Boardwalk REIT Reports Solid Third Quarter 2007 Financial Results with Funds From Operations per Unit Up 27.1% and DI per Unit up 24.5% YOY; Further Upward Revision in Guidance; and an Increase in Annual Distributions by 13.0% to $1.80 Per Year



    CALGARY, Nov. 9 /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 third quarter of 2007
with FFO per Unit up 27.1% and DI per Unit up 24.5% YOY; further upward
revision in guidance for 2007; and an increase in annual distributions by 13%
to $1.80 per unit, per year.
    For the third quarter ended September 30, 2007, the Trust reported Funds
From Operations(1) ("FFO") of $34.1 million and FFO per unit of $0.61 on a
diluted basis, compared to FFO of $26.9 million and FFO per unit of $0.48 for
the same period last year. Distributable Income ("DI") for the quarter was
$34.3 million and DI per Unit was $0.61 on a diluted basis, compared to
$27.3 million and $0.49 per unit, respectively, for the same period last year.

    
    Highlights of the Trust's Third Quarter 2007 financial results include:

    -   Rental revenues of $95.7 million, an increase of 18.0%, compared to
        $81.1 million for the three-month period ended September 30, 2006.

    -   Net operating income of $64.1 million, representing a 24.3% increase
        from $51.6 million in the same period last year.

    -   FFO of $34.1 million, an increase of 26.7%, compared to $26.9 million
        for the three-month period ended September 30, 2006.

    -   FFO per unit was $0.61 on a diluted basis, up 27.1%, compared to
        $0.48 for the three-month period ended September 30, 2006.

    -   DI was $0.61 per unit, up 24.5% from $0.49 for the three months ended
        September 30, 2006.

    -   Net earnings of $13.1 million, an increase of $5.6 million for the
        three-month period ended September 30 2007 compared to the same
        period in the prior year. For the nine-month period ended
        September 30, 2007, net earnings were $(80.8) million compared to
        $18.9 million for the same period as last year as a direct result of
        a one-time non-cash deferred tax charge of $113 million relating to
        the Royal Assent of Bill C-52 on June 22, 2007.
    

    Commenting on the Trust's Q3 2007 results, Sam Kolias, C.E.O., said: "We
are pleased to report on another successful quarter for the Trust. Economic
expansion continued in our Western Canadian markets this quarter, delivering
continued positive revenue growth. Though our primary gains this quarter were
achieved by our Western markets, our geographic diversity across both Eastern
and Western markets remains a key asset."
    "Our Saskatchewan markets, which make up 13% of our portfolio, had a
particularly positive quarter. Positive job creation, wage growth and
migration resulted in an increase in demand of rental units pushing occupancy
and market rents higher. Average market rents were up approximately $178 in
Saskatoon; and $156 in Regina at the end of Q3 over Q2 2007."
    "Our Alberta portfolio, which makes up approximately 53% of our total
portfolio, continued to produce significant revenue growth this quarter. In
Edmonton, average market rents were up approximately $60 at the end of Q3 over
Q2. Market rents continued their upward trend in Calgary, posting a slight
increase of $4 at the end of Q3 over Q2. Although Calgary market rents
increased slightly at the end of September, this market is now experiencing a
more typical seasonality in market rents. Calgary rental market fundamentals
are moving towards a balance between supply and demand as vacancy rose from
3.14% in Q2 to 3.34% in Q3."
    Roberto Geremia, President, added: "The tempering in Calgary market rents
demonstrates the effectiveness of the free market. Free market pricing allows
for levels of supply and demand to adjust, increasing apartment alternatives
for consumers as vacancy rises. Our Calgary market fundamentals reflect how
well the free market works and we stand firm in our stance against legislated
rent controls."
    "Our mark-to-market lease differential - the difference between the
in-place rental revenue (based on actual rental rates obtained) and potential
rental revenue (based on market rental rates) - continued to grow this
quarter. We continue to strive to close the mark-to-market gap while
maintaining our Customer-focused policies. Our Customer-centric policies
increase Customer loyalty and satisfaction, lowers turnovers and expenses
associated with turnovers, maximizes revenues and increases the sustainability
of our financial performance."

    
    Operational Highlights

    -   The average vacancy rate across the Trust's portfolio for the third
        quarter of 2007 was 3.93%, down from 4.16% in the second quarter of
        2007, but up from 3.73% for the third quarter of 2006.

    -   The average monthly rent realized in the third quarter of 2007 was
        $879 per unit, up $78 from $801 per unit in the same period last
        year.

    -   The average market rent for the Trust's properties at the end of
        September 2007 was an estimated $1096 per rental unit per month,
        which compares to an average in-place monthly rent per occupied unit
        of $907 as at September 30, 2007. This translates to an estimated
        'loss-to-lease' of approximately $78.5 million on an annualized
        basis, or $1.39 per outstanding Trust Unit, given existing occupancy
        levels.
    

    More detail on our operations can be found in our conference call
presentation to be posted on our web site today at
www.boardwalkreit.com/FinancialReports/. The conference call audio for this
presentation can also be found on our web site at
www.boardwalkreit.com/FinancialReports/ following the call.

    Same-Property Results

    Boardwalk REIT continued to show solid performance in its stabilized
properties (defined as properties owned for over 24 months). The
"same-property" results for the Trust's stabilized portfolio for the
three-month period ended September 30, 2007 showed rental revenue growth of
11.4% on a year-over-year basis. Operating expenses increased 2.3%, resulting
in an increase in NOI of 16.2% compared to the same period last year. A total
of 33,014 units, representing approximately 90% of Boardwalk REIT's total
portfolio, were classified as stabilized as at September 30, 2007.

