Boardwalk REIT Announces Solid Fourth Quarter and Full Year 2007 Financial Results; FFO Per Unit Up 26.2% and DI Per Unit up 24.9% YOY; and its February 2008 Distribution



    CALGARY, Feb. 14 /CNW/ - Boardwalk Real Estate Investment Trust ("BEI.UN"
- TSX) - Boardwalk Real Estate Investment Trust ("Boardwalk REIT" or the
"Trust") today announced solid financial results for both the fourth quarter
of 2007 and fiscal 2007; FFO per unit up 22.7% and DI per unit up 19.6% for
the fourth quarter of 2007 compared to the same period last year and FFO per
unit up 26.2% and DI per unit up 24.9% YOY. During fiscal 2007, the Trust
acquired a total of 2,421 residential units in Western Canada.
    For the fourth quarter ended December 31, 2007, the Trust reported Funds
From Operations(1) ("FFO") of $29.9 million and FFO per unit of $0.54 on a
diluted basis, compared to FFO of $25.0 million and FFO per unit of $0.44 for
the same period last year. Distributable income ("DI") for the quarter was
$30.8 million and DI per unit was $0.55 on a diluted basis, compared to
$25.9 million and $0.46 per unit for the same period last year.

    
    Highlights of the Trust's fourth quarter 2007 financial results include:

    -   Rental revenues of $99.0 million, an increase of 18.4%, compared to
        $83.6 million for the three-month period ended December 31, 2006.

    -   Net operating income of $61.6 million, representing a 22.0% increase,
        from $50.5 million in the same period last year.

    -   FFO of $29.9 million, an increase of 19.6%, compared to $25.0 million
        for the three-month period ended December 31, 2006.

    -   FFO per unit was $0.54 on a diluted basis, up 22.7%, compared to
        $0.44 for the three-month period ended December 31, 2006.

    -   DI was $0.55 per unit, up 19.6%, from $0.46 for the three months
        ended December 31, 2006.

    Highlights of the Trust's financial results for fiscal 2007 include:

    -   Rental revenues of $375.0 million, an increase of 17.4% compared to
        $319.4 million for the twelve-month period ended December 31, 2006.

    -   Net operating income of $235.5 million, representing a 22.6% increase
        from $192.1 million in the same period last year.

    -   FFO from continuing operations of $116.5 million, an increase of
        27.5% compared to $91.4 million for the twelve-month period ended
        December 31, 2006.

    -   FFO per unit from continuing operations of $2.07 on a diluted basis,
        up 26.2% compared to $1.64 for the twelve-month period ended
        December 31, 2006.

    -   DI from continued operations was $2.11 per unit, up 24.9% compared to
        $1.69 for the twelve months ended December 31, 2006.
    

    Commenting on the Trust's Q4 and fiscal 2007 results, Sam Kolias, C.E.O.
and Chairman of the Board, said: "Fiscal 2007 was an impressive year for
Boardwalk REIT. The geographic diversity of our portfolio, strong market
fundamentals, and our ability to nimbly adapt to change resulted in an
excellent year with outstanding growth. Throughout the 2007 year, we embraced
the challenge of meeting and exceeding the exceptional results that we
achieved in fiscal 2006. We are pleased that our efforts produced another
solid year in 2007."
    "Over the fourth quarter, in-place occupied rents continued to rise.
Across the portfolio, occupied rent increased $32, or 3.5%, from approximately
$915 per suite at the end of Q3 2007 to approximately $947 per suite at the
end of Q4 2007. Year-over-year occupied rent increased approximately $96 per
suite for the entire portfolio. Despite increasing occupied rents, a decline
in market rents and occupancy was noted over the fourth quarter, reflecting a
typical weaker winter season. It is too early to gauge if the trend of
decreasing market rents will extend beyond the normal seasonal winter cycle
into the spring and summer months. For the entire portfolio, market rents
decreased $42, from approximately $1096 per suite at the end of Q3 2007 to
$1054 per suite at the end of Q4 2007. Corresponding with the seasonal
decrease in market rents, our mark-to-market per suite (representing the
difference between actual rental rates obtained and potential rental revenue
based on market rental rates) also declined slightly over the fourth quarter.
Across our portfolio, our mark-to-market decreased from approximately $189 per
suite at the end of Q3 2007 to $95 per suite at the end of Q4 2007. As a
result, the annualized total mark-to-market gap decreased from $78.5 million
at the end of Q3 2007 to $39.4 million at the end of Q4 2007, adjusted for
current vacancy. This decrease can be attributed to both an increase in
occupied rents, as well as a decrease in market rents. Despite the decline,
the gap between in-place and market rents remains significant."
    "Our strategy of adjusting market rent allows us to maximize revenues by
creating the most economically beneficial balance of occupancy and rent
levels. As maximizing revenues is a balancing act of price, supply and demand,
we continue to monitor our markets on a constant basis, adjusting rents and
incentives with agility and market sensitivity. It is not uncommon for us to
adjust market rents, based on market demand for rentals over a short period of
time. We are optimistic that we will make strides towards closing the
mark-to-market gap in 2008. In 2007, legislation passed by the government of
Alberta limited rental increases for current Customers to once a year. Due to
the retroactive nature of the legislation, our ability to close our
mark-to-market gap through rental increases was temporarily reduced in 2007.
However, as of January 2008, the majority of our existing Alberta Customers
were eligible for monthly rent increase notices up to our internal maximum
increase of $150, a significant stride towards realizing this mark-to-market
gap. After this adjustment, over half of the rental rates of in-place
Customers will still be well below market rates."
    "Our Saskatchewan markets, which make up 13% of our portfolio, had a very
positive quarter and a particularly impressive year. With strong activity in
the energy sector, record population and employment growth, rising house
prices, and an influx of inter-provincial migration, demand for rental housing
in Saskatchewan is strong. Average market rents were up approximately $15 per
suite in Saskatchewan at the end of Q4 2007 over Q3 2007 and up approximately
$224 per suite year-over-year. In-place occupied rents in the province
increased $53, from $729 per suite at the end of Q3 2007 to $782 per suite at
the end of Q4 2007. Carrying momentum from a strong finish to 2007, analysts
predict that 2008 will be another notable year for the province."
    "Our Alberta markets, which make up 54% of our portfolio, continued to
generate solid growth for the Trust over the fourth quarter and for the 2007
fiscal year. Though the growth rate of some market fundamentals tempered from
the extraordinary levels of 2006, most indicators remained at strong levels at
the close of the year. We are particularly pleased to note continued
investment in Alberta's Oil Sands, as well as strong employment growth in the
province. Despite strong results, occupancy rates in Edmonton decreased from
97.52% for Q4 of 2006 to 95.22% for Q4 of 2007. In Calgary, occupancy
decreased from 97.47% for Q4 of 2006 to 94.42% for Q4 of 2007. It should be
noted, however, that the occupancy rates posted at the end of 2006 were at an
unprecedented high level. In Calgary, average market rents decreased
approximately $100 per suite at the end of Q4 over Q3 2007. In Edmonton,
average market rents decreased approximately $113 per suite at the end of Q4
over Q3 2007; however, increased $101 per suite year-over-year. Despite the
decline in market rents, occupied rents increased $67 per suite in Calgary and
$61 per suite in Edmonton at the end of Q4 over Q3 2007. We believe that there
is still room for growth in Alberta at a more sustainable and balanced pace.
We continue to maximize revenues by constantly adjusting market rents while
maintaining acceptable occupancy levels."

    Operational Highlights

    The average vacancy rate across the Trust's portfolio for the fourth
quarter of 2007 was 4.69%, up from 3.93% in the third quarter of 2007, and up
from 3.51% compared to the same period last year.
    The average monthly rent on our entire portfolio realized in the fourth
quarter of 2007 was $903 per suite, up $83 from $820 per suite for the same
period last year.
    The average market rent for the Trust's properties at the end of December
2007 was an estimated $1054 per suite per month, which compares to an average
in-place monthly rent per occupied suite of $947 for the quarter ended
December 31, 2007.
    At the end of December 2007, the potential between occupied rents and
market rents (mark-to-market) totalled $39.4 million, or $0.71 per trust unit,
down from $78.5 million, or $1.39 per trust unit, at the end of September
2007.
    More detail on our operations will be found in our conference call
presentation to be posted on our web site today at
http://www.boardwalkreit.com/FinancialReports/ The conference call audio for
this presentation can also be found on our web site at
http://www.boardwalkreit.com/FinancialReports/ following the call.

    Same-Property Results

    Boardwalk continued to show solid performance in its stabilized
properties (defined as properties owned for over 24 months). The
"same-property" results for the Trust's stabilized portfolio for the
three-month period ended December 31, 2007 showed rental revenue growth of
9.7% on a year-over-year basis. Operating expenses increased 0.6%, resulting
in an increase in NOI of 15.4% compared to the same period last year. The
"same-property" results for the twelve-month period ended December 31, 2007
showed rental revenue growth of 11.0% and an increase in total operating
expenses of 2.4%, resulting in an increase in NOI of 16.4% compared to the
same period last year. A total of 33,014 units, representing approximately
90.5% of Boardwalk's total portfolio, were classified as stabilized as at
December 31, 2007.

    Same-Property Results - Stabilized Portfolio

    
                                                              Net
                                             Operating  Operating       % of
                          No. of    Revenue    Expense     Income Stabilized
    Dec 31 2007 - 3 M      Units     Growth     Growth     Growth        NOI

    Calgary                4,973      10.1%       5.0%      12.1%        21%
    Edmonton              10,369      16.2%       4.5%      23.1%        34%
    Other Alberta          1,680       7.6%      16.6%       3.8%         6%
    British Columbia         633       3.6%     -16.1%      17.9%         2%
    Ontario                4,265       0.3%     -13.0%      13.7%         9%
    Quebec                 6,434       3.6%      -4.1%       9.5%        17%
    Saskatchewan           4,660      13.8%       8.5%      17.8%        11%
                         ----------------------------------------------------
                          33,014       9.7%       0.6%      15.4%       100%
                         ----------------------------------------------------
                         ----------------------------------------------------

                                                              Net
                                             Operating  Operating       % of
                          No. of    Revenue    Expense     Income Stabilized
    Dec 31 2007 - 12 M     Units     Growth     Growth     Growth        NOI

    Calgary                4,973      17.6%       4.2%      23.2%        21%
    Edmonton              10,369      17.4%       8.9%      22.1%        34%
    Other Alberta          1,680      12.6%      13.3%      12.3%         6%
    British Columbia         633       8.1%      -6.1%      16.0%         2%
    Ontario                4,265      -0.1%      -4.6%       4.7%         9%
    Quebec                 6,434       2.9%      -3.5%       7.6%        18%
    Saskatchewan           4,660       9.8%       2.5%      15.6%        10%
                         ----------------------------------------------------
                          33,014      11.0%       2.4%      16.4%       100%
                         ----------------------------------------------------
                         ----------------------------------------------------
    

    Commenting on Boardwalk's same-property results, President, Roberto
Geremia, said, "In the fourth quarter, we were pleased to see continued
revenue growth translating into a strong reported net operating income.
Boardwalk's Alberta and Saskatchewan portfolios continue to deliver growth."
    The 2007 reported results were favourably impacted by Alberta natural gas
rebates in the amount totalling approximately $1.2 million compared to
approximately $2.0 million for the prior year. For a more detailed analysis of
the program, please visit the following Alberta provincial government website:
http://www.energy.gov.ab.ca

    Sequential Revenue Analysis

    
    -------------------------------------------------------------------------
    Stabilized Revenue
    Growth Q4 2007 vs.         No. of Units    Q3 2007    Q2 2007    Q1 2007
    -------------------------------------------------------------------------
    Calgary                           4,973       0.4%       1.3%       5.6%
    Edmonton                         10,369       1.8%       5.7%      10.4%
    Other Alberta                     1,680       1.9%       2.7%       2.3%
    British Columbia                    633      -1.9%       0.7%       2.4%
    Ontario                           4,265       2.1%       0.6%       1.0%
    Quebec                            6,434       0.2%       2.4%       3.0%
    Saskatchewan                      4,660       4.6%      10.4%      12.9%
    -------------------------------------------------------------------------
                                     33,014       1.5%       3.9%       6.7%
    -------------------------------------------------------------------------
    

    Commenting on Boardwalk REIT's sequential stabilized revenue growth,
William Wong, Chief Financial Officer said, "Stabilized revenues reported for
the current quarter were up 6.7% comparing Q4 over Q1 2007, 3.9% comparing Q4
over Q2 2007, and 1.5% comparing Q4 over Q3 2007. Though stabilized revenue
growth tempered through the third and fourth quarters, mainly due to a change
in legislation in Alberta requiring a 12-month period between rental increases
(up from our previous 6-month period), we estimate that growth will again
increase in the first half of 2008 when annual rental increases in Alberta are
realized. Rental legislation enacted in May of 2007 (retroactive to the
beginning of 2007) limits rental increases to once per year in Alberta, our
largest market, resulting in larger rental increases given less often."

