Boardwalk REIT Announces Solid Second Quarter 2008 Financial Results; FFO Per Unit Up 13.2% and DI Per Unit up 15.1% YOY; its August 2008 Distribution and its intention to renew its Normal Course Issuer Bid



    CALGARY, Aug. 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 the second quarter of
2008; FFO per unit up 13.2% and DI per unit up 15.1% YOY; its August 2008
Distribution and its intention to renew its Normal Course Issuer Bid. FFO and
DI are non-GAAP measures; the reconciliation to Net Earnings and to Total
Operating Cash Flows, respectively, can be found in Management's Discussion
and Analysis (MD&A) for the second quarter ended June 30, 2008, under the
section titled, "Performance Measures".
    For the second quarter ended June 30, 2008, the Trust reported Funds From
Operations ("FFO") of $32.9 million and FFO per unit of $0.60 on a diluted
basis, compared to FFO of $29.8 million and FFO per unit of $0.53 for the same
period last year. Distributable income ("DI") for the quarter was
$33.2 million and DI per unit was $0.61 on a diluted basis, compared to
$30.0 million and $0.53 per unit for the same period last year.

    
    Highlights of the Trust's Second quarter 2008 financial results include:

    -   Rental revenues of $105.5 million, an increase of 13.8%, compared to
        $92.7 million for the three-month period ended June 30, 2007.

    -   Net operating income of $66.7 million, representing a 13.6% increase,
        from $58.7 million for the three-month period ended June 30, 2007.

    -   FFO of $32.9 million, an increase of 10.6%, compared to $29.8 million
        for the three-month period ended June 30, 2007.

    -   FFO per Unit was $0.60 on a diluted basis, up 13.2%, compared to
        $0.53 for the three-month period ended June 30, 2007.

    -   DI per Unit was $0.61, up 15.1%, from the $0.53 per Unit for the
        three months ended June 30, 2007.
    

    Commenting on the Trust's Q2 2008 results, Sam Kolias, C.E.O. and
Chairman of the Board, said: "We are pleased to report on a solid second
quarter of 2008 for the Trust. Economic strength in Western Canada continued
to support strong demand for rental accommodations in our largest markets this
quarter, producing positive revenue growth for the Trust. Funds from
Operations (FFO) and FFO per Unit increased approximately 10.6% and 13.2%,
respectively, over last year's second quarter.
    Much of our success this quarter can be attributed to our three-pronged
revenue maximization strategy, in which we actively monitor occupancy, adjust
price and apply suite-specific incentives. In the first quarter of 2008, we
strategically reduced market rents on select properties in response to weaker
seasonal demand and quickly realized an increase in occupancy. In the second
quarter, this strategy continued to be very successful, with occupancy
improving overall in Alberta, Saskatchewan, British Columbia and Quebec. This
improved occupancy places the Trust in a strong position for continued revenue
growth over the third and fourth quarters of 2008. Despite some adjustments,
market rents remain quite stable, with slight increases or decreases depending
on the local rental market."
    Roberto Geremia, President, added: "Saskatchewan's booming economy
continues to produce outstanding market fundamentals, particularly in
Saskatoon, Saskatchewan's largest centre. House prices in Saskatoon and Regina
continue to increase at a significant pace, creating a strong value
differential for the rental option. Monthly occupied rent in our property
portfolio increased approximately $44 in Saskatchewan in June 2008 over March
2008 and increased approximately $137 year-over-year. Average market rents in
Saskatchewan increased $63 in June 2008 compared to March 2008, and increased
$257 year-over-year.
    Though some market fundamentals have tempered from their peak, Alberta
continues to exhibit solid economic strength. Strong employment growth, a
thriving energy sector and healthy international migration continue to bode
well for rental demand. With 54% of our portfolio located in the province, we
are pleased to note continued growth at a more sustainable pace.
    Over the second quarter of 2008, a large housing inventory and a
continued tempering of housing prices were noted in Calgary and Edmonton.
Despite increased housing options for consumers, we are pleased to report
improved occupancy in both Calgary and Edmonton on a quarter-over-quarter
basis. We believe that our incremental approach to market rents, with a focus
on occupancy, continues to be the best way to maximize revenues in these
markets. Average occupied rents were up approximately $6 in Calgary and up
approximately $10 in Edmonton in June 2008, compared to March 2008. Market
rents increased approximately $51 in Calgary and decreased approximately $5 in
Edmonton in June 2008 compared to March 2008. Year-over-year market rent
decreased by $34 and $75 in Calgary and Edmonton, respectively."

    
    Operational Highlights

    -   The average vacancy rate across the Trust's portfolio for the second
        quarter of 2008 was 4.74%, down from 5.65% in the first quarter of
        2008, and up from 4.16% for the second quarter of 2007.

    -   The average monthly rent realized in the second quarter of 2008 was
        $955 per rental unit, up $90 from $865 per rental unit for the same
        period last year.

    -   The average market rent for the Trust's properties at the end of June
        2008 was an estimated $1,068 per rental unit per month, which
        compares to an average in-place monthly rent per occupied unit of
        $1,008. This translates to an estimated 'loss-to-lease' of
        approximately $25.2 million on an annualized basis, or $0.46 per
        outstanding Trust Unit, given existing occupancy levels.

    -   For the second quarter, 'same-property' (or properties owned for a
        period of 24 months or longer) rental revenue grew by 9.6% compared
        to the same period last year, overall operating costs increased by
        12.0%, resulting in same-property NOI increase of 8.2%. A total of
        33,854 units, representing approximately 92% of Boardwalk REIT's
        total portfolio, were classified as stabilized as of June 30, 2008.
    

    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.

    Amendment to Declaration of Trust

    On May 13, 2008 and July 30, 2008, respectively, Boardwalk REIT
Unitholders and Debenture Holders voted to adopt the amendment to its
Declaration of Trust and Trust Indenture to change the definition of "Gross
Book Value" by increasing the asset bump by $410 million, from $231 million to
$641 million. We believe that the amendment to the definition of Gross Book
Value will give the Trust increased flexibility to implement its strategic
plan, which includes the purchase of accretive multi-family assets in the
current competitive acquisition environment and, at the same time, execute its
Trust Unit buy-back program.

    Same-Property Results

    Boardwalk continued to show solid performance in its stabilized
properties (defined as properties owned for 24 months or longer). The
"same-property" results for the Trust's stabilized portfolio for the
three-month period ended June 30, 2008 showed rental revenue growth of 9.6% on
a year-over-year basis. Operating expenses increased 12.0%, resulting in an
increase in NOI of 8.2% compared to the same period last year. A total of
33,854 units, representing approximately 92.0% of Boardwalk's total portfolio,
were classified as stabilized as at June 30, 2008.

    
    Same-Property Results - Stabilized Portfolio

    -------------------------------------------------------------------------
                                                       %    % Net      % of
                                             % Operating Operating     Stabi-
                              No. of   Revenue   Expense    Income     lized
    Jun 30 2008 - 3 M          Units    Growth    Growth    Growth       NOI
    -------------------------------------------------------------------------
    Calgary                    4,973      7.8%     13.9%      5.6%     20.2%
    Edmonton                  10,649     14.2%     18.1%     12.4%     35.2%
    Other Alberta              1,680      6.1%     29.6%     -3.1%      5.6%
    British Columbia             871      5.8%     -3.6%     12.0%      2.6%
    Ontario                    4,265      1.1%      6.1%     -3.4%      7.6%
    Quebec                     6,756      3.3%      4.1%      2.7%     16.9%
    Saskatchewan               4,660     20.9%     13.7%     25.3%     11.9%
    -------------------------------------------------------------------------
                              33,854      9.6%     12.0%      8.2%    100.0%
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                       %     % Net      % of
                                             % Operating Operating     Stabi-
                              No. of   Revenue   Expense    Income     lized
    Jun 30 2008 - 6 M          Units    Growth    Growth    Growth       NOI
    -------------------------------------------------------------------------
    Calgary                    4,973      8.5%     17.0%      5.2%     20.3%
    Edmonton                  10,649     15.3%     17.9%     13.9%     35.7%
    Other Alberta              1,680      5.9%     23.5%     -1.8%      5.8%
    British Columbia             871      6.0%      3.8%      7.6%      2.6%
    Ontario                    4,265      0.9%      1.6%      0.1%      7.6%
    Quebec                     6,756      3.0%      1.4%      4.2%     17.1%
    Saskatchewan               4,660     18.4%     14.4%     21.6%     10.9%
    -------------------------------------------------------------------------
                              33,854      9.6%     11.0%      8.8%    100.0%
    -------------------------------------------------------------------------
    