    
    Same-Property Results - Stabilized Portfolio

                                                               Net      % of
                                               Operating Operating     Stabi-
                              No. of   Revenue   Expense    Income     lized
    Sep 30 2007 - 3 M          Units    Growth    Growth    Growth       NOI

    Calgary                    4,973     16.3%     -2.9%     23.2%       21%
    Edmonton                  10,369     18.8%     14.6%     20.7%       34%
    Other Alberta              1,680     10.2%     19.7%      6.6%        6%
    British Columbia             633     12.3%    -21.3%     27.3%        2%
    Saskatchewan               4,660     11.3%      5.3%     15.2%       10%
    Quebec                     6,434      3.6%     -7.0%      9.7%       19%
    Ontario                    4,265     -0.9%     -6.4%      4.8%        8%
                             ------------------------------------------------
                              33,014     11.4%      2.3%     16.2%      100%
                             ------------------------------------------------
                             ------------------------------------------------


                                                               Net      % of
                                               Operating Operating     Stabi-
                              No. of   Revenue   Expense    Income     lized
    Sep 30 2007 - 9 M          Units    Growth    Growth    Growth       NOI

    Calgary                    4,973     20.4%      3.9%     27.4%       21%
    Edmonton                  10,369     17.8%     10.5%     21.7%       34%
    Other Alberta              1,680     14.4%     12.2%     15.4%        6%
    British Columbia             633      9.7%     -1.7%     15.5%        2%
    Saskatchewan               4,660      8.4%      0.5%     14.8%       10%
    Quebec                     6,434      2.7%     -3.3%      7.0%       18%
    Ontario                    4,265     -0.2%     -1.9%      1.6%        8%
                             ------------------------------------------------
                              33,014     11.5%      3.0%     16.8%      100%
                             ------------------------------------------------
                             ------------------------------------------------


    Commenting on Boardwalk REIT's same-property results, Sam Kolias, CEO,
said, "In the third quarter, we are pleased to see revenue growth accelerating
more quickly than expense increases on a stabilized property basis for the
eighth straight quarter. The increase in reported stabilized revenue was
driven mainly by the Trust's Alberta operations, which accounts for
approximately 61% of the Trust's reported stabilized net operating income."

    Sequential Revenue Analysis

    Stabilized Revenue Growth Q3 2007 Vs...

                                               No. Units   Q1 2007   Q2 2007
    -------------------------------------------------------------------------
    Calgary                                        4,973     5.34%     1.05%
    Edmonton                                      10,369     8.65%     4.01%
    Other Alberta                                  1,680     0.50%     0.86%
    British Columbia                                 633     4.41%     2.61%
    Ontario                                        4,265    -1.06%    -1.44%
    Quebec                                         6,434     2.86%     2.27%
    Saskatchewan                                   4,660     7.92%     5.52%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                  33,014     5.17%     2.48%
    

    Commenting on Boardwalk REIT's stabilized revenue growth, Sam Kolias,
CEO, said, "Stabilized revenues reported for the current quarter were up 5.17%
comparing Q3 over Q1 2007, and 2.48% comparing Q3 over Q2 2007. Although
stabilized revenue growth tempered slightly through the third quarter, we
estimate that growth will again increase in the first half of 2008 when annual
rental increases in Alberta are realized. Rental legislation enacted in May of
this year (retroactive to the beginning of 2007) limits rental increases to
once per year in Alberta, our largest market, resulting in larger rental
increases given less often."

    
    Real Estate Acquisition/Disposition Activity

    Closed - 2007

                                    No. of
    Building Name      City          Units     Type                 Price
    -------------------------------------------------------------------------
    Prairie Sunrise                           High Rise
     Portfolio         Grande Prairie  275    & Walk up          $40,000,000
    West Edmonton                             High Rise,
     Village           Edmonton       1176    Walk up, Town     $143,500,000
    Ridgemont
     Apartments        Coquitlam        41    Walk up             $3,700,000
    St. Charles
     Place &
     Parkview Manor    Edmonton         51    Walk up             $4,150,000
    Springwood Place
     Apartments        Spruce Grove    160    Low Rise           $16,000,000
    Lakeview
     Apartments        Calgary         120    Walk Up            $21,850,000
                                              High Rise &
    Whitehall Square   Edmonton        598    Walk Up           $111,250,000
    -------------------------------------------------------------------------
    Total                            2,421                      $340,450,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                       Year 1   Year 2
    Building Name     Cap Rate Cap Rate  $/unit  $/sq ft  Date Closed
    -------------------------------------------------------------------------
    Prairie Sunrise
     Portfolio         4.74%    6.30%   $145,455   $175   March 14, 2007
    West Edmonton
     Village           5.47%    6.61%   $122,024   $126   February 28, 2007
    Ridgemont
     Apartments        5.03%    5.66%    $90,244   $142   January 25, 2007
    St. Charles
     Place &
     Parkview Manor    4.52%    5.52%    $81,373   $104   January 26, 2007
    Springwood Place
     Apartments        5.25%    5.76%   $100,000   $130   May 28, 2007
    Lakeview
     Apartments        4.80%    5.86%   $182,083   $203   September 20, 2007
    Whitehall Square   5.12%    5.53%   $186,037   $204   September 24, 2007
    -------------------------------------------------------------------------
    Total              5.20%    6.11%   $147,673   $162
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Dispositions

                                    No. of
    Building Name      City          Units     Type                 Price
    -------------------------------------------------------------------------
    St. Charles Place
     & Parkview Manor  Edmonton         51    Walk Up             $5,900,000
    -------------------------------------------------------------------------


                       Year 1   Year 2
    Building Name     Cap Rate Cap Rate  $/unit  $/sq ft  Date Closed
    -------------------------------------------------------------------------
    St. Charles Place
     & Parkview Manor  3.20%    3.67%   $115,686   $148  April 30, 2007
    -------------------------------------------------------------------------
    

    The Trust also sold and closed 45 units of a 90-unit property located in
Calgary, Alberta that is being developed into condominium units for sale.
    Commenting on the Trust's property acquisitions and dispositions, Bill
Chidley, Senior Vice President, Corporate Development, said: "To date, we have
completed acquisitions of 2421 apartment units in 2007. All of these
acquisitions are located in strong Western markets. We confirm our acquisition
guidance of 2,000 - 3,000 residential units for the 2007 fiscal year."
    "Our highly skilled Acquisitions department continues to work proactively
to find, underwrite and negotiate superior acquisition opportunities across
the country. Currently, our primary focus is in the strong Western Canadian
market, most particularly the Lower Mainland and Victoria areas in British
Columbia, the entire Province of Alberta, and the major centres in
Saskatchewan. Despite this predominantly Western focus, we also remain, as
always, poised to act quickly on any particularly attractive one-time deals in
the East. As we have mentioned in the past, we believe it is still too early
in the market cycle to consider the Greater Toronto Area in a meaningful way.
Boardwalk REIT looks for meaningful rental growth rates in addition to initial
accretion in its acquisitions."
    "The acquisition market for multi-family rentals in Canada continues to
be a highly competitive 'seller's market'. We are in discussion on a number of
possible acquisitions; however, we cannot be certain of closing on any of
these transactions."