    Real Estate Acquisition/Disposition Activity

    
    Acquisitions

    Building Name             City          Closing Date       Type    Units
    -------------------------------------------------------------------------

    Ridgement Apartments  Coquitlam, BC   January 25, 2007   Low Rise     41
    Oliver View/Manor
     (St. Charles Pl/
      Parkview)            Edmonton, AB   January 26, 2007   Walk Up      51
    West Edmonton Village  Edmonton, AB  February 28, 2007   Various   1,176

    Prairie Sunrise Tower    Grande                          Walk Up/
     Portfolio             Prairie, AB     March 14, 2007    Hi Rise     275
    Springwood Place         Spruce
     Apartments             Grove, AB       May 28, 2007     Low Rise    160
    Lakeview Apartments    Calgary, AB   September 20, 2007   Walkup     120

                                                             Highrise/
    Whitehall Square       Edmonton, AB  September 24, 2007   Walkup     598

    -------------------------------------------------------------------------
    Total                                                              2,421
                                                                      -------
                                                                      -------

                                        Year 1                 Avg.
    Building Name             Price    Cap Rate    $/Unit     Sq.Ft. $/Sq.Ft.
    -------------------------------------------------------------------------

    Ridgement Apartments  $  3,700,000   5.03%  $     90,244    634   $  142
    Oliver View/Manor
     (St. Charles Pl/
      Parkview)           $  4,150,000   4.52%  $     81,373    795   $  102
    West Edmonton Village $143,500,000   5.47%  $    122,024    968   $  126

    Prairie Sunrise Tower
     Portfolio            $ 40,000,000   4.74%  $    145,455    831   $  175
    Springwood Place
     Apartments           $ 16,000,000   5.63%  $    100,000    767   $  130
    Lakeview Apartments   $ 21,850,000   4.72%  $    182,083    897   $  203

    Whitehall Square      $111,250,000   5.03%  $    186,037    913   $  204

    -------------------------------------------------------------------------
    Total                 $340,450,000   5.22%  $    140,624    913   $  154
                          ---------------------------------------------------
                          ---------------------------------------------------


    Dispositions

    Building Name             City          Closing Date       Type    Units
    -------------------------------------------------------------------------

    Oliver View/Manor
     (St. Charles Pl/
      Parkview)            Edmonton, AB    April 30, 2007    Walk Up      51

    -------------------------------------------------------------------------
    Total                                                                 51
                                                                      -------
                                                                      -------

                                        Year 1                 Avg.
    Building Name             Price    Cap Rate    $/Unit     Sq.Ft. $/Sq.Ft.
    -------------------------------------------------------------------------

    Oliver View/Manor
     (St. Charles Pl/
      Parkview)           $  5,900,000   3.20%  $    115,686    795   $  146

    -------------------------------------------------------------------------
    Total                 $  5,900,000   3.20%  $    115,686    795   $  146
                          ---------------------------------------------------
                          ---------------------------------------------------
    

    Commenting on the Trust's property acquisitions and dispositions, Bill
Chidley, Senior Vice President, Corporate Development, said: "In 2007, the
Trust fulfilled its acquisition target by closing on 2,421 rental units in
British Columbia and Alberta. The acquisitions had a total purchase price of
340.5 million and, in aggregate, a going-in cap rate of 5.2%. The Trust had no
new acquisitions in the fourth quarter of 2007."
    "During 2007, we increased our already large presence in the economically
strong province of Alberta. With reasonable cap rates and strong rental
fundamentals, our 2007 Alberta acquisitions make a welcome contribution to the
strength of the Trust's property portfolio. In 2007, we closed on six Alberta
properties, located in Edmonton, Calgary, Spruce Grove, and Grande Prairie. In
2007, we also conducted one disposition in Edmonton, Alberta of a 51-unit
walk-up, and also sold and closed 50 units in a 90-unit property located in
Calgary, Alberta that is being developed into condominium units for sale. The
50 condominium units sold and closed in 2007 is not included in the
disposition table noted above."
    "The accretive acquisitions outlined above would not be possible without
our experienced team of acquisition professionals. Our team is able to act
with speed and confidence based on their ongoing due diligence, consisting of
intensive, building-by-building analysis in all major Canadian markets. By
consistently monitoring a property's surrounding area, background,
socio-economic motivators, and potential tenants, the Trust is able to
recognize and close on below-market-value deals."

    New Apartment Development

    In 2007, we began to explore the possibility of developing new
multi-family rental product in select markets in Western Canada, focusing on
several of our existing buildings in Calgary and Edmonton that feature excess
density. During the third quarter of 2007, the Trust completed a preliminary
densification study in Calgary. The planning consultants estimate that, in
Calgary, an additional density of 7,000 to 14,000 apartment units could be
achieved with re-zoning, the vast majority on 11 sites. In the fourth quarter,
these numbers were revisited and revised to 6,200 to 12,700 apartment units.
    Over the fourth quarter, we continued our densification study in the
Edmonton area, focusing on two Edmonton properties - West Edmonton Village and
Viking Arms. We have also commissioned a densification study for Fort
McMurray. It is important to note that we are in the early stages of this
process, with the earliest completion of any new development between 2011 and
2012 which is 2.5 to four years away. As part of this investigation, we are
considering a number of ways to surface this densification value, including
direct development, joint venture, and the sale of excess density. Though we
are excited by this potential, it is important to note that in order to obtain
the estimated maximum density, it will be necessary to demolish existing
rental units. It is our belief that the key to this development is to find the
optimal trade-off between maximizing density and retaining as much of the
existing rental stock as possible. Boardwalk believes that being prepared for
all future opportunities is a key to our on-going success.

    Alberta Royalty Review

    On October 25, 2007, the Alberta Government announced changes to the
existing oil and gas royalty program. This new program, which will commence in
2009, is more heavily based on a sliding scale that is responsive to the
market price of the underlying commodity. This new scale increases the top end
of the royalty rates from approximately 35% to a maximum of 50%. It is the
Government's belief that this new system strikes a balance between the needs
of both the Province and the producers of these commodities.
    The long-term impact of this decision on the Alberta economy has not yet
been determined; however, thus far, there has been no material pullback in Oil
Sands related projects. Optimism has been encouraged with the announcement of
several long-term sustaining investments in the Oil Sands after the new
Royalty Program was released. Of particular note is Suncor Energy's January
2008 announcement of a $20.6 billion expansion plan to boost crude oil
production in Alberta's Oil Sands. It is our continued belief that the high
price of oil will continue to encourage further investment, particularly in
the Alberta Oil Sands.

    Bill C-52

    On June 22, 2007, Bill C-52 received Royal Assent and as such became law.
This "Income Trust Law" set forth a number of tests that, if not met, would
strip the right of a trust to continue as a Specified Investment Flow-Through
("SIFT") tax-effective vehicle. In the legislation, there are specific
exemptions for real estate investment trusts ("REITs"). Although we do believe
the spirit of the Legislation was to exclude all REITs, the actual detail of
the Bill is unclear on some issues that, if not corrected, may result in many
REITs, including Boardwalk REIT, not qualifying to continue as a REIT
effective January 1, 2011 in accordance with the definition stipulated in the
Legislation.
    On December 20, 2007, the Canadian Federal Government proposed technical
changes to the current rules governing REITs. Proposed changes include the
removal of the 25% limit on foreign investment by REITs, as well as some
technical amendments, which clarified the uncertainty on whether most real
estate investment trusts will qualify as REITs as previously defined in Bill
C-52. These recently released modifications appear to have rectified the need
to re-structure to continue to qualify as a REIT. Although we have not seen
the details of the agreement, we view this proposal as a positive move towards
rectifying the uncertainty surrounding Bill C-52.
    We continue to work with the Federal Government and other industry
organizations to address the issues surrounding Bill C-52. If these items are
rectified, the Trust will reverse the one-time non-cash charge recorded in Q2
of 2007 on our financial statements, which was updated at the end of the third
and fourth quarters of 2007. Until then, this non-cash charge will be reviewed
and adjusted, if necessary, on a quarterly basis. Unfortunately, we are not
able to provide any guidance on the likelihood or the expected timing of this
reversal.

    Unit Buyback and Distribution Reinvestment Plan

    Under the Normal Course Issuer Bid previously announced in 2007, as of
February 1, 2008, the Trust had repurchased a total of 1,013,212 trust units
representing a total market value of $44.9 million, or an average price of
$44.35 per trust unit.
    Boardwalk's Board of Trustees has determined that, effective February 29,
2008, the Trust will be suspending its Distribution Reinvestment Plan (the
"Plan"). The Plan was originally put in place as part of the conversion to a
real estate investment trust in May of 2004. The Plan provided an efficient
and cost-effective equity to support the Trust's financing of its strategic
plan implementation. Given the current liquidity condition, the Trust finds it
no longer requires this source of funding at this time. The Trust may
reinstate the Plan in the future, if required to fund new investing
activities. The suspension of the Plan does not affect regular distributions
and Unitholders will continue to receive such distributions as declared.

    Continued Financial Strength

    The Trust strengthened its financial position through 2007 due to lower
interest rates. We remain focused on maintaining a strong and healthy balance
sheet. Boardwalk's total mortgage and long-term debt was $1.88 billion as at
December 31, 2007, compared to $1.50 billion at December 31, 2006. As at
December 31, 2007, the Trust's total debt had an average term maturity of
3 years with a weighted average interest rate of 5.11%. The Trust's
debt-to-total-market-capitalization ratio was approximately 43.2%. The Trust's
interest coverage ratio of adjusted EBITDA (i.e. earnings before interest,
taxes, depreciation and amortization) to interest expense, after excluding
gains, was 2.25 times for the three months ended December 31, 2007, compared
to 2.29 times for the same period last year. During the fourth quarter of
2007, Boardwalk successfully completed approximately $420 million in mortgage
refinancings and renewals.

    Outlook and 2008 Financial Guidance

    Commenting on the outlook for the Trust, Roberto Geremia, President,
said, "We are confirming our previously announced fiscal 2008 guidance for FFO
and Distributable Income of between $2.35 to $2.50 and $2.37 to $2.52,
respectively. These forecasts are based on the assumptions of achieving
approximately 8.0% - 14.0% in stabilized NOI growth and new property
acquisitions of between 1,000 to 2,000 new residential units for the year. In
accordance with the Trust's current policy, management will update the market
on our Annual 2008 Guidance on a quarterly basis." The reader is cautioned
that this information is forward-looking information and actual results may
vary materially from those reported.

    February 2008 Monthly Distribution

    The Trust has declared its February 2008 distribution in the amount of
15.00 cents per trust unit ($1.80 on an annualized basis). The February
distribution will be payable on March 17, 2008 to unitholders of record on
February 29, 2008.