    Commenting on Boardwalk REIT's same-property results, William Wong, Chief
Financial Officer, said: "For the second quarter 2008, same-store revenue
increased by 9.6% compared to the same period in the prior year. Despite
rental expenses increasing by 12.0%, net operating income growth improved
overall by 8.2%. The increase in reported stabilized revenue was driven mainly
by the Trust's Alberta operations, which account for approximately 61.0% of
the Trust's reported stabilized net operating income. The majority of the
reported increase in rental operating expenses for the three months ended
June 30, 2008 was due to higher utility costs, particularly the cost of
natural gas.
    For the six months ended June 30, 2008, same-store revenues increased by
9.6% over the same period last year, resulting in an overall increase in net
operating income of 8.8%, despite an increase of 11.0% in operating expenses
in the first six months of 2008. Overall, the increased operating expenses
were the result of an increase in the number of units in the portfolio and
higher utility costs."

    
    Sequential Revenue Analysis

    -------------------------------------------------------------------------
                                       Q2 2008   Q1 2008   Q4 2007   Q3 2007
    Stabilized                No. of    vs. Q1    vs. Q4    vs. Q3    vs. Q2
     Revenue Growth            Units      2008      2007      2007      2007
    -------------------------------------------------------------------------
    Calgary                    4,973      3.0%      3.3%      0.4%      0.8%
    Edmonton                  10,649      2.6%      5.3%      1.8%      3.9%
    Other Alberta              1,680      0.1%      3.2%      1.9%      0.8%
    British Columbia             871      1.9%      4.1%     -1.9%      2.6%
    Ontario                    4,265      0.9%     -0.4%      2.1%     -1.4%
    Quebec                     6,756      1.1%      0.0%      0.2%      2.3%
    Saskatchewan               4,660      6.6%      2.7%      4.6%      5.5%
    -------------------------------------------------------------------------
                              33,854      2.5%      2.9%      1.5%      2.4%
    -------------------------------------------------------------------------

    Commenting on Boardwalk REIT's sequential stabilized revenue growth,
William Wong, Chief Financial Officer, said: "On a sequential basis,
stabilized revenues grew 2.5% from Q1 2008 to Q2 2008, 2.9% from Q4 2007 to Q1
2008, 1.5% from Q3 2007 to Q4 2007 and 2.4% from Q2 2007 to Q3 2007."

    Real Estate Acquisition/Disposition Activity

    Closed - 2008

                                    No. of
    Building Name      City          Units     Type                 Price
    -------------------------------------------------------------------------
    Varsity Square
     Apartments        Calgary         297   High Rise         $  48,750,000
    -------------------------------------------------------------------------
    Total Acquisitions                 297                     $  48,750,000
    -------------------------------------------------------------------------


    Closed - 2008

                       Year 1   Year 2
    Building Name     Cap Rate Cap Rate  $/unit  $/sq ft   Date Closed
    -------------------------------------------------------------------------
    Varsity Square
     Apartments        5.86%    6.12%   $164,141   $207    June 12, 2008
    -------------------------------------------------------------------------
    Total
     Acquisitions      5.86%    6.12%   $164,141   $207
    -------------------------------------------------------------------------
    

    Excluded from the table is one additional unit acquired in an Edmonton,
Alberta property called, "Morningside", of which Boardwalk REIT already owned
220 units. Dispositions to date for 2008 consisted solely of the sales and
closings of 30 units in a 90-unit property converted into condominiums for
sale.
    Commenting on the Trust's property acquisitions and dispositions, Bill
Chidley, Senior Vice President, Corporate Development, said: "In the second
quarter of 2008, the Trust closed on a previously announced acquisition of
297 rental units in Calgary, Alberta. The acquisition had a total purchase
price of $48.8 million and a year one cap rate of 5.86%."

    Unit Buyback

    We continue to believe that one of the best investments we can make is
purchasing our Trust Units at current levels. Under the Normal Course Issuer
Bid, the Trust purchased and cancelled 1,518,100 REIT Trust Units in the first
half of 2008, representing a total market value of approximately
$59.7 million, or an average of $39.33 per Trust Unit. Together with the
856,447 Trust Units purchased and cancelled in 2007, the Trust has purchased
and cancelled 2,374,547 Trust Units representing a total market value of
approximately $98.3 million at June 30, 2008, or an average of $41.39 per
Trust Unit.

    Intention to Renew Normal Course Issuer Bid

    Boardwalk Real Estate Investment Trust ("Boardwalk") wishes to announce
its intention to renew its normal course issuer bid (the "Bid") through the
facilities, and subject to regulatory approval, of The Toronto Stock Exchange.
Boardwalk's previous normal course issuer bid will expire on August 15, 2008.
    As of July 31, 2008, Boardwalk has 49,712,541 issued and outstanding
trust units. The Bid, if approved, would allow Boardwalk to purchase up to
4,040,192 trust units, representing 10% of the public float of its trust unit
capital, through the facilities of The Toronto Stock Exchange. The average
daily trading volume for the six calendar months prior to the date hereof was
170,393 trust units. The Bid, if approved, is expected to commence on
August 18, 2008 and will terminate one year later, or at such earlier time as
the Bid is complete.

    Continued Financial Strength

    The Trust continued to build on its solid financial position throughout
the second quarter of 2008. Boardwalk REIT's total principal mortgage and debt
outstanding was $2.16 billion as of June 30, 2008, as compared to
$1.76 billion as of June 30, 2007. As of June 30, 2008, the Trust's total debt
had an average maturity of 3 years with a weighted average interest rate of
4.91% and debt-to-total enterprise value ratio was 50.2%.
    We currently estimate that by the end of this fiscal year, the Trust
could have access to approximately $350 million of available capital in the
form of cash-on-hand; a secured, undrawn acquisition and operating facility;
and estimated additional mortgage proceeds for the remainder of the year. The
Trust's interest coverage ratio, excluding gains, for the six-month period
ended June 30, 2008 was 2.20 times compared to 2.27 times in the same period
last year.

    Outlook and 2008 Financial Guidance

    Each quarter, we review our key assumptions in providing our financial
guidance. Based on this review, we are revising our reported 2008 financial
guidance. We have adjusted the reported range of FFO from $2.35 - $2.50 to a
new range of $2.35 - $2.45 (DI from $2.37 - $2.52 to $2.37 - $2.47). The two
main catalysts for these adjustments are the higher-than-expected utility
costs and lower-than-anticipated acquisitions.
    The following table summarises the changes to our 2008 Financial
Guidance:

    
    -------------------------------------------------------------------------
                             Original         Q1 Revised         Q2 Revised
    Description              Guidance          Guidance           Guidance
    -------------------------------------------------------------------------
    Acquisitions         $130 million to     $65 million to     $75 million
                          $260 million        $130 million      (500 units)
                         (1,000 to 2,000     (500 to 1,000
                         apartment units)   apartment units)
    -------------------------------------------------------------------------
    Stabilized Building
     NOI growth                8% to 14%         8% to 12%         8% to 10%
    -------------------------------------------------------------------------
    FFO per Trust Unit    $2.35 to $2.50    $2.35 to $2.50    $2.35 to $2.45
    -------------------------------------------------------------------------
    DI per Trust Unit     $2.37 to $2.52    $2.37 to $2.52    $2.37 to $2.47
    -------------------------------------------------------------------------
    

    Change to Quarterly Reporting Format

    Commencing with the third quarter of 2008, we will be significantly
adjusting the format of our quarterly reporting to reduce redundancy. We
believe the new format will be easier to read and provide a high-level
overview of our quarterly results. A more detailed analysis will continue to
be provided in the MD&A and quarterly presentation.