    New Apartment Development

    Boardwalk continues to explore the possibility of developing new
multi-family product in select markets in Western Canada. At this time, we are
focusing on selected properties that feature excess density in Calgary and
Edmonton. We remain committed to continue to explore new accretive
multi-family development and are currently in the process of density
intensification and financial feasibility studies, as well as the design and
permitting stages.
    Over the third quarter, the Trust completed a preliminary densification
study on Calgary. The planning consultants estimate that in Calgary an
additional density of seven to fourteen thousand units could be achieved with
re-zoning, the vast majority on eleven sites. We are in the early stages of
this process with the earliest completion of any new development 2.5 to 4
years away. As part of this investigation, we are considering a number of ways
to surface this densification value, including direct development, joint
venture with an experienced developer and the sale of excess density. The
Edmonton densification study is in progress and is focusing on two Edmonton
properties, West Edmonton Village and Viking Arms.
    Though we are excited by this potential, it is important to note that to
obtain the estimated maximum density, it will be necessary to demolish
existing rental units. It is our belief that the key to this development is to
find the optimal trade-off between maximizing density and retaining as much of
the existing rental stock as possible.

    Continued Financial Strength

    The Trust built upon its solid financial position through the third
quarter of 2007. Boardwalk REIT's total principal mortgage and debt
outstanding was $1.81 billion as at September 30, 2007, as compared to
$1.52 billion as at September 30, 2006. As at September 30, 2007, the Trust's
total debt had an average maturity of 3 years with a weighted average interest
rate of 5.22%. The Trust's debt-to-total enterprise value was 40.0%.
    The Trust currently has a $200 million, secured, undrawn acquisition and
operating facility available for future investment opportunities. In addition,
the Trust has been proactive in managing its debt portfolio and, as such, has
already locked in over $132 million in mortgages maturing in the last quarter
of the 2007 fiscal year at rates well below both the maturing and existing
market rates.
    The Trust's interest coverage ratio, excluding gains, for the three-month
period ended September 30, 2007 was 2.48 times, compared to 2.36 times in the
same period last year.

    Alberta Royalty Review

    On October 25, 2007, the Alberta Government announced changes to the
existing oil and gas royalty program. The new program is more heavily based on
a sliding scale that is responsive to the market price of the underlying
commodity. This new scale increases the top end of the royalty rates from
approximately 35% to a maximum of 50%. It is the government's belief that this
new system strikes a balance between the needs of both the province and the
producers of these commodities. The new program will commence in January 2009.
For more details on this new program, please visit the Government of Alberta
website - www.energy.gov.ab.ca
    It is too early to know what effect this new program will have on the
Alberta oil and gas industry; however, this program will result in an
increased tax on oil and gas producers and may result in some of these
producers revisiting the assumptions they have used in the determination of
investment in the province of Alberta. It is our current belief that the high
price of oil will continue to encourage further investment, in particular in
the Alberta Tar Sands. We are pleased that the market uncertainty that
preceded the release of the details of this new program has been put to rest
and that a thorough analysis and better-educated decisions can now be made.

    Normal Course Issuer Bid

    In the second quarter, we announced that we would be commencing with a
Normal Course Issuer Bid as a response to the recent volatility in the public
markets. In the third quarter, we obtained approval from the Board of Trustees
and public securities bodies to purchase up to 10% of our existing outstanding
float or approximately 4.1 million shares. To date, we have purchased
approximately $627 thousand trust units on the public market with a total of
approximately $28.6 million, or for an average price of $45.69 per trust unit.
We continue to believe that one of the best investments we can make is
purchasing our trust units at current levels.

    Outlook and 2007 Financial Guidance

    Commenting on the outlook for the Trust, Roberto Geremia, President,
said, "After reporting on three strong quarters, and after reviewing our key
assumptions, we are revising our Guidance upward for fiscal 2007. For 2007, we
are expecting a FFO range of between $2.00 to $2.05 as compared to the $1.95
to $2.04 previously announced and for DI the revised range is between $2.02 to
$2.06 as compared to the previously announced $1.97 to $2.05. We are also
revising upward our expectations of Stabilized Properties NOI (or NOI on
properties we have held for at least 24 months) performance to an expected
growth of 15% from the previous 10% while maintaining our target apartment
acquisition range of 2,000 to 3,000 apartment units."

    2008 Financial Guidance

    As is customary in the third quarter, we would like to introduce fiscal
2008 guidance for FFO and DI on a per trust unit basis of between $2.35 to
$2.50 and $2.37 to $2.52, respectively. In computing these estimates, we have
assumed the acquisition of between 1,000 and 2,000 apartments, as well as
stabilized properties reporting NOI growth of approximately 8% to 14%.

    Distribution Increase

    Commenting on the distribution increase, Roberto Geremia, President,
said, "After a detailed review of our year to date results and estimates of
both our year end and 2008 results, the Board of Trustees has initiated an
increase in the monthly distribution. Effective for unitholders on record at
November 30, 2007, Boardwalk will increase its monthly trust unit distribution
paid out to its unitholders from $0.1333 ($1.60 annualized) to $0.1500 ($1.80
annualized). In times when many Trusts are reviewing and considering decreases
in distributions, we are very thankful to be in a financial position that
warrants an increase in distributions of approximately 13%."

    November 2007 Monthly Distribution

    The Trust has declared its November 2007 distribution in the amount of
15.00 cents per unit ($1.80 annualized). The November distribution will be
payable on December 17, 2007 to Unitholders of Record on November 30, 2007. To
encourage participation and reward unitholders, investors registered in the
Distribution Reinvestment Plan ("DRIP") will continue to receive a "bonus"
distribution of additional Trust Units representing 3% of the amount of their
cash distributions reinvested pursuant to the Plan. A full copy of the DRIP
can be found on Trust's website at www.boardwalkREIT.com.