    Supplementary Information

    Boardwalk produces Quarterly Supplemental Information that provides
detailed information regarding the Trust's activities during the quarter. The
Fourth Quarter 2007 Supplemental Information is available on our investor
website at www.boardwalkreit.com.

    Teleconference on Fourth Quarter Financial Results

    We invite you to participate in the teleconference that will be held to
discuss these results this same morning at 11:00 am EST. Senior management
will speak to the fourth quarter financial results and provide a corporate
update. Presentation materials will be made available on our investor website
at www.boardwalkreit.com prior to the call.

    Participation & Registration: Please RSVP to Investor Relations at
403-206-6758 or by email to investor@bwalk.com.

    Teleconference: The telephone numbers for the conference are: (416)
644-3415 (within Toronto) or toll-free (800) 733-7560 (outside Toronto).

    Webcast: Investors will be able to listen to the call and view our slide
presentation over the Internet by visiting http://www.boardwalkreit.com 15
min. prior to the start of the call. An information page will be provided for
any software needed and system requirements. The live audiocast will also be
available at
    http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2128940

    Replay: An audio recording of the teleconference will be available from
1:00 pm ET on Thursday, February 14, 2008 until 11:59 pm ET on Thursday,
February 21, 2008. You can access it by dialling 416-640-1917 and using the
passcode 21258069 followed by the pound (number) sign. An audio archive will
also be available on our website (http://www.boardwalkreit.com/) approximately
two hours after the conference call.

    Corporate Profile

    Boardwalk REIT is an open-ended real estate investment trust formed to
acquire all of the assets and undertakings of Boardwalk Equities Inc.
Boardwalk REIT's principal objectives are to provide its unitholders with
monthly cash distributions, partially on a Canadian income tax-deferred basis,
and to increase the value of its units through the effective management of its
residential multi-family revenue producing properties and the acquisition of
additional properties. Boardwalk REIT currently owns and operates in excess of
260 properties with over 36,480 units totalling approximately 40 million net
rentable square feet, and is Canada's largest owner/operator of multi-family
rental communities. Boardwalk REIT's portfolio is concentrated in the
provinces of Alberta, British Columbia, Saskatchewan, Ontario and Quebec.

    
    (1) Funds From Operations ("FFO") is a generally accepted measure of
        operating performance of real estate investment trusts and companies;
        however, it is a non-GAAP measure. The Trust calculates FFO by taking
        net earnings after discontinued operations, adjusting for gains or
        losses on disposal of discontinued operation assets and extraordinary
        items, and adding non-cash expenses including future income taxes and
        amortization. The determination of this amount may differ from that
        of other real estate investment trusts and companies. Distributable
        Income ("DI") is calculated based on the definition as set out in the
        Trust's declaration of trust and is computed by taking FFO and adding
        back amortization on any deferred financing charges incurred prior to
        May 3, 2004 as well as adjusting for any discounts or premiums
        relating to the amortization of mark-to-market debt adjustment
        incurred subsequent to the real estate investment trust conversion
        date of May 3, 2004.
    

    CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

    This news release contains forward-looking statements relating to our
operations and the environment in which we operate, which are based on our
expectations, estimates, forecast and projections, which we believe are
reasonable as of the current date. These statements are not guarantees of
future performance and involve risks and uncertainties that are difficult to
control or predict. For more exhaustive information on these risks and
uncertainties you should refer to our most recently filed annual information
form which is available at www.sedar.com. Actual outcomes and results may
differ materially from those expressed in these forward-looking statements.
Readers, therefore, should not place undue reliance on any such
forward-looking statements. Further, a forward-looking statement speaks only
as of the date on which such statement is made and should not be relied upon
as of any other date. While we may elect to, we undertake no obligation to
publicly update any such statement to reflect new information or the
occurrence of future events or circumstances at any particular time.


    
    Consolidated Balance Sheets
    (CDN$ THOUSANDS)
                                                   December 31,  December 31,
    As at                                                 2007          2006
                                                   --------------------------
    Assets

    Revenue producing properties (NOTE 4)          $ 2,149,853   $ 1,836,429
    Other assets (NOTE 7)                               15,776        13,873
    Future income taxes (NOTES 3 and 14)                     -           316
    Mortgages and accounts receivable (NOTE 6)          10,071         4,388
    Segregated tenants' security deposits               12,935         9,998
    Cash and cash equivalents                              960             -
    Discontinued operations (NOTE 5)                     6,293         5,456
    -------------------------------------------------------------------------
                                                   $ 2,195,888   $ 1,870,460
                                                   --------------------------
                                                   --------------------------

    Liabilities

    Mortgages payable (NOTES 3 and 8)              $ 1,770,015   $ 1,380,578
    Debentures (NOTES 3 and 9)                         118,768       118,448
    Accounts payable and accrued liabilities            48,279        35,423
    Refundable tenants' security deposits and other     16,186        13,102
    Bank indebtedness                                        -         4,042
    -------------------------------------------------------------------------
                                                     1,953,248     1,551,593
    Future income taxes (NOTES 3 and 14)               100,287             -
    -------------------------------------------------------------------------
                                                     2,053,535     1,551,593

    Unitholders' Equity

    Unitholders' equity                                142,353       318,867
    -------------------------------------------------------------------------
                                                   $ 2,195,888   $ 1,870,460
                                                   --------------------------
                                                   --------------------------

    Commitments and contingencies (NOTE 16)
    SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



    CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (LOSS)
    (CDN$ THOUSANDS, EXCEPT NUMBER OF UNITS AND PER UNIT AMOUNTS)

                                                    Year ended    Year ended
                                                   December 31,  December 31,
                                                          2007          2006
                                                   --------------------------
    Revenue
      Rental income                                $   375,012   $   319,440
                                                   --------------------------

    Expenses
      Revenue producing properties:

        Operating expenses                              64,934        56,797
        Utilities                                       43,504        40,443
        Utility rebate (NOTE 2)                         (1,228)       (2,032)
        Property taxes                                  32,300        32,143

      Administration                                    21,213        17,072
      Financing costs                                   92,982        80,806
      Deferred financing costs amortization              4,823         3,193
      Amortization of capital assets (NOTE 2)           76,863        71,583
      Amortization of intangibles (NOTE 2)               7,382         1,842
    -------------------------------------------------------------------------
                                                       342,773       301,847
                                                   --------------------------

    Earnings from continuing operations before
     the following                                      32,239        17,593

      Other income (NOTE 13)                              (755)         (750)
    -------------------------------------------------------------------------

    Earnings from continuing operations before
     income taxes                                       32,994        18,343

      Large corporations taxes (recovery)                   15           (30)
      Future income taxes (NOTE 14)                    100,597           613
    -------------------------------------------------------------------------

    Earnings (loss) from continuing operations         (67,618)       17,760

    Earnings from discontinued operations,
     net of tax (NOTE 5)                                 8,292         7,629
    -------------------------------------------------------------------------

    Net earnings (loss)                                (59,326)       25,389

    Other comprehensive income                               -             -
                                                   --------------------------

    Comprehensive income (loss)                    $   (59,326)  $    25,389
                                                   --------------------------
                                                   --------------------------

    Basic earnings (loss) per unit (NOTE 12)
      - from continuing operations                 $     (1.20)  $      0.32
      - from discontinued operations                      0.15          0.14
    -------------------------------------------------------------------------
    Basic earnings (loss) per unit                 $     (1.05)  $      0.46
                                                   --------------------------
                                                   --------------------------
    Diluted earnings (loss) per unit (NOTE 12)
      - from continuing operations                 $     (1.20)  $      0.32
      - from discontinued operations                      0.15          0.14
    -------------------------------------------------------------------------
    Diluted earnings (loss) per unit               $     (1.05)  $      0.46
                                                   --------------------------
                                                   --------------------------

    Weighted average number of units                56,248,879    55,542,918
                                                   --------------------------
                                                   --------------------------

    SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



    CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY
    (CDN$ THOUSANDS, EXCEPT NUMBER OF UNITS)

                                                    Year ended    Year ended
                                                   December 31,  December 31,
                                                          2007          2006
                                                   --------------------------
    Trust units (NOTE 11)
    Balance, beginning of year                     $   365,744   $   295,696
    Units issued under equity financing,
     net of issue costs                                   (151)       63,583
    Units issued under distribution
     reinvestment plan                                   8,917         5,784
    Restructuring costs                                      -          (140)
    Deferred unit plan (NOTE 10)                         1,750           821
    Units issued for vested deferred units (NOTE 10)       400             -
    Units purchased and cancelled (NOTE 11)            (38,576)            -
    -------------------------------------------------------------------------
    Balance, end of year                           $   338,084   $   365,744
                                                   --------------------------
    Cumulative earnings
    Balance, beginning of year                     $   154,917   $   129,528
    Net earnings (loss)                                (59,326)       25,389
    -------------------------------------------------------------------------
    Balance, end of year                           $    95,591   $   154,917
                                                   --------------------------
    Accumulated other comprehensive income
    Balance, beginning of year                     $         -   $         -
    Other comprehensive income                               -             -
    -------------------------------------------------------------------------
    Balance, end of year                           $         -   $         -
                                                   --------------------------

    Cumulative distributions to unitholders
    Balance, beginning of year                     $  (201,794)  $  (129,482)
    Distributions declared to unitholders (NOTE 12)    (89,528)      (72,312)
    -------------------------------------------------------------------------
    Balance, end of year                           $  (291,322)  $  (201,794)
                                                   --------------------------

    Total unitholders' equity                      $   142,353   $   318,867
                                                   --------------------------
                                                   --------------------------

    Units issued and outstanding (NOTE 11)          55,708,934    56,351,783
                                                   --------------------------
                                                   --------------------------

    SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (CDN$ THOUSANDS)

                                                    Year ended    Year ended
                                                   December 31,  December 31,
                                                          2007          2006
                                                   --------------------------
    Operating activities
      Net earnings (loss)                          $   (59,326)   $   25,389
      Earnings from discontinued operations,
       net of tax                                       (8,292)       (7,629)
      Future income taxes                              100,597           613
      Amortization of capital assets                    76,863        71,583
      Amortization of intangibles                        7,382         1,842
      Amortization of deferred financing costs           4,823         3,193
      Other income (NOTE 13)                              (755)         (750)
    -------------------------------------------------------------------------
                                                       121,292        94,241

      Cash from discontinued operations                     (8)          308

      Net change in operating working capital            6,419         4,458
    -------------------------------------------------------------------------
      Total operating cash flows                       127,703        99,007
                                                   --------------------------

    Financing activities
      Issuance of trust units (net of issue costs)
       (NOTE 11)                                         8,766        69,367
      Restructuring costs                                    -          (140)
      Distributions paid                               (88,144)      (70,952)
      Unit repurchase program (NOTE 11)                (38,576)            -
      Financing of revenue producing properties        795,429        67,605
      Repayment of debt on revenue producing
       properties                                     (419,543)      (72,987)
      Deferred financing costs incurred                (21,471)       (3,564)
    -------------------------------------------------------------------------
                                                       236,461       (10,671)
                                                   --------------------------
    Investing activities
      Purchases of revenue producing properties
       (NOTE 4)                                       (309,313)      (85,812)
      Improvements to revenue producing properties     (71,528)      (37,448)
      Net cash proceeds from sale of properties
       (NOTE 4)                                         21,974        20,274
      Net cash proceeds from extinguishment of option
       to acquire property                                   -           750
      Net cash proceeds from forfeiture of deposit         755             -
      Additions to corporate technology assets          (1,050)       (1,287)
    -------------------------------------------------------------------------
                                                      (359,162)     (103,523)
                                                   --------------------------
    Net increase (decrease) in cash and cash
     equivalents balance                                 5,002       (15,187)

    Cash and cash equivalents (bank indebtedness),
     beginning of year                                  (4,042)       11,145
    -------------------------------------------------------------------------

    Cash and cash equivalents (bank indebtedness),
     end of year                                   $       960   $    (4,042)
                                                   --------------------------
                                                   --------------------------

    Supplementary cash flow information:
    Capital taxes paid                             $        15   $       120
    Interest paid                                  $    90,056   $    81,129
                                                   --------------------------
                                                   --------------------------

                                                    Year ended    Year ended
                                                   December 31,  December 31,
                                                          2007          2006
                                                   --------------------------
    Net change in operating working capital:

    Net change in mortgages and accounts
     receivable                                    $    (5,683)  $     4,651
    Net change in other assets                            (901)       (3,318)
    Net change in tenant security deposits                 147          (102)
    Net change in accounts payable and accrued
     liabilities                                        12,856         3,227
                                                   --------------------------
                                                   $     6,419   $     4,458
                                                   --------------------------
                                                   --------------------------

    SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    YEARS ENDED DECEMBER 31, 2007 AND 2006
    (TABULAR AMOUNTS IN CDN$ THOUSANDS, EXCEPT NUMBER OF UNITS AND PER UNIT
    AMOUNTS UNLESS OTHERWISE STATED)

    1.  ORGANIZATION OF TRUST

        Boardwalk Real Estate Investment Trust ("Boardwalk REIT" or the
        "Trust") is an unincorporated, open-ended real estate investment
        trust created pursuant to the Declaration of Trust, dated January 9,
        2004 and as amended and restated on May 3, 2004, May 10, 2006 and
        May 10, 2007, under the laws of the Province of Alberta. Boardwalk
        REIT was created to invest in revenue producing multi-family
        residential properties or interests within Canada, initially through
        the acquisition of operations of Boardwalk Equities Inc. (the
        "Corporation"), which was acquired on May 3, 2004.

