years with a syndicate of Canadian chartered banks. In August of 2009, Crombie completed $15,000 of additional mortgage financing and applied the proceeds to the Term Facility. In September of 2009 Crombie issued $85,000 of Series B Debentures to further reduce the Term Facility. The floating interest rate is based on a specified margin over prime rate or bankers acceptance rate. As security for the Term Facility, Crombie has granted a charge on the secured properties together with an assignment of leases. The Term Facility contains financial and non-financial covenants that are customary for a credit facility of this nature and which mirror the covenants set forth in the 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
    Year          Principal        Year   Rate Debt    Maturity   % of Total
    -------------------------------------------------------------------------
    Remaining
     2009            $4,879          $-          $-      $4,879          0.7%
    2010             15,840     106,079           -     121,919         18.0%
    2011             15,771      26,786     113,595     156,152         23.0%
    2012             16,362           -           -      16,362          2.4%
    2013             17,193      30,042           -      47,235          7.0%
    Thereafter       75,320     256,755           -     332,075         48.9%
    -------------------------------------------------------------------------
    Total (1)      $145,365    $419,662    $113,595    $678,622        100.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes fair value debt adjustment of $8,588 and the deferred
        financing costs of $4,659

    Crombie has $106,079 of fixed rate mortgage debt maturing in the first
quarter of 2010. Negotiations on refinancing have begun and Crombie does not
anticipate difficulty in refinancing the debt prior to maturity.

    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   September
                                                       20, 2008    30, 2009

    Maturity date                                         March        June
                                                       20, 2013    30, 2015
    -------------------------------------------------------------------------
    

The Series A Debentures were issued in relation to the Portfolio Acquisition and the Series B Debentures were issued to pay down 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 aforementioned redemption 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.

    
    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 November 5, 2009 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  Investment     Capital
    Taxation Year                        of 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. In order to hedge its interest rate risk on various debt commitments maturing through 2011, Crombie has entered into a series of interest rate swap agreements on notional principal amounts totalling approximately $188,334 at September 30, 2009 that have settlement dates between October 15, 2009 and July 4, 2011. The recent turmoil in the capital markets has caused the mark-to-market adjustment on these interest rate swap agreements to reach an out-of-the-money position of approximately $25,090 at September 30, 2009. There is no immediate cash impact from this mark-to-market adjustment. The unfavourable difference in the mark-to-market amount of the remaining interest rate swap agreements is reflected in other comprehensive income(loss) rather than net income(loss) as the swaps are all designated and effective hedges. However, the deterioration in the mark-to-market position may have the impact of reducing Crombie's available credit pursuant to the Revolving Credit Facility.

At September 30, 2009, the amount available under the Revolving Credit Facility was $77,522 after calculation of the Aggregate Coverage Amount.

At September 30, 2009, Crombie remained in compliance with all debt covenants.

Debt to Gross Book Value Ratio

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 ratio was 51.0% at September 30, 2009 compared to 50.9% at June 30, 2009. This leverage ratio is below the maximum 60%, or 65% including convertible debentures, as outlined by Crombie's Declaration of Trust. On a long-term basis, Crombie intends to maintain overall indebtedness in the range of 50% to 55% 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      Sep. 30,    Jun. 30,    Mar. 31,    Dec. 31,    Sep. 30,
     noted)            2009        2009        2009        2008        2008
    -------------------------------------------------------------------------
    Mortgages
     payable       $573,615    $564,101    $565,980    $531,970    $524,307
    Convertible
     debentures     115,000      30,000      30,000      30,000      30,000
    Term facility    41,378     139,000     140,323     178,824     180,000
    Revolving
     credit
     facility
     payable         72,217      62,812     111,400      93,400     121,585
    Demand credit
     facility
     payable              -           -           -      10,000           -
    -------------------------------------------------------------------------
    Total debt
     outstanding    802,210     795,913     847,703     844,194     855,892
    Less:
     Applicable
     fair value
     debt
     adjustment      (8,489)     (9,256)    (10,032)    (10,818)    (11,615)
    -------------------------------------------------------------------------
    Debt           $793,721    $786,657    $837,671    $833,376    $844,277
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total
     assets     $1,465,591   $1,470,474  $1,466,045  $1,483,219  $1,501,186
    Add:
    Deferred
     financing
     charges         9,066        7,600       6,332       6,255       6,351
    Accumulated
     depreciation
     of commercial
     properties     63,865       57,715      51,796      45,865      40,105
    Accumulated
     amortization
     of intangible
     assets         72,147       66,492      60,836      53,505      45,995
    Less:
    Assets
     related to
     discontinued
     operations     (7,038)      (7,054)     (7,162)     (7,184)     (9,673)
    Interest
     rate subsidy   (8,489)      (9,256)    (10,032)    (10,818)    (11,615)
    Fair value
     adjustment
     to future
     taxes         (39,245)     (39,245)    (39,245)    (39,245)    (39,245)
    -------------------------------------------------------------------------
    Gross book
     value      $1,555,897   $1,546,726  $1,528,570  $1,531,597  $1,533,104
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Debt to
     gross book
     value            51.0%        50.9%       54.8%       54.4%       55.1%
    Maximum
     borrowing
     capacity(1)        65%          65%         65%         65%         65%
    -------------------------------------------------------------------------
    (1) Maximum permitted by the Declaration of Trust
    

Debt and Interest Service Coverage Ratios

Crombie's interest and debt service coverage ratios for the nine months ended September 30, 2009 were 2.85 times EBITDA and 1.98 times EBITDA. This compares to 2.81 times EBITDA and 2.02 times EBITDA respectively for the nine months ended September 30, 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.