    Supplementary Information

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

    Teleconference on Third Quarter Financial Results

    We invite you to participate in the teleconference that will be held to
discuss these results this same morning at 11:00 am EST. Senior management
will speak to the third 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
403-531-9255 or by email to investor@bwalk.com.

    Teleconference: The telephone numbers for the conference are 416-644-3415
(within Toronto) or toll-free 1-800-732-9303 (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=2027960

    Replay: An audio recording of the teleconference will be available from
1:00 pm ET on Friday, November 09 2007 until 11:59 pm ET on Friday,
November 16, 2007. You can access it by dialing 416-640-1917 and using the
passcode 21248968 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
stable and growing 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 approximately
36,500 units totalling approximately 30 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)
    As at                                         September 30,  December 31,
                                                          2007          2006
                                                    (Unaudited)     (Audited)
                                                  ---------------------------
    Assets

    Revenue producing properties (NOTE 4)          $ 2,149,318   $ 1,836,429
    Other assets (NOTE 5)                               19,960        13,873
    Future income taxes (NOTE 11)                            -           316
    Mortgages and accounts receivable                    4,623         4,388
    Segregated tenants' security deposits               13,402         9,998
    Discontinued operations (NOTE 6)                     4,589         5,456
    -------------------------------------------------------------------------
                                                   $ 2,191,892   $ 1,870,460
                                                  ---------------------------
                                                  ---------------------------
    Liabilities

    Mortgages payable (NOTE 3)                     $ 1,646,844   $ 1,380,578
    Debentures (NOTES 3 and 7)                         118,677       118,448
    Accounts payable and accrued liabilities            41,606        35,423
    Refundable tenants' security deposits and other     16,255        13,102
    Bank indebtedness                                  101,346         4,042
    -------------------------------------------------------------------------
                                                     1,924,728     1,551,593
    Future income taxes (NOTES 3 and 11)               113,143             -
    -------------------------------------------------------------------------
                                                   $ 2,037,871   $ 1,551,593
    Unitholders' Equity

    Unitholders' equity                            $   154,021   $   318,867
    -------------------------------------------------------------------------
                                                   $ 2,191,892   $ 1,870,460
                                                  ---------------------------
                                                  ---------------------------

    Commitments and contingencies (NOTE 12)
    SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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

                          3 months      3 months      9 months      9 months
                             ended         ended         ended         ended
                      September 30, September 30, September 30, September 30,
                              2007          2006          2007          2006
                      -------------------------------------------------------
                        (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
    Revenue
      Rental income    $    95,702   $    81,083   $   275,983   $   235,805
                      -------------------------------------------------------

    Expenses
      Revenue producing
       properties:

        Operating
         expenses           14,768        14,003        46,513        42,107
        Utilities            8,472         7,464        31,629        29,346
        Utility rebate
         (NOTE 12)               -           (39)         (933)       (1,427)
        Property taxes       8,317         8,041        24,888        24,201

      Administration         5,264         3,867        15,862        12,712
      Financing costs       23,734        20,209        67,973        60,691
      Deferred
       financing costs
       amortization
       (NOTE 3)              1,081           767         3,460         2,233
      Amortization of
       capital assets       21,838        18,887        61,605        54,620
    -------------------------------------------------------------------------
                            83,474        73,199       250,997       224,483
                      -------------------------------------------------------

    Earnings from
     continuing
     operations before
     income taxes           12,228         7,884        24,986        11,322

      Large
       corporations
       taxes                    15             -            15             8
      Future income
       taxes (NOTE 11)       2,055           446       113,453           222

    -------------------------------------------------------------------------
    Earnings (loss)
     from continuing
     operations             10,158         7,438       (88,482)       11,092
    Earnings from
     discontinued
     operations, net
     of tax (NOTE 6)         2,900            64         7,670         7,768

    -------------------------------------------------------------------------
    Net earnings (loss)     13,058         7,502       (80,812)       18,860

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

    Comprehensive
     income (loss)     $    13,058   $     7,502   $   (80,812)  $    18,860
                      -------------------------------------------------------
                      -------------------------------------------------------

    Basic earnings
     (loss) per unit
     (NOTE 10)
      - from continuing
        operations     $      0.18   $      0.13   $     (1.58)  $      0.20
      - from
        discontinued
        operations            0.05          0.00          0.14          0.14
    -------------------------------------------------------------------------
    Basic earnings
     (loss) per unit   $      0.23   $      0.13   $     (1.44)  $      0.34
                      -------------------------------------------------------
                      -------------------------------------------------------

    Diluted earnings
     (loss) per unit
     (NOTE 10)
      - from continuing
        operations     $      0.18   $      0.13   $     (1.58)  $      0.20
      - from
        discontinued
        operations            0.05          0.00          0.14          0.14
    -------------------------------------------------------------------------
    Diluted earnings
     (loss) per unit   $      0.23   $      0.13   $     (1.44)  $      0.34
                      -------------------------------------------------------
                      -------------------------------------------------------

    SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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

                                                      9 months      9 months
                                                         ended         ended
                                                  September 30, September 30,
                                                          2007          2006
                                                  ---------------------------
                                                    (Unaudited)   (Unaudited)

    Trust units (NOTE 9)
    Balance, beginning of period                   $   365,744   $   295,696
    Units issued under equity financing,
     net of issue costs                                   (151)       63,594
    Units issued under distribution
     reinvestment plan                                   6,194         4,008
    Restructuring costs                                      -          (165)
    Deferred unit plan (NOTE 8)                          1,275           597
    Units issued for vested deferred units (NOTE 8)        400             -
    Unit purchased and cancelled (NOTE 9)              (26,361)            -
    -------------------------------------------------------------------------
    Balance, end of period                         $   347,101   $   363,730
                                                  ---------------------------
    Cumulative earnings
    Balance, beginning of period                   $   154,917   $   129,530
    Net earnings (loss) for the period                 (80,812)       18,860
    -------------------------------------------------------------------------
    Balance, end of period                         $    74,105   $   148,390
                                                  ---------------------------
    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                   $  (201,794)  $  (129,483)
    Distributions declared to unitholders (NOTE 10)    (65,391)      (52,522)
    -------------------------------------------------------------------------
    Balance, end of period                         $  (267,185)  $  (182,005)
                                                  ---------------------------
    Total unitholders' equity                      $   154,021   $   330,115
                                                  ---------------------------
                                                  ---------------------------
    Units issued and outstanding                    55,928,929    56,303,731
                                                  ---------------------------
                                                  ---------------------------

    SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (CDN$ THOUSANDS)

                          3 months      3 months      9 months      9 months
                             ended         ended         ended         ended
                      September 30, September 30, September 30, September 30,
                              2007          2006          2007          2006
                      -------------------------------------------------------
                        (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)

    Operating activities
      Net earnings
       (loss)          $    13,058   $     7,502   $   (80,812)  $    18,860
      Earnings from
       discontinued
       operations,
       net of tax           (2,900)          (64)       (7,670)       (7,768)
      Future income
       taxes                 2,055           446       113,453           222
      Amortization of
       capital assets       21,838        18,887        61,605        54,620
    -------------------------------------------------------------------------
                            34,051        26,771        86,576        65,934
      Cash from
       discontinued
       operations                -           111            (7)          383
      Net change in
       operating
       working capital      (4,302)        2,316         4,098           612
    -------------------------------------------------------------------------
      Total operating
       cash flows           29,749        29,198        90,667        66,929
                      -------------------------------------------------------

    Financing activities
      Issue of trust
       units (net of
       issue costs)
       (NOTE 9)              1,948         1,499         6,043        67,437
      Distributions paid   (22,010)      (17,725)      (64,869)      (52,199)
      Unit repurchase
       program (NOTE 9)    (26,361)            -       (26,361)            -
      Financing of
       revenue producing
       properties           68,933         7,293       387,618        20,039
      Repayment of debt
       on revenue
       producing
       properties          (12,883)      (14,177)     (145,120)      (39,803)
      Deferred financing
       costs incurred
       (net of
       amortization)        (1,444)         (180)       (6,687)         (379)
    -------------------------------------------------------------------------
                             8,183       (23,290)      150,624        (4,905)
                      -------------------------------------------------------

    Investing activities
      Purchases of
       revenue producing
       properties
       (NOTE 4)           (133,100)            -      (309,313)      (60,795)
      Improvements to
       revenue producing
       properties          (15,238)      (11,051)      (48,732)      (29,623)
      Net cash proceeds
       from sale of
       properties            8,031             -        20,306        20,274
      Additions to
       corporate
       technology assets      (163)         (379)         (856)       (1,007)

    -------------------------------------------------------------------------
                          (140,470)      (11,430)     (338,595)      (71,151)
                      -------------------------------------------------------
    Net decrease in
     cash and cash
     equivalents
     balance              (102,538)       (5,522)      (97,304)       (9,127)

    Cash and cash
     equivalents (bank
     indebtedness),
     beginning of period     1,192         7,540        (4,042)       11,145
    -------------------------------------------------------------------------

    Cash and cash
     equivalents (bank
     indebtedness),
     end of period     $  (101,346)  $     2,018   $  (101,346)  $     2,018
                      -------------------------------------------------------
                      -------------------------------------------------------

    Supplementary cash
     flow information:
    Capital taxes
     received          $         -   $      (676)  $         -   $      (326)
    Interest paid      $    24,615   $    21,876   $    55,906   $    62,534
                      -------------------------------------------------------
                      -------------------------------------------------------

    SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Three and nine months ended September 30, 2007
    (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, dated January 9,
        2004 and as amended and restated on May 3, 2004, May 10, 2006 and
        May 10, 2007, under the laws of the Province of Alberta. Boardwalk
        REIT was created to invest in revenue producing multi-family
        residential properties or interests within Canada, initially through
        the acquisition of operations of Boardwalk Equities Inc. (the
        "Corporation"), which was acquired on May 3, 2004.

    2.  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, 2006, 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.

        Due to seasonality, the operating results for the three and nine
        months ended September 30, 2007 are not necessarily indicative of the
        results that may be expected for the full year ending December 31,
        2007 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, which create
        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, 2007, the Trust adopted five new accounting standards
        issued by the CICA. These standards are to be applied on a
        retroactive basis without restatement to prior periods. Any
        adjustments as a result of adopting these new standards were
        recognized by restating the balance of opening unitholders' equity.
        Comparative periods are not permitted to be restated. These five
        standards are outlined below:

        a) Section 1506 - Accounting Changes

        b) Section 1530 - Comprehensive Income

        c) Section 3855 - Financial Instruments-Recognition and Measurement

        d) Section 3861 - Financial Instruments-Disclosure and Presentation

        e) Section 3865 - Hedges

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

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

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

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

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

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

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

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

                                                   September 30, December 31,
                                                           2007         2006

                                                  ---------------------------
        Mortgages Payable

        Principal outstanding                       $ 1,694,405  $ 1,420,701
        Unamortized deferred financing costs            (48,769)     (41,853)
        Unamortized mark-to-market adjustment             1,208        1,730
        ---------------------------------------------------------------------

                                                    $ 1,646,844  $ 1,380,578
                                                  ---------------------------
                                                  ---------------------------

        Debentures
        Principal outstanding                       $   120,000  $   120,000
        Unamortized deferred financing costs        $    (1,323)      (1,552)
        ---------------------------------------------------------------------

                                                    $   118,677  $   118,448
                                                  ---------------------------
                                                  ---------------------------

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

        Bill C-52

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

        Impact of Bill C-52

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

        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 three new accounting standards that
        are effective for the Trust's fiscal year commencing January 1, 2008:

        a)    Section 1535 - Capital Disclosures
        b)    Section 3862 - Financial Instruments-Disclosure
        c)    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 3862 - Financial Instruments-Disclosure and Section 3863 -
        Financial Instruments-Presentation, which will replace Section 3861 -
        Financial Instruments Presentation and Disclosure, revise and enhance
        the disclosure requirements for financial instruments and carry
        forward unchanged the presentation requirements for financial
        instruments.