    2.  SIGNIFICANT ACCOUNTING POLICIES

        (a)   Basis of presentation

        These consolidated financial statements have been prepared in
        accordance with the recommendations of the handbook of the Canadian
        Institute of Chartered Accountants ("CICA Handbook").

        The preparation of financial statements in accordance with Canadian
        generally accepted accounting principles ("Canadian GAAP") requires
        management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities, and to make disclosure of
        contingent assets and liabilities at the date of the financial
        statements, and the reported amounts of revenues and expenses during
        the reporting period. Actual results may differ from those estimates.

        (b)   Principles of consolidation

        The consolidated financial statements include the accounts of
        Boardwalk REIT and its wholly-owned subsidiaries, as well as entities
        over which it exercises control on a basis other than ownership of
        voting interests in accordance with CICA Handbook Accounting
        Guideline 15 (AcG-15), Consolidation of Variable Interest Entities.
        All inter-company transactions have been eliminated.

        (c)   Revenue recognition

              i.    Revenue from a rental property is recognized once the
                    Trust has attained substantially all of the benefits and
                    risks of ownership of the rental property. Rental revenue
                    includes rents, parking and other sundry revenues. The
                    majority of the residential leases are for one-year terms
                    or less; consequently, the Trust accounts for leases with
                    its tenants as operating leases.

              ii.   Revenue from the disposition of property held for sale,
                    or redevelopment and sale, is recognized when all
                    conditions of the purchase and sale agreement have been
                    met, a sufficient purchaser deposit (usually 15%) has
                    been received and there is reasonable assurance on the
                    collectibility of any outstanding amount.

        (d)   Revenue producing properties

        Revenue producing real estate properties, which are held for
        investment, are stated at the lower of cost less accumulated
        amortization or "net recoverable amount". Cost includes all amounts
        relating to the acquisition and improvement of the properties. All
        costs associated with upgrading the existing facilities, other than
        ordinary repairs and maintenance, are capitalized and amortized as
        project improvements.

        Revenue producing properties and intangible assets are reviewed
        periodically for impairment. An impairment loss will be recognized in
        the period when the carrying amount of the revenue producing
        properties exceeds the net recoverable amount represented by the
        undiscounted estimated future cash flows expected to be received from
        the ongoing use of the properties plus their residual value. If it is
        determined that an impairment exists, the carrying value of the
        revenue producing properties and intangible assets will be reduced to
        their estimated fair value.

        In accordance with the requirements of the CICA Handbook, when
        acquiring revenue producing properties, Boardwalk REIT allocates a
        portion of the purchase price to in-place operating leases that are
        acquired in connection with the real estate property and to a
        separate customer relationship intangible asset relating to the
        possibility or probability that existing tenants will renew their
        leases.

        (e)   Amortization of capital assets

        Revenue producing real estate properties are amortized over the
        estimated useful lives of the assets. Revenue producing building
        assets are amortized using the straight-line method over periods
        ranging from 40 to 50 years. Non-building assets are amortized using
        the declining-balance method at rates ranging from 8% to 35%.

        Estimated useful lives of buildings and non-building assets are
        periodically evaluated by management and any changes in these
        estimates are accounted for on a prospective basis.

        (f)   Amortization of intangibles

        The value allocated to in-place operating leases when revenue
        producing properties are purchased by the Trust, is amortized over a
        twelve-month period.

        (g)   Deferred financing costs

        Insurance premiums paid to Canada Mortgage and Housing Corporation
        ("CMHC") to obtain insurance through the National Housing Act ("NHA")
        are amortized on a straight-line basis over the insured term of the
        mortgage loans. Upon the refinancing of a mortgage, any unamortized
        insurance premium associated with the previous mortgage is written
        off to income. Transaction costs related to refinancing are amortized
        on a straight-line basis over the term of the new loan.

        (h)   Deferred unit plan

        The deferred unit plan is described in NOTE 10. Deferred units
        granted to trustees and executives in respect of their trustee fees
        and bonuses, respectively, are considered to be in respect of past
        services and are recognized in compensation expense upon grant.
        Deferred units granted relating to amounts matched by the Trust are
        considered to be in respect of future services and are recognized in
        compensation expense on a straight-line basis over the vesting
        period. Compensation cost is measured based on the market price of
        the Trust's units on the date of grant of the deferred units. The
        unvested deferred units (and vested deferred units that have not been
        exchanged for Trust Units) earn additional deferred units for the
        distributions that would otherwise have been paid on the deferred
        units had they instead been issued as Trust Units on the date of
        grant (or the date they were exchangeable for Trust Units). No
        additional compensation cost is recorded for additional deferred
        units issued. Deferred units that have vested, but for which the
        corresponding Trust Units have not been issued and where the ultimate
        issuance of such Trust Units is simply a matter of the passage of
        time, are considered to be outstanding units from the date of vesting
        for basic and diluted earnings per unit calculations.

        (i)   Risk management and fair value

        Risk management

        The Trust is exposed to financial risk that arises from the
        fluctuation in interest rates, the credit quality of its tenants, and
        the fluctuation in utility rates. These risks are managed as follows:

              i.    Interest rate risk

                    Interest rate risk is minimized through the Trust's
                    current strategy of having the majority of its mortgages
                    payable in fixed term arrangements. In addition,
                    management is constantly reviewing its operating facility
                    and, if market conditions warrant, the Trust has the
                    ability to convert its existing demand debt to fixed rate
                    debt. The Trust had demand debt outstanding of
                    $1.2 million at December 31, 2007 (December 31, 2006 -
                    $6.2 million). In addition, the Trust structures its
                    financings so as to stagger the maturities of its debt,
                    thereby minimizing the Trust's exposure to interest rates
                    in any one year.

                    The majority of the Trust's mortgages are insured by CMHC
                    under the NHA mortgage program. This added level of
                    insurance offered to lenders allows the Trust to receive
                    the best possible financing and interest rates, and
                    significantly reduces the potential for a lender to call
                    a loan prematurely.

              ii.   Credit risk

                    Credit risk arises from the possibility that tenants may
                    experience financial difficulty and be unable to fulfill
                    their lease term commitments. The Trust mitigates this
                    risk of credit loss by geographically diversifying its
                    existing portfolio, by limiting its exposure to any one
                    tenant and by conducting thorough credit checks with
                    respect to all new rental leasing arrangements. In
                    addition, where legislation allows, the Trust obtains a
                    security deposit from a tenant to assist in the recovery
                    of monies owed to the Trust.

              iii.  Utilities

                    At December 31, 2007, the Trust had a long-term supply
                    arrangement with one electrical utility company to supply
                    the Trust with its electrical power needs for southern
                    Alberta for the next twelve months at a blended rate of
                    approximately $0.068/kwh. The agreement provides that the
                    Trust purchase its power for all southern Alberta
                    properties under contract for the upcoming months.

                    Beginning in November 2003, the Alberta government
                    implemented a natural gas rebate program covering the
                    winter usage months of November through March. In October
                    2005, the natural gas rebate program was extended to
                    cover the month of October. In January of 2006, the
                    Alberta government announced a three-year extension to
                    the program covering the winter months of October through
                    March, with the program to end March 31, 2009. The rebate
                    program becomes active when the natural gas consumer
                    price charged by two of the three major gas companies in
                    Alberta exceeds $5.50/GJ for any individual winter usage
                    month. For January through March 2007, Boardwalk REIT was
                    eligible for estimated rebates totalling approximately
                    $0.9 million. For October through December 2007,
                    Boardwalk REIT was eligible for estimated rebates
                    totalling $0.3 million. For January to March 2006,
                    Boardwalk REIT was eligible for rebates totalling
                    approximately $1.4 million. For October through December
                    2006, Boardwalk REIT was eligible for rebates totalling
                    approximately $0.6 million.

                    As at December 31, 2007, the Trust also had one natural
                    gas supply contract, which provides a degree of price
                    certainty for natural gas usage in the province of
                    Saskatchewan. The contract covers between 75 - 100% of
                    the Trust's natural gas requirements for this province.
                    The physical supply agreement for Saskatchewan covered
                    the period from November 1, 2006 to October 31, 2007 and
                    has been extended to October 31, 2008. The supply
                    contract provides the commodity at a price of $8.95/GJ.

                    While the above utility contracts reduce the risk of
                    exposure to adverse changes in commodity prices, they
                    also reduce the potential benefits of favourable changes
                    in commodity prices. For accounting purposes, all
                    settlements are recorded as utility expense in the period
                    the settlement occurs.

        Fair Value

        In accordance with the disclosure requirements of the CICA Handbook,
        Boardwalk REIT is required to disclose certain information concerning
        its "financial instruments", defined as a contractual right to
        receive or deliver cash or another financial asset. The fair values
        of the majority of the Trust's short-term financial assets and
        liabilities, such as mortgages and accounts receivable, tenants'
        security deposits, accounts payable and accrued liabilities and cash
        or bank indebtedness, approximate their recorded values at
        December 31, 2007 and 2006 due to their short-term nature. In these
        circumstances, the fair value is determined to be the market or
        exchange value of the assets or liabilities.

        Fair value estimates are made at a specific point in time, based on
        relevant market information and information about the financial
        instrument. These estimates are subjective in nature and involve
        uncertainties and matters of significant judgment and therefore
        cannot be determined with precision. Changes in assumptions could
        significantly affect estimates. The significant financial instruments
        of Boardwalk REIT and their carrying values as of December 31, 2007
        and 2006 are as follows:

                                                   December 31,  December 31,
        AS AT                                             2007          2006
                                                   --------------------------

        Mortgages and accounts receivable
          Carrying value                           $   10,071    $     4,388
          Fair market value                        $   10,071    $     4,388
        ---------------------------------------------------------------------
        Mortgages payable and debentures
          Carrying value                             1,888,783   $ 1,499,026
          Fair market value                          1,900,096   $ 1,532,259

        The fair value of the Trust's mortgages payable and debentures
        exceeded the recorded value by approximately $11.3 million at
        December 31, 2007, while the fair value of the mortgages payable
        exceeded the carrying value at December 31, 2006 by $33.2 million,
        due to changes in interest rates since the dates on which the
        individual mortgages and debentures were assumed. The fair value of
        the mortgages payable and debentures have been estimated based on the
        current market rates for mortgages and debentures with similar terms
        and conditions. The fair value of the Trust's mortgages payable and
        debentures is an amount computed based on the interest rate
        environment prevailing at December 31, 2007 and 2006, respectively;
        the amount is subject to change and the future amounts will converge.
        There are no additional costs or penalties to Boardwalk REIT if the
        mortgages and debentures are held to maturity.