    August 2008 Monthly Distribution

    The Trust has declared its August 2008 distribution in the amount of
15.00 cents per Trust Unit ($1.80 on an annualized basis). The August
distribution will be payable on September 15, 2008 to Unitholders of record on
August 29, 2008.

    Supplementary Information

    Boardwalk produces Quarterly Supplemental Information that provides
detailed information regarding the Trust's activities during the quarter. The
Second Quarter 2008 Supplemental Information is available on our investor
website at www.boardwalkreit.com.

    Teleconference on Second Quarter 2008 Financial Results

    We invite you to participate in the teleconference that will be held to
discuss these results this same morning (August 14, 2008) at 11:00 am EST.
Senior management will speak to the second 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:
416-644-3414 (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=2317260
    Replay: An audio recording of the teleconference will be available from
1:00 pm ET on Thursday, August 14, 2008 until 11:59 pm ET on Thursday,
August 21, 2008. You can access it by dialling 416-640-1917 and using the
passcode 21275127 followed by the pound 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 36,785 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)
    (UNAUDITED)

    As at                                               June 30, December 31,
                                                           2008         2007
                                                    -------------------------
    Assets

    Revenue producing properties (NOTE 4)            $2,187,680   $2,149,853
    Other assets (NOTE 5)                                17,221       15,776
    Mortgages and accounts receivable                     9,242       10,071
    Segregated tenants' security deposits                14,073       12,935
    Cash and cash equivalents                            76,185          960
    Discontinued operations (NOTE 6)                      1,564        6,293
    -------------------------------------------------------------------------
                                                     $2,305,965   $2,195,888
                                                    -------------------------
                                                    -------------------------

    Liabilities

    Mortgages payable                                $1,969,394   $1,770,015
    Debentures (NOTE 7)                                 118,920      118,768
    Accounts payable and accrued liabilities             43,314       48,279
    Refundable tenants' security deposits and other      17,343       16,186
    -------------------------------------------------------------------------
                                                      2,148,971    1,953,248
    Future income taxes (NOTES 3 and 11)                103,557      100,287
    -------------------------------------------------------------------------
                                                      2,252,528    2,053,535

    Unitholders' Equity

    Unitholders' equity                                  53,437      142,353
    -------------------------------------------------------------------------
                                                     $2,305,965   $2,195,888
                                                    -------------------------
                                                    -------------------------

    Commitments and contingencies (NOTE 14)
    Guarantees (NOTE 15)

    SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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

                             3 months     3 months     6 months     6 months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
                                 2008         2007         2008         2007
                            -------------------------------------------------
    Revenue
      Rental income          $105,460      $92,711     $207,669     $180,281
    Expenses
      Revenue producing
       properties:
        Operating expenses     18,577       16,202       37,136       31,743
        Utilities              11,819        9,512       28,543       23,374
        Utility rebate
         (NOTE 14)                  -           (8)      (1,258)        (933)
        Property taxes          8,330        8,285       16,009       16,354
      Administration            5,782        5,308       11,536       10,599
      Financing costs          26,936       22,570       52,531       44,239
      Amortization of
       deferred financing
       costs                    1,114        1,100        2,582        2,379
      Amortization of capital
       assets                  20,617       18,623       40,616       36,759
      Amortization of
       intangibles              1,021        1,810        2,960        3,008
    -------------------------------------------------------------------------
                               94,196       83,402      190,655      167,522
                            -------------------------------------------------

    Earnings from continuing
     operations before
     income taxes              11,264        9,309       17,014       12,759
      Current income taxes          -            -            4            -
      Future income taxes
       (NOTE 11)                  889      111,630        3,270      111,398
    -------------------------------------------------------------------------
    Earnings (loss) from
     continuing operations     10,375     (102,321)      13,740      (98,639)

    Earnings from discontinued
     operations, net of tax
     (NOTE 6)                   1,355        4,821        3,622        4,769
    -------------------------------------------------------------------------
    Net earnings (loss)        11,730      (97,500)      17,362      (93,870)

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

    Comprehensive income
     (loss)                   $11,730     $(97,500)     $17,362     $(93,870)
                            -------------------------------------------------
                            -------------------------------------------------

    Basic earnings (loss)
     per unit (NOTE 10)
      - from continuing
         operations             $0.19       $(1.82)       $0.25       $(1.75)
      - from discontinued
         operations              0.02         0.09         0.07         0.09
    -------------------------------------------------------------------------
    Basic earnings (loss)
     per unit                   $0.21       $(1.73)       $0.32       $(1.66)
                            -------------------------------------------------
                            -------------------------------------------------
    Diluted earnings (loss)
     per unit (NOTE 10)
      - from continuing
         operations             $0.19       $(1.82)       $0.25       $(1.75)
      - from discontinued
         operations              0.02         0.09         0.07         0.09
    -------------------------------------------------------------------------
    Diluted earnings (loss)
     per unit                   $0.21       $(1.73)       $0.32       $(1.66)
                            -------------------------------------------------
                            -------------------------------------------------

    SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



    CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY
    (CDN$ THOUSANDS, EXCEPT NUMBER OF UNITS)
    (UNAUDITED)
                                                       6 months     6 months
                                                          ended        ended
                                                        June 30,     June 30,
                                                           2008         2007
                                                    -------------------------

    Trust units (NOTE 9)
    Balance, beginning of period                       $338,084     $365,744
    Units issued under equity financing,
     net of issue costs                                       -         (136)
    Units issued under distribution reinvestment plan     2,121        4,232
    Deferred unit plan (NOTE 8)                             921          931
    Units purchased and cancelled (NOTE 9)              (59,707)           -
    -------------------------------------------------------------------------
    Balance, end of period                             $281,419     $370,771
                                                    -------------------------
    Cumulative earnings
    Balance, beginning of period                        $95,591     $154,917
    Net earnings (loss)  for the period                  17,362      (93,870)
    -------------------------------------------------------------------------
    Balance, end of period                             $112,953      $61,047
                                                    -------------------------
    Accumulated other comprehensive income
    Balance, beginning of period                             $-           $-
    Other comprehensive income for the period                 -            -
    -------------------------------------------------------------------------
    Balance, end of period                                   $-           $-
                                                    -------------------------
    Cumulative distributions to unitholders
    Balance, beginning of period                      $(291,322)   $(201,794)
    Distributions declared to unitholders (NOTE 10)     (49,613)     (42,866)
    -------------------------------------------------------------------------
    Balance, end of period                            $(340,935)   $(244,660)
                                                    -------------------------
    Total unitholders' equity                           $53,437     $187,158
                                                    -------------------------
                                                    -------------------------

    Units issued and outstanding                     54,247,552   56,451,371
                                                    -------------------------
                                                    -------------------------

    SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (CDN$ THOUSANDS)
    (UNAUDITED)

                              3 months    3 months     6 months     6 months
                                 ended       ended        ended        ended
                               June 30,    June 30,     June 30,     June 30,
                                  2008        2007         2008         2007
                             ------------------------------------------------
    Operating activities
      Net earnings (loss)      $11,730    $(97,500)     $17,362     $(93,870)
      (Earnings) from
        discontinued
        operations,
        net of tax              (1,355)     (4,821)      (3,622)      (4,769)
      Future income taxes          889     111,630        3,270      111,398
      Amortization of
       capital assets           20,617      18,623       40,616       36,759
      Amortization of
       intangibles               1,021       1,810        2,960        3,008
      Amortization of
       deferred financing
       costs                     1,114       1,100        2,582        2,379
    -------------------------------------------------------------------------
                                34,016      30,842       63,168       54,905
      Cash from (used in)
       discontinued operations       -          19            -           (9)
      Net change in operating
       working capital
       (see below)                (937)      8,555       (6,210)       8,401
    -------------------------------------------------------------------------
      Total operating
       cash flows               33,079      39,416       56,958       63,297
                             ------------------------------------------------