    
    -------------------------------------------------------------------------
                                                         Nine Months Ended
                                                     ------------------------
                                                      September   September
    (In thousands of dollars)                          30, 2009     30,2008
    -------------------------------------------------------------------------
                                                                (as restated)
    Property revenue                                   $154,876    $135,620
    Amortization of above-market leases                   2,316       2,286
    Amortization of below-market leases                  (6,435)     (5,145)
    -------------------------------------------------------------------------
    Adjusted property revenue                           150,757     132,761
    Property expenses                                   (55,814)    (50,721)
    General and administrative expenses                  (7,172)     (5,935)
    -------------------------------------------------------------------------
    EBITDA (1)                                          $87,771     $76,105
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Interest expense                                    $33,597     $27,914
    Amortization of deferred financing charges           (1,713)       (826)
    Amortization of effective swap agreements            (1,112)          -
    -------------------------------------------------------------------------
    Adjusted interest expense (2)                       $30,772     $27,088
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Debt repayments                                    $213,228    $157,519
    Debt repayments on discontinued operations                -        (109)
    Amortization of fair value debt premium                  (4)        (20)
    Payments relating to interest rate subsidy           (2,329)     (2,537)
    Payments relating to Term Facility                 (137,446)   (100,000)
    Payments relating to revolving credit facility      (49,900)    (29,793)
    Payments relating to demand credit facility         (10,000)          -
    Balloon payments on mortgages                             -     (14,447)
    -------------------------------------------------------------------------
    Adjusted debt repayments (3)                        $13,549     $10,613
    -------------------------------------------------------------------------
    Interest service coverage ratio ((1)/(2))              2.85        2.81
    -------------------------------------------------------------------------
    Debt service coverage ratio ((1)/((2)+(3)))            1.98        2.02
    -------------------------------------------------------------------------


    Distributions and Distribution Payout Ratios

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

Pursuant to Crombie's Declaration of Trust, it is required, at a minimum, to make distributions to Unitholders equal to the amount of net income and net realized capital gains of Crombie as is necessary to ensure that Crombie will not be liable for income taxes. Within these guidelines, Crombie 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:
    -------------------------------------------------------------------------

                                                         Nine Months Ended
                                                    -------------------------
    (Distribution amounts represented                 September   September
     in thousands of dollars)                          30, 2009    30, 2008
    -------------------------------------------------------------------------
    Distributions to Unitholders                        $19,626     $17,051
    Distributions to Special Voting Unitholders          17,882      15,344
    -------------------------------------------------------------------------
    Total distributions                                 $37,508     $32,395
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Number of diluted Units                          28,996,836  25,033,294
    Number of diluted Special Voting Units           26,460,247  23,072,277
    -------------------------------------------------------------------------
    Total diluted weighted average Units             55,457,083  48,105,571
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions per unit                                $0.68       $0.67
    FFO payout ratio (target ratio equals 70%)             77.5%       62.5%
    AFFO payout ratio (target ratio equals 95%)           145.5%      107.9%
    -------------------------------------------------------------------------
    

The FFO payout ratio of 77.5% 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. The AFFO payout ratio of 145.5% 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.

THIRD 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, except      September   September
     where otherwise noted)                30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Property revenue                        $50,991     $51,044        $(53)
    Property expenses                        18,585      18,634          49
    -------------------------------------------------------------------------
    Property NOI                             32,406      32,410          (4)
    -------------------------------------------------------------------------
    NOI margin percentage                      63.6%       63.5%        0.1%
    -------------------------------------------------------------------------
    Expenses:
      General and administrative              1,882       2,004         122
      Interest                               11,595      11,449        (146)
      Depreciation and amortization          11,032      12,535       1,503
    -------------------------------------------------------------------------
                                             24,509      25,988       1,479
    -------------------------------------------------------------------------
    Income from continuing operations
     before other items, income taxes
     and non-controlling interest             7,897       6,422       1,475
    Other income (expenses)                  (9,981)         27     (10,008)
    -------------------------------------------------------------------------
    Income (loss) from continuing
     operations before income taxes and
     non-controlling interest                (2,084)      6,449      (8,533)
    Income taxes expense  - Future                -         859         859
    -------------------------------------------------------------------------
    Income (loss) from continuing
     operations before non-controlling
     interest                                (2,084)      5,590      (7,674)
    Write down of assets held for sale            -        (895)        895
    Income from discontinued operations           -         226        (226)
    -------------------------------------------------------------------------
    Income (loss) before non-controlling
     interest                                (2,084)      4,921      (7,005)
    Non-controlling interest                   (989)      2,358       3,347
    -------------------------------------------------------------------------
    Net income (loss)                       $(1,095)     $2,563     $(3,658)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net income (loss)
     per Unit                                $(0.03)      $0.09      $(0.12)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic weighted average Units
     outstanding (in 000's)                  31,879      27,147
    ------------------------------------------------------------
    ------------------------------------------------------------
    Diluted weighted average Units
     outstanding (in 000's)                  31,879      27,272
    ------------------------------------------------------------
    ------------------------------------------------------------

    Net income (loss) for the quarter ended September 30, 2009 of $(1,095)
decreased by $3,658 from the net income of $2,563 for the quarter ended
September 30, 2008. The decrease was primarily due to:

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

    - lower amortization charges on intangible assets as some intangibles
      have become fully amortized.

    Property Revenue and Property Expenses

    -------------------------------------------------------------------------
                                               Quarter Ended
                                         ------------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Same-asset property revenue             $50,991     $51,044        $(53)
    Acquisition property revenue                  -           -           -
    -------------------------------------------------------------------------
    Property revenue                        $50,991     $51,044        $(53)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the quarter ended September 30, 2009, all previous acquisitions are
included in same-asset property revenue on a comparative basis. Property
revenue for the quarter is consistent with the same period in 2008.