        (j)   Use of estimates

        The accounting process requires that management make, and
        periodically review, a number of estimates including the following
        material items:

              i.    economic useful life of buildings for purposes of
                    calculating amortization as disclosed in NOTE 2 (e);

              ii.   forecast of economic indicators in order to measure fair
                    values of buildings for purposes of determining net
                    recoverable amount under Canadian generally accepted
                    accounting principles as discussed in NOTE 2 (d);

              iii.  amount of capitalized on-site wages which relate to
                    project improvements, as discussed in NOTE 4; and

              iv.   amount of utility accrual for charges related to the
                    current period.

        Actual results may differ from these estimates.

        (k)   Cash and cash equivalents

        Boardwalk REIT considers highly liquid investments with an original
        maturity of three months or less to be cash equivalents.

        (l)   Disposal of long-lived assets

        Disposal of long-lived assets are classified as held for sale or
        redevelopment, and the results of operations and cash flows
        associated with the assets disposed are reported separately as
        discontinued operations, less applicable income taxes. A long-lived
        asset is classified as an asset held for sale or redevelopment at the
        point in time when it is available for immediate sale, management has
        committed to a plan to sell the asset and is actively locating a
        buyer for the asset at a sales price that is reasonable in relation
        to the current fair value of the asset, and the sale is probable and
        expected to be completed within a one-year period. For unsolicited
        interest in a long-lived asset, the asset is classified as held for
        sale only if all the conditions of the purchase and sale agreement
        have been met, a sufficient purchaser deposit has been received and
        the sale is probable and expected to be completed shortly after the
        end of the current period.

        A long-lived asset classified as held for sale or redevelopment is
        measured at the lower of its carrying value and fair value less cost
        to sell. No amortization is recorded while it is classified as held
        for sale or redevelopment. Interest and other expenses attributable
        to the long-lived asset held for sale continue to be accrued.

        The carrying value of long-lived assets classified as held for sale
        or redevelopment are segregated on the balance sheet as "Discontinued
        Operations" and the earnings and cash flows associated with these
        assets are presented separately on the statement of earnings and
        comprehensive income (loss) as line item "Earnings from discontinued
        operations, net of tax". For comparative purposes, the prior year's
        financial information has also been restated to reflect the
        reclassification of these assets.

        (m)   Hedging relationships

        Boardwalk REIT appropriately documents and monitors to ensure that
        there is a reasonable assurance, both in inception and throughout the
        term of the hedge, that the hedging relationship will be effective.
        Relationships that do not qualify for hedge accounting will be
        carried at fair value on the consolidated balance sheets, and changes
        in fair value will be recorded in the consolidated statements of
        earnings. Hedge accounting was applied to a bond forward contract
        (see NOTE 9) entered into by the Trust to mitigate future cash
        interest payments associated with our unsecured debentures, which was
        completed on January 21, 2005. Hedge accounting will also be applied
        to bond forward transaction completed subsequent to the fiscal year
        end (see NOTE 19).

        (n)   Disclosure of guarantees

        In accordance with the disclosure requirements of the CICA Handbook,
        Boardwalk REIT is required to disclose significant details of
        guarantees that have been given, regardless of whether it will have
        to make payments under the guarantees (see NOTE 17).

        (o)   Comparative figures

        Certain comparative figures have been reclassified to conform to the
        presentation of the current period, or as a result of accounting
        changes.

    3.  ACCOUNTING CHANGES

        On January 1, 2007, the Trust adopted five new accounting standards
        issued by the CICA. These standards are to be applied on a
        retroactive basis without restatement to prior periods. Any
        adjustments as a result of adopting these new standards were
        recognized by restating the balance of opening unitholders' equity.
        Comparative periods are not permitted to be restated. These five
        standards are outlined below:

        a) Section 1506 - Accounting Changes

        b) Section 1530 - Comprehensive Income

        c) Section 3855 - Financial Instruments-Recognition and Measurement

        d) Section 3861 - Financial Instruments-Disclosure and Presentation

        e) Section 3865 - Hedges

        Section 1506 - Accounting Changes prescribes the criteria for
        changing accounting policies, together with the accounting treatment
        and disclosure of changes in accounting policies, changes in
        accounting estimates and correction of errors in order to enhance the
        relevance, reliability and comparability of financial statements.

        Section 1530 - Comprehensive Income is comprised of net earnings and
        other comprehensive income ("OCI"), which represents changes in
        unitholders' equity during a period arising from transactions and
        other events with non-owner sources. OCI generally would include
        unrealized gains and losses on financial assets classified as
        available-for-sale, unrealized foreign currency translation
        adjustments arising from self-sustaining foreign operations and
        changes in the fair value of the effective portion of cash flow
        hedging instruments.

        Section 3855 - Financial Instruments - Recognition and Measurement
        establishes standards for recognizing and measuring financial assets,
        financial liabilities and non-financial derivatives. All financial
        instruments are required to be measured at fair value on initial
        recognition, except for certain related-party transactions.
        Measurement in subsequent periods depends on whether the financial
        instrument has been classified as held-for-trading, available-for-
        sale, held-to-maturity, loans and receivables, or other liabilities.
        Financial assets and financial liabilities classified as held-for-
        trading are required to be measured at fair value with gains and
        losses recognized in net earnings. Financial assets classified as
        held-to-maturity, loans and receivables and financial liabilities
        (other than those held-for-trading) are required to be measured at
        amortized cost using the effective interest method of amortization.
        Available-for-sale financial assets are required to be measured at
        fair value with unrealized gains and losses recognized in OCI.
        Investments in equity instruments classified as available-for-sale
        that do not have a quoted market price in an active market should be
        measured at cost. Derivative instruments must be recorded on the
        balance sheet at fair value including those derivatives that are
        embedded in a financial instrument or other contract but are not
        closely related to the host financial instrument or contract,
        respectively. Changes in the fair values of derivative instruments
        are required to be recognized in net earnings, except for derivatives
        that are designated as a cash flow hedge, in which case the fair
        value change for the effective portion of such hedge relationship is
        required to be recognized in OCI. The standard permits us to
        designate any financial instrument whose fair value can be reliably
        measured as held-for-trading on initial recognition or adoption of
        the standard, even if that instrument would not otherwise satisfy the
        definition of held-for-trading set out in Section 3855. The standard
        specifically excludes Section 3065 - Leases, from the definition of
        financial instruments, except for derivatives that are embedded in a
        lease contract. Other significant accounting implications arising on
        adoption of the standard include the initial recognition of certain
        financial guarantees at fair value on the balance sheet and the use
        of the effective interest method of amortization for any transaction
        costs or fees, premiums or discounts earned or incurred for financial
        instruments measured at amortized cost.

        Section 3861 - Financial Instruments - Disclosure and Presentation
        establishes standards for presentation of financial instruments and
        non-financial derivatives, and identifies the information that should
        be disclosed about them. The presentation paragraphs deal with the
        classification of financial instruments, from the perspective of the
        issuer, between liabilities and equity, the classification of related
        interest, dividends, losses and gains, and the circumstances in which
        financial assets and financial liabilities are offset. The disclosure
        paragraphs deal with information about factors that affect the
        amount, timing and certainty of an entity's future cash flows
        relating to financial instruments. This Section also deals with
        disclosure of information about the nature and extent of an entity's
        use of financial instruments, the business purposes they serve, the
        risks associated with them and management's policies for controlling
        those risks.

        Section 3865 - Hedges specifies the criteria under which hedge
        accounting can be applied and how hedge accounting should be executed
        for each of the permitted hedging strategies: fair value hedges, cash
        flow hedges and hedges of a foreign currency exposure of a net
        investment in a self-sustaining foreign operation. In a fair value
        hedging relationship, the carrying value of the hedged item will be
        adjusted by gains or losses attributable to the hedged risk and
        recognized in net earnings. The changes in the fair value of the
        hedged item, to the extent that the hedging relationship is effective
        as defined by the standard ("effective"), will be offset by changes
        in the fair value of the hedging derivative. In a cash flow hedging
        relationship, the effective portion of the change in the fair value
        of the hedging derivative will be recognized in OCI. The ineffective
        portion as defined by the standard ("ineffective") will be recognized
        in net earnings. The amounts recognized in OCI will be reclassified
        to net earnings in those periods in which net earnings is affected by
        the variability in the cash flows of the hedged item. In hedging a
        foreign currency exposure of a net investment in a self-sustaining
        foreign operation, the effective portion of foreign exchange gains
        and losses on the hedging instruments will be recognized in OCI and
        the ineffective portion is recognized in net earnings. Deferred gains
        or losses on the hedging instrument with respect to hedging
        relationships that were discontinued prior to the transition date but
        qualify for hedge accounting under the new standards will be
        recognized in the carrying amount of the hedged item and amortized to
        net earnings over the remaining term of the hedged item for fair
        value hedges, and for cash flow hedges will be recognized in OCI and
        reclassified to net earnings in the same period during which the
        hedged item affects net earnings. However, for discontinued hedging
        relationships that do not qualify for hedge accounting under the new
        standards, the deferred gains and losses will be recognized in the
        opening balance of retained earnings on transition.

        Impact of Adoption of Sections 1506, 1530, 3855, 3861 and 3865

        Our consolidated financial statements now include consolidated
        statements of earnings and comprehensive income while the cumulative
        amount of other comprehensive income has been included as a separate
        section of unitholders' equity.

        Boardwalk REIT has also adopted the effective interest rate method
        for calculating the amortized cost of its financial liabilities and
        of allocating the financing charges, including transaction costs,
        over the relevant reporting periods. Any adjustment as a result of
        the adoption of Section 3855 is recognized by restating the balance
        of opening unitholders' equity. Comparative periods are not permitted
        to be restated. For the current and prior periods, all unamortized
        transaction costs (previously designated as deferred financing costs
        and mark-to-market adjustment of debt) are now netted against the
        respective financial liability. The table below outlines the
        transitional effect of adopting the new accounting standards on
        financial instruments:


                                                   December 31,  December 31,
                                                          2007          2006
                                                   --------------------------
        Mortgages Payable

        Principal outstanding as previously
         reported                                  $ 1,827,793   $ 1,420,701
        Unamortized deferred financing costs as
         previously reported                           (58,821)      (41,853)
        Unamortized mark-to-market adjustment as
         previously reported                             1,043         1,730
        ---------------------------------------------------------------------

                                                   $ 1,770,015   $ 1,380,578
                                                   --------------------------
                                                   --------------------------

        Debentures

        Principal outstanding as previously
         reported                                  $   120,000   $   120,000
        Unamortized deferred financing costs as
         previously reported                            (1,232)       (1,552)
        ---------------------------------------------------------------------

                                                   $   118,768   $   118,448
                                                   --------------------------
                                                   --------------------------

        There were no material impacts to the consolidated financial
        statements on adoption of Section 3865 by the Trust.

        Bill C-52

        On June 22, 2007, Bill C-52 received Royal Assent in Canada. As a
        result of this, under Generally Accepted Accounting Principles in
        Canada, once a bill is enacted, it is a requirement to record the
        income tax implications effective on that date. In accordance with
        Bill C-52, the assumption being made is that, effective January 1,
        2011, Boardwalk REIT will no longer qualify as a Real Estate
        Investment Trust ("REIT") in accordance with the definition contained
        in that legislation, and will remain within certain "normal growth"
        limits such that it will be subject to income tax pursuant to this
        new legislation.