    Financing activities
      Issuance of trust units
       (net of issue costs)
       (NOTE 9)                      -       1,782        2,121        4,095
      Distributions paid       (24,749)    (22,005)     (49,761)     (42,859)
      Unit repurchase program
       (NOTE 9)                (36,698)          -      (59,707)           -
      Financing of revenue
       producing properties    151,536      72,545      360,923      318,685
      Repayment and maturity
       of debt on revenue
       producing properties    (69,904)    (22,536)    (151,266)    (132,237)
      Deferred financing
       costs incurred           (5,192)     (2,447)     (12,214)      (7,622)
    -------------------------------------------------------------------------
                                14,993      27,339       90,096      140,062
                             ------------------------------------------------
    Investing activities
      Purchases of revenue
       producing properties
       (NOTE 4)                (48,925)    (16,000)     (48,925)    (176,213)
      Improvements to
       properties              (16,221)    (19,146)     (32,546)     (33,494)
      Net cash proceeds from
       sale of properties
       (NOTE 4)                  1,906      12,275       10,287       12,275
      Additions to corporate
       technology assets          (322)       (358)        (645)        (693)
    -------------------------------------------------------------------------
                               (63,562)    (23,229)     (71,829)    (198,125)
                             ------------------------------------------------
    Net increase (decrease)
     in cash and cash
     equivalents balance       (15,490)     43,526       75,225        5,234

    Cash and cash equivalents
     (bank indebtedness),
     beginning of period        91,675     (42,334)         960       (4,042)
    -------------------------------------------------------------------------

    Cash and cash equivalents,
     end of period             $76,185      $1,192      $76,185       $1,192
                             ------------------------------------------------
                             ------------------------------------------------

    Supplementary cash flow
     information:
    Taxes paid                     $-           $-           $4           $-
    Interest paid             $24,332      $15,118      $50,874      $31,291
                            -------------------------------------------------
                            -------------------------------------------------

    Net change in operating
     working capital:
    Net change in mortgages
     and accounts receivable     $825         $927         $829         $261
    Net change in other assets    (81)      (1,105)      (2,093)      (1,933)
    Net change in tenants'
     security deposits            (12)         (13)          19          176
    Net change in accounts
     payable and accrued
     liabilities               (1,669)       8,746       (4,965)       9,897
                             ------------------------------------------------
                                $(937)      $8,555      $(6,210)      $8,401
                             ------------------------------------------------
                             ------------------------------------------------

    SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Three and six months ended June 30, 2008

    (TABULAR AMOUNTS IN CDN$ THOUSANDS, EXCEPT NUMBER OF UNITS AND PER UNIT
    AMOUNTS UNLESS OTHERWISE STATED)
    (UNAUDITED)

    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 ("DOT"), dated
        January 9, 2004 and as amended and restated on May 3, 2004, May 10,
        2006, May 10, 2007, and May 13, 2008 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.  BASIS OF PRESENTATION

        These unaudited interim consolidated financial statements have been
        prepared in accordance with the recommendations of the handbook of
        the Canadian Institute of Chartered Accountants ("CICA Handbook") and
        are consistent with those used in the audited consolidated financial
        statements as at and for the year ended December 31, 2007, except as
        disclosed in NOTE 3 below. These interim financial statements do not
        include all of the disclosures required by Canadian generally
        accepted accounting principles ("Canadian GAAP") applicable to annual
        financial statements and, therefore, they should be read in
        conjunction with the audited consolidated financial statements.

        The preparation of financial statements in accordance with 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.

        The operating results for the three and six months ended June 30,
        2008 are not necessarily indicative of the results that may be
        expected for the full year ending December 31, 2008 due to seasonal
        variations in utility costs and other factors. Historically,
        Boardwalk REIT has experienced higher utility expenses in the first
        quarter as a result of the winter months, resulting in variations in
        the quarterly results.

        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, 2008, the Trust adopted four new accounting standards
        issued by the CICA as outlined below:

        a) Section 1535 - Capital Disclosures

        b) Section 3031 - Inventories

        c) Section 3862 - Financial Instruments - Disclosure

        d) 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 replaced 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 3862 - Financial Instruments-Disclosure and Section 3863 -
        Financial Instruments-Presentation, which replaced 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. Section 3862 requires entities to provide disclosures in
        their financial statements which allow the users to evaluate both the
        significance of financial instruments for the entity's financial
        position and performance; and the nature and extent of risks arising
        from financial instruments to which the entity is exposed during the
        period and at the balance sheet date, and how the entity manages
        those risks. The purpose of Section 3863 is to enhance financial
        statement users' understanding of the significance of financial
        instruments to an entity's financial position, performance and cash
        flows.

        Impact of Adoption of Sections 1535, 3031, 3862 and 3863

        Our consolidated financial statements include additional disclosures
        on capital management (NOTE 12) and financial instruments (NOTE 13).

        There was no material impact to the consolidated financial statements
        on adoption of Section 3031 by the Trust.

        Bill C-52

        On June 22, 2007, Bill C-52 received Royal Assent in Canada. As a
        result of this, under Canadian GAAP, 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.

        Impact of Bill C-52

        Our interpretation of Bill C-52 on Boardwalk REIT was that, at this
        time, based on a detailed review of the legislation, it may be
        interpreted that the Trust does not qualify as a REIT, which would be
        exempt from the specified investment flow-through ("SIFT") rules, and
        as such the Trust recorded an estimate of its the future income tax
        liability at December 31, 2007 recognizing the probability that it
        would be 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 December 31, 2007 of $99.9 million, which was
        revised upward by $2.8 million to $102.7 million at March 31, 2008
        and $0.6 million to $103.3 million at June 30, 2008. At a future
        time, if it has been deemed that the Trust would be in compliance
        with the SIFT rules, the amount of the adjustment will be reversed.
        Although the adjustment to earnings and cumulative earnings at
        June 30, 2008 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 this time,
        it is the belief of the Trust that it will be in compliance with the
        existing and or amended legislation prior to the effective date of
        January 1, 2011.

        At June 30, 2008, the technical amendments announced in late December
        2007 had not received Royal Assent; however, on July 14, 2008, draft
        legislation was published for review, which mirrors the technical
        amendments announced in late December 2007. 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 management will
        reverse the future income tax liability reported in these financial
        statements.

        Hedging Relationships

        In the beginning of 2008, the Trust entered into a forward bond
        transaction (the "Transaction") with a major Canadian financial
        institution. In total, the Transaction, which comprised of bond
        forward contracts on specific mortgages set to mature and be renewed
        in 2008, was for a total nominal amount of $101.6 million with a
        weighted average term and interest rate of 7.2 years and 3.63%,
        respectively. Subsequent to entering into this Transaction, the Trust
        initiated changes to the terms of one of the contracts in the
        Transaction and negotiated a settlement loss of $100 thousand related
        to the changes. This contract was assessed to be ineffective and the
        settlement loss of $100 thousand was included in financing costs for
        the quarter ended March 31, 2008. During the second quarter ended
        June 30, 2008, the remaining bond forward contracts in the
        Transaction were settled. Except for one of the contracts, all
        remaining contracts were assessed to be ineffective and the net
        settlement loss of $168 thousand was included in financing costs for
        the quarter. The bond forward contract assessed to be effective was
        settled for a loss of $284 thousand, which will be amortized over the
        term of the new financing.

        During the first quarter of 2008, the Trust entered into an interest
        rate swap agreement on the mortgages of specific properties within
        its portfolio in an effort to hedge the variability in cash flows
        attributed to fluctuating interest rates. These interest rate swap
        agreements were designated as cash flow hedges on March 11, 2008. The
        effective date of the hedge was May 1, 2008 and will continue to be
        designated as such until May 1, 2015. Settlements on both the fixed
        and variable portion of the interest rate swap will occur on a
        monthly basis. The fixed interest rate is 4.15%, plus a stamping fee
        of 0.25%, while the total amount of the mortgage debt subject to the
        interest rate swap is $91.5 million. Hedge accounting will be applied
        to these agreements in accordance with CICA Handbook section 3865.