    -------------------------------------------------------------------------
                                               Quarter Ended
                                         ------------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Same-asset property expenses            $18,585     $18,634         $49
    Acquisition property expenses                 -           -           -
    -------------------------------------------------------------------------
    Property expenses                       $18,585     $18,634         $49
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the quarter ended September 30, 2009, all previous acquisitions are
included in same-asset expenses on a comparative basis. Property expenses for
the quarter are consistent with the same period in 2008.

    -------------------------------------------------------------------------
                                               Quarter Ended
                                         ------------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Same-asset property NOI                 $32,406     $32,410         $(4)
    Acquisition property NOI                      -           -           -
    -------------------------------------------------------------------------
    Property NOI                            $32,406     $32,410         $(4)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    There was no material change in same-asset NOI for the quarter ended
September 30, 2009 compared to the same quarter of 2008.

    Property NOI for the quarter ended September 30, 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   $23,293    $9,761     $13,532      58.1%       56.2%      1.9%
    Newfound-
     land and
     Labrador   7,928     2,237       5,691      71.8%       70.5%      1.3%
    New
     Brunswick  5,929     2,396       3,533      59.6%       63.0%     (3.4)%
    Ontario     8,161     2,702       5,459      66.9%       70.7%     (3.8)%
    Prince
     Edward
     Island     1,232       311         921      74.8%       69.7%      5.1%
    Quebec      3,724       968       2,756      74.0%       75.0%     (1.0)%
    Saskat-
     chewan       724       210         514      71.0%       73.9%     (2.9)%
    -------------------------------------------------------------------------
    Total     $50,991   $18,585     $32,406      63.6%       63.5%      0.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Overall, NOI as a percentage of revenue remained consistent with the same quarter in 2008. NOI % has increased in Prince Edward Island due to offsetting declines in property revenue and property expenses. NOI % has decreased in New Brunswick due to decreased property revenue; in Ontario due to increased property expenses; and, in Saskatchewan due to increased property expenses partially offset by increased property revenue.

General and Administrative Expenses

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

    
    -------------------------------------------------------------------------
                                               Quarter Ended
                                         ------------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Salaries and benefits                      $815      $1,031        $216
    Professional fees                           479         388         (91)
    Public company costs                        185         275          90
    Rent and occupancy                          195         163         (32)
    Other                                       208         147         (61)
    -------------------------------------------------------------------------
    General and administrative expenses      $1,882      $2,004        $122
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    As a percentage of revenue                  3.7%        3.9%        0.2%
    -------------------------------------------------------------------------
    

General and administrative expenses, as a percentage of revenue, decreased by 0.2% for the quarter ended September 30, 2009 to $1,882 compared to $2,004 for the quarter ended September 30, 2008. The decrease in expenses was primarily due to a one-time payroll cost allocation adjustment in the third quarter of 2009; professional fees incurred in 2009 related to tax issues and short term financing matters; and the timing of the annual costs.

    
    Interest Expense

    -------------------------------------------------------------------------
                                               Quarter Ended
                                         ------------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Same-asset interest expense             $11,595     $11,449       $(146)
    Acquisition interest expense                  -           -           -
    -------------------------------------------------------------------------
    Interest expense                        $11,595     $11,449       $(146)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Same-asset interest expense of $11,595 for the quarter ended September 30, 2009 increased by 1.3% when compared to the quarter ended September 30, 2008 due to the amortization of payments made on the settlement of interest rate swap agreements of $450, offset in part by a decline in the floating interest rate paid on the Revolving Credit Facility and 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 September 30, 2009 was $767 (quarter ended September 30, 2008 - $818). 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
                                         ------------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Same-asset depreciation and
     amortization                           $11,032     $12,535      $1,503
    Acquisition depreciation and
     amortization                                 -           -           -
    -------------------------------------------------------------------------
    Depreciation and amortization           $11,032     $12,535      $1,503
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Same-asset depreciation and amortization of $11,032 for the quarter ended September 30, 2009 was 12.0% lower than the quarter ended September 30, 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 the IPO being fully amortized, offset in part by depreciation on fixed asset additions and amortization on tenant improvement and lease costs incurred since September 30, 2008. Depreciation and amortization consists of:

    
    -------------------------------------------------------------------------
                                               Quarter Ended
                                         ------------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Depreciation of commercial
     properties                              $4,721      $4,544       $(177)
    Depreciation of recoverable capital
     expenditures                               268         233         (35)
    Amortization of tenant
     improvements/lease costs                 1,161         989        (172)
    Amortization of intangible assets         4,882       6,769       1,887
    -------------------------------------------------------------------------
    Depreciation and amortization           $11,032     $12,535      $1,503
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other Income (Expenses)

    -------------------------------------------------------------------------
                                               Quarter Ended
                                         ------------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Expense related to swap settlement      $(8,139)         $-     $(8,139)
    Write off of deferred financing
     charges                                 (1,860)          -      (1,860)
    Other income items                           18          27          (9)
    -------------------------------------------------------------------------
                                            $(9,981)        $27    $(10,008)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

On September 14, 2009 in connection with the Series B 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 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 (loss) for the period ended September 30, 2009 for the settlement amount. In addition, Crombie wrote off the deferred financing charges related to the repaid component of the Term Facility.