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

    4.  REVENUE PRODUCING PROPERTIES

        Acquisitions
                             3 months     3 months     9 months     9 months
                                ended        ended        ended        ended
                            September    September    September    September
                             30, 2007     30, 2006     30, 2007     30, 2006
                          ---------------------------------------------------

        Cash paid         $   133,100  $         -  $   309,313  $    60,795
        Debt assumed                -            -       31,209            -
        ---------------------------------------------------------------------

        Total purchase
         price                133,100            -      340,522       60,795
        Fair value
         adjustments to
         debt                       -            -          376            -
        ---------------------------------------------------------------------

        Book value        $   133,100  $         -  $   340,898  $    60,795
                          ---------------------------------------------------
                          ---------------------------------------------------
        Allocation of
         book value
         to revenue
         producing
         properties       $   129,635  $         -  $   331,035  $    58,562
        Allocation of
         book value
         to other
         assets                 3,465            -        9,863        2,233
        ---------------------------------------------------------------------
                          $   133,100  $         -  $   340,898  $    60,795
                          ---------------------------------------------------
                          ---------------------------------------------------

        Multi-family
         units acquired           718            -        2,421          840
                          ---------------------------------------------------
                          ---------------------------------------------------


        Dispositions
                             3 months     3 months     9 months     9 months
                                ended        ended        ended        ended
                            September    September    September    September
                             30, 2007     30, 2006     30, 2007     30, 2006
                          ---------------------------------------------------

        Cash received     $     8,031  $         -  $    20,306  $    20,274
        Cost of
         dispositions               -            -          125          426
        ---------------------------------------------------------------------

        Total proceeds          8,031            -       20,431       20,700
        Net book value          5,131            -       12,721       13,173
        ---------------------------------------------------------------------

        Gain on
         dispositions     $     2,900  $         -  $     7,710  $     7,527
                          ---------------------------------------------------
                          ---------------------------------------------------

        Multi-family
         units sold                24            -           96          194
                          ---------------------------------------------------
                          ---------------------------------------------------

    5.  OTHER ASSETS

                                                   September 30, December 31,
        As at                                              2007         2006
                                                  ---------------------------
        Corporate technology assets (net of
         accumulated amortization)                  $     3,278  $     3,436
        Head office building  (net of accumulated
         amortization)                                    2,330        2,329
        Deposits on potential property acquisitions           -          814
        Prepaid parts and supplies                        2,790        2,097
        Lease goodwill and customer relationship
         intangibles (net of accumulated
         amortization)                                    6,233        1,271
        Prepaid property taxes                            2,823        1,193
        Prepaid and other                                 2,506        2,733
        ---------------------------------------------------------------------
                                                    $    19,960  $    13,873
                                                  ---------------------------
                                                  ---------------------------

        Accumulated amortization for corporate technology assets and head
        office building at September 30, 2007 were $13.1 million and
        $1.1 million, respectively (December 31, 2006 - $12.1 million and
        $1.0 million, respectively). Accumulated amortization for lease
        goodwill and customer relationship intangibles at September 30, 2007
        was $12.7 million (December 31, 2006 - $7.9 million)

    6.  DISCONTINUED OPERATIONS

        During the third quarter of 2007, it was determined that the plan to
        sell a 108-unit property in Edmonton, Alberta would not proceed. As a
        result, this building was reclassified as part of continuing
        operations. This Edmonton property is part of our Alberta segment in
        our segmented information disclosure.

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

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

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

                             3 months     3 months     9 months     9 months
                                ended        ended        ended        ended
                            September    September    September    September
                             30, 2007     30, 2006     30, 2007     30, 2006
                          ---------------------------------------------------
        Revenue

          Rental income   $         -  $       273  $       219  $     1,011
        ---------------------------------------------------------------------

        Expenses

          Revenue
           producing
           properties:
          Operating
           expenses                 -           30           99          168
          Utilities                 -           25           41          130
            Utility
             rebate                 -            -           (5)         (12)
            Property
             taxes                  -           19           25           82

          Administration            -            6           54           28
          Financing
           costs                    -           81           13          228
          Deferred
           financing
           cost
           amortization             -            1            -            4
          Amortization
           of capital
           assets                   -           47           32          142
        ---------------------------------------------------------------------
                                    -          209          259          770
                          ---------------------------------------------------

                                    -           64          (40)         241
          Gain on
           dispositions         2,900            -        7,710        7,527
        ---------------------------------------------------------------------

        Earnings from
         discontinued
         operations       $     2,900  $        64  $     7,670  $     7,768
                          ---------------------------------------------------
                          ---------------------------------------------------

                                                   September 30, December 31,
                                                           2007         2006
                                                  ---------------------------
        Discontinued Assets

          Properties held for redevelopment         $     4,589  $     5,456
                                                  ---------------------------
                                                  ---------------------------

    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 September 30, 2007, the Trust was in
        compliance with all the covenants reported in the debenture.

    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. At the end of September 30, 2007, total compensation
        costs of $2.1 million were recognized in income related to employee
        awards under the deferred unit plan.

        The status of the outstanding deferred units is as follows:

        Summary of Deferred Unit Plan               Outstanding       Vested


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

        December 31, 2006                                73,746            -

        Deferred units granted                           39,860            -
        Additional deferred units earned on
         unvested units                                   2,454            -
        Deferred units cancelled                        (10,478)           -
        ---------------------------------------------------------------------

        September  30, 2007                             105,582            -
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

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

    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. On conversion of Boardwalk
        Equities Inc. to a trust, Boardwalk Equities Inc. incurred
        $10.3 million in restructuring costs. Under the Arrangement, the
        former shareholders of Boardwalk Equities Inc. received Boardwalk
        REIT units or Class B Limited Partnership ("LP Class B") units of a
        controlled limited partnership of the Trust, Boardwalk REIT Limited
        Partnership.

        The LP Class B units are non-transferable, except under certain
        circumstances, but are exchangeable, on a one-for-one basis, into
        Boardwalk REIT units at any time at the option of the holder. Prior
        to such exchange, distributions will be made on the exchangeable
        units in an amount equivalent to the distributions which would have
        been made had the units of Boardwalk REIT been issued. Each LP Class
        B unit was accompanied by a Special Voting unit, which 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, 2005                            53,224,194  $   295,696

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

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

        Units issued under distribution
         reinvestment plan                              142,625        6,194
        Issue costs                                           -         (151)
        Deferred unit plan                                    -        1,275
        Units issued for vested deferred units            8,413          400
        Units purchased and cancelled                  (573,892)     (26,361)
                                                    -------------------------

        September 30, 2007                           55,928,929  $   347,101
                                                    -------------------------
                                                    -------------------------

        Subsequent to June 30, 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 573,892 REIT
        units in the third quarter of 2007 representing a total market value
        of approximately $26.4 million.