        In late December of 2007, the Federal Government announced its
        intention to make technical amendments to Bill C-52, in particular,
        amendments clarifying the definition of a REIT, which is exempted
        from the specified investment flow-through ("SIFT") rules. In
        particular, it is proposed that revenue of a subsidiary trust will be
        treated as revenue from real property.

        Impact of Bill C-52 and Related Ammendments

        The impact of our interpretation of Bill C-52 on Boardwalk REIT was
        that, based on a detailed review of the legislation, at this time it
        may be interpreted that the Trust does not qualify as a REIT, which
        would be exempt from the SIFT rules, and as such has recorded an
        estimate of its future income tax liability at June 30, 2007 and
        subsequently updated at December 31, 2007 based on it being subject
        to the tax prescribed by the SIFT rules on January 1, 2011. The
        result is that the Trust recorded a future income tax liability at
        June 30, 2007 of $111.1 million, which was revised upward by
        $1.7 million to $112.8 million at September 30, 2007 and revised
        downward by $12.9 million to $99.9 million at December 31, 2007.
        Although the adjustment to earnings and cumulative earnings at
        December 31, 2007 is significant, it is not large enough to affect
        any existing debt covenants currently in place, including those
        stipulated for Boardwalk REIT's unsecured debentures.

        At December 31, 2007, the technical amendments announced in late
        December 2007 had not received Royal Assent. However, if these
        amendments receive Royal Assent, as was the case with Bill C-52, it
        is believed that Boardwalk REIT would qualify as a REIT and will
        reverse the future income tax liability reported in these financial
        statements.

        Future Changes in Significant Accounting Policies

        Boardwalk REIT monitored the recently issued CICA accounting
        pronouncements to assess the applicability and impact, if any, of
        these new pronouncements on our consolidated financial statements and
        note disclosures. The CICA issued five new accounting standards that
        are effective for the Trust's fiscal year commencing January 1, 2008,
        except for Section 3064, which is effective the the Trust's fiscal
        year commencing January 1, 2009:

        a) Section 1535 - Capital Disclosures

        b) Section 3031 - Inventories

        c) Section 3064 - Goodwill and Intangible Assets

        d) Section 3862 - Financial Instruments-Disclosure

        e) Section 3863 - Financial Instruments-Presentation

        Section 1535 - Capital Disclosures requires the disclosure of both
        qualitative and quantitative information, which allows the users of
        financial statements to evaluate the entity's objective, policies and
        processes for managing capital.

        Section 3031 - Inventories, which will replace Section 3030 -
        Inventories, provides guidelines on the measurement and costing of
        inventories, as well as allows for the reversal of inventory values
        previously written-down. This new section also enhances disclosure
        requirements for inventory to include accounting policies and
        carrying amounts used to value inventory, inventory amounts
        recognized as an expense and disclosure of any write-downs or the
        reversal of any inventory write-downs previously recorded.

        Section 3064 - Goodwill and Intangible Assets, which replaces Section
        3062 - Goodwill and Other Intangible Assets and Section 3450 -
        Research and Development Costs, establishes standards for the
        recognition, measurement, presentation and disclosure of goodwill
        subsequent to its initial recognition and of intangible assets by
        profit-oriented enterprises. Standards concerning goodwill remain
        unchanged from the standards included in the previous Section 3062.
        The new section will be applicable to financial statements relating
        to fiscal years beginning on or after October 1, 2008.

        Section 3862 - Financial Instruments-Disclosure and Section 3863 -
        Financial Instruments-Presentation, which will replace Section 3861 -
        Financial Instruments Presentation and Disclosure, revises and
        enhances the disclosure requirements for financial instruments and
        carry forward unchanged the presentation requirements for financial
        instruments.

        The new accounting pronouncements are not expected to have any
        material impact to the consolidated financial statements on adoption.

    4.  REVENUE PRODUCING PROPERTIES

        As at                                      December 31,  December 31,
                                                          2007          2006
                                                   --------------------------


        Land                                       $   214,575   $   162,839
        Building and non-building assets             2,455,085     2,117,315
        ---------------------------------------------------------------------

        Total revenue producing properties           2,669,660     2,280,154
        Less: accumulated amortization                (513,514)     (438,269)
        ---------------------------------------------------------------------

                                                   $ 2,156,146   $ 1,841,885
                                                   --------------------------
                                                   --------------------------

        Continuing operations                      $ 2,149,853   $ 1,836,429
        Discontinued operations (NOTE 5)                 6,293         5,456
        ---------------------------------------------------------------------

                                                   $ 2,156,146   $ 1,841,885
                                                   --------------------------
                                                   --------------------------

        Acquisitions
                                                    Year ended    Year ended
                                                   December 31,  December 31,
                                                          2007          2006
                                                   --------------------------

        Cash paid                                  $   309,313   $    85,812
        Debt assumed                                    31,209         3,539
        ---------------------------------------------------------------------

        Total purchase price                           340,522        89,351
        Fair value adjustments to debt                     376            19
        ---------------------------------------------------------------------

        Book value                                 $   340,898   $    89,370
                                                   --------------------------
                                                   --------------------------

        Allocation of book value to revenue
         producing properties                      $   331,035   $    86,338
        Allocation of book value to other assets
         (NOTE 2 (d))                                    9,863         3,032
        ---------------------------------------------------------------------

                                                   $   340,898   $    89,370
                                                   --------------------------
                                                   --------------------------

        Multi-family units acquired                      2,421         1,103
                                                   --------------------------
                                                   --------------------------

        Included in revenue producing properties is capitalized wages of
        $6.8 million for the year ended December 31, 2007 (December 31, 2006
        - $3.9 million) relating to capital upgrades.


        Dispositions
                                                    Year ended    Year ended
                                                   December 31,  December 31,
                                                          2007          2006
                                                   --------------------------

        Cash received                              $    21,974   $    20,274
        Cost of dispositions                               125           426
        ---------------------------------------------------------------------

        Total proceeds                                  22,099        20,700
        Net book value                                  13,767        13,173
        ---------------------------------------------------------------------

        Gain on dispositions                       $     8,332   $     7,527
                                                   --------------------------
                                                   --------------------------

        Multi-family units sold                            101           196
                                                   --------------------------
                                                   --------------------------

        Included in dispositions were the sales and closings of 50 units in a
        90-unit property located in Calgary, Alberta that is being developed
        into condominium units for sale (see NOTE 5). Under the percentage of
        completion method, sales of $16.2 million for the year ended
        December 31, 2007 (December 31, 2006 - $nil) were recorded against
        cost of sales of $9.5 million (December 31, 2006 - $nil).

    5.  DISCONTINUED OPERATIONS

        During the third quarter of 2007, it was determined by the purchaser
        that the plan to purchase a 108-unit property in Edmonton, Alberta
        owned by Boardwalk would not proceed. As a result, this building was
        reclassified as part of continuing operations with no loss recognized
        (see NOTE 13). This Edmonton property is part of our Alberta segment
        in our segmented information disclosure.

        During the first quarter of 2007, the Trust acquired a property in
        Edmonton, Alberta consisting of two buildings totaling 51 apartment
        units. Prior to the closing of the acquisition, the Trust received an
        unsolicited offer to sell this property to an unrelated third party.
        After a detailed review of the offer, the Trust agreed to the sale of
        this property. The property was, therefore, classified as
        discontinued operations upon acquisition.

        During the end of the third quarter of 2006, a revenue producing
        property consisting of 90 units in Calgary was classified as
        discontinued operations as a result of the Trust initiating an active
        program to dispose of this property. This property is being developed
        into condominium units for sale at a price that is reasonable in
        relation to its current fair value. This Calgary property formed part
        of our Alberta segment in our segmented information disclosure.

        The following tables set forth the results of operations as well as
        the assets and liabilities associated with the discontinued
        operations.

                                                    Year ended    Year ended
                                                   December 31,  December 31,
                                                          2007          2006
                                                   --------------------------
        Revenue
        Rental income                              $       219   $     1,167
                                                   --------------------------

        Expenses

        Revenue producing properties:
          Operating expenses                                99           186
          Utilities                                         41           167
          Utilities rebate                                  (5)          (16)
          Property taxes                                    25            96

        Administration                                      54            42
        Financing costs                                     13           208
        Deferred financing costs amortization                -           176
        Amortization of capital assets                      32           206
        ---------------------------------------------------------------------
                                                           259         1,065
                                                   --------------------------

                                                           (40)          102
        Gain on dispositions                             8,332         7,527
        ---------------------------------------------------------------------
        Operating earnings from discontinued
         operations before income taxes                  8,292         7,629

          Future income taxes                                -             -
        ---------------------------------------------------------------------

        Earnings from discontinued operations      $     8,292   $     7,629
                                                   --------------------------
                                                   --------------------------

        As at                                      December 31,  December 31,
                                                          2007          2006
                                                   --------------------------
        Discontinued Assets
          Properties held for redevelopment and
           sale                                    $     6,293   $     5,456
                                                   --------------------------
                                                   --------------------------

    6.  MORTGAGES AND ACCOUNTS RECEIVABLE

        The mortgages and accounts receivable comprise an aggregate amount of
        $10.1 million at December 31, 2007 (December 31, 2006 -
        $4.4 million). The balance consists mainly of mortgage holdbacks,
        refundable mortgage fees and amounts owed to Boardwalk REIT by
        customers.

        As at                                      December 31,  December 31,
                                                          2007          2006
                                                   --------------------------

        Accounts receivable                        $     5,197   $     4,388
        Mortgage holdbacks and refundable mortgage
         fees                                            4,874             -
        ---------------------------------------------------------------------

                                                   $    10,071   $     4,388
                                                   --------------------------
                                                   --------------------------

    7.  OTHER ASSETS

        As at                                      December 31,  December 31,
                                                          2007          2006
                                                   --------------------------

        Corporate technology assets (net of
         accumulated amortization)                 $     3,100   $     3,436
        Head office building (net of accumulated
         amortization)                                   2,307         2,329
        Deposits on potential property acquisitions          -           814
        Prepaid parts and supplies                       2,791         2,097
        In-place lease and customer relationship
         intangibles (net of accumulated
         amortization)                                   3,686         1,271
        Prepaid property taxes                           1,312         1,193
        Prepaid and other                                2,580         2,733
        ---------------------------------------------------------------------

                                                   $    15,776   $    13,873
                                                   --------------------------
                                                   --------------------------

        Accumulated amortization for corporate technology assets and head
        office building at December 31, 2007 were $13.5 million and
        $1.1 million, respectively (December 31, 2006 - $12.1 million and
        $1.0 million, respectively). Accumulated amortization for lease
        goodwill and customer relationship intangibles at December 31, 2007
        was $15.2 million (December 31, 2006 - $7.9 million).