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 thou-
     sands of           Quarter ended                  Quarter ended
     dollars,        September 30, 2009             September 30, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue   $6,702        $-      $6,702    $7,018          $-    $7,018
    Property
     expenses   1,276         -       1,276     1,691           -     1,691
    -------------------------------------------------------------------------
    Property
     NOI       $5,426        $-      $5,426    $5,327          $-    $5,327
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    81.0%        -%       81.0%     75.9%          -%     75.9%
    -------------------------------------------------------------------------
    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 a decrease in recoverable costs, primarily property taxes.

    Retail Plaza Properties
    -------------------------------------------------------------------------
    (In thou-
     sands of           Quarter ended                  Quarter ended
     dollars,        September 30, 2009             September 30, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue  $17,656        $-     $17,656   $17,317          $-   $17,317
    Property
     expenses   5,935         -       5,935     5,024           -     5,024
    -------------------------------------------------------------------------
    Property
     NOI      $11,721        $-     $11,721   $12,293          $-   $12,293
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    66.4%        -%       66.4%     71.0%          -%     71.0%
    -------------------------------------------------------------------------
    Occu-
     pancy %     96.2%        -%       96.2%     96.1%          -%     96.1%
    -------------------------------------------------------------------------

    NOI and NOI % are lower in the third quarter of 2009 when compared to 2008
due to increased roofing and paving costs, primarily in Ontario.

    Retail Enclosed Properties
    -------------------------------------------------------------------------
    (In thou-
     sands of           Quarter ended                  Quarter ended
     dollars,        September 30, 2009             September 30, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue  $12,309        $-     $12,309   $11,917          $-   $11,917
    Property
     expenses   4,082         -       4,082     4,260           -     4,260
    -------------------------------------------------------------------------
    Property
     NOI       $8,227        $-      $8,227    $7,657          $-    $7,657
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    66.8%        -%       66.8%     64.3%          -%     64.3%
    -------------------------------------------------------------------------
    Occu-
     pancy %     91.1%        -%       91.1%     90.4%          -%     90.4%
    -------------------------------------------------------------------------
    

The improvement in NOI was primarily caused by the improved results at Avalon Mall in St. John's, Newfoundland and Labrador. Same-asset NOI margin % is higher than 2008 due to the lower non-shareable and recoverable expenses in 2009. Occupancy is higher in 2009 compared to 2008 due to the completion of redevelopment work ongoing at two properties as previously discussed and the commencement of the new leases at those properties.

    
    Office Properties
    -------------------------------------------------------------------------
    (In thou-
     sands of           Quarter ended                  Quarter ended
     dollars,        September 30, 2009             September 30, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue   $5,598        $-      $5,598    $5,893          $-    $5,893
    Property
     expenses   2,910         -       2,910     3,091           -     3,091
    -------------------------------------------------------------------------
    Property
     NOI       $2,688        $-      $2,688    $2,802          $-    $2,802
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    48.0%        -%       48.0%     47.5%          -%     47.5%
    -------------------------------------------------------------------------
    Occu-
     pancy %     87.4%        -%       87.4%     89.7%          -%     89.7%
    -------------------------------------------------------------------------
    

Occupancy levels have decreased slightly at the Halifax Developments Properties when compared to the same quarter of the prior year, while occupancy remained steady at Terminal Centres in 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 thou-
     sands of           Quarter ended                  Quarter ended
     dollars,        September 30, 2009             September 30, 2008
     except as  -------------------------------------------------------------
     otherwise   Same-    Acqui-                 Same-      Acqui-
     noted)     Asset   sitions       Total     Asset     sitions     Total
    -------------------------------------------------------------------------
    Property
     revenue   $8,726        $-      $8,726    $8,899          $-    $8,899
    Property
     expenses   4,382         -       4,382     4,568           -     4,548
    -------------------------------------------------------------------------
    Property
     NOI       $4,344        $-      $4,344    $4,331          $-    $4,331
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NOI
     Margin %    49.8%        -%       49.8%     48.7%          -%     48.7%
    -------------------------------------------------------------------------
    Occu-
     pancy %     93.1%        -%       93.1%     96.8%          -%     96.8%
    -------------------------------------------------------------------------

    The decrease in mixed-use occupancy levels from 96.8% in 2008 to 93.1% in
2009 was due primarily to the decrease in occupancy in Aberdeen Business
Centre, Nova Scotia. The NOI margin has increased as a result of decreased
common area expenses.

    OTHER THIRD QUARTER PERFORMANCE MEASURES

    Funds from Operations

    A calculation of FFO for the quarter ended September 30, 2009 and 2008 is
as follows:

    -------------------------------------------------------------------------
                                               Quarter Ended
                                         ------------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Net income (loss)                       $(1,095)     $2,563     $(3,658)
    Add (deduct):
    Non-controlling interest                   (989)      2,358      (3,347)
    Depreciation of commercial properties     4,721       4,544         177
    Depreciation of recoverable capital
     expenditures                               268         233          35
    Amortization of tenant
     improvements/lease costs                 1,161         989         172
    Amortization of intangible assets         4,882       6,769      (1,887)
    Depreciation and amortization on
     discontinued operations                      -         (10)         10
    Future income taxes                           -         859        (859)
    Write down of asset held for sale             -         895        (895)
    -------------------------------------------------------------------------
    FFO                                      $8,948     $19,200    $(10,252)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The significant decrease in FFO for the quarter ended September 30, 2009
was primarily due to the impact of the settlement of the ineffective interest
rate swap agreement as previously discussed.