        The Trust has assumed that there is no ineffectiveness in the hedge
        of its interest rate exposure. The effectiveness of the hedging
        relationship will be reviewed on a quarterly basis and measured at
        fair value. The portion of the gain or loss on the swap transaction
        that is determined to be an effective hedge will be recognized in
        other comprehensive income ("OCI"). The ineffective portion of the
        gain or loss on the swap transaction will be recognized immediately
        in net earnings. On recognition of the financial liability of the
        hedged item on the balance sheet, the associated gains or losses that
        were recognized in OCI will be reclassified into net earnings in the
        same period or periods during which the interest payments of the
        hedged item affected net earnings. However, if all or a portion of
        the net loss recognized in OCI will not be recovered in one or more
        future periods, the amount not expected to be recovered will be
        immediately reclassified into net earnings.

        As at June 30, 2008, the interest rate swap agreement was assessed to
        be effective and, consequently, any gains or losses on the interest
        rate swap agreement were recognized in earnings in the periods during
        which the interest payments on the hedged items were recognized.

        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 one new accounting standard that is
        effective for the Trust's fiscal year commencing January 1, 2009:

        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 1000 -
        Financial Statement Concepts, was also amended to provide consistency
        with this new standard.

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

    4.  REVENUE PRODUCING PROPERTIES

        Acquisitions

                                3 months    3 months    6 months    6 months
                                   ended       ended       ended       ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                              -----------------------------------------------

        Cash paid                $48,925     $16,000     $48,925    $176,213
        Debt assumed                   -           -           -      31,209
        ---------------------------------------------------------------------

        Total purchase price      48,925      16,000      48,925     207,422
        Fair value adjustments
         to debt                       -           -           -         376
        ---------------------------------------------------------------------

        Book value               $48,925     $16,000     $48,925    $207,798
                              -----------------------------------------------
                              -----------------------------------------------

        Allocation of book
         value to revenue
         producing properties    $47,413     $15,528     $47,413    $201,400
        Allocation of book
         value to other assets     1,512         472       1,512       6,398
        ---------------------------------------------------------------------

                                 $48,925     $16,000     $48,925    $207,798
                              -----------------------------------------------
                              -----------------------------------------------

        Multi-family units
         acquired                    298         160         298       1,703
                              -----------------------------------------------
                              -----------------------------------------------


        Dispositions

                                3 months    3 months    6 months    6 months
                                   ended       ended       ended       ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                              -----------------------------------------------

        Cash received             $1,906     $12,275     $10,287     $12,275
        Cost of dispositions           -         125           -         125
        ---------------------------------------------------------------------

        Total proceeds             1,906      12,400      10,287      12,400
        Net book value               551       7,590       6,665       7,590
                              -----------------------------------------------
                              -----------------------------------------------

        Gain on dispositions      $1,355      $4,810      $3,622      $4,810
                              -----------------------------------------------
                              -----------------------------------------------

        Multi-family
         units sold                    6          72          30          72
                              -----------------------------------------------
                              -----------------------------------------------

        Dispositions for the second quarter ended June 30, 2008 consist
        solely of the sales and closings of 6 units (30 units for the current
        fiscal year to date) in a 90-unit property located in Calgary,
        Alberta that is being developed into condominium units for sale (see
        NOTE 6). Under the percentage of completion method, sales of
        $1.9 million for the three months ($10.3 million for the current
        fiscal year to date) ended June 30, 2008 were recorded against cost
        of sales of $0.6 million ($6.7 million for the current fiscal year to
        date).

    5.  OTHER ASSETS

        As at
                                                       June 30,  December 31,
                                                          2008          2007
                                                    -------------------------

        Corporate technology assets (net of
         accumulated amortization)                      $3,145        $3,100
        Head office building (net of accumulated
         amortization)                                   2,628         2,307
        Prepaid parts and supplies                       2,834         2,791
        In-place lease and customer relationship
         intangibles (net of accumulated amortization)   2,239         3,686
        Prepaid property taxes                           4,073         1,312
        Prepaid insurance and other                      2,302         2,580
        ---------------------------------------------------------------------
                                                       $17,221       $15,776
                                                    -------------------------
                                                    -------------------------

        Accumulated amortization for corporate technology assets and head
        office building at June 30, 2008 were $14.1 million and $1.2 million,
        respectively (December 31, 2007 - $13.5 million and $1.1 million,
        respectively). Accumulated amortization for in-place lease and
        customer relationship intangibles at June 30, 2008 was $18.2 million
        (December 31, 2007 - $15.2 million)

    6.  DISCONTINUED OPERATIONS

        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 (See NOTE 4). This Calgary
        property formed 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 totalling 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,
        which the Trust accepted. This property was, therefore, classified as
        discontinued operations upon acquisition.

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

                                3 months    3 months    6 months    6 months
                                   ended       ended       ended       ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                              -----------------------------------------------
        Revenue

          Rental income               $-         $31          $-        $219
        ---------------------------------------------------------------------

        Expenses
          Revenue producing
           properties:
            Operating expenses         -          14           -         101
            Utilities                  -          (4)          -          41
            Utility rebate             -           -           -          (5)
            Property taxes             -           2           -          25
          Administration               -           -           -          53
          Financing costs              -           -           -          13
          Amortization of
           capital assets              -           8           -          32
        ---------------------------------------------------------------------
                                       -          20           -         260
                              -----------------------------------------------

                                       -          11           -         (41)
          Gain on dispositions     1,355       4,810       3,622       4,810
        ---------------------------------------------------------------------

        Earnings
         from discontinued
         operations               $1,355      $4,821      $3,622      $4,769
                              -----------------------------------------------
                              -----------------------------------------------

                                                       June 30,  December 31,
                                                          2008          2007
                                                    -------------------------
        Discontinued Assets
          Properties held for redevelopment
           and sale                                     $1,564        $6,293
                                                    -------------------------
                                                    -------------------------

    7.  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 were 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. At June 30, 2008 the Trust was in compliance
        with all the covenants reported in the debenture. These covenants are
        discussed in NOTE 13(d).

    8.  DEFERRED UNIT PLAN

        During 2006, the Trust implemented a deferred unit plan. 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
        $39.02 per unit at the grant dates for 2008 to date (2007 - $45.87;
        2006 - $25.48). For the three months ended June 30, 2008, total
        compensation costs of $0.5 million (2007 - $0.3 million) were
        recognized in income related to employee awards under the deferred
        unit plan, while $0.9 million (2007 - $0.9 million) was recognized on
        a year-to-date basis.

        The status of the outstanding deferred units is as follows:


        Summary of Deferred Unit Plan                Outstanding      Vested

        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           -

        Deferred units granted                            50,885      19,096
        Additional deferred units earned on
         unvested units                                    3,164       2,892
        ---------------------------------------------------------------------

        June 30, 2008                                    172,526      21,988
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    9.  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. 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 will
        entitle 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, 2006                             56,351,783    $365,744

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

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

        Units issued under
         distribution reinvestment plan                   56,718       2,121
        Deferred unit plan (NOTE 8)                            -         921
        Units purchased and cancelled (see below)     (1,518,100)    (59,707)
                                                     ------------------------

        June 30, 2008                                 54,247,552    $281,419
                                                     ------------------------
                                                     ------------------------

        In August 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, on a cumulative
        basis, 2,374,547 REIT units (1,518,100 in the first six months of
        2008), representing a total market value of approximately
        $98.2 million (2008 - $59.7 million), or an average of $41.39 per
        trust unit (2008 - $39.33 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                          49,772,552
        Special Voting Units issued to holders
         of LP Class B units                           4,475,000
                                                     ------------------------
        Total trust units                             54,247,552    $281,419
                                                     ------------------------
                                                     ------------------------

    10. 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 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 as 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 they are,
        therefore, unlikely to be comparable to similar measures presented by
        other real estate companies and trusts.