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

        (a)   REIT Units

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

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

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

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

        (b)   Special Voting Units

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

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

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

                                                          Units       Amount
        Boardwalk REIT Units                         51,453,929
        Special Voting Units issued to holders
         of LP Class B units                          4,475,000
                                                    -------------------------
        Total trust units                            55,928,929  $   347,101
                                                    -------------------------
                                                    -------------------------

    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 Declaration of
        Trust ("DOT"). Under the DOT, as amended and restated, the Trust is
        required to distribute, at a minimum, its reported taxable income.
        The reconciliation of distributable income and per unit information
        begins with total operating cash flows calculated in accordance with
        Canadian generally accepted accounting principles and 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,
        therefore, unlikely to be comparable to similar measures presented by
        other real estate companies and trusts.

                             3 months     3 months     9 months     9 months
                                ended        ended        ended        ended
                            September    September    September    September
                             30, 2007     30, 2006     30, 2007     30, 2006
                          ---------------------------------------------------

        Total operating
         cash flows       $    29,749  $    29,198  $    90,667  $    66,929
        Net change in
         operating
         working capital        4,302       (2,316)      (4,098)        (612)
        Add:
          Deferred
           financing costs
           amortization         1,081          768        3,460        2,237
        Deduct:
          Deferred
           financing costs
           amortization
           post May 2, 2004      (642)        (317)      (1,591)        (824)
          Amortization of
           net premium on
           long-term debt
           assumed after
           May 2, 2004           (208)         (11)        (551)         (34)
        ---------------------------------------------------------------------

        Distributable
         income           $    34,282  $    27,322  $    87,887  $    67,696
        Distribution
         declared to
         unitholders      $    22,525  $    17,730  $    65,391  $    52,522

        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Weighted average
         units
         outstanding -
         basic and
         diluted           55,900,390   56,277,684   55,856,690   55,279,021
        Distributable
         income earned
         per unit         $      0.61  $     0.485  $      1.57  $     1.225
        Actual
         distributions
         declared per
         unit             $      0.40  $     0.315  $      1.17  $     0.950
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Earnings per unit

                             3 months     3 months     9 months     9 months
                                ended        ended        ended        ended
                            September    September    September    September
                             30, 2007     30, 2006     30, 2007     30, 2006
                          ---------------------------------------------------
        Numerator
          Earnings (loss)
           from continuing
           operations     $    10,158  $     7,438  $   (88,482) $    11,092
          Earnings from
           discontinued
           operations     $     2,900  $        64  $     7,670  $     7,768
        ---------------------------------------------------------------------
        Denominator
          Denominator for
           basic earnings
           per unit  -
           weighted
           average units   55,900,390   56,277,684   55,856,690   55,279,021
        ---------------------------------------------------------------------
          Denominator for
           diluted
           earnings per
           unit adjusted
           for weighted
           average units
           and assumed
           conversion      55,900,390   56,277,684   55,856,690   55,279,021
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Earnings (loss)
         per unit from
         continuing
         operations
          Basic           $      0.18  $      0.13  $     (1.58) $      0.20
          Diluted         $      0.18  $      0.13  $     (1.58) $      0.20
        ---------------------------------------------------------------------
        Earnings per
         unit from
         discontinued
         operations
          Basic           $      0.05  $      0.00  $      0.14  $      0.14
          Diluted         $      0.05  $      0.00  $      0.14  $      0.14
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    11. INCOME TAXES

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

                             3 months     3 months     9 months     9 months
                                ended        ended        ended        ended
                            September    September    September    September
                             30, 2007     30, 2006     30, 2007     30, 2006
                          ---------------------------------------------------

        Continuing
         operations       $     2,055  $       446  $   113,453  $       222
        Discontinued
         operations                 -            -            -            -
        ---------------------------------------------------------------------

        Total future
         income taxes     $     2,055  $       446  $   113,453  $       222
                          ---------------------------------------------------
                          ---------------------------------------------------

        Future income taxes consist of the following:

                             3 months     3 months     9 months     9 months
                                ended        ended        ended        ended
                            September    September    September    September
                             30, 2007     30, 2006     30, 2007     30, 2006
                          ---------------------------------------------------

        Tax expense
         based on
         expected rate    $       345  $       280  $       494  $        50
        Adjustment to
         future income
         tax liabilities        1,710          166      112,959          172
                          ---------------------------------------------------
        Future income
         taxes            $     2,055  $       446  $   113,453  $       222
                          ---------------------------------------------------
                          ---------------------------------------------------

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

                                                   September 30, December 31,
        As at                                              2007         2006
                                                  ---------------------------

        Tax asset related to operating losses       $         6  $       294
        Tax liability related to differences in
         tax and book basis                         $  (113,149)          22
        ---------------------------------------------------------------------
        Future income tax asset (liability)         $  (113,143) $       316
                                                  ---------------------------
                                                  ---------------------------

    12. COMMITMENTS AND CONTINGENCIES

        At September 30, 2007, the Trust had a long-term supply arrangement
        with one electrical utility company to supply the Trust with its
        electrical power needs for southern Alberta for the next fifteen
        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
        September 2006, Boardwalk REIT was eligible for estimated rebates
        totalling approximately $1.4 million. For January to September 2007,
        Boardwalk REIT was eligible for rebates totalling approximately
        $0.9 million.

        The Trust also entered into three natural gas supply contracts, which
        provide a degree of price certainty for natural gas usage in the
        provinces of Saskatchewan, Ontario and Quebec. The contracts cover
        between 75 - 100% of the Trust's natural gas requirements for each of
        the provinces. The physical supply agreement for Saskatchewan runs
        from November 1, 2006 to October 31, 2007 and provides the commodity
        at a price of $8.48/GJ. The physical supply agreements for Eastern
        Canada covered the period from June 1, 2006 to June 1, 2007 and
        provided the commodity near $8.00/GJ.

        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.