    Adjusted Funds from Operations

    The calculation of AFFO for the quarters ended September 30, 2009 and 2008
is as follows:

    -------------------------------------------------------------------------
                                               Quarter Ended
                                         ------------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
                                                      (as restated)
    FFO                                      $8,948     $19,200    $(10,252)
    Add:
    Amortization of effective swap
     agreements                                 450           -         450
    Above-market lease amortization             773         771           2
    Deduct:
    Below-market lease amortization          (2,145)     (2,145)          -
    Straight-line rent adjustment              (648)       (741)         93
    Maintenance capital expenditures           (939)     (3,401)      2,462
    Maintenance  TI and leasing costs        (4,083)     (1,219)     (2,864)
    Settlement of effective interest
     rate swap agreements                    (2,807)     (2,438)       (369)
    Non-cash revenue impacts on
     discontinued operations                      -          (8)          8
    -------------------------------------------------------------------------
    AFFO                                      $(451)    $10,019    $(10,470)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The AFFO result for the quarter ended September 30, 2009 was primarily affected by 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 "Borrowing Capacity and Debt Covenants" and "Risk Management" sections of this MD&A, recent turmoil in the financial markets have resulted in a significant deterioration of the mark-to-market 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 has cash settled these mark-to-market values, 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 (both effective and ineffective) during the quarter ended September 30, 2009, AFFO would have been $10,045 and the AFFO payout ratio would have been 135.0% (quarter ended September 30, 2008 $12,457 and 93.5% 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
                                         ------------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
                                                    (as restated)
    Cash provided by operating
     activities                             $23,583     $13,941      $9,642
    Add back (deduct):
    Recoverable/productive capacity
     enhancing TIs                                -         111        (111)
    Change in non-cash operating items       (9,561)      2,166     (11,727)
    Unit-based compensation expense             (12)        (11)         (1)
    Amortization of deferred financing
     charges                                   (716)       (349)       (367)
    Write off 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                    (2,807)     (2,438)       (369)
    Maintenance capital expenditures           (939)     (3,401)      2,462
    -------------------------------------------------------------------------
    AFFO                                      $(451)    $10,019    $(10,470)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash Flow

    -------------------------------------------------------------------------
                                               Quarter Ended
                                         ------------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Operating activities                    $23,583     $13,941      $9,642
    Financing activities                   $(21,380)    $(4,842)   $(16,538)
    Investing activities                    $(2,203)    $(9,099)     $6,896
    -------------------------------------------------------------------------

    Operating Activities
    --------------------
    -------------------------------------------------------------------------
                                               Quarter Ended
                                         ------------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Net income and non-cash items           $18,105     $17,437        $668
    TI and leasing costs                     (4,083)     (1,330)     (2,753)
    Non-cash working capital                  9,561      (2,166)     11,727
    -------------------------------------------------------------------------
    Cash provided by operating activities   $23,583     $13,941      $9,642
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Financing Activities
    --------------------
    -------------------------------------------------------------------------
                                               Quarter Ended
                                         ------------------------
                                          September   September
    (In thousands of dollars)              30, 2009    30, 2008    Variance
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Net issue of convertible debentures     $81,443          $-     $81,443
    Settlement of interest rate swap
     agreements                             (10,946)     (2,438)     (8,508)
    Net issue (repayment) of commercial
     property debt                          (79,188)      8,420     (87,608)
    Payment of distributions                (13,565)    (11,649)     (1,916)
    Other items (net)                           876         825          51
    -------------------------------------------------------------------------
    Cash provided by (used in) financing
     activities                            $(21,380)    $(4,842)   $(16,538)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash used in financing activities for the quarter ended September 30, 2009
was $16,538 higher than the quarter ended September 30, 2008 primarily due to
the issue of the Series B Debentures with proceeds being used to pay down
commercial property debt in the quarter ended September 30, 2009, as well as
the settlement of the interest rate swap agreements.

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

    Cash used in investing activities for the quarter ended September 30, 2009
was $2,203. Of this, $1,965 was used for additions to commercial properties.
Cash used in investing activities for the quarter ended September 30, 2008 of
$9,099 was primarily due to the liquor store expansions onto three Sobeys
locations.

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

    -------------------------------------------------------------------------
                                                           Quarter Ended
                                                    -------------------------
                                                      September   September
    (In thousands of dollars)                          30, 2009    30, 2008
    -------------------------------------------------------------------------
    Total additions to commercial properties             $1,965      $9,099
    Less: amounts recoverable from ECL                        -      (1,177)
    -------------------------------------------------------------------------
    Net additions to commercial properties                1,965       7,922
    Less: productive capacity enhancements               (1,026)     (4,521)
    -------------------------------------------------------------------------
    Maintenance capital expenditures                       $939      $3,401
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                           Quarter Ended
                                                    -------------------------
                                                      September   September
    (In thousands of dollars)                          30, 2009    30, 2008
    -------------------------------------------------------------------------
    Total additions to TI and leasing costs              $4,083      $1,330
    Less: amounts recoverable from ECL                        -        (111)
    -------------------------------------------------------------------------
    Net additions to TI and leasing costs                 4,083       1,219
    Less: productive capacity enhancements                    -           -
    -------------------------------------------------------------------------
    Maintenance TI and leasing costs                     $4,083      $1,219
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The lower maintenance capital expenditures are primarily as a result of the cautious outlook on capital intensive projects during the current economic environment. The higher maintenance TI and leasing costs in the third quarter are the result of the tenants now willing to commit to new leasing deals as the economic outlook has begun to improve.

Productive capacity enhancements during the quarter consisted of the redevelopment of Valley Mall in Corner Brook, Newfoundland and Labrador, the conversion of Fort Edward Mall in Windsor, Nova Scotia from a retail enclosed property to a retail plaza and construction of additional GLA at Aberdeen Business Centre, New Glasgow, Nova Scotia.