    8.  MORTGAGES PAYABLE

        As at                                      December 31,  December 31,
                                                          2007          2006
                                                   --------------------------
        (a) Revenue producing properties

        Mortgages payable bearing interest at
        rates ranging between 3.5% and 8.85% per
        annum with a weighted average rate of 5.11%
        per annum at December 31, 2007 (December 31,
        2006 - 5.31%), payable in monthly principal
        and interest instalments totalling $13.4
        million for the year ended December 31,
        2007 (December 31, 2006 - $9.0 million),
        mature from 2008 to 2020 and are secured
        by specific charges against specific
        properties. All interest rates are fixed
        for the term of the respective mortgage.   $ 1,768,389   $ 1,378,910

        (b) Other assets

        Mortgage payable bearing interest at the
        rate of 7.92% per annum at December 31,
        2007 and 2006, payable in monthly principal
        and interest instalments totalling $15
        thousand for the years ended December 31,
        2007 and 2006, matures in September 2010 and
        is secured by a specific charge against the
        head office building. The interest rate is
        fixed for the term of the mortgage.              1,626         1,668
        ---------------------------------------------------------------------

                                                   $ 1,770,015   $ 1,380,578
                                                   --------------------------
                                                   --------------------------

        Estimated principal payments required to meet mortgage obligations as
        at December 31, 2007 are as follows:

                                         Revenue
                                       Producing
                                      Properties  Other Assets         Total
                                     ----------------------------------------
        2008                         $   272,954   $        48   $   273,002
        2009                             270,849            53       270,902
        2010                             300,557         1,537       302,094
        2011                             126,663             -       126,663
        2012                             703,252             -       703,252
        Subsequent                       151,880             -       151,880
        ---------------------------------------------------------------------
                                     $ 1,826,155   $     1,638   $ 1,827,793
        Unamortized deferred
         financing costs                 (58,809)          (12)      (58,821)
        Unamortized mark-to-market
         adjustment                        1,043             -         1,043
        ---------------------------------------------------------------------
                                     $ 1,768,389   $     1,626   $ 1,770,015
                                     ----------------------------------------
                                     ----------------------------------------

        Estimated principal payments required to meet mortgage obligations as
        at December 31, 2006 were as follows:

                                         Revenue
                                       Producing
                                      Properties  Other Assets         Total
                                     ----------------------------------------
        2007                         $   326,997   $        45   $   327,042
        2008                             227,298            48       227,346
        2009                             222,699            53       222,752
        2010                             268,405         1,537       269,942
        2011                             123,433             -       123,433
        Subsequent                       250,186             -       250,186
        ---------------------------------------------------------------------
                                     $ 1,419,018   $     1,683   $ 1,420,701
        Unamortized deferred
         financing costs                 (41,838)          (15)      (41,853)
        Unamortized mark-to-market
         adjustment                        1,730             -         1,730
        ---------------------------------------------------------------------
                                     $ 1,378,910   $     1,668   $ 1,380,578
                                     ----------------------------------------
                                     ----------------------------------------

        CMHC provides mortgage loan insurance in connection with mortgages
        made to Boardwalk REIT. In an agreement dated September 13, 2002 and
        as amended and restated on January 19, 2005 and April 25, 2006, the
        Trust agreed to provide certain financial information to CMHC and be
        subject to certain restrictive covenants, including limitation on
        additional debt, payment of distributions in respect of unitholders'
        capital in the event of default, and maintenance of certain financial
        ratios. In the event of default, the Trust's total financial
        liability under this Agreement is limited to a one-time penalty
        payment of $250 thousand under a Letter of Credit issued in favour of
        CMHC.

        (c) Demand facilities

        During the year, the Trust had a demand facility in the form of an
        acquisition and operating line with a major financial institution.
        This demand facility was secured by a first or second mortgage charge
        of specific real estate assets. The maximum amount available varies
        with the value of pledged assets to a maximum not to exceed
        $200 million. Approximately $198.2 million was available from this
        facility on December 31, 2007 (December 31, 2006 - $103.0 million).
        The amount of $1.2 million of the facility was outstanding at
        December 31, 2007 (December 31, 2006 - $6.2 million). In addition,
        two Letters of Credit ("LC") were issued and outstanding against the
        facility as at December 31, 2006. One LC was issued in favour of CMHC
        as noted above. The second LC in the amount of $356 thousand was
        issued in favour of the City of London. The demand facility carried
        an interest rate ranging from prime to prime plus 1.0% per annum and
        had no fixed terms of repayment. The facility was subject to annual
        reviews by the financial institution.

    9.  DEBENTURES

        On January 21, 2005, Boardwalk REIT completed the issuance of
        unsecured debentures in a public offering in the aggregate amount of
        $120 million. The debentures are rated "BBB" with a stable trend by
        Dominion Bond Rating Services, carry a coupon rate of 5.31% and will
        mature on January 23, 2012. Net proceeds of approximately
        $119 million was used to fund acquisitions, repay operating lines of
        credit and for general trust purposes. In conjunction with the
        debenture issue, the Trust also entered into a bond forward contract
        to hedge the risk of interest rate fluctuations prior to the final
        pricing of the debenture. The bond forward contract was settled when
        the debentures were issued for the settlement amount of $0.7 million.
        The settlement amount will be amortized over the term of the
        unsecured debentures. As at December 31, 2007, the Trust was in
        compliance with all the covenants reported in the debenture.

    10. DEFERRED UNIT PLAN

        During 2006, the Trust implemented a deferred unit plan, which allows
        Boardwalk REIT to issue a maximum number of deferred units equal to
        1% of the Trust Units outstanding on a fully diluted basis. The plan
        entitles trustees and officers, at the participant's option, to
        receive deferred units in consideration for trustee fees or executive
        bonuses, respectively, with the Trust matching the number of units
        received. The deferred units vest 50% on the third anniversary and
        25% on each of the fourth and fifth anniversaries, subject to
        provisions for earlier vesting in certain events. The deferred units
        earn additional deferred units for the distributions that would
        otherwise have been paid on the deferred units (i.e., had they
        instead been issued as Trust Units on the date of grant). Once
        vested, participants are entitled, at their option, to receive an
        equivalent number of Trust Units or the equivalent value in cash of
        the vested deferred units and the corresponding additional deferred
        units. The deferred unit plan was approved by unitholders on May 10,
        2006. The deferred units had a weighted average fair value of
        $45.87 per unit at the grant date in 2007 (2006 - $25.48). Total
        compensation costs of $1.8 million were recognized (2006 -
        $0.8 million) in income related to employee and trustee awards under
        the deferred unit plan.

        The status of the outstanding deferred units is as follows:

        Summary of Deferred Unit Plan              Outstanding        Vested

        Deferred units granted                          72,746             -
        Additional deferred units earned
         on unvested units                               1,000             -
        ---------------------------------------------------------------------

        December 31, 2006                               73,746             -

        Deferred units granted                          51,722             -
        Additional deferred units earned
         on unvested units                               3.487             -
        Deferred units cancelled                       (10,478)            -
        ---------------------------------------------------------------------

        December 31, 2007                              118,477             -
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        In the third quarter of 2007, a total of 8,413 deferred units vested
        as a result of the retirement of one trustee and the resignation of
        one executive. These deferred units were exchanged for an equivalent
        number of Trust Units and cancelled along with the remaining
        2,065 deferred units that were unvested.

    11. UNITHOLDERS' CAPITAL

        The Plan of Arrangement (the "Arrangement") to convert Boardwalk
        Equities Inc. from a share corporation to a real estate investment
        trust was completed on May 3, 2004. On conversion of Boardwalk
        Equities Inc. to a trust, Boardwalk Equities Inc. incurred
        $10.3 million in restructuring costs. Under the Arrangement, the
        former shareholders of Boardwalk Equities Inc. received Boardwalk
        REIT units or Class B Limited Partnership ("LP Class B") units of a
        controlled limited partnership of the Trust, Boardwalk REIT Limited
        Partnership.

        The LP Class B units are non-transferable, except under certain
        circumstances, but are exchangeable, on a one-for-one basis, into
        Boardwalk REIT units at any time at the option of the holder. Prior
        to such exchange, distributions will be made on the exchangeable
        units in an amount equivalent to the distributions which would have
        been made had the units of Boardwalk REIT been issued. Each LP Class
        B unit was accompanied by a Special Voting unit, which entitles the
        holder to receive notice of, attend and vote at all meetings of
        unitholders. There is no value assigned to the Special Voting units.
        The LP Class B units issued are included in the unitholders' capital
        contributions on the balance sheet. The changes in unitholders'
        capital contribution are as follows:

        Summary of Unitholders' Capital
         Contributions                                   Units        Amount

        December 31, 2005                           53,224,194   $   295,696

        Units issued under equity financing,
         net of issue costs                          2,915,000        63,583
        Units issued under distribution
         reinvestment plan                             212,589         5,784
        Restructuring costs                                  -          (140)
        Deferred unit plan (NOTE 10)                         -           821
        ---------------------------------------------------------------------

        December 31, 2006                           56,351,783       365,744

        Units issued under distribution
         reinvestment plan                             205,185         8,917
        Issue costs                                          -          (151)
        Deferred unit plan (NOTE 10)                         -         1,750
        Units issued for vested deferred
         units (NOTE 10)                                 8,413           400
        Units purchased and cancelled                 (856,447)      (38,576)
        ---------------------------------------------------------------------

        December 31, 2007                           55,708,934   $   338,084
                                                   --------------------------
                                                   --------------------------

        In the second quarter of 2007, Boardwalk REIT filed an application
        for a normal course issuer bid (the "Bid"), which received regulatory
        approval from the Toronto Stock Exchange on August 10, 2007. The Bid
        allows Boardwalk REIT to purchase and cancel up to 4,267,048 trust
        units, representing 10% of the public float of its trust units at the
        time of the TSX approval. The Bid will terminate on the earlier of
        one year from the date of commencement of the Bid on August 17, 2007
        or at such time as purchases under the Bid are complete.

        Under the Bid, the Trust has purchased and cancelled 856,447 REIT
        units in the year representing a total market value of approximately
        $38.6 million, or an average of $45.04 per trust unit.

        The Declaration of Trust authorizes Boardwalk REIT to issue an
        unlimited number of units for the consideration and on terms and
        conditions established by the Trustees without the approval of any
        unitholders. The interests in Boardwalk REIT are represented by two
        classes of units: a class described and designated as "REIT Units"
        and a class described and designated as "Special Voting Units". The
        beneficial interest of the two classes of units is as follows:

        (a) REIT Units

        REIT Units represent an undivided beneficial interest in Boardwalk
        REIT and in distributions made by Boardwalk REIT. The REIT Units are
        freely transferable, subject to applicable securities regulatory
        requirements. Each REIT Unit entitles the holder to one vote at all
        meetings of unitholders. Except as set out under the redemption
        rights below, the REIT Units have no conversion, retraction,
        redemption or pre-emptive rights.

        REIT Units are redeemable at any time, in whole or in part, on demand
        by the holders. Upon receipt by Boardwalk REIT of a written
        redemption notice and other documents that may be required, all
        rights to and under the REIT Units tendered for redemption shall be
        surrendered and the holder shall be entitled to receive a price per
        REIT Unit equal to the lesser of:

        i)    90% of the "market price" of the REIT Units on the principal
              market on which the REIT Units are quoted for trading during
              the twenty-day period ending on the trading day prior to the
              day on which the REIT Units were surrendered to Boardwalk REIT
              for redemption; and

        ii)   100% of the "closing market price" of the REIT Units on the
              principal market on which the REIT Units are quoted for trading
              on the redemption date.

        (b) Special Voting Units

        The Declaration of Trust provides for the issuance of an unlimited
        number of Special Voting Units that will be used to provide voting
        rights to holders of LP Class B units or other securities that are,
        directly or indirectly, exchangeable for REIT Units.

        Each Special Voting Unit entitles the holder to the number of votes
        at any meeting of unitholders, which is equal to the number of REIT
        Units that may be obtained upon surrender of the LP Class B unit to
        which the Special Voting Unit relates. The Special Voting Units do
        not entitle or give any rights to the holders to receive
        distributions or any amount upon liquidation, dissolution or winding-
        up of Boardwalk REIT.

        The breakdown of trust units of Boardwalk REIT by class is as
        follows:

                                                         Units        Amount

        Boardwalk REIT Units                        51,233,934
        Special Voting Units issued to
         holders of LP Class B units                 4,475,000
        ---------------------------------------------------------------------

        Total trust units                           55,708,934   $   338,084
                                                   --------------------------
                                                   --------------------------

    12. DISTRIBUTABLE INCOME AND PER UNIT INFORMATION

        Distributable income per unit

        Boardwalk REIT makes distributions to unitholders on a monthly basis
        on or about the 15th day of the following month. The reported
        distributable income is defined under the Trust's Declaration of
        Trust ("DOT"). Under the DOT, as amended and restated, the Trust is
        required to distribute, at a minimum, its reported taxable income.
        The reconciliation of distributable income and per unit information
        begins with total operating cash flows calculated in accordance with
        Canadian generally accepted accounting principles and is defined in
        the Declaration of Trust for Boardwalk REIT. However, distributable
        income and the per unit information are non-GAAP measures that do not
        have any standardized meaning prescribed by Canadian GAAP and,
        therefore, unlikely to be comparable to similar measures presented by
        other real estate companies and trusts.