                                3 months    3 months    6 months    6 months
                                   ended       ended       ended       ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                              -----------------------------------------------

        Total operating
         cash flows              $33,079     $39,416     $56,958     $63,297
        Net change in
         operating working
         capital                     937      (8,555)      6,210      (8,401)
        Deduct:
          Deferred financing
           costs amortization
           post May 2, 2004         (707)       (622)     (1,438)       (948)
          Amortization of net
           premium on long-term
           debt assumed after
           May 2, 2004               (92)       (254)       (216)       (343)
        ---------------------------------------------------------------------

        Distributable income     $33,217     $29,985     $61,514     $53,605
                              -----------------------------------------------
                              -----------------------------------------------
        Distributions declared
         to unitholders          $24,655     $22,005     $49,613     $42,866
        Distributable income
         withheld                 $8,562      $7,980     $11,901     $10,739
                              -----------------------------------------------
                                 $33,217     $29,985     $61,514     $53,605
                              -----------------------------------------------
                              -----------------------------------------------

        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Weighted average units
         outstanding - basic
         and diluted          54,691,272  56,429,362  55,057,843  56,408,370
        Distributable income
         earned per unit          $0.607      $0.531      $1.117      $0.950
        Actual distributions
         declared per unit        $0.451      $0.390      $0.901      $0.760
        Distributions declared
         as a % of
         distributable income      74.3%       73.4%       80.7%       80.0%
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Earnings per unit

                                3 months    3 months    6 months    6 months
                                   ended       ended       ended       ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                              -----------------------------------------------
        Numerator
          Earnings (loss)
           from continuing
           operations            $10,375   $(102,321)    $13,740    $(98,639)
          Earnings from
           discontinued
           operations             $1,355      $4,821      $3,622      $4,769
        ---------------------------------------------------------------------
        Denominator
          Denominator for basic
           earnings per unit
           - weighted average
            units             54,691,272  56,429,362  55,057,843  56,408,370
        ---------------------------------------------------------------------
          Denominator for
           diluted earnings
           per unit adjusted
           for weighted average
           units and assumed
           conversion         54,691,272  56,429,362  55,057,843  56,408,370
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Earnings (loss) per
         unit from continuing
         operations
          Basic                    $0.19      $(1.82)      $0.25      $(1.75)
          Diluted                  $0.19      $(1.82)      $0.25      $(1.75)
        ---------------------------------------------------------------------
        Earnings per unit
         from discontinued
         operations
          Basic                    $0.02       $0.09       $0.07       $0.09
          Diluted                  $0.02       $0.09       $0.07       $0.09
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    11. INCOME TAXES

        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. 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, was required to
        estimate what the impact of the reported tax amount would be on
        January 1, 2011. This estimate is reviewed quarterly and adjusted, if
        necessary.

                                3 months    3 months    6 months    6 months
                                   ended       ended       ended       ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                              -----------------------------------------------

        Continuing operations       $889    $111,630      $3,270    $111,398
        ---------------------------------------------------------------------

        Total future
         income taxes               $889    $111,630      $3,270    $111,398
                              -----------------------------------------------
                              -----------------------------------------------


        Future income taxes consist of the following:

                                3 months    3 months    6 months    6 months
                                   ended       ended       ended       ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                              -----------------------------------------------

        Tax expense based on
         expected rate              $231         $40        $291        $149
        Adjustment to future
         income tax liabilities      658     111,590       2,979     111,249
        ---------------------------------------------------------------------
        Future income taxes         $889    $111,630      $3,270    $111,398
                              -----------------------------------------------
                              -----------------------------------------------

        The future income tax liability is calculated as follows:

        As at
                                                       June 30,  December 31,
                                                          2008          2007
                                                    -------------------------

        Tax asset (liability) related to
         operating losses                                  $70          $(90)
        Tax liability related to differences in
         tax and book basis                           (103,627)     (100,197)
        ---------------------------------------------------------------------
        Future income tax liability                  $(103,557)    $(100,287)
                                                    -------------------------
                                                    -------------------------


    12. CAPITAL MANAGEMENT

        The Trust defines capital resources as the aggregate of unitholders'
        equity, debt (both secured and unsecured), internally generated funds
        and cash on hand. The Trust's capital management framework is
        designed to maintain a level of capital that allows it to implement
        its business strategy while complying with investment and debt
        restrictions pursuant to Boardwalk REIT's DOT as well as existing
        debt covenants and to continue building long-term unitholder value.
        The main components of the Trust's capital allocation are approved by
        its unitholders as stipulated in the Trust's DOT and on a regular
        basis by its Board of Trustees (the "Board") through their annual
        review of the Trust's strategic plan and budget, supplemented by
        periodic Board and Board Committee meetings. Capital adequacy is
        monitored by the Trust by assessing performance against the approved
        annual plan throughout the year, which is updated accordingly, and by
        monitoring adherence to investment and debt restrictions contained in
        the DOT and debt covenants. Boardwalk REIT's DOT provides for maximum
        total debt level of up to 70% of Gross Book Value ("GBV"), defined in
        the DOT as total assets plus accumulated amortization of income
        properties as recorded by the Trust (and calculated in accordance
        with Canadian GAAP) and to this amount an additional amount of
        $231 million (the "Bump") is added as was previously approved by the
        Trust's unitholders. On May 13, 2008, the unitholders voted and
        approved an amendment to the definition of GBV to increase the Bump
        to its existing GBV calculation by an additional $410 million,
        resulting in a total asset bump of $641 million. Subsequent to
        June 30, 2008, the debenture holders, in a special meeting held
        July 30, 2008, approved an amendment to the Trust Indenture amending
        the definition of GBV to increase the Bump to its existing GBV
        calculation by an additional $410 million, resulting in a total asset
        bump of $641 million (see NOTE 17). As a matter of internal policy,
        the Trust has a target of total debt levels not to exceed 65% of GBV.
        The following table highlights Boardwalk REIT's existing leverage
        ratio:

        As at
                                                       June 30,  December 31,
                                                          2008          2007
                                                    -------------------------

        Total assets                                $2,305,965    $2,195,888
        Amortization                                   553,331       513,514
        Exchange value bump                            641,460       231,460
        ---------------------------------------------------------------------
                                                    $3,500,756    $2,940,862
                                                    -------------------------
                                                    -------------------------
        Mortgages payable                           $1,969,394    $1,770,015
        Unsecured debentures                           118,920       118,768
        Adjustment to debt                               5,450        10,560
                                                    -------------------------
                                                    $2,093,764    $1,899,343
                                                    -------------------------
                                                    -------------------------
        Adjusted Debt-to-GBV                               60%           65%
                                                    -------------------------
                                                    -------------------------

        With a DOT limit not to exceed 70% on Adjusted Debt-to-Gross Book
        Value, Boardwalk REIT has the ability to add additional leverage of
        approximately $356.8 million to its existing portfolio. Additionally,
        the Trust's DOT contains provisions that have the effect of limiting
        capital expended by the Trust.

        As outlined in NOTE 13(d), Boardwalk REIT's debenture and credit
        facility agreements contain financial covenants.

        Boardwalk REIT's available capital is comprised of long-term fixed
        rate debt (both secured and unsecured), unitholders' capital and
        drawings under lines of credit and totalled $2.4 billion as at
        June 30, 2008 (December 31, 2007 - $2.3 billion). As at June 30,
        2008, the Trust was in compliance with all covenants in both its DOT
        and all existing debt facilities.