CHANGES IN ACCOUNTING POLICIES

Effective January 1, 2009 Crombie adopted one new accounting standard that was 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 is 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 $233 to depreciation of commercial properties and a decrease of $233 to property expenses in the consolidated Statements of Income(Loss)for the three months ended September 30, 2008 and an increase of $695 to depreciation of commercial properties and a decrease of $695 to property expenses for the nine months ended September 30, 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, 2009.

    
    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.

EFFECT OF NEW ACCOUNTING POLICIES NOT YET IMPLEMENTED

    
    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 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 is not expected to have a material impact on the disclosures of Crombie.

    
    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.

An example of a potential change to the Declaration of Trust in order to comply with IFRS standards as they are currently drafted include the fact that Crombie's units may be regarded under IFRS as a "liability" rather than "equity" (as they are currently recognized under Canadian GAAP). This interpretation is influenced principally by the requirement in the Declaration of Trust that Crombie "shall" distribute in each year an amount at least equal to its taxable income. Under IFRS, the units would be classified as a liability if they contain "a contractual obligation to deliver cash or another financial asset to another entity".

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
    preparation    in Canadian      key IFRS            assessment during
                   GAAP/IFRS        accounting policy   2009, which
                   accounting       choices to occur    involved a high
                   policies         during Q4 of        level review of
                                    fiscal 2009         major differences
                                                        between IFRS and
                                                        Canadian GAAP.
                                                        Presented position
                   Evaluate and                         papers on
                   select IFRS                          significant IFRS
                   policies &                           accounting
                   IFRS 1 choices                       policy choices
                                                        for Audit
                                                        Committee
                                                        consideration.

                   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 are being
                                                        tested with
                                                        current
                                                        financial data

                   Quantify         Final               IFRS 1 exemptions
                   effects of       quantification      applicable to the
                   changeover in    of conversion       entity have been
                   initial IFRS 1   effects on 2011     identified;
                   disclosures      comparative         assessment of
                   and fiscal       period by Q1        alternatives is
                   2011 financial   fiscal 2010         underway
                   statements

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

    Training       Educate the      Ongoing training    Completed training
    and            Board of         provided to all     for general awareness
    communication  Trustees,        groups to align     of IFRS to broad
                   Audit            with changeover     group of finance
                   Committee,                           employees, Board
                   management,                          of Trustees, and
                   key employees,   Additional          Audit Committee
                   and other        training will
                   stakeholders     occur as needed
                                    during the
                                    changeover year

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

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

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

    Information    Determine if     IT implementation   Assessment of
    systems        business         plan to be          business processes
                   processes        completed by Q3     is underway in
                   require change   fiscal 2009         conjunction with
                   to be IFRS                           work on accounting
                   compliant                            policies



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

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

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

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

                                    Complete
                                    budgeting plan
                                    during fiscal
                                    2010

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

    Control
    environment   Assess and        Changes to ICFR     Analysis of control
                  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 ("ICFR")                    accounting issues
                  for all           Test and evaluate   and policies
                  accounting        revised controls
                  policy changes    throughout fiscal
                                    2010

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

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

RELATED PARTY TRANSACTIONS

As at September 30, 2009, Empire, through its wholly-owned subsidiary ECL, holds a 47.4% 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. The costs assumed by Empire pursuant to the agreement during the three months ended and nine months ended September 30, 2009 were $206 and $781 (three months ended and nine months ended September 30, 2008 - $285 and $1,126 respectively) 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. In addition, for various periods, ECL has an obligation to provide rental income and interest rate subsidies. The costs assumed by Empire pursuant to the agreement during the three months ended and nine months ended September 30, 2009 were $229 and $878 (three months ended and nine months ended September 30, 2008 - $343 and $1,516 respectively) and was netted against property expenses owing by Crombie to Empire. The head lease subsidy during the three months ended and nine months ended September 30, 2009 were $311 and $715 (three months and nine months ended September 30, 2008 - $105 and $734 respectively).

Crombie also earned rental revenue of $14,356 for the three months ended September 30, 2009 and $47,566 for the nine months ended September 30, 2009 (three months ended and nine months ended September 30, 2008 - $13,578 and $33,075 respectively) from Sobeys Inc., Empire Theatres and ASC Commercial Leasing Limited ("ASC"). These companies were all subsidiaries of Empire 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 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. 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 right, ECL 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 purchased $10,000 of Series B Debentures.

CRITICAL ACCOUNTING ESTIMATES

Critical accounting estimates are discussed under the section "Critical Accounting Estimates" in the 2008 Annual Report.

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 15.6 and 75.9 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 $145 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.

RISK MANAGEMENT

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

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

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

Crombie mitigates credit risk by geographical diversification, utilizing staggered lease maturities, diversifying both its tenant mix and asset mix and conducting credit assessments for new and renewing tenants. As at September 30, 2009;

    
    - Excluding Sobeys (which accounts for 32.9% 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 9.3% of the gross leaseable area
      of Crombie will expire in any one year.
    

Crombie earned rental revenue of $14,356 for the three months ended September 30, 2009 and $47,566 for the nine months ended September30, 2009 (three months ended and nine months ended September 30, 2008 - $13,578 and $33,075 respectively) from subsidiaries of Empire.