    13. GUARANTEES

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

        In connection with the sales of properties, a mortgage assumed by the
        purchaser 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
        September 30, 2007 is approximately $5.3 million (September 30, 2006
        - $5.5 million). In the event of default, Boardwalk REIT's recourse
        for recovery includes the sale of the respective building asset.
        Boardwalk REIT expects that the proceeds from the sale of the
        building asset will cover, and in most likelihood exceed, the maximum
        potential liability associated with the amount being guaranteed.
        Therefore, at September 30, 2007, no amounts have been recorded in
        the consolidated financial statements with respect to the above noted
        indirect guarantees.

    14. 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     9 months     9 months
                                ended        ended        ended        ended
                            September    September    September    September
                             30, 2007     30, 2006     30, 2007     30, 2006
                          ---------------------------------------------------
        Alberta
          Revenue         $    55,679  $    43,600  $   158,687  $   124,712
                          ---------------------------------------------------
          Expenses
            Operating           7,745        6,823       24,011       19,904
            Utilities           4,929        3,498       16,693       14,224
            Utility
             rebates                -            -         (930)      (1,384)
            Property
             taxes              3,379        2,967        9,961        9,399
        ---------------------------------------------------------------------
                               16,053       13,288       49,735       42,143
                          ---------------------------------------------------
          Net operating
           income         $    39,626  $    30,312  $   108,952  $    82,569
                          ---------------------------------------------------

        Saskatchewan
          Revenue         $     9,941  $     8,933  $    28,573  $    26,347
                          ---------------------------------------------------
          Expenses
            Operating           1,795        1,579        5,264        4,758
            Utilities             898          886        3,420        3,646
            Property
             taxes              1,126        1,187        3,454        3,625
        ---------------------------------------------------------------------
                                3,819        3,652       12,138       12,029
                          ---------------------------------------------------
          Net operating
           income         $     6,122  $     5,281  $    16,435  $    14,318
                          ---------------------------------------------------

        Ontario
          Revenue         $     9,276  $     9,363  $    28,064  $    28,130
                          ---------------------------------------------------
          Expenses
            Operating           1,418        1,540        4,455        4,657
            Utilities           1,364        1,460        4,742        4,739
            Property
             taxes              1,753        1,846        5,275        5,373
        ---------------------------------------------------------------------
                                4,535        4,846       14,472       14,769
                          ---------------------------------------------------
          Net operating
           income         $     4,741  $     4,517  $    13,592  $    13,361
                          ---------------------------------------------------

        British Columbia
          Revenue         $     2,902  $     2,151  $     8,527  $     5,939
                          ---------------------------------------------------
          Expenses
            Operating             495          429        1,777        1,178
            Utilities             219          235        1,058          684
            Property
             taxes                151          120          451          342
        ---------------------------------------------------------------------
                                  865          784        3,286        2,204
                          ---------------------------------------------------
          Net operating
           income         $     2,037  $     1,367  $     5,241  $     3,735
                          ---------------------------------------------------

        Quebec
          Revenue         $    17,475  $    16,927  $    51,588  $    50,225
                          ---------------------------------------------------
          Expenses
            Operating           3,141        3,196        9,978       10,116
            Utilities           1,011        1,345        5,615        5,944
            Property
             taxes              1,869        1,906        5,651        5,397
        ---------------------------------------------------------------------
                                6,021        6,447       21,244       21,457
                          ---------------------------------------------------
          Net operating
           income         $    11,454  $    10,480  $    30,344  $    28,768
                          ---------------------------------------------------


        Total
          Net operating
           income         $    63,980  $    51,957  $   174,564  $   142,751
          Unallocated
           revenue(*)             430          382          544       22,163
          Unallocated
           expenses(xx)       (51,352)     (44,837)    (255,920)    (146,054)
        ---------------------------------------------------------------------
          Net earnings
           (loss) for
           the period     $    13,058  $     7,502  $   (80,812) $    18,860
                          ---------------------------------------------------
                          ---------------------------------------------------

                                                   September 30, December 31,
        As at                                              2007         2006
                                                   --------------------------
        Alberta
          Identifiable assets
            Revenue producing properties            $ 1,245,671  $   933,212
            Mortgages and accounts receivable               710        1,249
            Tenants' security deposit                    10,581        7,988
                                                   --------------------------
                                                    $ 1,256,962  $   942,449
                                                   --------------------------
        Saskatchewan
          Identifiable assets
            Revenue producing properties            $   169,794  $   172,269
            Mortgages and accounts receivable               194          216
            Tenants' security deposits                    1,975        1,491
                                                   --------------------------
                                                    $   171,963  $   173,976
                                                   --------------------------
        Ontario
          Identifiable assets
            Revenue producing properties            $   206,546  $   208,927
            Mortgages and accounts receivable                95          124
                                                   --------------------------
                                                    $   206,641  $   209,051
                                                   --------------------------
        British Columbia
          Identifiable assets
            Revenue producing properties            $   103,440  $    98,111
            Mortgages and accounts receivable             1,296           37
            Tenants' security deposits                      441          408
                                                   --------------------------
                                                    $   105,177  $    98,556
                                                   --------------------------
        Quebec
          Identifiable assets
            Revenue producing properties            $   419,750  $   419,962
            Mortgages and accounts receivable             1,075          859
                                                   --------------------------
                                                    $   420,825  $   420,821
                                                   --------------------------
        Total assets
          Identifiable assets                       $ 2,161,568  $ 1,844,853
          Unallocated assets(xxx)                        30,324       25,607
                                                   --------------------------
                                                    $ 2,191,892  $ 1,870,460
                                                   --------------------------
                                                   --------------------------

        (*)   Unallocated revenue includes property sales, interest income,
              revenue from discontinued operations and other non-rental
              income.
        (xx)  Unallocated expenses include cost of property sales, operating
              expenses from discontinued operations, non-rental operating
              expenses, corporate administration, financing costs,
              amortization, income taxes and other provisions.
        (xxx) Unallocated assets include discontinued assets, cash, short-
              term investments and other assets.

    15. SUBSEQUENT EVENTS

        Subsequent to September 30, 2007, effective for unitholders on record
        at and subsequent to November 30, 2007, Boardwalk REIT increased its
        monthly trust unit distribution paid out to its unitholders from
        $0.1333 (or $1.60 on an annualized basis) to $0.1500 (or $1.80 on an
        annualized basis).
    

    %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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