    13. FINANCIAL INSTRUMENTS

        Fair Value of Financial Instruments

        The Trust's financial instruments consist of mortgages and accounts
        receivable, tenants' security deposits, cash or bank indebtedness,
        mortgages payable, debentures and accounts payable and accrued
        liabilities. All of the Trust's financial instruments were classified
        as either held for trading (cash), loans and receivables (carried at
        amortized cost) or other financial liabilities (carried at amortized
        cost using the effective interest rate method). The fair values of
        the Trust's financial instruments were determined as follows:

        i)  The carrying amounts of mortgages and accounts receivable,
            tenants' security deposits, cash or bank indebtedness and
            accounts payable and accrued liabilities approximate their fair
            values due to their short-term nature.

        ii) The fair values of the Trust's mortgages payable and debentures
            are estimates made at a specific point in time, based on relevant
            market information. These estimates are based on quoted market
            prices for the same or similar issues or on the current rates
            offered to the Trust for similar financial instruments subject to
            similar risks and maturities. These estimates are subjective in
            nature and involve uncertainties and matters of significant
            judgement and, therefore, cannot be determined with precision.
            Changes in estimates could significantly affect fair values. The
            significant financial instruments of Boardwalk REIT and their
            carrying values as at June 30, 2008 are as follow:

        As at                                                        June 30,
                                                                        2008
                                                                 ------------
        Mortgages and accounts receivable
          Carrying value                                              $9,242
          Fair market value                                           $9,242
        ---------------------------------------------------------------------
        Mortgages payable and debentures
          Carrying value                                          $2,088,314
          Fair market value                                       $2,104,134


        At January 1, 2008 and for the three and six months ended June 30,
        2008, the Trust had no embedded derivatives requiring separate
        recognition.

        The nature of these financial instruments and the Trust's operations
        expose the Trust to certain principal financial risks. The main
        objective of the Trust's risk management process is to properly
        identify financial risks and minimize the exposure to potential
        losses arising from those risks. The principal financial risks to
        which the Trust is exposed are described below.

        Risk Management

        a) Interest rate risk

        The Trust is exposed to interest rate risk as a result of its
        mortgages payable, debentures and credit facilities; however, this
        risk is minimized through the Trust's current strategy of having the
        majority of its mortgage payable and debentures in fixed terms
        arrangements. As such, the Trust's cash flows are not significantly
        impacted by a change in market interest rates. 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 also insured
        by the Canadian Mortgage and Housing Corporation ("CMHC") under the
        National Housing Act ("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. In addition,
        management is constantly reviewing its credit facility (floating-rate
        debt) and, if market conditions warrant, the Trust has the ability to
        convert its existing floating-rate debt to fixed rate debt.

        As at June 30, 2008, the Trust had no credit facility debt
        outstanding and, as such, of the Trust's total debt at June 30, 2008,
        100% was fixed-rate debt and 0% was floating-rate debt. For the three
        and six months ended June 30, 2008, all else being equal, the
        increase or decrease in net earnings for each 1% change in market
        interest rates would be $0.

        b) Credit risk

        The Trust is exposed to credit risk as a result of its mortgages and
        accounts receivable. This balance is comprised of mortgage holdbacks
        and refundable mortgage fees, accounts receivable from significant
        customers and tenant receivables. As at June 30, 2008, no balance
        relating to mortgage holdbacks, refundable mortgage fees or accounts
        receivable from significant customers was past due.

        In relation to mortgage holdbacks and refundable mortgage fees, the
        Trust's exposure to credit risk is low given the nature of these
        balances. These funds will be advanced when the Trust has met the
        conditions pursuant to the mortgage agreement (in the case of the
        mortgage holdback) or when financing is completed (in the case of
        refundable mortgage fees), both of which are expected to occur.

        Similar to mortgage holdbacks and refundable mortgage fees, the Trust
        assesses the credit risk on accounts receivable to be low due to the
        assured collection of these balances. The majority of the balance
        relates to money owing from an energy provider as a result of the
        Alberta government natural gas rebate program and the Trust's revenue
        sharing initiatives. Given the Trust's collection history and the
        nature of these customers, credit risk is assessed as low. An amount
        was owing pursuant to the unit sales (see NOTE 4), all of which was
        collected subsequent to June 30, 2008. Additionally, an amount is
        owed by insurance companies in relation to current outstanding
        claims. In all circumstances, the insurance deductible has been paid
        and amounts incurred and owing for reimbursement are due to an
        insurable event. Recoverability may differ from the amount owing
        solely due to discrepancies between the Trust and the insurance
        provider regarding the value of replacement costs.

        With tenant receivables, credit risk arises from the possibility that
        tenants may experience financial difficulty and be unable to fulfill
        their lease term commitments. The maximum exposure to credit risk is
        equal to the carrying value of the financial assets.

        As stated above, the carrying amount of tenant receivables reflects
        management's assessment of the credit risk associated with its
        tenants; however, 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.

        Past due receivables are reviewed by management on a monthly basis
        and tenant receivables are considered for impairment on a case-by-
        case basis. The Trust takes into consideration the tenant's payment
        history, their credit worthiness and the current economic environment
        however tenant receivable balances exceeding 60 days are typically
        written off to bad debt expense as the Trust does not utilize an
        allowance for doubtful accounts. The amount of the loss is recognized
        in the consolidated statement of earnings and comprehensive income
        within operating expenses. Subsequent recoveries of amounts
        previously written off are credited against operating expenses during
        the period of settlement. As tenant receivables are typically written
        off after 60 days, none of the balance is considered to be past due
        by the Trust.

        c) Liquidity risk

        Liquidity risk is the risk that the Trust will not be able to meet
        its financial obligations as they become due. The Trust maintains
        what it believes to be a conservatively leveraged balance sheet and
        can finance any future growth through one or a combination of
        internally generated cash flows, borrowing under existing credit
        facility, the issuance of debt or the issuance of equity, according
        to its capital management objectives. In addition, the Trust
        structures its financings so as to stagger the maturities of its
        debt, thereby minimizing the Trust's exposure to liquidity risk in
        any one year. In addition, cash flow projections are completed on a
        regular basis to ensure the Trust has sufficient cash flows to make
        its monthly distributions to its Unitholders. Given the Trust's
        currently available liquid resources (from both financial assets and
        on-going operations) as compared to its contractual obligations,
        management assesses the Trust's liquidity risk to be low.

        d) Debt covenants

        As outlined in its mortgages payable agreements, the Trust is
        required to make equal monthly payments of principal and interest
        based on the respective amortization period. Additionally, the Trust
        must ensure that all property taxes have been paid in full when they
        become due and that no arrears exist.

        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 the CMHC and
        be subject to certain restrictive covenants, including limitation on
        additional debt, payment of distributions in respect to 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.

        In accordance with the debenture agreement, the Trust is required to
        pay semi-annual interest instalments on January 23 and July 23 of
        each year. The Trust is also required to maintain in good condition,
        repair and working order all of the properties owned by it or any of
        its subsidiaries while maintaining property and liability insurance.

        The debenture agreement contains three financial covenants as
        follows:

        i)   the Trust will maintain a Consolidated Earnings Before Interest,
             Taxes, Depreciation and Amortization ("EBITDA") to Consolidated
             Interest Expense of not less than 1.50 to 1. As outlined in
             NOTE 17, this covenant was amended to 1.75 to 1 on July 30,
             2008. As at June 30, 2008, this ratio was 2.2 to 1 and, as such,
             the Trust was in compliance.

        ii)  the Trust will not incur or assume any indebtedness unless the
             quotient obtained by dividing the Adjusted Consolidated
             Indebtedness by the Adjusted Gross Book Value would be less than
             or equal to 70%. As outlined in NOTE 12, on May 13, 2008, the
             unitholders approved an amendment to the definition of GBV;
             however, as noted in NOTE 17, this amendment was not approved by
             the debenture holders until July 30, 2008. As such, as at
             June 30, 2008, this amount was 68% based on the previous
             definition for GBV and the Trust was in compliance.

        iii) the Trust will maintain at all times, an Adjusted Unitholders'
             Equity of at least $300 million. Adjusted Unitholders' Equity
             was $833 million as at June 30, 2008.

        The Trust has a committed revolving credit facility with a major
        financial institution. This credit facility is secured by a pledge of
        a group of specific real estate assets (carrying value of
        $292 million). The amount available through the revolving credit
        facility varies with the value of the pledged assets, with a maximum
        limit not to exceed $200 million. The revolving facility requires
        monthly interest payments and is renewable annually subject to the
        mutual consent of the lender and the Trust. To the extent the
        revolving credit facility is not extended, the drawn-down principal
        would be due 364 days later.