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

Interest rate risk is the potential for financial loss arising from increases in interest rates. Crombie mitigates interest rate risk by utilizing staggered debt maturities, limiting the use of permanent floating rate debt and utilizing interest rate swap agreements. As at September 30, 2009:

    
    - Crombie's weighted average term to maturity of the fixed rate mortgages
      was 6.0 years, and

    - Crombie's exposure to floating rate debt, including the impact of the
      fixed rate swap agreements discussed below, was 9.3% of the total
      commercial property debt. Excluding the floating rate term facility,
      which is to be replaced with permanent fixed rate financing during the
      next two years, the exposure to floating rate debt is 3.5%
    

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. Recent turmoil in the financial markets has 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 remain below historical average values and the effect of the abnormally low swap spreads, combined with the decline in the Canadian bond yields, has resulted in a significant deterioration of the mark-to-market values for the interest rate swap agreements. At September 30, 2009, the mark-to-market exposure on the interest rate swap agreements was approximately $25,090. There is no immediate cash impact from the mark-to-market adjustment. The unfavourable difference in the mark-to-market amount of the remaining interest rate swap agreements is reflected in other comprehensive income(loss) rather than net income(loss) as the swaps are all designated and effective hedges. The breakdown of the swaps in place 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 September 30, 2009, had
      an unfavourable mark-to-market exposure of $3,280 (September 30, 2008
      unfavourable $1,608) 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 number of delayed interest rate swap
      agreements of a notional amount of $100,334 (September 30, 2008 -
      $110,431) with settlement dates between February 1, 2010 and July 2,
      2011, maturing between February 1, 2019 and July 2, 2021 to mitigate
      exposure to interest rate increases for mortgages maturing in 2010 and
      2011. The fair value of these delayed interest rate swap agreements had
      an unfavourable mark-to-market exposure of $15,082 compared to the face
      value September 30, 2009 (September 30, 2008 - unfavourable $8,037).
      The change in these amounts has been recognized in other comprehensive
      income (loss).

    - In relation to the acquisition of a portfolio of 61 retail properties
      from subsidiaries of Empire, Crombie has entered into a delayed
      interest rate swap agreement of a notional amount of $38,000
      (September 30, 2008 - $180,000) with a settlement date of October 15,
      2009 to mitigate exposure to interest rate increases prior to replacing
      the floating rate term facility with long-term financing. The fair
      value of this agreement had an unfavourable mark-to-market exposure of
      $6,728 compared to the face value on September 30, 2009 (September 30,
      2008 - unfavourable $6,168). The change in this amount has been
      recognized in other comprehensive income(loss). Subsequent to period
      end the agreement was settled for $6,116 (see "Subsequent Events").
    

During the first quarter of 2009, Crombie settled an interest rate swap agreement related to a notional amount of $42,000 for a settlement amount of $4,535. This settlement amount has been recognized in other comprehensive income (loss) since the inception of the interest rate swap agreements. This amount will be reclassified to interest expense using the effective interest method.

On August 27, 2009, Crombie settled an interest rate swap agreement related to a notional amount of $16,000 for a settlement amount of $2,807. This settlement amount has been recognized in other comprehensive income (loss) since the inception of the interest rate swap agreements. This amount will be reclassified to interest expense using the effective interest method.

On September 14, 2009, Crombie settled an interest rate swap agreement related to the notional amount of $84,000 for a settlement amount of $8,139. The settlement amount was recognized as an expense in the period as the swap was no longer deemed to be an effective hedge.

Crombie estimates that $503 of other comprehensive income (loss) will be reclassified to interest expense during the remaining quarter of 2009 based on interest rate swap agreements settled to September 30, 2009.

A fluctuation in interest rates would have an impact on Crombie's net earnings 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:

    
                                 Three months ended      Three months ended
                                 September 30, 2009      September 30, 2008
                            -------------------------------------------------
                                    0.5%        0.5%        0.5%        0.5%
                               increase    decrease    increase    decrease
    -------------------------------------------------------------------------
    Impact on net income of
     interest rate changes
     the floating rate
     revolving credit
     facility                     $(189)       $189       $(501)       $501
    -------------------------------------------------------------------------

                                  Nine months ended      Three months ended
                                 September 30, 2009      September 30, 2008
                            -------------------------------------------------
                                    0.5%        0.5%        0.5%        0.5%
                               increase    decrease    increase    decrease
    -------------------------------------------------------------------------
    Impact on net income of
     interest rate changes
     the floating rate
     revolving credit
     facility                     $(703)       $703       $(866)       $866
    -------------------------------------------------------------------------

                                 September 30, 2009      September 30, 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                  $6,139     $(6,434)     $9,486     $(9,903)
    -------------------------------------------------------------------------
    

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 security provided by Crombie. The mark-to-market adjustment on the interest rate swap agreements reached an out-of-the-money position of approximately $25,090 at September 30, 2009. The deterioration in the mark-to-market position may have the impact of reducing Crombie's available credit in the Revolving Credit Facility.

Crombie has no mortgages maturing in fiscal 2009 and during the second quarter of 2009 completed the extension of the Term Facility from the original maturity date of October 2009 to May 2011. In addition, 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 a $106,079 fixed rate mortgage debt maturing in the first quarter of 2010. Negotiations on refinancing have begun and Crombie does not anticipate difficulty in refinancing the debt prior to maturity.

SUBSEQUENT EVENTS

On October 22, 2009, Crombie declared distributions of 7.417 cents per unit for the period from October 1, 2009, to and including, October 31, 2009. The distribution will be payable on November 16, 2009 to Unitholders of record as at October 31, 2009.

On September 23, 2009, Crombie signed a commitment letter for mortgage financing of $37,000 with a third party. Upon closing, the mortgage will have an interest rate of 6.9% and a term of 10 years. On receipt, the mortgage funds will be used to reduce the floating rate term facility. In connection with the mortgage financing, on October 14, 2009, Crombie cash settled an interest rate swap with a notional value of $38,000 for a settlement amount of $6,116. As at September 30, 2009, the swap had a mark-to-market value of $6,728. The settlement amount will be reclassified to interest expense using the effective interest method over the 10 year term of the mortgage.