                                                    Year ended    Year ended
                                                   December 31,  December 31,
                                                          2007          2006
                                                   --------------------------

        Total operating cash flows                 $   127,703   $    99,007
        Net change in operating working capital         (6,419)       (4,458)
        Add:
          Amortization of net discount on long-term
           debt assumed after May 2, 2004                    -            67
        Deduct:
          Deferred financing costs amortization
           post May 2, 2004                             (2,155)       (1,007)
          Amortization of net premium on long-term
           debt assumed after May 2, 2004                 (417)            -
        ---------------------------------------------------------------------

        Distributable income                       $   118,712   $    93,609
        Distribution declared to unitholders       $    89,528   $    72,312
        Distributable income withheld              $    29,184   $    21,297

        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Weighted average units outstanding
         - basic and diluted                        56,248,879    55,542,918
        Distributable income earned per unit       $     2.110   $     1.685
        Actual distributions declared per unit     $     1.592   $     1.302
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Earnings per unit

                                                    Year ended    Year ended
                                                   December 31,  December 31,
                                                          2007          2006
                                                   --------------------------

        Numerator
          Earnings (loss) from continuing
           operations                              $   (67,618)  $    17,760
          Earnings from discontinued operations          8,292         7,629
        ---------------------------------------------------------------------
        Denominator
          Denominator for basic earnings per unit
           - weighted average units (THOUSANDS)         56,249        55,543
          Denominator for diluted earnings per unit
           adjusted for weighted average units and
           assumed conversion (THOUSANDS)               56,249        55,543
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Earnings (loss) per unit from
         continuing operations
          Basic                                    $     (1.20)  $      0.32
          Diluted                                  $     (1.20)  $      0.32
        ---------------------------------------------------------------------
        Earnings per unit from
         discontinued operations
          Basic                                    $      0.15   $      0.14
          Diluted                                  $      0.15   $      0.14
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    13. OTHER INCOME

        In 2007, Boardwalk REIT had an agreement to sell a 108-unit property
        located in Edmonton, Alberta to an unrelated third-party purchaser.
        This sale did not proceed in accordance with the agreement, resulting
        in the forfeiture of the buyer's deposit to Boardwalk REIT in the
        amount of $755 thousand.

        In 2006, Boardwalk REIT had an option to acquire a property with an
        unrelated third-party, provided the first agreement to sell the
        property to another purchaser was not consummated. This agreement to
        sell the property to another purchaser was realized, resulting in a
        gain to Boardwalk REIT of $750 thousand.

    14. Income Taxes

        Although Boardwalk REIT is a "mutual fund trust" as defined under the
        Income Tax Act (Canada) and accordingly is not taxable on its income
        to the extent that its income is distributed to its unitholders. This
        exemption does not extend to the corporate subsidiaries of Boardwalk
        REIT that are subject to income tax. The adjustment for change in
        effective tax rate reflects the reduction of the current combined
        federal and provincial substantively enacted rate in the province of
        Alberta. On June 22, 2007, Bill C-52 received royal assent (see NOTE
        3 for further details). As such, the Trust, to be in compliance with
        Canadian GAAP, is required to estimate what the impact of the
        reported tax amount would be on January 1, 2011.

                                                    Year ended    Year ended
                                                   December 31,  December 31,
                                                          2007          2006
                                                   --------------------------

        Total future income taxes                  $   100,597   $       613
                                                   --------------------------
                                                   --------------------------

        Future income taxes consists of the following:

                                                    Year ended    Year ended
                                                   December 31,  December 31,
                                                          2007          2006
                                                   --------------------------

        Tax expense based on expected rate         $       586   $       455
        Adjustment to future income tax liabilities    100,011           158
        ---------------------------------------------------------------------

        Future income taxes                        $   100,597   $       613
                                                   --------------------------
                                                   --------------------------

        The future income tax asset (liability)
         is calculated as follows:

                                                   December 31,  December 31,
        As at                                             2007          2006
                                                   --------------------------

        Tax asset (liability) related
         to operating losses                       $       (90)  $       294
        Tax asset (liability) related to
         differences in tax and book basis            (100,197)           22
        ---------------------------------------------------------------------

        Future income tax asset (liability)        $  (100,287)  $       316
                                                   --------------------------
                                                   --------------------------

    15. RELATED PARTY TRANSACTIONS

        During the years ended December 31, 2007 and 2006, there were no
        related party transactions.

    16. COMMITMENTS AND CONTINGENCIES

        Boardwalk REIT has long-term supply arrangements with utility
        companies as described in NOTE 2(i).

        Boardwalk REIT, in the normal course of operations, will become
        subject to a variety of legal and other claims against the Trust.
        Management and the Trust's legal counsel evaluate all claims on their
        apparent merits, and accrue management's best estimate of the
        estimated costs to satisfy such claims. Management believes that the
        outcome of legal and other claims filed against the Trust or its
        predecessor will not be material to Boardwalk REIT.

    17. GUARANTEES

        In the normal course of business, various agreements may be entered
        that may contain features that meet the AcG-14 definition of a
        guarantee. AcG-14 defines a guarantee to be a contract (including an
        indemnity) that contingently requires an entity to make payments to
        the guaranteed party based on (i) changes in an underlying interest
        rate, foreign exchange rate, equity or commodity instrument, index or
        other variable, that is related to an asset, a liability or an equity
        security of the counterparty, (ii) failure of another party to
        perform under an obligating agreement or (iii) failure of a third
        party to pay its indebtedness when due.

        In connection with the sales of properties, a mortgage assumed by the
        purchaser may have an indirect guarantee provided to the lender until
        the mortgage is refinanced by the purchaser. In the event of default
        by the purchaser, the seller would be liable for the outstanding
        mortgage balance. Boardwalk REIT's maximum exposure at December 31,
        2007 is approximately $5.3 million (December 31, 2006 -
        $5.4 million). In the event of default, Boardwalk REIT's recourse for
        recovery includes the sale of the respective building asset.
        Boardwalk REIT expects that the proceeds from the sale of the
        building asset will cover, and in most likelihood exceed, the maximum
        potential liability associated with the amount being guaranteed.
        Therefore, at December 31, 2007, no amounts have been recorded in the
        consolidated financial statements with respect to the above noted
        indirect guarantees.

    18. SEGMENTED INFORMATION

        Boardwalk REIT specializes in multi-family residential housing and
        operates primarily within one business segment in five provinces
        located in Canada. The following summary presents segmented financial
        information for Boardwalk REIT's business by geographic location.

                                                    Year ended    Year ended
                                                   December 31,  December 31,
                                                          2007          2006
                                                   --------------------------
        Alberta
          Revenue                                  $   217,323   $   170,261
                                                   --------------------------
          Expenses
            Operating                                   33,881        27,116
            Utilities                                   22,938        20,188
            Utility rebates                             (1,222)       (1,988)
            Property taxes                              13,219        12,278
        ---------------------------------------------------------------------
                                                        68,816        57,594
                                                   --------------------------
          Net operating income                     $   148,507   $   112,667
                                                   --------------------------

        Saskatchewan
          Revenue                                  $    38,974   $    35,485
                                                   --------------------------
          Expenses
            Operating                                    6,922         6,375
            Utilities                                    4,928         4,815
            Property taxes                               4,573         4,813
        ---------------------------------------------------------------------
                                                        16,423        16,003
                                                   --------------------------
          Net operating income                     $    22,551   $    19,482
                                                   --------------------------

        Ontario
          Revenue                                  $    37,535   $    37,573
                                                   --------------------------
          Expenses
            Operating                                    6,063         6,059
            Utilities                                    6,312         6,368
            Property taxes                               6,262         7,169
        ---------------------------------------------------------------------
                                                        18,637        19,596
                                                   --------------------------
          Net operating income                     $    18,898   $    17,977
                                                   --------------------------

        Quebec
          Revenue                                  $    69,065   $    67,141
                                                   --------------------------
          Expenses
            Operating                                   13,271        13,680
            Utilities                                    7,697         7,878
            Property taxes                               7,510         7,335
        ---------------------------------------------------------------------
                                                        28,478        28,893
                                                   --------------------------
          Net operating income                     $    40,587   $    38,248
                                                   --------------------------

        British Columbia
          Revenue                                  $    11,410   $     8,358
                                                   --------------------------
          Expenses
            Operating                                    2,541         1,943
            Utilities                                    1,463         1,015
            Property taxes                                 601           465
        ---------------------------------------------------------------------
                                                         4,605         3,423
                                                   --------------------------
          Net operating income                     $     6,805   $     4,935
                                                   --------------------------


        Total
          Net operating income                     $   237,348   $   193,309
          Unallocated revenue(*)                        23,778        22,489
          Unallocated expenses(xx)                    (320,452)     (190,409)
        ---------------------------------------------------------------------
          Net earnings (loss) for the period       $   (59,326)  $    25,389
                                                   --------------------------
                                                   --------------------------


                                                   December 31,  December 31,
        As at                                             2007          2006
                                                   --------------------------
        Alberta
          Identifiable assets
            Revenue producing properties           $ 1,244,328   $   933,212
            Mortgages and accounts receivable            5,863         1,249
            Tenants' security deposit                   10,385         7,988
                                                   --------------------------
                                                   $ 1,260,576   $   942,449
                                                   --------------------------
        Saskatchewan
          Identifiable assets
            Revenue producing properties           $   168,581   $   172,269
            Mortgages and accounts receivable              202           216
            Tenants' security deposits                   2,096         1,491
                                                   --------------------------
                                                   $   170,879   $   173,976
                                                   --------------------------
        Ontario
          Identifiable assets
            Revenue producing properties           $   206,366   $   208,927
            Mortgages and accounts receivable              237           124
                                                   --------------------------
                                                   $   206,603   $   209,051
                                                   --------------------------
        Quebec
          Identifiable assets
            Revenue producing properties           $   421,473   $   419,962
            Mortgages and accounts receivable              800           859
                                                   --------------------------
                                                   $   422,273   $   420,821
                                                   --------------------------
        British Columbia
          Identifiable assets
            Revenue producing properties           $   104,491   $    98,111
            Mortgages and accounts receivable            1,049            37
            Tenants' security deposits                     444           408
                                                   --------------------------
                                                   $   105,984   $    98,556
                                                   --------------------------

        Total assets
          Identifiable assets                      $ 2,166,315   $ 1,844,853
          Unallocated assets(xxx)                       29,573        25,607
                                                   --------------------------
                                                   $ 2,195,888   $ 1,870,460
                                                   --------------------------
                                                   --------------------------

        (*)   Unallocated revenue includes property sales, interest income,
              revenue from discontinued operations and other non-rental
              income.

        (xx)  Unallocated expenses include cost of property sales, operating
              expenses from discontinued operations, non-rental operating
              expenses, corporate administration, financing costs,
              amortization, income taxes and other provisions.

        (xxx) Unallocated assets include discontinued assets, cash, short-
              term investments and other assets.

    19. SUBSEQUENT EVENTS

        Forward Bond transaction

        Subsequent to the end of the fiscal year, the Trust entered into a
        forward bond transaction with a major Canadian financial institution.
        In total, the transaction was for $101.6 million with a weighted
        average term and interst rate of 7.2 years and 3.63%, respectively.
    

    %SEDAR: 00020684E




For further information:

For further information: Boardwalk REIT: Sam Kolias, CEO, (403)
531-9255; Roberto Geremia, President, (403) 531-9255


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