        The credit facility contains three financial covenants as follows:

        i)   the Trust will maintain an overall Debt Service Coverage Ratio
             of at least 1.20. As at June 30, 2008, this ratio was 1.67 and,
             as such, the Trust was in compliance.

        ii)  the Trust will maintain a Debt Service Coverage Ratio, specific
             to the Security Portfolio of at least 1.15 (tested semi-
             annually). As at June 30, 2008, this ratio was 1.26 and, as
             such, the Trust was in compliance.

        iii) Total indebtedness of the Trust will not exceed 70% of the GBV
             of all assets as defined in the DOT. As outlined in NOTE 12, as
             at June 30, 2008, this amount was 60% based on the new
             definition of GBV and, as such, the Trust was in compliance.

        As at June 30, 2008, the Trust was in compliance with all covenants.

        e) Utility risk

        The Trust is exposed to utility risk as a result of fluctuations in
        the prices of natural gas and electricity service charges. As
        outlined in NOTE 14, the Trust has commitments to certain utility
        contracts to reduce the risk of exposure to adverse changes in
        commodity prices.

    14. COMMITMENTS AND CONTINGENCIES

        At June 30, 2008, the Trust had a long-term supply arrangement with
        one electrical utility company to supply the Trust with its
        electrical power needs for its southern Alberta properties for the
        next six 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. The
        extension of the natural gas rebate program will 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
        June 2007, Boardwalk REIT was eligible for estimated rebates
        totalling approximately $0.9 million. For January to June 2008,
        Boardwalk REIT was eligible for rebates totalling approximately
        $1.3 million.

        The Trust also entered into 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.
        Currently, the Trust's gas contract provider has declared bankruptcy,
        which may limit the Trust's ability to buy gas from this provider for
        the remaining term of the contract.

        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.

    15. GUARANTEES

        In the normal course of business, various agreements may be entered
        that may contain features that meet the CICA Accounting Handbook
        Guideline 14 ("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 will 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
        June 30, 2008 is approximately $4.9 million (June 30, 2007 -
        $5.3 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 will cover, and in most likelihood exceed, the maximum
        potential liability associated with the amount being guaranteed.
        Therefore, at June 30, 2008, no amounts have been recorded in the
        consolidated financial statements with respect to the above noted
        indirect guarantees.

    16. 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.


                                3 months    3 months    6 months    6 months
                                   ended       ended       ended       ended
                                 June 30,    June 30,    June 30,    June 30,
                                    2008        2007        2008        2007
                              -----------------------------------------------
        Alberta
          Revenue                $62,860     $53,842    $123,979    $103,008
                              -----------------------------------------------
          Expenses
            Operating             10,017       7,907      20,500      15,443
            Utilities              6,845       5,116      15,710      11,764
            Utility rebates            -          (8)     (1,255)       (930)
            Property taxes         3,584       3,387       7,075       6,582
        ---------------------------------------------------------------------
                                  20,446      16,402      42,030      32,859
                              -----------------------------------------------
          Net operating
           income                $42,414     $37,440     $81,949     $70,149
                              -----------------------------------------------

        Saskatchewan
          Revenue                $11,387      $9,420     $22,069     $18,632
                              -----------------------------------------------
          Expenses
            Operating              2,005       1,615       3,669       3,209
            Utilities                977         797       3,340       2,522
            Property taxes         1,075       1,157       2,207       2,328
        ---------------------------------------------------------------------
                                   4,057       3,569       9,216       8,059
                              -----------------------------------------------
          Net operating
           income                 $7,330      $5,851     $12,853     $10,573
                              -----------------------------------------------

        Ontario
          Revenue                 $9,522      $9,412     $18,957     $18,788
                              -----------------------------------------------
          Expenses
            Operating              1,667       1,395       3,260       2,910
            Utilities              1,503       1,350       3,515       3,378
            Property taxes         1,615       1,766       3,188       3,522
        ---------------------------------------------------------------------
                                   4,785       4,511       9,963       9,810
                              -----------------------------------------------
          Net operating
           income                 $4,737      $4,901      $8,994      $8,978
                              -----------------------------------------------

        British Columbia
          Revenue                 $3,020      $2,854      $5,986      $5,625
                              -----------------------------------------------
          Expenses
            Operating                598         568       1,218       1,189
            Utilities                397         439         894         840
            Property taxes           155         152         305         300
                              -----------------------------------------------
                                   1,150       1,159       2,417       2,329
                              -----------------------------------------------
          Net operating
           income                 $1,870      $1,695      $3,569      $3,296
                              -----------------------------------------------

        Quebec
          Revenue                $17,659     $17,099     $35,129     $34,113
                              -----------------------------------------------
          Expenses
            Operating              3,307       3,452       6,870       6,417
            Utilities              2,030       1,610       4,922       4,604
            Property taxes         1,880       1,893       3,183       3,782
        ---------------------------------------------------------------------
                                   7,217       6,955      14,975      14,803
                              -----------------------------------------------
          Net operating
           income                $10,442     $10,144     $20,154     $19,310
                              -----------------------------------------------


        Total
          Net operating
           income                $66,793     $60,031    $127,519    $112,306
          Unallocated
           revenue(*)              1,012          84       1,549         115
          Unallocated
           expenses(xx)          (56,075)   (157,615)   (111,706)   (206,291)
        ---------------------------------------------------------------------
          Net earnings (loss)
           for the period        $11,730    $(97,500)    $17,362    $(93,870)
                              -----------------------------------------------
                              -----------------------------------------------


        As at                                          June 30,  December 31,
                                                          2008          2007
                                                    -------------------------

        Alberta
          Identifiable assets
            Revenue producing properties            $1,287,570    $1,244,328
            Mortgages and accounts receivable            5,085         5,863
            Tenants' security deposits                  11,104        10,385
                                                    -------------------------
                                                    $1,303,759    $1,260,576
                                                    -------------------------
        Saskatchewan
          Identifiable assets
            Revenue producing properties              $167,241      $168,581
            Mortgages and accounts receivable              506           202
            Tenants' security deposits                   2,492         2,096
                                                    -------------------------
                                                      $170,239      $170,879
                                                    -------------------------
        Ontario
          Identifiable assets
            Revenue producing properties              $204,200      $206,366
            Mortgages and accounts receivable               99           237
                                                    -------------------------
                                                      $204,299      $206,603
                                                    -------------------------
        Quebec
          Identifiable assets
            Revenue producing properties              $419,458      $421,473
            Mortgages and accounts receivable              774           800
                                                    -------------------------
                                                      $420,232      $422,273
                                                    -------------------------
        British Columbia
          Identifiable assets
            Revenue producing properties              $104,803      $104,491
            Mortgages and accounts receivable            1,241         1,049
            Tenants' security deposits                     474           444
                                                    -------------------------
                                                      $106,518      $105,984
                                                    -------------------------

        Total assets
          Identifiable assets                       $2,205,047    $2,166,315
          Unallocated assets(xxx)                      100,918        29,573
                                                    -------------------------
                                                    $2,305,965    $2,195,888
                                                    -------------------------
                                                    -------------------------

        (*)   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 and cash
              equivalents and other assets.


    17. SUBSEQUENT EVENTS

        Subsequent to the quarter ended June 30, 2008, the debenture holders,
        in a special meeting held July 30, 2008, approved an amendment to the
        Trust Indenture amending the definition of Gross Book Value to
        increase the Bump to its existing GBV calculation by an additional
        $410 million, resulting in a total asset bump of $641 million. In
        addition, the Consolidated EBITDA to Consolidated Interest Expense
        financial covenant was amended to 1.75 to 1 from the current 1.50 to
        1 and the rate of interest on the debenture was increased to 5.61%
        from the current 5.31% commencing July 30, 2008 until the maturity
        date of January 23, 2012.
    


    %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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