On November 5, 2009, Crombie entered into an agreement to acquire eight retail properties, representing approximately 335,000 square feet of gross leaseable area, from subsidiaries of Empire Company Limited. The purchase price of the properties is approximately $62,000, excluding closing and transaction costs. The acquision is expected to close in stages over the next six months as due diligence and mortgage financing for the properties are finalized. The purchase price will be funded through a combination of assumed mortgage financing and Crombie's floating rate revolving credit facility.

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 September 30, 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 quarter ended September 30, 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 September 30, 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, except            Sep. 30,    Jun. 30,    Mar. 31,    Dec. 31,
     per unit amounts)             2009        2009        2009        2008
    -------------------------------------------------------------------------
    Property revenue            $50,991     $50,893     $52,992     $52,522
    Property expenses            18,585      17,258      19,971      19,649
    -------------------------------------------------------------------------
    Property net operating
     income                      32,406      33,635      33,021      32,873
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative             1,882       3,646       1,644       2,701
      Interest                   11,595      11,272      10,730      11,318
      Depreciation and
       amortization              11,032      10,803      12,491      12,499
    -------------------------------------------------------------------------
                                 24,509      25,721      24,865      26,518
    -------------------------------------------------------------------------
    Income from continuing
     operations before other
     items, income taxes
     and non-controlling
     interest                     7,897       7,914       8,156       6,355
    Other income (expense)
     items                       (9,981)          -          92          55
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes
     and non-controlling
     interest                    (2,084)      7,914       8,248       6,410
    Income tax expense
     (recovery) -Future               -           -         200      (3,450)
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations
     before non-controlling
     interest                    (2,084)      7,914       8,048       9,860
    Gain/(loss) on sale of
     discontinued operations          -           -           -         487
    Income from discontinued
     operations                       -           -           -          24
    -------------------------------------------------------------------------
    Income (loss) before
     non-controlling interest    (2,084)      7,914       8,048      10,371
    Non-controlling interest       (989)      3,786       3,856       4,968
    -------------------------------------------------------------------------
    Net income (loss)           $(1,095)     $4,128      $4,192      $5,403
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net
     income (loss) per unit      $(0.03)      $0.15       $0.15       $0.20
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                        Quarter Ended (as restated)
    -------------------------------------------------------------------------
    (In thousands of
     dollars, except            Sep. 30,    Jun. 30,    Mar. 31,    Dec. 31,
     per unit amounts)             2009        2009        2009        2008
    -------------------------------------------------------------------------
    AFFO                          $(451)    $14,524     $11,698     $13,521
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO                          $8,948     $18,717     $20,739     $18,933
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions               $13,566     $12,294     $11,649     $11,649
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    AFFO per unit(1)             $(0.01)      $0.27       $0.22       $0.25
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO per unit(1)               $0.15       $0.35       $0.40       $0.36
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions per unit(1)     $0.22       $0.23       $0.22       $0.22
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                            -------------------------------------------------
                                        Quarter Ended (as restated)
    -------------------------------------------------------------------------
    (In thousands of
     dollars, except            Sep. 30,    Jun. 30,    Mar. 31,    Dec. 31,
     per unit amounts)             2008        2008        2008        2007
    -------------------------------------------------------------------------
    Property revenue            $51,044     $47,315     $37,262     $36,455
    Property expenses            18,634      16,776      15,312      14,336
    -------------------------------------------------------------------------
    Property net operating
     income                      32,410      30,539      21,950      22,119
    -------------------------------------------------------------------------
    Expenses:
      General and
       administrative             2,004       1,979       1,952       2,492
      Interest                   11,449       9,965       6,500       6,577
      Depreciation and
       amortization              12,535      10,757       7,995       8,352
    -------------------------------------------------------------------------
                                 25,988      22,701      16,447      17,421
    -------------------------------------------------------------------------
    Income from continuing
     operations before other
     items, income taxes
     and non-controlling
     interest                     6,422       7,838       5,503       4,698
    Other income (expense)
     items                           27          97           -           -
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations
     before income taxes
     and non-controlling
     interest                     6,449       7,935       5,503       4,698
    Income tax expense
     (recovery) -Future             859         701         400      (2,994)
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations
     before non-controlling
     interest                     5,590       7,234       5,103       7,692
    Gain/(loss) on sale of
     discontinued operations       (895)          -           -           -
    Income from discontinued
     operations                     226         136         263         132
    -------------------------------------------------------------------------
    Income (loss) before
     non-controlling interest     4,921       7,370       5,366       7,824
    Non-controlling interest      2,358       3,531       2,583       3,766
    -------------------------------------------------------------------------
    Net income (loss)            $2,563      $3,839      $2,783      $4,058
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net
     income (loss) per unit       $0.09       $0.15       $0.13       $0.19
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                        Quarter Ended (as restated)
    -------------------------------------------------------------------------
    (In thousands of
     dollars, except            Sep. 30,    Jun. 30,    Mar. 31,    Dec. 31,
     per unit amounts)             2008        2008        2008        2007
    -------------------------------------------------------------------------
    AFFO                        $10,019     $11,916      $8,096      $7,545
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO                         $19,200     $18,812     $13,839     $13,257
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions               $11,649     $11,879      $8,867      $8,867
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    AFFO per unit(1)              $0.19       $0.24       $0.19       $0.18
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO per unit(1)               $0.37       $0.38       $0.33       $0.32
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions per unit(1)     $0.22       $0.23       $0.21       $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
        60,804,544 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, 41,728,561 for the quarter ended December 31, 2007.
        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: November 5, 2009

Stellarton, Nova Scotia, Canada

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


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